CHAPTER2 the International Environment

7/31/2019 CHAPTER2 the International Environment

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CHAPTER 2

THE INTERNATIONAL ENVIRONMENT: CULTURE

ECONOMIC

POLITICAL & LEGAL

COMPETITION


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Introduction

The foreign environment faced by theinternational marketing company has manydistinct components.

Major ones include economic forces,political/legal forces, socio-culturalforces, and competition.


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1.0 Socio-Cultural Environment

Socio-cultural environment influences thebehavior of customers, managers, andmarketing intermediaries.

Its influences the political/legalenvironment of the country, the wayeconomic system works and attitudes

towards competition.


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Cont..

So it is crucial to understands and dealing

effectively with the pervasive effect ofculture on export management.

Foreign consumers differ from domestic

consumers in all aspects of behavior i.e.the what, why, who, how, when and where.

Marketer need to understand the foreignculture, its differences and how its affects

the desires, objectives and behaviors ofpotential customers.


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1.1 Managing Cultural Differences

Sometimes viewed as a major obstacles.

However it is proven wrong by the successand well-known multinationals.

Better understanding on culturaldifferences as well as appropriatestrategies can be a competitive tools toexcel in foreign market.


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1.2 Managing Multiculturalism

a. Cultivate self-awareness

b. Work with differences

c. Communication stylesd. Cross-cultural conflict management

e. Be curious


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1.3 Nature of Culture

What is culture? In a real sense, culture is human-made.

It is learned and communicated from one

generation to another. Culture is a shared system of meanings,

it is learned and inherited.


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Cont..

To understand culture, one mustunderstand its origins, history, structureand functioning.

Culture change overtime; might be due to

outside pressure i.e. government or othergroups (race, religious and organization).

Culture provides norms for behavior ofbuyers, consumers and sellers.


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1.4 Cultural Dimensions

Value and Attitudes

Education

Religion

Politics

P/s: refer to table 3.2 pg. 122

Law

Language

Social Organization

Technology andmaterial culture


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1.5 Culture and Communication

Behavior itself is a form ofcommunication.

Each culture differ in way of attitudestowards time, space, relationship (calledsilent-language)

According to Hall (1960); five dimensions(time, space, things, friendship andagreements)

As a basis for real understanding of othercultures.


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1.6 Cultural Context

Important to understand differencesamong cultures in their reactions tocommunication and behavior.

2 types of cultural context

i. High context cultures

ii. Low context cultures


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High Context Cultures (Indirect Comm.)

The situation, relationships, and unspoken

understandings may carry more meaning andimportance than the words themselves.

Ex. Japan and most Asia countries.

Low Context Cultures (Direct Comm.) Meaning of messages can usually be wholly or

partially isolated from the context in whichthe message occurs.

Ex. US and mostly European countries.


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High Context: Things are left unsaid, letting the culture

explain. Collectivist, intuitive, and contemplative.

Low Context:

Logical, linear, individualistic, actionoriented.Japanese vs. American

We dont speak as much as you do here. When we say

one word, we understand ten, but you have to sayten to understand one.


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2.0 Economic Forces

Affect the market potentials. Also influences strongly in terms of

infrastructure i.e. communication, energyand transportation facilities.

Demand for products is affected both bypopulation size and distribution of incomeand wealth.

Influences the whole business environmentin a country.


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2.1 Market Development

Economic development of market influencesthe lines of business and methods by whichbusiness can be carried out.

Foreign markets are at different stage of

economic development. Economic development of a country isclassified into developed, developing andnewly industrialized.

Big emerging markets known as BEMs maypresent major marketing opportunities.(China, India, Indonesia, Korea, Brazil)


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Cont..

Countries also differ widely in risk tobusiness profitability.

Index of Operational Risk-based on

categories of risks such as security,political stability; governmenteffectiveness, legal and regulatory,macroeconomic, foreign trade and

payments, tax policy, labor market as wellas infrastructure.


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3.0 Political/Legal Environment

The government provides the political/legalenvironment, though not all factors thataffect businesses are part of formalgovernment policy (i.e. Nationalism).

Nationalism or protectionism may result inbehavior by government officials or otherbusinesses even though they are not specifiedby law (e.g. the traditionally strong, thoughnow declining, preference of Japanese

companies buying from other Japanesecompanies).


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3.1 Role of Government

Government act as a participator, planner,controller or simulator.

Basically, Gov. involve in three main activities:

i. Promote encourage/facilitate export

marketing transaction;

ii. Those that impedesuch transactions;

iii. Government competewith private

firms


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3.2 Government Control

Government may impedes export marketingactivities by imposing restrictions andcontrols.

The restrictions and controls specifically focus

on imports and exports. Such controls affecttypes and amount of

products that can be im/ex.

Restrictions affecttrading relationships suchas transactions advisability/profitability.


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Controls specifically addressing

international activities such as:a. License requirementb. Tariffs (protective and revenue)c. Anti-dumping dutiesd. Quotase. Extra taxesf. Qualitative controls

g. Exchange controls


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Cont.. Export controls may be placed on certain

products or services, usually those relatedto national defense. Packaging and recycling requirements for

materials are being increased, leading toredesigns, some changes in transportationrequirements, and some new businessactivities.

The growth of the Internet and the WorldWide Web, and the increases in e-

commerce, are leading to new legislationand regulations.


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3.3 Other Types ofLegal/Regulatory Activities

a. Environmental:greenhouse gases,packaging, environmentally friendlyproducts;

b. Labor rights;c. Protection of intellectual property;d. Tax policy;e. Antitrust regulations, mergers, pricing,

business practices; andf. Corruption.


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4.0 Competition

One of the most dynamic forces affectingmarketing strategy.

Differential advantage gives an individual

firm an edge over others. Effective use of information gives tacticalcompetitive advantage.

Competition is not always fair: bribes and

political activities.


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4.1 Nature of Competition

Export marketing require a knowledge of:

1.Structure of Competition: Number andtypes of competitors.

2.Actions of Competitors: Product, channel,price, promotion.

3.Competition from AcceptableSubstitutes: Aspirin, razor blades, soft

drinks, automobiles.


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4.2 Factors Influencing Competition

Type of Product: Homogeneous have intensecompetition on price; Differentiatedproducts use non-price competition.

Prices of homogeneous products tend to beforced down to average unit costs.

Overall, competition is influencedlargely by:a. General business conditions; culture,economic and social conditionsb. costs;

c. laws and regulations; andd. actions of competitors.


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Conclusion

Each of the major components in theinternational environment discussed(economic, socio-cultural, political-legal,competitive) has a distinct effect on

competition, it could also interact witheach others.

International marketer or exporter mustunderstand/consider for each component

so that they could compete efficiently inthe foreign market.

CHAPTER2 the International Environment

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