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Terms in this set (5)

International Marketing
Principles of marketing is the same, they just act different
The Internationalization of U.S. Business
Globalization of U.S. business (e.g.)
Exports approx. $2.35 trillion in 2017
Imports $2.9 trillion

Increasing number of U.S. companies are foreign controlled

Selected U.S. Companies and Their International Sales
Majority of the income is made outside of the US majority of sake is held by foreign company/owner
Foreign Acquisitions of U.S. Companies
Jaguar, India
Land Rover, India
Geely, China
Volvo, China
Trader Joe's, Germany
7-11, Japan

Global Marketing Environment
Global Marketing Environment (cont.)
Controllable: company/marketers have power to decide/control
4 Ps of marketing are controllable
Uncontrollables: company/marketer has no power to decide/no control
Distribution has the biggest impact when it comes to infrastructure because goods will have problems getting to point B if it isn't good
All 4 Ps can be affected by infrastructure
Environmental Adaptation
Anticipate, adjust and adapt to uncontrollable elements
Make a change
Understanding the political, social, legal, cultural environment is important!
Starbucks coffee in Japan
Distribute channel changed because they preferred cold, ready to go.
Changed strategy by calling coffee exotic places
Changed who they targeted... teens
Noticed that teens liked getting a small gift with coffee

The Self-Reference Criterion and Ethnocentrism
The key to successful international marketing is adaptation to the environmental differences from one market to another.
Primary obstacles to success in international marketing:
SRC Example 1 Example 2 (PDA in US vs India)... more acceptable in US
Ethnocentrism
The Self-Reference Criterion and Ethnocentrism (continued)
Dangers of the SRC (can create huge issues):
Failing to recognize the need to take action
Discounting the cultural differences that exist among countries
Reacting to a situation in a way offensive to your hosts
Tolerance of cultural differences:
Understanding cultural differences and accepting and working with others whose behavior may be different from yours


Levels of International Marketing Involvement
No direct foreign marketing; e.g.myethnicstuff.com
Not actively involved in marketing
Think of foreign markets in US
Infrequent foreign marketing
Not actively involved in marketing
Focus on domestic... will send away surplus to foreign places
Regular foreign marketing
Baby steps... sees the importance but focus on domestics
International marketing
Advanced level, actively involved in foreign places, segment the marketing geographically
Global marketing
Most advanced, fully committed to marketing in foreign places, facilities in foreign places, majority of income comes from foreign places
The biggest difference
criteria with segmentation is more than geography (it is no longer involved)
How do they segment... like age, income, etc.
This creates larger segments because it includes all countries
Free trade
When two countries can trade with each other without any barriers
In reality, this doesn't exist
NAFTA: North American Free Trade Agreement

Protectionism

The policy of restricting trade between countries (type of barrier taxes (tariffs))
Retaliation
Trade wars (ex. China and US
Save jobs
At home
Good sell to voters
Makes it hard for countries to compete... make it pricier (tax) the foreign goods so the consumer is more likely to buy the American one
Does Protectionism Save Jobs?
Higher Price = lower demand
Companies will cut back on production
Less production will lead to lay offs
Overall consumers are worst off
Cost of Protectionism
Protectionism is not really a good thing
In the consumer cost per job saved box prices go up
In the annual welfare costs to US (the tax payers pay this)

Trade Barriers
Tariffs (just taxes) prices goes up, demand goes down
Quotas quantity restrictions on imports; (ex 34 US movies in China a year)
Voluntary Export Restraints (VER) (the export country limits the amount of goods sold to a different country... you anticipate another country will tax you)
Boycotts and Embargoes (e.g.) (e.g.2)
Absolute restriction of purchase of goods is boycott
A governmental boycott is when the government enforces it
Nongovernmental boycott... ex when PETA called to stop supporting KFC
Embargoes: when you don't trade with... refusal to sell
Why do this? You don't agree with politics/polices
Sanctions: mean either boycotts or embargoes
Monetary Barriers ( restriction on foreign currency )
Blocked currency (completely blocks foreign money)
Differential exchange rate (paying more or less to encourage/turn away countries)
Government approval (can only sell until government approves... this can take forever)
Differential exchange rate and governmental approval happen often
Standards
Setting high standards to prevent foreign goods (two different standards for local and foreign)
Antidumping Penalties & Counter-veiling duties
Dumping is trying to sell the product lower than the production costs... absorbing the loss... this will wipe out the competition
The penalty is a punish for dumping. The penalty will increase the price

Balance of Payment
Balance of payments: a system of accounts that records a country's international financial transactions transactions
Unilateral transfer: the one-way transfer (ex. Donate to Africa)
Transactions recorded yearly
Must always be in balance (theoretically)
A Balance of Payments statement includes three accounts: (We aren't as bothered by capital and reserved... mostly current
Current account
A record of all merchandise exports, imports, and services plus unilateral transfers of funds
The primary interest to international business
It includes all international merchandise trade and service accounts, that is, accounts for the value of all merchandise and services imported and exported all receipts and payments from investments and overseas employment
Capital account
A record of direct investment, portfolio investment, and short-term capital movements to and from countries
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
Trade and economy
Balance of Trade
When a country exports more than imports it is a trade surplus
When a country imports more than exports it is a trade trade deficit

Other Economic Indicators
GDP growth rate & GDP per capita
Growth Domestic Potential
Total amount of goods and services that are produced in the country
Doesn't reflect the country's economic health
GDP per capita points to the economy (not that great to compare
GDP/population= GDP per capita
Marketers need to pay attention to GDP growth rate... if GDP growing, more people are working and making more money
Inflation (e.g.)
The value of the $ goes down: increase in price
CPI (how inflation is measured)
Consumers buy less of the same product
1-5% low (want to aim for the higher side of this), 5-30% med, 31%-50 high, 50-100% extreme high, 100+% hyper
Household income (GINI)
Average is needed so we know how much disposable income
Need to know the income segments
GINI
Zero means equal wealth for all, 100 means wealth with one person
Average is 45 (some inequalities)
Income Distribution
Offer different products for each segment
Aka low cost products for the deprived and premium for the rich
Growth of International Trade
Four ongoing activities to support the growth of international trade:
GATT (an agreement)
The associated World Trade Organization (WTO)
International Monetary Fund (IMF)
The World Bank Group
http://www.wto.org/english/res_e/webcas_e/webcas_e.htm
WTO, IMF, and the World Bank Group are all associated groups




General Agreement on Tariffs and Trade
Paved the way for the first effective worldwide tariff agreement.
Basic Elements of the GATT:
Trade shall be conducted on a nondiscriminatory basis
Protection shall be afforded domestic industries through customs tariffs, not through such commercial measures as import quotas
Consultation shall be the primary method used to solve global trade problems.
Eliminating barriers to international trade (Uruguay Round):
The General Agreement on Trade in Services (GATS)
Trade-Related Investment Measures (TRIMs)
Trade-Related Aspects of Intellectual Property Rights (TRIPs)

World Trade Organization
An institution, not an agreement as was GATT
Sets many rules governing trade between its 148 members
Provides a panel exports to hear and rule on trade disputes between members.
Issues binding decisions
All member countries will have equal representation
For the first time, member countries, will undertake obligations to open their markets and to be bound by the rules of the multilateral trading system.
Trouble with U.S. ratification:
Concern for the possible loss of sovereignty over its trade laws to WTO
The lack of veto power
The role the U.S. would assume when a conflict arises over an individual state's laws that might be challenged by a WTO member.

The International Monetary Fund
Created to assist nations in becoming and remaining economically viable.
Objectives of the IMF:
Stabilization of foreign exchange rates
Establishment of freely convertible currencies to facilitate the expansion and balanced growth of international trade
Special Drawing Rights (SDRs)
"paper gold"

http://www.imf.org/external/mmedia/view1.asp?eventId=52&file=1

The World Bank Group
Institution that has as its goal the reduction of poverty and the improvement of living standards by promoting sustainable growth and investment in people.
The World Bank has five institutions each of which performs the following services:
Lending money to the government of developing countries
Providing assistance to governments for developmental projects to the poorest developing countries.
Lending directly to the private sector
The World Bank Group
Providing investors with investment guarantees against "noncommercial risk."
Promoting increased flows of international investment
Culture - Definition
Ways of living, built by a group of human beings, that are transmitted from generation to generation
An underlying value framework
Culture
The sum of the values, rituals, symbols, beliefs, and thought processes
Learned through
Socialization
Learned culture through areas we participate
Acculturation (culture modification through prolong interaction)
Assimilation
Acquiring the host culture while loosing main culture
Integration
Acquiring the host culture while maintaining your main culture
Separation
Maintaining your main culture while rejecting host culture

Role modeling (eg)
Looking to others
Ex. Children to parents

Elements of Culture
Rituals
Pattern behaviors and interactions that are learned and repeated
Breakfast
Marriage

Symbols
Language e.g., Prado or Badao?
Aesthetic values
We learn meaning through these through art, folklore, music, drama etc
Insensitivity to aesthetic values can offend, create a negative impression, and, in general, render marketing efforts ineffective or even damaging.
Elements of Culture
Beliefs
To make light of superstitions in other cultures when doing business can be an expensive mistake.



Elements of Culture
Cultural classification scheme - Hofstede
Based the classifications on the value systems of country
Individualism/Collectivism Index
Individualism: the degree in which people in society prefer to act as individuals other than act in a group.... Focus on the persons needs and wants
US, UK, Australia
Collectivism: groups needs is more important that the individuals. Group orientated
In group (friends, family) (Chinese word, guanxi=relationships) vs others
Preference to act as individuals vs. part of a group (e.g., Ind.- U.S., U.K., Aus; Collect. - S.K., Taiwan, Indonesia, Venezuela) -
e.g., Guanxi in China
Power Distance Index
Degree of tolerance of social inequalities (e.g., High - Malaysia, Mexico, India; Low - U.S. U.K. Germany)
Everyone has a rightful place in the society
Resourceful Democrat
Elements of culture
Uncertainty Avoidance Index
Tolerance of ambiguity and uncertainty
(e.g., High UA - Greece, Portugal, France, Japan; Low UA- India, Malaysia, UK, Singapore)
in high uncertainty avoidance areas people feel threatened by change... wary of new things
low uncertainty isn't afraid of change (better to introduce new products in these types of countries)
Masculinity/ Femininity Index
Masculine values- assertiveness, status success, competitive drive (e.g., Japan, Aus, Italy, Mexico)
Feminine values- solidarity, people orientation, quality of life (e.g., Thailand, Chile, Sweden)
Long-term orientation/ Short-term orientation
Focus on future Vs. past or present (e.g., LTO -China, HK, Japan; STO - US, UK, Phil)
Perseverance, persistence, thrift (save today use in the future), Vs. immediacy, reciprocation
Cultural Change
Resistance to change
Cultural Congruence
This strategy involves marketing products similar to ones already in the market in a manner as congruent as possible with existing cultural norms, thereby minimizing resistance
Marketers have two options when introducing an innovation to a culture:
They can wait
They can cause change
Planned and unplanned cultural change:
Determine which cultural factors conflict with an innovation
Change those factors from obstacles to acceptance into stimulants for change. (india's fear of microwaves)

Planned changed: deliberately set out to change those aspects of the culture offering resistance to predetermined marketing goals.
Unplanned change: introduce a new product and hope for the best
Example: the Japanese diet changed drastically when westernized diets and foods such as steak, milk, and bread were introduced
How much to Adapt?
Cultural Imperatives
Business customs and expectations that must be met and conformed to or avoided if relationships are to be successful
You have to follow it.... Hijabs, time, introductions, GUANXI
Cultural Electives
Customs to which adaption is helpful but not necessary
relate to areas of behavior or to customs that cultural aliens may wish to conform to or participate in but are not required
Examples: drinking alcohol (for health, personal, or religious reasons)
You should do a symbolic attempt to participate
Cultural Exclusives
Customs in which an outsider must not participate
EXAMPLES: making fun of the countries politics or a Christin attempting to act like a Muslim
Culture & Communication: Classification of Culture
Edward Hall
Low context cultures
Direct communicators, what is said is what it meant
French, North American, Scandinavian, German and Swiss
High context cultures
Indirect, meant to be understood or interrupt based off the situation
Japanese, Latin Americans, Spanish, Arabian, Italian
Time orientation
Monochronic time (linear-separable time):
Tend to concentrate on one thing at a time
Divide time into small units and are concerned with promptness
Most low-context cultures operate on M-Time
The US(live by planners)
Polychronic time (circular time):
Dominant in high-context cultures
Characterized by the simultaneous occurrence of many things
Allows for relationships to build and context to be absorbed as parts of high-context cultures.
Handle multiple thing at once, very relaxed
Caribbean islands
Negotiations
Can it lengthy in high context cultures
Ask questions that have nothing to do with the meeting
This isn't an invasion of privacy
No business will happen until you get into the in group
Corruption Defined (video)
Impairment of integrity, virtue, or moral principle; Inducement to wrong by improper or unlawful means; a departure from the original or from what is pure or correct
Types of Corruption:
Profits (Marxism)
In formerly communist countries where Marxism was an important part of the educational system for many, profits can be seen as a kind of corruption
Individualism (US and Japan)
What American managers view as essential, other view as a sign of exploitation
Rampant Consumerism (India)]
Buying a lot??? India blames rampant consumerism for its decline in society such as that promoted by MTV. Americans find it useful because it keep our economy afloat
Missionaries (China)
Religious movements that are viewed by the government as potentially dangerous and disruptive
Bribery
Bribery and Extortion
Bribery: voluntary use of money to get what you want that is illegal in your favor
Extortion: forcing someone's hand; demand of payment under distress from a person of power for someone's rights
Types:
Subornation and Lubrication
Subornation: payment of large amounts of money to high ranking officials so that they do something illegal for you
Lubrication: paying small amounts of money to lower officials to get work done faster.... Not considered illegal
Agent's Fees
Not illegal; agents have to be paid part of the agent's fee, but once they bribe other officials from a different country it becomes illegal


Bribery
OECD Convention (Organization of Economic Cooperation and Development)
Organization for Economic Cooperation Development
Only 46 countries have signed up (196 total countries on the globe)... China and India have NOT signed up
Hosts an anti-bribery convention
Transparency International (TI)
Watchdog agency that produces CPI
CPI: Corruption Perception Index: amount of corruption in govt.
The closer to 100, the least corrupt
Useful info for businesses trying to move to new countries
Foreign Corrupt Practices Act 1977
FCPA of 1977: Foreign Corrupt Practices Act: prohibits US citizens/businesses/foreign businesses in the stock exchange from bribery