BUS 413 - International Business Aslı...

By Onur Deniz : Erasmus student : BYS: o199513197

University : Marmara University Course : BUS 413 - International Business

Teacher : Aslı Ekmekçi

Marketing in a global business 2013 / 2014

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Table of Contents

Summary ............................................................................................................. 3

Introduction .......................................................................................................... 4

1. What is Global marketing? ............................................................................... 4

1.1 Global Branding ............................................................................................ 5

1.2 Examples of globally successful companies ...................................................... 6

1.3 Chapter summary ......................................................................................... 7

2. The world consumer ........................................................................................ 8

2.1 Global advertising ......................................................................................... 8

2.2 The global advertising budget ........................................................................ 8

2.3 Internet marketing strategies ......................................................................... 9

2.4 New technology and global advertising ............................................................ 9

2.4.1 Most used tools in internet marketing.......................................................10

2.5 Chapter summary ........................................................................................11

3. Marketing strategies in a global business. .........................................................12

3.1 Standardization or/and adaptation for global marketing ....................................12

3.2 Differences in the marketing mix ...................................................................13

3.4 Chapter summary ........................................................................................14

4 Culture and marketing ....................................................................................15

4.1 Defining culture ...........................................................................................15

4.2 The impact of culture in global marketing .......................................................15

4.3 Chapter summary ........................................................................................17

5 Political and Government influences ................................................................18

5.1 Individual governments ................................................................................18

5.2 Managing the political environment ................................................................19

5.3 Legal environment .......................................................................................19

5.4 Chapter summary ........................................................................................20

Bibliography.........................................................................................................21


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Summary A company that is able to market to almost all countries on the planet is called a global company. The company has the capability to reach big markets, has the knowledge about different cultures, has trained staff, country insights, and expertise to deliver value to customers worldwide. It understands the requirement to service customers locally with standardized or adapted solutions or products. But to get recognized worldwide, it is important to have a consistent brand image. A consistent brand image involves a structured process of analyzing soft and hard assets of the

company’s resources. This analyses has topics like customer analysis, competitive analysis, and self-analysis. Two very well-known companies Coca Cola and Apple are known worldwide and succeeded penetrating the markets successfully in many countries. To create a clear global brand image, the company has to synchronize the communication strategy in all countries. Keeping also subcultures in mind, global companies adapt their products to satisfy these groups as well. Working in a global environment as a company, communicating with the consumer the right way is

of essence in order to reach the target group successfully. To communicate, a global company

usually has a budget. To set the right marketing budget, there are 3 ways to define it. Competitive parity, Objective-and-task method, and the bottom up / top down approach. The internet has added a whole new way communicating with world consumers. Marketers realized the power of the internet, and its little costs compared to traditional marketing efforts. This of

course also saves the company’s marketing budget. To get the attention of the consumers on the internet, companies use different online tools like viral marketing, google search engines & advertising, social media & social media advertising. And the newest emerging market, the mobile market. Every global company needs a strategy. Do you adapt your products to a specific country? Or leave it as it is for all countries (standardized). Standardizing its products for all countries means, all

countries get the same product and the same service. The marketing mix is the same for all communication efforts. Adapting means modifications to the original product / service to conform to other cultures. For example, McDonalds serves different meals in different countries. Adapting means a new marketing mix of the 4P’s. Before the standardizing/adapting strategy, companies were only exporting companies. As the business evolved they became multinational companies,

and at last the global companies emerged.

To make these strategy decisions, every marketer has to know the different cultures. A culture is the collective programming of the mind which distinguishes the members of one group or category from those of another. This is something a marketeer has to adapt to and the impact of different cultures are a challenge for marketeers to understand. To understand how cultural values determine business practices and market conditions, there are 5 different dimensions: Individualism/Collective, Power Distance, Uncertainty Avoidance , Masculinity/Feminity, and Long

Term Orientation. Based on the type of product a company markets, the company has to make a decision in its marketing strategy. Before making these decisions it’s important for a company to know what their core values are and if it’s a product that can be accepted in other cultures. Not only culture is important, In the business life, governments affect almost every aspect. Governments determine which industries receive protection and which fall in face open competition. It also determines labor regulations and property laws. There are a few ways to

characterize the nature of a government by its political ideology: Communism, Socialism and capitalism. The number of political parties also influences the level of political stability. So it is important for a company to make informed decisions. The marketing manager needs to understand

the political factors of the country, the national strategies and goals, and the legal environment and laws. To be successful, a foreign company has to offer some benefits for the host country. Assessing the political power structure and the mood in a country is important before making business decisions. By evaluating various environmental factors, the company can get a better

understanding of the risks and opportunities in a country. For the last part, a company also has to think about the legal environment. Issues such as pricing policies, production decisions, packaging decisions, product decisions, competitive decisions, selling decisions and channel decisions have to be thought thoroughly to avoid punishment by the host country.


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Introduction

As an Erasmus student, I am learning about marketing in an other country and learn

what the culture values are in marketing. To take this topic in a more general view, there

is global marketing. The biggest companies like Coca Cola and Apple are wordwide

known companies. The world is globalising since the estabilishment of the World Trade

Act in 1979. This made it possible for many companies to go global on a world scale

(Wikipedia, World Trade Act, 2013). But what is a global company exactly? In this paper

we define the global company, the brand image of a global company, communicating

with the world consumer, talk about the definition of a culture and the impact of cultures

for marketers, define global strategies, and define the impact of political, governmental

en legal environmental issues.

1.


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What is Global marketing?

Global marketing is a company’s ability to market to almost all countries on the planet.

With extensive reach, the need for a company’s product or services is established. A

global company has the capability to reach big markets, knowledge about different

cultures, trained staff, skills, country insights, and expertise to deliver value to customers

worldwide.

The company understands the requirement to service customers locally with global

standard or adapted solutions or products, and localizes that product as required to

maintain an optimal balance of cost, efficiency, customization and localization. The

company will price its products appropriately worldwide, nationally and locally, and

promote, deliver access and information to its customers in the most cost-effective way.

The company also needs to understand, research, measure and develop loyalty for its

brand and create a consistant brand image and equity for the long term. (Rance, 2009)

1.1 Global Branding

A global brand is marketed according to a set of core principles across the world. This

means the same product formulation, the same core benefits and values and the same

positioning across the world. However, one or more elements of the marketing mix, such

as price, packaging, media, and distribution channels may be varied to suit the needs of

individual markets. At the global level, global marketing and global branding are

integrated. Branding involves a structured process of analyzing "soft" assets and "hard"

assets of a company's resources. The strategic analysis and development of a brand

includes a couple of topics.

customer analysis

trends

motivation

unmet needs

segmentation

competitive analysis

brand image/identity

strengths

strategies

vulnerabilities

self-analysis

existing brand image

brand heritage

strengths/capabilities

organizational values


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Global brand identity development is the process of establishing brands of products, the

company, and services locally and worldwide with consideration for scope, product

attributes, quality/value, uses, users and country of origin; organizational attributes

(local vs. global); personality attributes (genuine, energetic, elegant) and brand

customer relationships (friend, adviser, influencer, trusted source); and importantly

symbols, trademarks, imagery, photography. (David Aaker, 2009)

1.2 Examples of globally successful companies There are a lot of Global companies that are known all over the world. In this part we

give 2 simple examples of one of the biggest global companies in the world.

Apple As we all know by now, Apple is known in almost every country

with its electronic products and is at the moment the world’s

second largest information technology company by revenue and

for the first time in history it was chosen the world’s most

valuable brand by Omnicom group (ELLIOTT, September.

2013). Founded in 1976 by Steve Jobs, the first Macintosh

computer got a lot of attention in the U.S. As computer

technology was on the rise it also got a lot of attention in other

countries all over the world. Becoming a global company was a First Apple Macintosh

self-fulfilling prophesy for the company.

With stylish products and strategically branding the company as a high luxury product,

the Apple products are now mostly bought for self-expression and self-branding by its

customers.

Coca-Cola The Coca-Cola Company is the world's largest beverage company and is the leading

producer and marketer of soft drinks. The Company markets four of the world's top five

soft drinks brands: Coca-Cola, Diet Coke, Fanta and Sprite. Started originally as a

medicine for patients in 1944, the company was one of the first succesfull beverage

companies to act global and to think local. In 1986 the company started selling globally

and gained a big market share very quick.

As of today, coca cola has a succesfull global strategy to maintain and expand its market

share. The latest succesful marketing campaign was personalizing every Coke can with a

name in a specifig country. (Wikipedia, 2013)


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1.3 Chapter summary

A company that is able to market to almost all countries on the planet is called a global

company. The company has the capability to reach big markets, has the knowledge

about different cultures, has trained staff, country insights, and expertise to deliver value

to customers worldwide. It understand the requirement to service customers locally with

standardized or adapted solutions or products. To maintain an optimal balance of cost,

efficiency, and customization, it localizes its products and solutions. To get recognized

worldwide, it is important to have a consistent brand image. This means the company

markets according to a set of core principles across the world. Like the same product

formulation, same core benefits, same values, and the same positioning across the

world. It involves a structured process of analyzing soft and hard assets for the

company’s resources. This analyses has topics like customer analysis, competitive

analysis, and self-analysis. Two very well-known companies Coca Cola and Apple are

known worldwide and succeeded penetrating the markets successfully in many countries.


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2. The world consumer

Working in a global environment as a company, communicating with the consumer the

right way is of essence in order to gain the trust of a consumer. In this chapter we

highlight how global companies communicate with the world consumers, the dangers of

language and religion, define strategies for the marketing budget, define the importance

of the internet and the most used tools for advertising on the web.

2.1 Global advertising

Advertising is a large extent to a cultural phenomenon. Advertising shapes a country’s

popular culture. At the same time, the host country’s culture may also influence the

creation of an ad campaign and its effectiveness. Many of the trickiest promotional issues

occur in the domain of religion. An example of an ad in Saudi Arabia where only veiled

woman can be shown in TV commercials. These restrictions lead to problems for hair care

advertisers. Also language is one of the hardest barriers that international advertisers

struggle with. Numerous promotional efforts have misfired because of language related

mishaps. Apart from translation, another challenge is the proper interpretation of ideas

(Masaaki Mike Kotabe, 2010). An example by Fisher company, who are active in the

automobile industry. The original slogan “Body by Fisher” was translated wrong in a

foreign country, making the slogan “Corpse by Fisher” (David A. Ricks, 2006).

2.2 The global advertising budget Advertising in a global market isn’t free of course, so one of the issues that marketers

must struggle with when planning their communication strategy is the ‘‘money’’ issue”.

Usually marketers use a percentage of sales revenues for advertising purposes. They

usually base this percentage on past or expected sales revenues. Most of the time it’s

hard to choose what percentage to choose for the advertising budget. This strategy is

mostly used in well-known markets and not in markets where the company recently

entered.

Competitive parity

Another way to define the advertising budget is by competitive parity. This means using

the competitors spending as a benchmark. For example a company could simply match

its lead competitor’s spending amount to get a similar amount of share-of-voice (A

company’s advertising weight as a percentage of the total category advertising). The

rationale for this approach is that the competitors’ collective wisdom signals the

‘‘optimal’’ spending amount. Advertising scholars have pointed out several shortcomings

of competitive parity as a budgeting norm. The industry’s spending habits may be very

questionable: collective wisdom is not always a given. Also, marketers that recently

entered a new market probably should spend far more relative to the existing brands to

break through. (N. E. Synodinos, 1989)

Objective-and-task method

The most popular budgeting rule is the objective-and-task method. Conceptually, this is

also the most appealing budgeting rule: it treats promotional efforts as a means to

achieve the advertiser’s stated objectives. The concept of this budgeting rule is very

Straight forward. The first step of the procedure is to spell out the goals of the

communication strategy. The next step is to determine the tasks that are needed to

achieve the objectives. The planned budget is then the overall costs that the

completion of these tasks will amount to. For the objective-and-task method it is

necessary for a solid understanding of the relationship between advertising spending and

the stated objectives (e.g., market share, brand awareness). One way to assess these

linkages is to use field experiments. With experimentation, the advertiser systematically

manipulates the spending amount in different areas within the country to measure the


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impact of advertising on the key objectives of the campaign (e.g., brand awareness,

sales volume, market share). (N. E. Synodinos, 1989)

Bottom up / Top down budgeting

The bottom up concept determines how much should be spend for each country, looking

at the resources, and environment. Than the company requests the desired resources

from the headquarters to advertise. The top down approach is the opposite of the bottom

up concept. The headquarters determines the overall budget and then splits it up among

different affiliates. (N. E. Synodinos, 1989)

2.3 Internet marketing strategies At the core of any global web marketing strategy is the conflict between local

responsiveness and global integration. By being locally responsive in the market’s

demands, the company can do a better job in satisfying its overseas customers. Research

shows that consumers have a higher purchase intention and better attitude toward highly

adapted websites compared to sites that are medium or low on cultural adaptation (Nitish

Singh, 2004). This internet marketing strategy is mostly used for products like wines,

financial products and information. When a company is locally responsive, it benefits the

company with the consumers higher purchase intention and a better attitude towards the

adapted website. However, adapting and localizing comes at a price. With a global

integration strategy, the company can achieve operational efficiencies in terms of setup,

learning and maintenance costs. These cost savings can be passed on to the distributors

and the end user benefits from a lower cost for a product. Just like global ad campaigns, an integrated web marketing strategy can also ensure cross-country consistency in

building up a global brand image. (Nitish Singh, 2004) The journal business horizons

divided the local responsiveness and global integration in to a framework, resulting in 4

different internet strategies. (Horizons, 2002)

2.4 New technology and global advertising The internet has reshaped the global marketplace for international marketers both on

the demand- and the supply-side. The web provides a unique distribution and

communication channel to marketers across the world. It is the ultimate marketplace to

buy and to sell goods and services. The challenge for many global companies is to wring

out the benefits that the web offers. Internet startups that initially focused on their home

market, going global can provide an great chance for further growth with the internet.

The internet offers two major benefits to companies that use the tool as a gateway to


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global marketing: cost/efficiency savings and the connectivity/interaction with the

consumer. Compared to traditional communication tools like media advertising, catalogs,

and distribution channels, the costs of the internet are far lower.

Although it may seem very easy to go global through the internet, a company still has to

overcome several barriers like language, cultural differences, infrastructure, country

knowledge, government regulations, legal environment, and the possible political

changes like in traditional advertising. (Silverstein, 2002)

2.4.1 Most used tools in internet marketing

Viral marketing

One way to save costs and gain brand awareness through the internet is by viral

marketing. Although this is not a new technique in the marketing world, with the

upcoming internet bubble, viral marketing took a whole new meaning. Usually made with

video clips, flash games, images, text messages or web pages, marketers use a unique

way to get the attention of the consumer. With the help of social media and word of

mouth, the advertisement spreads very rapidly through the internet (Wikipedia, Viral

marketing, 2013). For example a body and hair care company Old Spice, made

humoristic video clips, promoting their products. The video’s went viral and the revenues

went up with 107% in a month. (Guardian, 2012)

Social media marketing

social media is about people connecting, interacting, and sharing online. With the rise of

social media, companies had the chance to interact and stay connected with the

customer in a whole new way. The benefits of this medium are mainly gaining customer

loyalty, connectivity, interaction, reach more potential customers, and cost savings.

The three most popular social media for companies to be active on are at the moment

Facebook, Twitter, YouTube. (Brian Halligan, 2009)

Search engine marketing

One of the most used search engine Google is an excellent way for a company to

advertise on. Getting found on Google, means getting found on the internet. The best

argument for advertising on Google is that people are actually searching for something. A

company has to think about search engine optimization to get ranked high in the Google

pages, and can also use Google AdWords / AdSense to advertise on the Google pages.

When a company goes global, it is unthinkable to use Google as a advertising channel.

(Brian Halligan, 2009)

Mobile advertising

One of the most important trends in the last 5 years is the rise of the smartphones &

tablets. Everyone has to stay connected to the internet, and of course marketers use this

opportunity to advertise in a new advertising channel. With the newest technologies,

mobile markets are emerging in a very rapid way, and is becoming a channel to take

very seriously for marketers. These new customers are called the untethered customers,

and have computing power wherever they go. These customers constantly consumes

content from there smartphones / tablets, no matter where they are. Watching movie

clips while waiting for the bus for example. (Martin, 2011)In 2012 the mobile ad

spending was $8.3 Billion dollars and it is estimated that by the year 2016 this will rise to

$37 billion dollars. (Jones, 2013)


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2.5 Chapter summary Working in a global environment as a company, communicating with the consumer the

right way is of essence in order to gain the trust of a consumer. One of the trickiest

promotional issues are religion and language. Marketers must understand different

cultures and their values. To set the right marketing budget, there are usually 3 ways to

define the budget. Competitive parity, Objective-and-task method, and the bottom up /

top down approach. The most common approach is the objective-and-task method for

global companies. When a global company is familiar with the market, it can switch its

budget strategy to one of the 2 other approaches to spent the budget efficiently.

The internet has added a whole new way communicating with world consumers. The

benefits are mostly cost savings and interacting and connecting more with the

consumers. To get the attention of the consumers, companies use different online tools

like viral marketing, google search engines & advertising, social media & social media

advertising, and the newest emerging market, the mobile market.


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3. Marketing strategies in a global business. When dealing with global marketing one of the key points to consider is whether the

product or marketing mix should be standardized or/and adapted to each local market.

The question is one of the most debated in the international marketing literature. As we

saw in the examples from the last chapter, Apple has a standardised marketing strategy

for all countries aswell as the Coca Cola company. The difference with the Coca Cola

company is, they also adapt their products to the specific country with the marketing

activities. The Coke cans with the names is a good examples of this concept.

3.1 Standardization or/and adaptation for global marketing

Although the paradigm of standardization/ adaptation has been analyzed for more than

four decades, there are never ending discussions of the definitions and different concepts

used to define these terms.

Researcher Levitt has analyzed this subject in 1983 with terms such as “Global markets”,

“Standardized goods”, and “Global standardization”, but the problem was there was no

clear definition of the differences between the terms.

Based on the work of Levitt, many researchers (Douglas and Wind, Porter, Jain, Samiee

and Roth) used these terms as replacing or supplementing one another or equal to each

other. This resulted in creating more confusion in research of marketing strategies in

foreign markets. Later there was an attempt to define the concept of standardization

clearly: Jain (1989) defined standardization of the marketing mix as one marketing mix

for the whole global market, whereas Cavusgil and Zou assessed standardization of the

marketing mix as a standardized allocation of resources between elements of the

marketing mix in various markets of activities, later supplementing this definition of

standardization by the concept of globalization and stating that standardization was:

“The extent to which a company globalizes its marketing activities in various countries

through standardization of elements of the marketing mix, concentration and

coordination of marketing activities and integration of competitive actions in many

markets”. (Monika Alimiene, 2008)

A similar situation appeared when seeking for a clear definition of adaptation. Up till now,

most researchers use two terms; adaptation and adjustment. Medina and Duffy defined

adaptation as:

“Obligatory modification of standards of products intended for the country’s inner target

market with the aim to make the product suitable for conditions of the environment of

the foreign markets”. (Monika Alimiene, 2008)


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3.2 Differences in the marketing mix When a company is active in a global economy, this affects the marketing mix strategy,

and the company makes its marketing mix based on standardization or/and adaptation.

In the figure below we can see the main differences between standardization and

adaptation in the marketing mix. (philisopher, 2013)

3.3 Evolution of the marketing strategy

Douglas and Craig created an overview of the evolution of the marketing strategy in the

different stages for a company. In the first stage we have the domestic focus. The

company acts only in its own country of origin. The next step a company can take is to

export their products to a foreign country, multiplying this to more countries, the

company becomes a multinational company. Developing new marketing strategies,

developing and acquiring new brand, and share the promotional costs. The best position

a company can have to expand is the global company. In this stage the company is

heavily decentralized and has multiple headquarters all over the world. Coordinating the

marketing mix across all countries and regions, integrate sourcing and production with

marketing, and allocate resources to achieve portfolio balance and growth. (Monika

Alimiene, 2008)


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3.4 Chapter summary Based on the type of product a company markets, the company has to make a decision

in its marketing strategy. Before making these decisions it’s important for a company to

know what their core values are and if it’s a product that can be accepted in other

cultures. To create a clear global brand image, the company has to synchronize the

communication strategy in all countries. Standardizing its products for all countries

means, all countries get the same product and the same service and the marketing mix

is the same for all communication efforts. Adapting to a certain country is sometimes

necessary as we have seen for the Coca Cola advertising. Names like Mark and Jaap are

very common in Holland to put on the personalized Coca Cola cans for example, but not

for the Turkish market. The slogan “Act Global, Think Local” is in perfect use for this

concept. Keeping also the religious subcultures in mind, global companies adapt their

products to satisfy these groups as well (Halal McDonalds).


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4 Culture and marketing As stated in the previous chapters, culture is a important barrier for markets to

overcome. Every country has its own values, traditions, rituals and many other aspects

that affect the consumer buying behavior. Succesful global companies should always do

their research before entering a country’s market. Messages can be mis understood or be

offending for some culture’s which may seem very normal in other cultures. This will be

of course killing for the global company.

4.1 Defining culture

To understand the impact of a culture in marketing, first we must understand what a

culture is. One’s culture affects almost everything they do, from birth to death and

everything in between. What exactly, is culture? Geert Hofstede, a Dutch cultural

anthropologist formulated culture as the following statement.

”The collective programming of the mind which distinguishes the members of one group

or category from those of another” Culture is learned and shared, not something

biologically programmed in our genes. As Hofstede says, culture is “the software of the

mind.” (Hofstede, 2011)

The origins of culture include geography, history, technology, and the political economy.

Throughout history, these factors have influenced and formed the social institutions that

exist around the world. Examples of social institutions include family, religion, school,

media, government and corporations.

These conditions are highly interrelated, constantly changing, and vary depending on

geographic location or country. Acculturation and socialization naturally occurs, which is

the process of adopting behavior patterns based on one’s surroundings. These patterns

are imitated and shared between groups of people and societies through time, thus

creating the elements of culture: values, rituals, symbols, beliefs and thought processes.

(Cateora, 2009)

4.2 The impact of culture in global marketing

The elements of culture have a effect on how companies market their products and do

business. Even though they may seem invisible at first, ignoring cultural differences can

hurt the marketer’s company and career.The best international marketers not only

respect cultural differences, but they also understand the origins of these differences and

integrate the lessons learned into their marketing strategy.

Cultural Knowledge is necessary in global marketing. There are two types of knowledge:

factual and interpretive. Factual is usually obvious and can be learned. This are the facts

about the culture and their values. Interpretive is more about acknowledging and

accepting different cultural traits and patterns (e.g Ramadan).

The most noted and useful way to understand how cultural values determine business

practices and market conditions come from Geert Hofstede. He studied more than 90,000

people in 66 countries, and was able to to categorize differences into five primary

dimensions (Hofstede, 2011):


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1. Individualism/Collective

The high side of this dimension, called Individualism, can be defined as a

preference for a loosely-knit social framework in which individuals are expected to

take care of themselves and their immediate families only. Its opposite,

Collectivism, represents a preference for a tightly-knit framework in society in

which individuals can expect their relatives or members of a particular in-group to

look after them in exchange for unquestioning loyalty. A society's position on this

dimension is reflected in whether people’s self-image is defined in terms of “I” or

“we.”

2. Power Distance

This dimension expresses the degree to which the less powerful members of a

society accept and expect that power is distributed unequally. The fundamental

issue here is how a society handles inequalities among people. People in societies

exhibiting a large degree of power distance accept a hierarchical order in which

everybody has a place and which needs no further justification. In societies with

low power distance, people strive to equalise the distribution of power and

demand justification for inequalities of power.

3. Uncertainty Avoidance

The uncertainty avoidance dimension expresses the degree to which the members

of a society feel uncomfortable with uncertainty and ambiguity. The fundamental

issue here is how a society deals with the fact that the future can never be

known: should we try to control the future or just let it happen? Countries

exhibiting strong UAI maintain rigid codes of belief and behavior and are

intolerant of unorthodox behavior and ideas. Weak UAI societies maintain a more

relaxed attitude in which practice counts more than principles.

4. Masculinity/Feminity

The masculinity side of this dimension represents a preference in society for

achievement, heroism, assertiveness and material reward for success. Society at

large is more competitive. Its opposite, femininity, stands for a preference for

cooperation, modesty, caring for the weak and quality of life. Society at large is

more consensus-oriented.

5. Long Term Orientation

The long-term orientation dimension can be interpreted as dealing with society’s

search for virtue. Societies with a short-term orientation generally have a strong

concern with establishing the absolute Truth. They are normative in their thinking.

They exhibit great respect for traditions, a relatively small propensity to save for

the future, and a focus on achieving quick results. In societies with a long-term

orientation, people believe that truth depends very much on situation, context and

time. They show an ability to adapt traditions to changed conditions, a strong

propensity to save and invest, thriftiness, and perseverance in achieving results.


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As a marketer, being culturally sensitive and tolerant of others is key. Culture is dynamic.

Both planned and unplanned cultural change takes place through time. One culture may

learn from another’s to solve societal problems, known as cultural borrowing. On the

other hand, some cultures may have a strong resistance to change, which often results in

conflict. All of these conditions require special effort and attention when marketing in a

foreign environment. Not only do they determine the 4 p’s (product, price, promotion,

and place), but they also shape management styles, business practices, and professional

behaviors. (Kotabe, 1998)

4.3 Chapter summary A culture is the collective programming of the mind which distinguishes the members of

one group or category from those of another” Culture is learned and shared, not

something biologically programmed in our genes. And can be seen as the software of the

mind. A culture is affected by a couple of subjects like geography, history, technology,

and the political economy. And is has its own values, rituals, symbols, beliefs and

thought processes. This is something a marketeer has to adapt to and the impact of

different cultures are a challenge for marketeers to understand. Cultural knowladge is of

essence for a global company to be succesful in a particular country. This affects

companies how they market their product in the country. A culture is dynamic and

planned and unplanned cultural changes can occur. For a succesfull market penetration in

a foreign country, the marketing mix is adapted partly to the local values and beliefs.

To understand how cultural values determine business practices and market conditions,

Geert Hofstede divided cultures in to 5 steps:

Individualism/Collective

Power Distance

Uncertainty Avoidance

Masculinity/Feminity

Long Term Orientation


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5 Political and Government influences International marketers should be aware that the economic interests of their companies

could differ widely from those of the countries in which they do business and sometimes

even from those of their own home countries. There are various international

agreements, treaties, and laws already in place for them to abide by. Furthermore, there

is an increased level of visible distrust of multinational companies around the world,

calling for creating codes of conduct for them (Sethi, 2003).

5.1 Individual governments Government affects almost every aspect of business life in a country. First, national

politics affect business environments directly, through changes in policies, regulations,

and laws. The government in each country determines which industries will receive

protection in the country and which will face open competition. The government

determines labor regulations and property laws. It determines fiscal and monetary

policies, which then affect investment and returns.

Companies search internationally for stable growing markets where their profits will not

be affected by exchange loss or inflation. Government policies drive many economic

factors such as the cost of capital, levels of economic growth, rates of inflation, and

international exchange rates. Governments may directly determine the prime lending

rate, or they may print or borrow the funds necessary to increase money supply.

Governments may fix their currencies’ exchange rates, or they may decide to allow the

international currency market to determine their exchange rates. The monetary and

exchange policies a government pursues will affect the stability of its currency which is of

critical concern to any company doing business abroad. (Masaaki Mike Kotabe, 2010)

Whenever marketing executives do business across national boundaries, they have to

face the regulations and laws of both the home and host countries. A Home country

refers to a country in which the parent company is based and from which it operates. A

host country is a country in which foreign companies are allowed to do business in

accordance with its government policies and within its laws. Therefore, international

marketing executives should be concerned about the host government’s policies and their

possible changes in the future, as well as their home government’s political climate.

(Sethi, 2003)

One way to characterize the nature of a government is by its political ideology, ranging

from communism and socialism to capitalism. Under strict communism, the government

owns and manages all businesses and no private ownership is allowed. On the other

hand, capitalism refers to an economic system in which free enterprise is permitted and

encouraged along with private ownership. Socialism generally is considered a political

system that falls in between pure communism and pure capitalism. A socialistic

government advocates government ownership and control of some industries considered

critical to the welfare of the nation.

The number of political parties also influences the level of political stability. A one-party

regime does not exist outside the communist country. Most countries have a number of

large and small political parties representing different views and value systems of their

population. In a single-party-dominant country, government policies tend to be stable

and predictable over time. Although such a government provides consistent policies, they

do not always guarantee a favorable political environment for foreign companies

operating in the country. (Masaaki Mike Kotabe, 2010)


19

5.2 Managing the political environment

International managers must manage the political environment in which the international

company operates. This means, first of all, learning to follow the customs of

the country in which the company is operating. But managing the political environment

also means knowing which facets of the foreign country must be carefully monitored, and

which can be manipulated. If managed correctly, the political environment could

become a marketing support system, rather than an inhibitor, for the foreign

company.

To make informed decisions, the marketing manager must understand the

political factors of the country, and also must understand the national strategies and

goals of the country. The political factors in a country include:

the political stability

the predominant ideology toward business (and foreign business in particular)

the roles that institutions have in the country (including the church, government

agencies, and the legal systems)

the international links to other countries legal and ideological structures.

It is important to carefully assess the political power structure and mood in a

country before making decisions regarding business operations. By evaluating various

environmental factors, marketing managers can get a better understanding of the

likelihood of various problems or opportunities in a country.

In a research done by the PRS Group in 2009, they ranked 70 countries in terms of the

risk level of entering a certain country to conduct business in. In this ranking, Norway is

ranked the least risky and Somalia the most risky. Based on criteria like: Composite risk

measure, Economic risk, Financial risk, and political risk.

Turkey was ranked 62, making it a risky country for global businesses to enter. (PRS-

Group, 2009)

5.3 Legal environment Businesses face a couple of legal issues every day. Questions relating to such issues as

pricing policies and production practices must be clearly answered in order to avoid

punishment. Choices relating to legal industry laws and various regulations on product

specifications, promotional activities, and distribution must be understood in order to

function efficiently and profitably. Legal systems in each country deal with these

questions differently. In the figure below we can see the types of decisions a company

has to take and the possibles issues. (Kotler, 2005)


20

5.4 Chapter summary In the business life, governments affect almost every aspect. Aspects like national

politics, policy changes, and regulations and laws can influence the foreign company.

Governments determine which industries receive protection and which fall in face open

competition. It also determines labor regulations and property laws.

There are a few ways to characterize the nature of a government by its political ideology.

The 3 types of ideologies a country these days uses are Communism, Socialism and

capitalism. Under communism, the government owns and manages all business and

there are no privately owned companies. Capitalism refers to an economic system with

free enterprise and encouraging private ownership. In a socialist ideology the

government acts like a advocate between government ownership and privately

ownership. It controls some industries that are considered critical to the welfare of the

nation.

The number of political parties also influences the level of political stability. A one-party

regime does not exist outside the communist country. In a single-party-dominant

country, government policies tend to be stable and predictable over time.

For a company to make informed decision, the marketing manager needs to understand

the political factors of the country, the national strategies and goals, and the legal

environment and laws. To be successful, a foreign company has to offer some benefits

for the host country.

Assessing the political power structure and the mood in a country is important before

making business decisions. By evaluating various environmental factors, the company

can get a better understanding of the risks and opportunities in a country.

For the last part, a company also has to think about the legal environment. Issues such

as pricing policies, production decisions, packaging decisions, product decisions,

competitive decisions, selling decisions and channel decisions have to be thought

thoroughly to avoid punishment by the host country.


21

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