BRANCH:-INTERNATIONAL BUSINESSSUBJECT:- INTERNATIONAL MARKETING

ASSIGNMENT ON

INTERNATIONAL MARKETING ENVIRONMENT

THE INTERNATIONAL MARKETING ENVIRONMENT

The international marketing environment is a complex constellation of demands and constraints which the firm faces as it attempts to compete and grow. Identifying customer values in international markets requires a sophisticated understanding of differentiated expressions of customer needs, many of which are influenced by culture. Similarly, the task of communicating the values provide and their delivery in international markets is complex, requiring a great deal of understanding of the environment and its influences. International marketing is characterized by the convergence of the company marketing process, usually in one country, and the customer’s purchase decision process in another. This international marketing environment consists of a number of elements most of which lie outside the control of the firm.

The following are the elements of the international marketing environment:-

1. ECONOMIC ENVIRONMENT:-The economic environment has much to do with the scope of

business, business prospects and the business strategy.The nature and the level of development of economy, economic

resources, size of economy, economic system and economic policies, economic conditions, trends in the GNP growth rate and per capita income, nature of and trends in foreign trade, domestic supply and demand conditions are all the factors relevant to business. The nations of the world are broadly classified as developing countries and developed countries.

The developing countries fall into two categories low income countries and middle income countries. Generally, high income countries are developed countries. While most of the high income economies are industrial economies some of them act as exporters.

Low income economies are those with a GNP per capita of $825 or less in 2004. Within the group of low income economies, the United

Nations has identified a special category namely Least Developed countries, most of whom suffer from one or more of the following constraints: a very low GNP per capita, land locked, remotely insularity, desertification and exposure to natural disasters.

The middle income economies are those with a GNP per capita between $826and $10,066 in 2004. The middle income economies are further divided into two categories; lower middle income between $826 and $3255 and upper middle income between $3031 and $9360

The High income economies are those with a GNP per capita of $10,066 or more, in 2004.The developed economies as a group are sometimes referred to as the North with some exceptions like Australia and New Zealand, since most of them lie in the Northern hemisphere and the developing economies are referred as the Southern hemisphere.

The differences in the levels of development and income have implications for business. In the developing countries, particularly in the low income economies, the demand for many categories of goods and services is limited because of the low levels of income. The products that are regarded as essentials in advanced countries like refrigerator, electric fans, TV, etc. are regarded as luxuries in these countries. The price and the demand for them may be affected by high taxes on them because of their categorization as luxurious items. Many developing countries suffer from severe balance of payments problems and hence their import policies are very restrictive. However, a number of developing countries hold out very good prospects for business in future because of three reasons:

1. A steady increase in population2. Increase in income3. Growing democratization and in dividual freedom

The share of the developing countries in the increase in the world income has been growing and it would continue in future. The developed economies are characterized by high levels of income and consumption and business competition. Foreign trade is more liberal in comparison with that of most of the developing countries. Import restrictions are confined by and large, to import competing industries. The markets for many products in these economies are nearing saturation or have already saturated or are even declining mostly because of the population trends. While the advanced countries are characterized by high level of competition in the industrial sector and fast technological changes, most developing countries lag behind in these respects. Companies in the developed economies even viewed the developing countries as a market for obsolete technologies and products.

The differences in the income levels may necessitate product and price modification. The Aero Shoes’ Woodland range of shoes has been introduced in India for less than one third of the US price although the Indian target is the upper segment of the market. In countries where the income levels are low cost reduction may become essential for price reduction. Low cost models of products without the frills may be appropriate for these markets.

A developing country firm intending to do business in the advanced and competitive markets must bear in mind the fact that the environment in such markets may be different from that in the domestic. Product quality, features, styling, and finish, packaging, etc. are very important for success in these markets. The firm must make sure that the increased cost due to these factors be more than compensated by the high price chargeable in foreign markets. The difference in the level of development may cause a difference in the nature of the demand for a product. Only the areas that are electrified may the demand for electric consumer durables will be there. In developing countries most of the household possess a moped, a refrigerator, a radio, a TV, and a number of other household appliances. The demand for most of these consumer durables is from the existing customers only. Creation of primary demand is very important in developed countries even for products that have become quite common in developed countries.

This difference in the nature of demand has important implications for marketing. In developed countries the consumers become familiar with the product and are generally more capable of evaluating the product and are better equipped to make a choice by not only identifying the common problems in the products but also rectifying the minor problems. The economic environment of different countries is thus different indicating that different business strategies may be required for different markets. The different regions of a national economy may show great diversity of economical nature. In such cases, it may not be appropriate to regard it as a single economic unit. 2. POLITICAL ENVIRONMENT:-

The critical concern Political environment has a very important impact on every business operation no matter what its size, its area of operation. Whether the company is domestic, national, international, large or small political factors of the country it is located in will have an impact on it. And the most crucial & unavoidable realities of international business are that both host and home governments are integral partners. Reflected in its policies and attitudes toward business are a governments idea of how best to promote the national interest, considering its own resources and political philosophy. A government control's and restricts a company's activities by encouraging and offering support or by discouraging and banning or restricting its activities depending on the government. Here steps in international law. International law recognizes the right of nations to grant or withhold permission to do business within its political boundaries and control its citizens when it comes to conducting business. Thus, political environment of countries is a critical concern for the international marketer and he should examine the salient features of political features of global markets they plan to enter.

THE SOVEREIGNITY OF NATIONS: From the international laws point of view a sovereign state is independent and free from external control; enjoys full legal equality; governs its own territory; selects its own political, social, economic systems; and has the power to enter into agreements with other nations. It is extension of national laws beyond a country's

borders that much of the conflict in international business arises. Nations can and do abridge specific aspects of their sovereign rights in order to coexist with other countries. Like the European Union, North American Free Trade Agreement (NAFTA) are examples of nations voluntarily agreeing to give up some of their sovereign rights in order to participate with member nations for common, mutually beneficial goals. For example the pajama game discussed in global perspective is not unusual for multinational corporations. The pajama caper was a controversy arose over a US embargo forbidding US businesses to trade with Cuba. Wal-Mart was selling Cuban made pajamas in Canadian market. When Wal-Mart officials in US came to know about this, they ordered all offending Cuban pajama's as it was against US law. Canada was incensed with the obtrusion of US law on Canadian citizens. The Canadian citizen's felt that they should be able to buy Cuban-made pajama's if they wanted to. Wal-Mart was caught between a Canada-US foreign policy feud. Wal-Mart Canada was breaking US law if it continued to sell pajamas, and was subject to a million-dollar fine and possible imprisonment. However, if it did pull out pajamas from Canadian market it was subject to 1.2 million dollar fine under Canadian law. The ideal political climate for a multinational firm is stable, friendly environment. Unfortunately, that is never really the case, it's not always friendly and stable. Since foreign businesses are judged by standards as variable as there are nations, the friendliness and stability of the government in each country must be assessed as an ongoing business practice.

STABILITY OF GOVERNMENT POLICIES: The most important of the political conditions that concern an international business is the stability or instability of the prevailing government policies. Political parties may change or get reelected but the main concern for MNCs is the continuity of the set rules or code of behavior regardless of the party in power. A change in the government does not always mean change in the level of political risks. In Italy the political parties have changed 50 times since the end of World War II but the business continues to go on as usual inspite of the political turmoil. In comparison is India, where the government has changed 51 times since 1945 but however much of the government policies remain hostile to foreign investments. Conversely, radical changes in policies toward foreign business can occur in the most stable of the governments. Some of the African countries are among the unstable with seemingly unending civil wars, boundary disputes and oppressive military regimes. Like one of the region with the greatest number of questions concerning long-term stability is Hong Kong as since China has gained control, the official message is that nothing will change and thus everything is seemingly going smoothly but the political analysts say that it is too early to say how will the business climate change, if it will. If there is potential for profit and if given permission to operate within a country, MNCs can function under any type of government as long as there is some long-term predictability and stability.

POLITICAL PARTIES: Particularly important to the marketer is the knowledge of all philosophies of all major political parties within a country,

since anyone might become dominant and alter prevailing attitudes. In those countries where there are two strong political parties where usually one succeeds the other, it is important to know the direction each of the parties is likely to take. Changes in direction a country may take toward trade and related issues are caused not only by political parties but also by politically strong interest groups and factions within different political parties, which cooperate to affect trade policies.

NATIONALISM: Economic nationalism that exists to some degree in all countries is another factor that affects international environment. Nationalism is intense feelings of national pride and unity, an awakening of nation's people to take pride in their own country. This pride can take an anti-foreign business bias. One of the central aims of economic nationalism is the preservation of national economic anatomy where national interest and security are more important than international considerations. POLITICAL RISKS OF GLOBAL BUSINESS CONFISCATION, EXPROPRIATION AND DOMESTICATION The most severe political risk is confiscation, which is seizing of company's assets without payment. Less severe is however, expropriation, which requires reimbursement, for the government seized investment. A third type of risk is domestication, which occurs when host country takes steps to transfer foreign investments to national control and ownership through series of government decrees. A change in the government's attitudes, policies, economic plans and philosophies toward the role of foreign investment is the reason behind the decision to confiscate, expropriate or domesticate existing foreign assets.

ECONOMIC RISKS International companies are often faced with many economic risks most of which arise without any prior warning. Economic risks are an important and a recurring part of political environment that a few companies can avoid. · Exchange controls stems from shortage of foreign exchange held by the country. When this happens, controls may be placed upon all movements of capital or selectively against most politically vulnerable companies. Exchange controls are extended to cover products by applying a system of multiple exchange rates to regulate trade. · Local-content laws- companies often require a portion of any product sold in a country to have a local content. · Import restrictions- selective restrictions on import of certain raw materials, machines and spare parts are common strategies used to force foreign companies to purchase more materials within host country creating markets for local products. · Tax controls- taxes are a classified risk when used as a means of controlling' foreign investments. They are often raised without warning and in violation of formal agreements. · Price controls- essential products that command considerable public interest are often subject to price controls. ASSESSING POLITICAL VULNERABILITY: Some products are more politically vulnerable than others, in that they receive more government attention. This special attention may result in positive or negative actions towards the company. Unfortunately there are no absolute guidelines for marketer's to follow whether the product will receive government attention or not.

POLITICALLY SENSITIVE PRODUCTS: There are some generalizations that help to identify the tendency for products to be politically sensitive. Products that have an effect upon the environment exchange rates, national and economic security, and the welfare of the people are more apt to be politically sensitive. For products judged non essential the risk would be greater, but for those thought to be making an important contribution, encouragement and special considerations could be available.

FORECASTING POLITICAL RISKS: A number of firms are employing systematic methods of measuring political risk. Political risk assessment can: · Help managers decide if risk insurance is needed · Devise and intelligence network and an early warning system · Help managers develop a contingency plan · Build a database of past political events for use by corporate management · Interpret the data gathered and getting forewarnings about political and economic situations REDUCING

POLITICAL VULNERABILTY: Even though the company cannot directly control or alter the political environment, there are measures with which it can lessen the susceptibility of a specific business venture. GOOD CORPORATE CITIZENSHIP A company can reduce its political vulnerability by being a corporate citizen and remembering: - 1. It is a guest in the country and should act accordingly 2. The profits are not it's solely, the local employees and the economy of the nation should also benefit. 3. It is not wise to try and win over new customers by totally Americanizing them. 4. A fluency in the local language helps making sales and cementing good public relationships. 5. It should train its executives to act appropriately in the foreign environment.

STRATEGIES TO LESSEN POLITICAL RISKS: MNCs can use other strategies to minimize political risks and vulnerability. They are: - · Joint ventures · Expanding the investment base · Marketing and distribution · Licensing · Planned domestication · Political payoffs GOVERNMENT ENCOURAGEMENT OF GLOBAL BUSINESS FOREIGN GOVERNMENT ENCOURAGEMENT Governments also encourage foreign investment. The most important reason to encourage investment is to accelerate the development of an economy. An increasing number of countries are encouraging investments with specific guidelines toward economic goals. MNCs may be expected to create local employment, transfer technology, generate export sales, stimulate growth and development of the local industry.

US GOVENRMENT ENCOURAEMENT: The US government is motivated for economic as well as political reasons to encourage American firms to seek opportunities in the countries worldwide. It seeks to create a favorable climate for overseas business by providing the assistance by providing the assistance that helps minimize some of the troublesome politically motivated financial risks of doing business abroad.

3. LEGAL ENVIRONMENT:-

Organizations must deal with laws at the international, federal, state, and locallevels. US laws directly affecting marketing typically fall into two categories: thosepromoting competition among firms and those protecting consumers and society.Exhibit 3.8 presents examples of each type. Laws promoting competition focus on outlawing practices that give a few firms unfair competitive advantages over others. The specific impact of these laws depends on court rulings that may change over time or differ at the state and national levels. An interesting example is in the area of pricing. A federal court ruled that American Airlines was not guilty of trying to drive weaker competitors out of business when it slashed fares in 1992. In contrast, a state court in Arkansas found Wal-Mart guilty of predatory pricing by selling pharmacy products below cost to drive out competitors. These examples illustrate the complexity of the political/legal environment.

Consumer protection laws generally indicate what firms must do to giveconsumers the information they need to make sound purchasing decisions or toensure that the products they buy are safe. For example, the Fair Packaging andLabeling Act requires packages to be labeled honestly; the Child Protection Actregulates the amount of advertising that can appear on children’s televisionprograms.

Laws typically affect marketing activities by indicating what can or cannot bedone. Until recently, Germany had a law that forced most retail stores to close at6:30 PM on weekdays and 2 PM on Saturdays, and it did not allow commercialbaking on Sunday. This restricted the operations of retailers. A new law expandedallowable shopping hours to 8 PM on weekdays and 4 PM on Saturdays; it alsoallowed bakeries to sell fresh bread on Sunday mornings. Other stores mustremain closed on Sunday.

Some laws are directed at providing marketing opportunities. Syria, for example in trying to open its economy to the private sector and foreign investment,passed a law that exempts investors in approved projects from taxes for five tonine years, waives customs duties on certain imports, and removes regulations thatmade it difficult to do business in Syria. Known as No. 10, it has contributed to a

7 to 8 percent growth in the Syrian economy.REGULATION AND REGULATORY AGENCIES:

Most legislation in the US is enforced through regulations developed by a variety of agencies, and marketers must often work with regulatory authorities at thefederal, state, and local levels. Key US laws affecting marketingA. Promoting competitionAct Purposev Sherman Act (1890) Prohibits monopolistic practicesv Clayton Act (1914) Prohibits anticompetitive activitiesv Federal Trade Commission Act (1914) Establishes regulatory agency to enforce laws against unfair competitionv Robinson–Patman Act (1936) Prohibits price discriminationv Lanham Trademark Act (1946) Protects trademarks & brand namesv Magnusson–Moss Act (1975) Regulates warrantiesv US–Canada Trade Act (1988) Allows free trade between US & CanadaB. Protecting consumers & societyAct Purposev Food, Drug, and Cosmetics Act (1938) Regulates food, drug & cosmetic industriesv Fair Packaging and Labeling Act (1966) Regulates packaging & labelingv Child Protection and Toy Safety Act (1969) Prevents marketing of dangerous products to childrenv Consumer Credit Protection Act (1968) Requires full disclosure of financial charges for loansv Fair Credit Report Act (1970) Regulates reporting & use of credit informationv Fair Debt Collections Practice Act (1970) Regulates methods for collecting debtsv Child Protection Act (1990) Regulates advertising on children’s television programsv Americans with Disabilities Act (1990) Prohibits discrimination against consumers with disabilities.

Often, regulations are not the same at different depends on court rulings that may change over time or differ at the state and national levels. An interesting example is in the area of pricing. A federal court ruled that American Airlines was not guilty of trying to drive weaker competitors out of business when it slashed fares in 1992. In contrast, a state court in Arkansas found Wal-Mart guilty of predatory pricing by selling pharmacy products below cost to drive out competitors. These examples illustrate the complexity of the political/legal environment.

The governmental levels: For example, the Federal Trade Commission (FTC) enforces guidelines for how firms promote the environmental advantages of their products, but these guidelines do not supersedestate laws or regulations. Now, 12 states regulate environmental claims in some way, with more states likely to follow in the future. Sorting through

different regulations is a complex task for marketers. Several of the most important federal agencies are described in

Some of these regulatory agencies cut across industries (FTC, CPSC, EPA); others focus on specific industries (FDA, ICC, FCC). The impact of these regulatory agencies is especially evident in the pharmaceutical industry. The FDA must approve a new drug before it is marketed and can place limitations on its use. For example, the FDA approved Warner-Lambert’s anticonvulsant, Neurontin, but only as an add-on therapy for patients taking other epilepsy medications. This stipulation limits Warner-Lambert’s marketing efforts for Neurontin. FDA actions can also producemarketing opportunities. The approval of smoking-cessation nicotine drugs as over-the-counter products opened up a large market to marketers of nicotine gum and patches. As more firms participate in the global marketplace, the need for international regulations is emerging. One example is the International Standards Organization’s 25-page set of quality standards called ISO 9000. These standards apply to 20 different functions within a company, such as product design, process control, purchasing, customer service, inspection and testing, and training, and are being incorporated into laws of the European Union (EU) to regulate trade in Europe. A company must go through a long and expensive process to become ISO 9000–certified, which would indicate it meets world standards in many areas. Companies not ISO 9000– certified may not do business in Europe or many other countries. Even individual companies, like General Motors and Siemens, require their suppliers to be ISO 9000–certified.Regulations in different countries also change and present market opportunities or threats. For example, the EU is deregulating European skies. Beginning April 1, 1997, any EU carrier can fly anywhere in the EU. This deregulation provides opportunities for EU airlines to open new markets, but the increased competition is likely to reduce prices to consumers. Lower prices will exert tremendous pressure on profits. Many of the smaller, start-up airlines may not be able to survive. The larger airlines, such as Lufthansa, are already implementing cost cutting measures to prepare for the more competitive environment. Sometimes regulations are slow to develop for new markets. This is the case in Japan shows of how entrepreneurs are taking advantage of this situation.

4.SOCIAL ENVIRONMENT:-

The social environment includes all factors and trends related to groups of people,including their number, characteristics, behavior, and growth projections. Since consumer markets have specific needs and problems, changes in the Identify relevant environmental factors & trends Does trend create a marketing opportunity?Does trend pose a marketing threat? Decide how to minimize threat Assess impactof trends on markets & marketing activities Decide how to take advantageof opportunity.

Social environment can affect markets differently. Trends in the social environment might increase the size of some markets, decrease the size of others, oreven help to create new markets. We discuss two important components of the social environment: the demographic environment and the cultural environment. Speaking from Experience Based in Hong Kong, Samuel Chi-HungLee’s company has established extensive business networks in southeast Asian countries, such as Indonesia, Malaysia, Singapore, Burma, Vietnam, and southern China. Samuel has been a senior sales and marketing management executive for several North American corporations with operations in Hong Kong and has an MBA. He describes some of the business opportunities made possible by the rapidly changing marketing environment in China and Hong Kong.

‘‘Tremendous changes have taken place in Hong Kong since China implementedits open-door policy to the outside world. Hong Kong has changed from amanufacturing center to an international financial and professional servicescenter. Because land and labor costs are high, many businesses in Hong Kongare knowledge-based and driven by information technology. My company utilizesknowledge and information to help other companies pursue opportunities indifferent Asian countries. For example, we are working with a joint venture tobuild a chemical plant in Ho Chi Minh City, Vietnam.’’

Demographic EnvironmentThe demographic environment refers to the size, distribution and

growth rate of groups of people with different characteristics. The demographic characteristicsof interest to marketers relate in some way to purchasing behavior, because people from different countries, cultures, age groups, or household arrangement often exhibit different purchasing behaviors. A global perspective requires that marketers be familiar with important demographic trends around the world as well as within the United States.

GLOBAL POPULATION SIZE AND GROWTHPopulation size and growth rates provide one indication of potential

market opportunities. The world population is now more than 5.3 billion, and almost 100 million people will be added each year during the 1990s. Thus, the world population is expected to grow by 1 billion during the decade of the 1990s. Approximately 95 percent of that growth will take place in developing countries in Asia, Africa, and Latin America.2 Population in the developed countries will grow at a much slower rate. For

example, the US population grew by approximately 1 percent per year during the 1980s, a low rate expected to persist throughout the 1990s. There is a tremendous disparity in population size and growth rates across countries, China currently has the largest population, followed by India, with the US a distant third. The rapid growth of the Indian population is expected to make it the world’s most populous nation by the year 2100. Other countries with large and growing populations are the developing nations of Indonesia, Brazil, Pakistan, Bangladesh, and Nigeria. The world population situation can be summarized as follows. About every two seconds, nine babies are born and three people die, for a net increase of three people each second. This leads to a growth rate of 10,600 people per hour, 254,000 per day, 1.8 million per week, 7.7 million per month, and 93 million per year. Of this annual increase, developing countries will have 87 million new people, and developed countries, 6 million. Annual growth will increase to 94million by the year 2000; by 2020 it will be 98 million, with 98 percent occurring in developing countries. These world population statistics make it clear that marketers cannot rely on population growth in developed countries alone for general increases in market size. The largest growth markets, measured by population size, are in thedeveloping countries. Yet, lower income levels in developing countries may limit the actual market size for many products. Thus, marketers will have to look hard to find attractive growth markets in developed and developing countries.GLOBAL DEMOGRAPHIC CHARACTERISTICS AND TRENDS

Overall world and country population statistics are important, but most marketers target subgroups within these large populations. Trends in population subgroups are therefore typically the most useful to marketers. An important trend in many countries is growth of the urban population. Current and projected populations for the world’s largest cities are presented in In general, the largest cities and the highest city growth rates are in developing countries such as Mexico, Brazil, and India; however, growth in urban population is evident in many developed countries. For example, in 1900 the US population was 39.6 percent urban and 60.4 percent rural; in 1990 the figures were 75.2 percent urban and 24.8 percent rural.4 This means the largest and fastest-growing markets for many products are located in the urban areas of most countries. However, there has also been some growth in the rural population in the US since 1990. US rural areas have seen a 5.1 percent population increase in the past five years, the fastest rural growth rate in more than two decades. Much of this growth is from retirees, those seeking specific types of recreation, and those wanting a more peaceful life. Some families are moving to rural areas; but in many of these households, at least one parent commutes to work in a big city or telecommutes. Retailers, such as Wal-Mart and Kmart are responding to this growth by opening stores in these rural areas. Another interesting trend is the aging of the population in many countries. Current and projected median ages for selected countries The aging of the population is especially evident in Italy, Japan, Britain, and the US. Notice, however, the relatively young populations in

the developing countries, such as Nigeria, Mexico, Brazil, and China. Age distribution trends in the US are presented in more detail in The largest percentage of growth is occurring in the 45–64 and 65+ age brackets, with slight to moderate decreases in all younger age categories. These trends have important implications for marketers; older consumers have different needs and purchasing habits than younger consumers. Marketers are responding to different age markets in a number of ways. For instance,

• Financial institutions have increased marketing efforts to attract mature Americans. Mutual fund giants, T. Rowe Price and Vanguard, offer softwareprograms to help older consumers plan for retirement. Merrill Lynch hired a gerontologist to understand mature consumers better and to develop products to suit their goals. ESPN developed the Alternative Sports Olympics to appeal to consumers aged 18 to 29. Also called The Extreme Games, the program featured sports that would attract the so-called Generation X (bungee jumping, street luging, sky surfing, and barefoot water ski jumping) and was sponsored by companies trying to target those young consumers (Taco Bell, Mountain Dew, Nike, AT&T, and Pontiac). More than 130,00 spectators saw the games live and 11.1 million watched on television. ESPN has made this an annual sports competition.

• Sega of America spends a great amount of time trying to understand teens. The company’s advertising agency visits the homes of 150 teens and goes shoppingwith them at the malls. This information helps Sega introduce new video gamessuccessfully. Yet another relevant demographic trend is the declining number of household units consisting of the ‘‘typical’’ family: married couples with children living at home. Only 26 percent of US households fall in this category, down from 31percent in 1980. People living with nonrelatives is the fastest-growing householdtype, up 46 percent during the 1980s.9 In addition, 23 million Americans live bythemselves. This is an increase of 91 percent for women and 156 percent for menduring the 1980s.10 The needs and purchasing behaviors of different householdarrangements represent important trends affecting marketers. The world’s largest citiesCity1991(in thousands)2000 (est.)(in thousands)1. Tokyo—Yokohama, Japan 27,245 29,9712. Mexico City, Mexico 20,899 27,8723. Sa˜ o Paulo, Brazil 18,701 25,3544. Seoul, South Korea 16,792 21,976

5. New York, USA 14,625 14,6486. Osaka—Kobe—Kyoto, Japan 13,872 14,2877. Bombay, India 12,109 15,3578. Calcutta, India 11,898 14,0889. Rio de Janeiro, Brazil 11,688 14,16910. Buenos Aires, Argentina 11,657 12,911

Cultural EnvironmentThe cultural environment refers to factors and trends related to

how people live and behave. Cultural factors, including the values, ideas, attitudes, beliefs, andactivities of specific population subgroups, greatly affect consumers’ purchasing behavior. Thus, marketers must understand important cultural characteristics and trends in different markets.CULTURAL DIVERSITY Cultural differences are important in both internationaland domestic markets. A cultural group’s characteristics affect the types of products it desires and how it purchases and uses those products. Different cultural groups in international markets often require marketers to develop strategies specifically for them. Campbell’s Soup has had some successes and some failures in doing this. The successes include hearty vegetable and fat-free soups in Australia, duck-gizzard soup in Hong Kong, and the Godiva Chocolatier line in Japan. But the company has had some failures due to lack of understanding cultural differences in some markets. German consumers did not like Campbell’s canned condensed soup. They prefer drysoups in envelopes. Polish consumers did not like Campbell’s prepared soups, sincethey would rather cook soup at home. Much of the population growth in the US is and will be accounted for by different cultural groups. The majority US population is expected to grow by about 3 percent between 1990 and 2000. Compare this to the 14 to 52 percent growth rates of different ethnic groups. A large portion of this population growth is accounted for by African-Americans, Asian-Americans, and Hispanic-Americans. However, significant growth is also expected from other cultural groups: Arabs, Russians, Eastern Europeans, and Caribbeans. These different cultural groups retain many of their habits, attitudes, interests, and behaviors even though they are proud to be Americans. The US is not a melting pot; it’s a mosaic of unique people with a variety of cultures. Successful marketers understand the delicate balance between important cultural differences and similarities that unite different cultures. For example, the Arab-American sector consists of a diverse group of people from 22 different countries, with the largest subgroups being Egyptians, Syrians, Lebanese, Palestinians, and Iraqis. Although these subgroups differ in various ways, there is also cohesiveness among them due to their common Arab heritage. This cultural complexity provides marketers with a continual challenge. Take the cosmetics industry as an example. Maybelline introduced its Shades of You

cosmetics line to appeal women of color in 1991 and captured 41 percent of the$55 million ethnic cosmetics market by 1992. In 1993, Revlon and Cover Girl entered the ethnic market. These companies found out, however, that a large portion of their sales were to white women, even though marketing efforts were targeted to specific cultural groups. The companies now offer a wide variety of cosmetic shades, but present them together in stores and advertise in generalmarket women’s magazines.Contrast that with the situation of Susan Yee. She and her five sisters were constantly frustrated by the lack of cosmetic products that would highlight the yellow undertones of their complexions. Susan decided to remedy the situation by establishing Zhen, a line of cosmetics targeted to Asian women. Zhen, pronounced‘‘jen,’’ means genuine in Chinese. Zhen products are sold through a 12-page catalog and at some Nordstrom branches. Her typical customer is a working Asian-American woman between the ages of 20 and 40.17 These examples in the cosmetics industry illustrate the importance of understanding the diversity among and within different cultural markets. There are typically opportunities to market products across some cultural groups and to also target specific cultural groups. Sometimes, products from one culture can appeal to consumers in another culture. Princess Asie Acansey of Ghana capitalized on such an opportunity when she formed Advanced Business Connections (ABC). She was disturbed about the imagery of Africa as typically presented in the US and decided to do something about it. ABC infuses African culture into the American teddy bear. The teddy bears represent African royalty and follow African royal customs. The first teddy bear was the king’s protocol officer, Kwesi-Bear, then King Tutu Bear, followed by Queen Abena. Most of ABC’s marketing has been on the QVC home shopping network. The products have been well received beyond the African-American market in the US, illustrating the potential from mixing different cultures.CHANGING ROLES As more women enter the workforce and household compositions change, typical household roles are altered. No longer are financially supporting the household and developing a career solely the responsibility of men. No longer are household chores, child care, or grocery shopping solely the responsibility of women. In many households, roles have shifted and distinctions have become blurred. More men spend time on household and shopping chores, and many women are involved in career development and provide much or most of the financial resources for a household. Tremendous market opportunities exist for firms that can develop effective strategies for appealing to these changing roles. Take golf as an example. Women now account for 21 percent of the 25 million golfers in the US. And this percentage is growing. Some of this growth is due to more women playing golf as part of their business or professional life. Others play the sport entirely for pleasure. In any case, women spend about $3 billion annually on golf equipment, clothing, travel, green fees, and other related products. One study found that women are more likely to take golf lessons, are less price sensitive, and are more concerned

about wearing fashionable clothing than men golfers. This growing, upscale market of female golfers is attractive to marketers of golf products as well as other products.EMPHASIS ON HEALTH AND FITNESS Another cultural trend is an increased emphasis on health and fitness. The pursuit of a healthier lifestyle includes eating more nutritious foods, exercising regularly, participating in various sports activities, and focusing on wellness. This translates into potential market opportunities for firms that provide products and services geared toward improving health and fitness.The organic food and beverage industry is illustrative. Sales have increased by more than 20 percent for each of the past four years and are in excess of $3 billion annually. The number of new organic food and beverage products has increased from 512 in 1991 to 1,015 in 1995. These products include everything from chicken potpies to pinot noir wine. Every indication is that this growth will continue in the future.20 The emphasis on health and fitness has contributed to the longer life expectancies in the US and other countries. Longer life spans increase the importance of customer loyalty as discussed in ‘‘Earning Customer Loyalty: Longer Lifetimes, More Lifetime Value.’’DESIRE FOR CONVENIENCE Changes in household composition, increases inthe number of working women, and a general shortage of time underlie an increased desire for convenience. Two-paycheck households often have more money than time. And they are willing to spend this money to avoid spending time doing undesirable chores, such as cooking, cleaning, or auto maintenance. Thus, many consumers buy products and services to minimize time devoted to such chores, opening new market opportunities for companies able to meet these needs. Firms specializing in home shopping are taking advantage of this need by making it easy for consumers to purchase products whenever it is convenient. QVC and Home Shopping Network dominate the $2.5 billion televised home shopping business. In Japan, consumers are purchasing US products through World Shopping Network (WSN). WSN is available 24 hours a day as an online computer service.CONSUMERISM Consumerism is the movement to establish and protect the rights of buyers. Some say the consumerism movement will intensify as we move through the 1990s. Consumers are more educated, knowledgeable, and organized. They will demand better consumer information, quality, service, and dependability, and fair prices.22 The consumerism movement is one reason marketers need to adopt anethics perspective. Giving consumers products that work, charging fair prices, beinghonest, and practicing social responsibility are the best ways to respond to consumerism.one increasingly important consumer issue is environmentalism.As consumers worldwide become concerned with environmental issues, their purchasing behavior will change. Successful marketers can respond by developing

environmentally safe products and communicating their environmental contributions.Ogallala Down Co. is taking advantage of this trend. The company’s philosophy is, ‘‘Healthy products for people and the environment.’’ It markets down comforters and pillows that are hypoallergenic, warm, lightweight, breathable, and guaranteed for 10 years. Established in 1989, the company has enjoyed rapid sales growth in an industry long dominated by large firms. The American Marketing Association recognized the environmental achievements of Ogallala Down by presenting it with an Edison Environmental Award. POPULAR CULTURE The final cultural trend we note is the popularization ofthe US culture throughout much of the world. Movies, television shows, and commercials typically express a culture’s values and attitudes, and US food, fashion, and entertainment trends are becoming increasingly popular worldwide. Technological advances and globalization of the media allow the export of this popular culture, resulting in a variety of market opportunities. One firm taking advantage of these opportunities is MTV, which beams music videos into 210 million households in 71 countries. Revenues are increasing at the rate of 20 percent per year as MTV establishes or expands operations in Europe, Australia, Latin America, Russia, China, Korea, and Taiwan.

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SUBMITTED BY:-ASHWIN VIJAY DIDOLKAR

SEMESTER: III