Managing Global Marketing-market Factors

INTERNATIONAL BUSINESS MANAGEMENT

LESSON 30 MANAGING GLOBAL MARKETING-MARKET FACTORS Promotion Promotion is the presentation of messages intended to help sell a product or service. The types and direction of messages and the method of presentation may be extremely diverse, depending on the company, product, and country of operation. The Push-Pull Mix Promotion may be categorized as push, which uses direct selling techniques, or pull, which relies on mass media. An example of push is Avon’s door-to-door selling of cosmetics; an example of pull is magazine advertisements for a brand of “cigarettes. Most companies use combinations of both marketing strategies. For each product in each country, a company must determine its total promotional budget as well as the mix of the budget between push and pull. Several factors help determine the mix of push and pull among countries • Type of distribution system • Cost and availability of media to reach target markets • Consumer attitudes toward sources of information • Price of the product compared to incomes

Generally, the more tightly controlled the distribution system, the more likely a company is to emphasize a push strategy because it requires a greater effort to get distributors to handle a product. This is true, for example, in Belgium, where distributors are small and highly fragmented, forcing companies to concentrate on making their goods available. Also affecting the push-pull mix is the amount of contact between salespeople and consumers. In a self-service situation, in which there are no salespersons to whom customers can turn for opinions on products, it is more important for the company to use a pull strategy by advertising through mass media or at the point of purchase. Because of diverse national environments, promotional problems are extremely varied. For example, about 70 percent of India’s population is rural, and many people in rural areas are illiterate, poor, and without access to televisions and radios. Some mass consumer merchandisers such as Colgate-Palmolive, Unilever, Coca-Cola, and Pepsi provide samples at religious pilgrimages that millions attend in the expectation that their subsequent word-of-mouth promotions will yield sales. In many countries, government regulations pose an even greater barrier. For example, Scandinavian television has long refused to accept commercials. Other countries may put legal constraints on what a company says, thus affecting the push-pull mix. For example, in me United States, pharmaceutical companies have been using more pull promotions even for prescription drugs. They talk about the product and brand in television ads and tell the viewer to ask their physicians about it. European countries are more restrictive. Thus, in Europe, Pfizer’s advertisements

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talk about the symptoms of erectile dysfunction and tell TV viewers to speak with their physicians about it; however, Pfizer never mentions its drug, Viagra, in these ads. Finally, the amount of consumer involvement in making a purchase decision varies by country because of income levels. When a product’s price compared to consumer income is high, consumers usually will want more time and information before making a purchase decision. Information is best conveyed in a personal selling situation, which fosters two-way communication. In developing countries, MNEs usually have to use more push strategies for mass consumer products because incomes are low compared to price. Standardization of Advertising Programs The savings that result from using the same advertising programs as much as possible-on a global basis or among countries with shared consumer attributes-are not as great as those from product standardization. Nevertheless, they can be significant. In addition to reducing costs, advertising standardization may improve the quality of advertising at the local level (because local agencies may lack expertise), prevent internationally mobile consumers from being confused by different images, and speed the entry of products into different countries. For example, Sony’s “My first Sony” was aimed at young consumers allover the world. However, standardized advertising usually means a program that is similar from market to market rather than one that is identical in each one. For example, Pepsi had Tina Turner sing the Pepsi-Cola theme song with local bands in different countries. Some of the problems that hinder complete, standardization of advertising relate to translation, legality, and message needs. Standardization usually implies using the same advertising agency globally. However, companies may differentiate campaigns among countries even if they use the same agency everywhere. By using the same agency, companies such as IBM, Colgate, and Tambrands have found that they can take good ideas in one market and quickly introduce them into other markets because they need not worry about legal and ethical problems from having one agency copy what another has done. However, some companies, such as Procter & Gamble, prefer to use more than one agency to keep the agencies in a state of perpetual competition and to cover one agency’s weak spots by drawing on the ideas of another agency. Translation When media reach audiences in multiple countries, such as MTV programs aired throughout most of Europe, ads in those media cannot be translated because viewers watch the same transmission. However, when a company is going to sell in a country with a different language, translation is usually necessary unless the advertiser is trying to communicate an aura of foreignness. Toyota used this tactic in ads in the United

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On the surface, translating a message would seem to be easy. However, some messages, particularly plays on words, simply don’t translate-even between countries that have the same language. The number of ludicrous but costly mistakes companies have made attest to translation difficulties. Sometimes what is an acceptable word or direct translation in one place is obscene, misleading, or meaningless in another. For example, the Milk Board’s “Got milk?” ad comes out as “Are you lactating?” in Spanish. Another problem is choosing the language when a country has more than one. For example, in Haiti, a company might use Creole to reach the general population but French to reach the upper class. Legality What is legal advertising in one country may be illegal elsewhere. The differences result mainly from varying national views on consumer protection, competitive protection, promotion of civil rights, standards of morality, and nationalism. In terms of c0nsumer protection, policies differ on the amount of deception permitted, what can be advertised to children, whether companies must list warnings on products that cite possible harmful effects, and the extent to which they must list ingredients. The United Kingdom and the United States allow direct comparisons with competitive brands (such as Pepsi versus Coca-Cola), whereas the Philippines prohibits them. Only a few countries regulate sexism in advertising. Some governments restrict the advertising of some products (such as contraceptives and feminine hygiene products) because they feel they are in bad taste. Elsewhere, governments restrict ads that might prompt children to misbehave or people to break laws (such as advertising automobile speeds that exceed the speed limit) and those that show scantily clade women. New Zealand banned a Nike ad in which a rugby team tackles the coach, as well as a Chanel ad in which the model said to her male lover before kissing him, “I hate you. I hare you so much I think I’m going to die from it darling.” In both cases, the ads were deemed to threaten violence. Message Needs An advertising theme may not be appropriate everywhere because of national differences in how well consumers know the product and how they perceive it, who will make the purchasing decision, and what appeals are most important. Recall from the discussions of gap analysis and product life cycles how product-knowledge conditions vary. For example, few Japanese own dishwashers even though they own most other appliances. In addition to size-constraints, which some manufacturers have overcome with new designs, Japanese housewives feel guilty about buying for the sake of convenience. Matsushita, which promotes convenience elsewhere, has shifted its Japanese ads to hot water conservation and hygiene. The reaction to how messages are presented may also vary. For example, Leo Burnett Worldwide produced a public service

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advertisement to promote checkups for breast cancer. It showed an attractive woman being admired in a sundress with a voiceover message, “If only women paid as much attention to their breasts as men do…” Japanese viewers found it a humorous way to draw attention to an important health issue, but French viewers found it offensive because there is nothing humorous about the issue. Branding A brand is an identifying mark for products or services. When a company registers a brand legally, it is a trademark. A brand gives a product or service instant recognition and may save promotional costs. MNEs must make four major branding decisions: 1. Brand versus no brand 2. Manufacturer’s brand versus private brand 3. One brand versus multiple brands 4. Worldwide brand versus local brands The international environment substantially affects only the last of these branding decisions. Some companies, such as CocaCola, have opted to use the same brand and logo globally. Other companies, such as Nestle, associate many of their products under the same family of brands, such as the Nestea and Nescafe brands, in order to make sure that these brands all share in the companies’ goodwill. Nevertheless, there are a number of problems in trying to use uniform brands internationally. Language Factors One problem is that brand names may carry a different association in another language. For example, GM thought its Nova model could easily be called the same in Latin America, because the name means, “star” in Spanish. However, people started pronouncing it “no, va,” which is Spanish for “it does not go.” Coca-Cola tries to use global branding wherever possible but discovered that the word diet in Diet Coke had a connotation of illness in Germany and Italy. The brand is called Coca-Cola Light outside the United States. Unilever has successfully translated the brand name for its fabric softener, while leaving its brand symbol, a baby bear, intact on the packaging. The U.S. name Snuggle is Kuschelweich in Germany, Cajoline in France, Coccolino in Italy, and Mimosin in Spain. But Snuggle did not quite convey the same meaning in English-speaking Australia, where Unilever uses Huggy. However, brand symbols don’t necessarily work everywhere either. Big Boy put its customary statue (a boy with checkered overalls and cowlick curl) outside its restaurant in Thailand, and many Thais placed offerings at his feet because they thought it was a Buddha. Pronunciation presents other problems, because a foreign language may lack some of the sounds of a brand name or the pronunciation of the name may be a word with a meaning that is different from the original. For example, McDonald’s uses Donald McDonald, not Ronald McDonald, in Japan because the Japanese have difficulty pronouncing the letter R. Marcel Bich dropped the H from his name when branding Bic pens because of the fear of mispronunciation in English. Some

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States that were done completely in French and Italian with subtitles. The most audible problem in commercial translation is dubbing, because words on an added sound track never quite correspond to lip movements. Marketing managers can avoid dubbing problems by creating commercials in which actors do not speak, along with a voice or print overlay in the appropriate language. Pillsbury does this in India, a country with multiple languages, where its Doughboy ads are in six languages.

INTERNATIONAL BUSINESS MANAGEMENT

locally popular soft drinks have unappetizing meanings when pronounced in English-Mucos (from Japan), Pipi (from Serbia), Pshitt (from France), and Zit (from Greece). Different alphabets present still other problems. For example, consumers judge English brand names by whether the name sounds appealing, whereas brand names in Mandarin and Cantonese need to have visual appeal as well because the Mandarin and Cantonese alphabets are pictograms. Such companies as Coca-Cola, Mercedes-Benz, and Boeing have taken great pains to assure not only that the translation of their names is pronounced roughly the same as in English but also that the brand name is meaningful. For example, Coca-Cola is pronounced Ke-kou-ke-le in Mandarin and means tasty and happy. Further, companies have sought names that are considered lucky in China, such as a name with eight strokes in it and displayed in red rather than blue. Brand Acquisitions Much international expansion takes place through the acquisition of companies in foreign countries that already have branded products. For example, when Avon acquired Justine in South Africa, it kept the Justine name because the brand was well known and respected. However, Sara Lee acquired various Brazilian coffee roasters and is now trying to consolidate them into Brazil’s first national brand because stretching the promotional budget over so many brands means that promotions are not as effective as they might be given that less “” spent on anyone brand to build significant positive recognition. Country-of-Origin Image Companies should consider whether to create a local or a foreign image for their products. The products of some countries, particularly developed countries, tend to have a higher quality image than do those from other countries. For example, Czechs associate locally made products with poor quality, so P&G has added German words to the labels of detergents it makes in the Czech Republic.41 There are also image differences concerning specific products from specific countries. For example, the British have a positive image of Australian wine; thus, a young Australian winery sought a very Australian name, Barramundi, for its wine exports to the United Kingdom. But images can change. Consider that for many years, various Korean companies sold abroad under private labels or under contract with well-known companies. Some of these Korean companies, such as Samsung, now emphasize their own trade names and the quality of Korean products. In an’ innovative effort to create a British ice cream flavor along the lines of its American Cherry Garcia, Ben & Jerry’s ran a contest for the best name and flavor. The flavor name Cool Britannia won out over such entrants as Minty Python, Grape Expectations, Choc Ness Monster, and The Rolling Scones. Generic and Near-Generic Names Companies want their product names to become household words, but not so much that competitors can use trademarked brand names to describe their similar products. In the United States, the brand names Xerox and Kleenex are nearly synonymous with copiers and paper tissues, but they have, nevertheless, remained proprietary brands. Some other names

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that were once proprietary, such as cellophane, linoleum, and Cornish hens, have become generic-available for anyone to use. In this context, companies sometimes face substantial differences among countries that may either stimulate or frustrate their sales. For example, aspirin and Swiss army knives are proprietary names in Europe but generic in the United States, a situation that impairs European export sales of those products to the United States because U.S. companies can produce aspirin and Swiss army knives. Distribution A company may accurately assess market potential, design goods or services for that market, price them appropriately, and promote them to probable consumers. However, it’s unlikely the company will reach its sales potential if it does1ft make the goods or services conveniently available to customers. Companies need to place their goods where people want to buy them. For example, does a man prefer to buy shampoo in a grocery store, barbershop, drugstore, or some other type of outlet? Distribution is the course-physical path or legal tide-that goods take between production and consumption. In interna1rional marketing, a company must decide on the method of distribution among countries as well as the method within the country where final sale occurs. Companies may limit early distribution in given foreign countries by attempting to sell regionally before moving nationally. Many products and markets lend themselves to this sort of gradual development. In many cases, geographic barriers and poor internal transportation systems divide countries into very distinct markets. In other countries, very little wealth or few potential sales may lie outside the large metropolitan areas. In still others, advertising and distribution may be handled effectively on a regional basis. Difficulty of Standardization Within the marketing mix, MNEs find distribution one of the most difficult functions to standardize internationally for several reasons. Each country has its own distribution system, which an MNE finds difficult to modify because it is entwined with the country’s cultural economic, and legal environments. Nevertheless, many retailers are successfully moving internationally. Some of the factors that influence how goods will be distributed in a given country are citizens’ attitudes toward owning their own store, the cost of paying retail workers, labor legislation differentially affecting chain stores and individually owned stores, legislation restricting the operating hours and size of stores, the trust that owners have in their employees, the efficacy of the postal system, and the financial ability to carry large inventories. For example in comparison to those in the United States, Hong Kong supermarkets carry a higher proportion of fresh goods, are smaller, sell smaller quantities per customer, and are located closer to each other. This means that companies selling canned, boxed, or frozen foods will encounter less per capita demand in Hong Kong than in the United States. They would also have to make smaller deliveries because of store sizes and would have a harder time fighting for shelf space.

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How do these differences affect companies’ marketing activities? One soft drink company, for example, has targeted most of its European sales through grocery stores. However the method for getting its soft drinks to those stores varies. In the United Kingdom, one national distributor has been able to gain sufficient coverage and shelf space to enable the soft drink company to concentrate on other aspects of its marketing mix. In France, a single distributor has been able to get good coverage in the larger supermarkets but not in the smaller ones; consequently, the soft drink company has been exploring how to get secondary distribution without upsetting its relationship with the primary distributor. In Norway, regional distributors predominate, so a soft drink company has found it difficult to launch national promotion campaigns. In Belgium, the company could find no acceptable distributor, so it bas had to assume that function itself Choosing Distributors and Channels We will now compare why companies self-handle their distribution or contract with other companies to do it for them, and we will discuss how they should choose outside distributors. Internal Handling When sales volume is low, it is usually more economical for a company to handle distribution by contracting with an external distributor. By doing so, however, it may lose a certain amount of control. However, small companies may lack the resources needed to handle their own distribution. Managers should reassess periodically whether sales and resources have grown to the point that they can handle distribution internally. Circumstances conducive to the internal handling of distribution include not only high sales volume but also several other factors, including • When a product has the characteristic of high price or high

technology, or the need for complex after-sales servicing (such as aircraft), the producer probably will have to deal directly with the buyer. The producer may simultaneously use a distributor within the foreign country that will serve to identify sales leads. • When the company deals with global customers, especially in business-to-business sales-such as an auto-parts manufacturer that sells original equipment to the same auto makers in multiple countries-such sales may go directly from the producer to the global customer. • When the company, such as some food franchisers, views its

main competitive advantage to be its distribution methods, it eventually may franchise abroad but maintain its own distribution outlet to serve as a flagship. Amway, Avon, and Tupperware are examples of companies that have

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successfully transferred their house-to-house distribution methods from the United States to their operations abroad. Dell Computer has successfully handled its own mail-order sales in Europe. Distributor Qualifications A company usually can choose from a number of potential distributors. Common criteria for selecting a distributor include: • Its financial strength. • Its good connections with customers. • The extent of its other business commitments. • The current status of its personnel, facilities, and equipment.

The distributor’s financial strength is important because of the potential long-term relationship between company and distributor and because of the assurance that money will be available for such things as maintaining sufficient inventory. Good connections are particularly important if sales must be directed to certain types of buyers, such as government procurement agencies. The number of other business commitments can indicate whether the distributor has time for the company’s product and whether it currently handles competitive or complementary products. Finally, the current status of the distributor’s personnel, facilities, and equipment indicates not only its ability to deal with the product but also how quickly start-up can occur. Spare Parts and Repair Consumers are reluctant to buy products that may require spare parts and service in the future unless they feel assured they will be readily available in good quality and at reasonable prices. The more complex and expensive the product, the more important after-sales servicing is. When after-sales servicing is important, companies may need to invest in service centers for groups of distributors that serve as intermediaries between producers and consumers. Earnings from sales of parts and after-sales service sometimes may match that of the original product. . Gaining Distribution Companies must evaluate potential distributors, but distributors must choose which companies and products to represent and emphasize. Both wholesalers and retailers have limited storage facilities, display space, money to pay for inventories, and transportation and personnel to move and sell merchandise, so they try to carry only those products that have the greatest profit potential. In many cases, distributors are tied into exclusive arrangements with manufacturers that prevent new competitive entries. For example, there are about 25,000 Japanese outlets that sell only Shiseido’s cosmetics, 13,000 that sell only Toshiba products, and 11,000 that sell only Hitachi products. A company that is new to a country and wants to introduce products that some competitors are already selling may find it impossible to find distributors to handle its brands. Even established companies sometimes find it hard to gain distribution for their new products, although they have the dual advantage of being known and of being able to offer existing profitable lines only if distributors accept the new unproven products. A company wanting to use existing distribution channels may need to analyze competitive conditions carefully before offering effective incentives for those distributors to handle the product.

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A few other examples should illustrate how distribution norms differ. Finland has few stores per capita because general-line retailers predominate there, whereas Italian distribution has a fragmented retail and wholesale structure. In the Netherlands, buyers’ cooperatives deal directly with manufacturers. Japan has cash-and-carry wholesalers for retailers that do not need financing or delivery services. In Germany, mail-order sales are very important; this is not the case in Italy, however, because of the country’s unreliable postal system.

INTERNATIONAL BUSINESS MANAGEMENT

It may need to identify problems that distributors experience and offer assistance in order to gain their loyalty. Companies alternatively may offer other incentives, such as higher profit margins, after-sales servicing, and promotional support-any of which may be offered on either a permanent or introductory basis. The type of incentive should also depend on the comparative costs within each market. In the final analysis, however, incentives will be of little help unless the distributors believe a company’s products are viable. The company must sell the distributors on its products as well as on itself as a reliable company. Hidden Cost in Foreign Distribution When companies consider launching products in foreign markets, they must determine what final consumer prices will be in order to estimate sales potential. Because of different national distribution systems, the cost of getting products to consumers varies widely from one country to another. Five factors that often contribute to cost differences in distribution are (1) infrastructure conditions, (2) the number of levels in the distribution system, (3) retail inefficiencies, (4) size and operating-hours restrictions, and (5) inventory stock-outs. Infrastructure In many countries, the roads and warehousing facilities are so poor that getting goods to consumers quickly, at a low cost, and with minimum damage or loss en route is problematic. In Nigeria, for example Nestle has had to build small warehouses across the country because it could not depend on a central warehouse that one would normally expect based on the country’s area. Roads are in such poor condition that travel is slow and trucks are prone to breakdowns. Further, because of crime, Nestle uses armed guards on its trucks and allows them to travel only during daylight hours. Levels in distribution system Many countries have multitiered wholesalers that sell to each other before the product reaches the retail level. For example, national wholesalers sell to regional ones, who sell to local ones, and so on. This sometimes occurs because wholesalers are too small to cover more than a small geographic area. Japan typifies such a market. There are, on average, 2.21 wholesale steps between producer and retailer in Japan, compared with 1.0 in the United States and 0.73 in France. Because each intermediary adds a markup, product prices are driven up. However, such overall figures obscure differences by product. For example, fresh food passes through much longer and complex channels than such products as electronic goods. Retail inefficiencies In some countries, particularly developing countries, low labor costs and a basic distrust by owners of all but family members result in retail practices that raise consumer prices. This distrust is evident in companies’ preference for counter service rather than self-service. In the former case, customers wait to be served and shown merchandise. A customer who decides to purchase something gets an invoice which is taken to a cashier’s line for payment. Once the invoice is stamped as paid, the customer must go to another line to pick up the merchandise after presenting the stamped invoice. Some retailers have counter service for purchases as small as a pencil. The additional personnel add to retailing costs, and the added time people must be in the store means fewer people can be 238

served in the given space. In contrast, most retailers in some (mainly industrialized) countries have equipment that improves the efficiency of handling customers and reports-for example, electronic scanners, cash registers linked to inventory control records, and machines connecting purchases to credit-card companies. Restrictions Many countries, such as France, Germany, and Japan, have laws to protect small retailers. These laws effectively limit the number of large retail establishments and the efficiencies they bring to sales. Many countries also limit operating hours as a means of protecting employees from having to work late at night or on weekends. At the same time, the limit keeps retailers from covering the fixed cost of their space over more hours, so these costs are passed on to consumers. In Sweden, 7-Eleven stores cannot use longer open-for-business hours as a competitive advantage because Swedish law prohibits sales of a full range of goods between midnight and 6 A.M. Stock-outs Where retailers are small, as is true of grocers in many developing countries, there is little space for storing inventory. Wholesalers must incur the cost of making small deliveries to many more establishments and sometimes may have to visit each retailer more frequently because of stock outages. The Internet and Electronic Commerce Estimates vary widely on the current and future number of worldwide online households and the electronic commerce generated through online sales. Nevertheless, they all indicate substantial growth. Table 8.3 shows some comparative estimates of growth. As electronic commerce increases, customers worldwide can quickly compare prices from different distributors, and this development should drive prices down. Electronic commerce offers companies an opportunity to promote their products globally. It also permits suppliers to deal more quickly with their customers. For example, Lee Hung Fat Garment Factory of Hong Kong supplies apparel to about 60 companies in Europe and now flashes picture samples of merchandise to them over the Web. Customers such as Kingfisher of the United Kingdom, can tinker with the samples and transmit new versions back to Hong Kong so that Lee Hung Fat produces exactly what the distributors want. Global Internet sales are not without problems. Many households, especially in emerging economies, lack access to Internet connections. Therefore, if a company wants to read mass global markets, it will need to supplement its Internet sales with sales that use other means of promotion and distribution. A company also needs to set up and promote in Internet sales, which can be very expensive. Royal Bank of Canada is spending about $75 million up-front to promote Internet sales in the United States. A company cannot easily differentiate its marketing program for each country where it operates. The same Web advertisements and prices reach customers everywhere, even though different appeals and prices for different countries might yield more sales and profits. If the company makes international sales over the

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Computer Industry Almanac (CIA) eMarketer* eTForecasts Gartner Dataquest International Data Corporation Ipsos-Read Morgan Stanley Dean Witter Neilsen/Netratings Ovum Pegasus Research International

413.6 352.2 414.0 330.4 400.0 252.0

538.5 445.9 4.3.9 400.0 426.5 -

673.0 529.9 673.0 480.3 449.0 -

Internet, it must deliver what it sells expeditiously. This may necessitate placing warehouses and service facilities abroad, which the company mayor may not own and manage itself. Note:* eMarketer’s year 2000 baseline is from the international Telecommunication Union’s estimate of internet users aged two years and older, who have accessed the Internet within the previous 30 days. Source: Marketer’s, “ Charting the Future of the Business.” (January 22, 2003): www.emarketer.com/products/ report.php?eglobal/welcome.html.Reprinted by permission of eMarketer, Inc. Finally, the company’s Internet ads and prices must comply with the laws of each country where the company makes sales. This is a challenge because a company’s Web page reaches Internet users everywhere. For example, Land’s End, a U.S. merchandiser, has long depended on its unconditional lifetime guarantee to help sell its merchandise. But German law prohibits such a guarantee on the grounds that it is a gimmick hidden in the sales price. Land’! End may have to exclude Germany from its Internet sales. Clearly, although the Internal creates new opportunities for companies to sell internationally, it also creates new challenges for them. Looking To The Future Will the “Haves” and the “Have-Nots” Meet the “Have-Somes”?

Most projections are that disparities between the “haves” and “have-nots” will grow in the foreseeable future, both within and among countries. Further, because the “haves” will have greater access to the Internet, they will be better able to search globally for lower prices for what they buy. Therefore, globally, the affluent segment will have more purchasing power and will not likely forgo buying because of antimaterialistic sentiments. As people’s discretionary income increases, what are now luxury products become more commonplace (partly because it takes fewer hours of work to purchase them), and seemingly dissimilar products and services (such as cars, travel, jewelry, and furniture) compete with each other for the same discretionary spending. Because of better communications and rising educational levels of the haves, they will want more choices. However, these choices may not fall primarily along national 11.154

825.4 622.9 549.4 536.0 -

709.1 604.7 -

1,174.0 977.0 923.0 -

lines. Rather, companies will identify consumer niches that cut across country lines. At the other extreme, because of growing numbers of poor people with little disposable income, companies will have opportunities to develop low-cost standardized products to fit the needs of the have-nots. Thus, companies will have conflicting opportunities-to develop luxury items to serve the haves and to cut costs to serve the have-nots. Despite the growing proportions of haves and have-nots, demographers project that the actual numbers of people moving out of poverty levels and into middle-income levels will increase. This is largely because of population and income growth in many developing countries, especially in Asia. Such a shift will likely mean that companies’ sales growth in developing countries will mainly be for products that are mature in industrial countries, such as telephones and household appliances. Further, with increased access to the Internet and lower barriers to trade, customers will be able to purchase goods from anywhere in the world. In the process, companies will find it more difficult to charge different prices in different countries. But they will more effectively be able to cut out middlemen in the distribution of their products. What products and services are likely to enjoy the major growth markets? It is probable that data generation and storage will continue to be a major growth area during the next few decades. It also is probable that among the market-growth leaders will be companies making breakthroughs in process technologies that improve productivity (e.g., lasers, optics, and robotics) and those making breakthroughs in energy conservation (e.g., solar photovoltaics, fuel cells, and coal conversion). Ethical Dilemma What Products Should Companies Market Internationally? Critics complain MNEs pay too little attention to the needs of developing countries. For example, they chide pharmaceutical companies for spending less on antimalarial research than on research for diseases more prevalent in industrial countries, even though malaria results in more fatalities. At the same time these critics have encouraged developing countries not to use DDT, although malaria deaths increased with the nonuse. They

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Table 8.3 COMPARATIVE ESTIMATES: INTERNET USERS WORLDWIDE, 2000-2006 (IN MILLIONS) 2000 2001 2002 2003 2004 2005 2006

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criticize so-called superfluous products and luxury goods because they shift spending away from necessities and contribute to the enhancement of elitist class distinctions. For instance, they question making soft drinks available to consumers who lack funds for pharmaceuticals. Soft drink companies have responded that consumers should make their own choices, that introduction sanitary bottling operations has aided other industries (including pharmaceuticals), and that attempts to ass vitamins or nutrition to tasty food has failed on the marketplace. Nevertheless, critics question whether this is sufficient justification for continuing to sell the soft drinks. Even if product reach only affluent customers companies may be criticized. For example Benetton has been taken to task for opening hard-currency-only shops for tourists in Cuba and North Korea because thus shops are an affront to the local population that is to people who are economically and legally prohibited from buying the merchandise.

because it is “the moral property if women.” Yet U.S. antiabortion activists took out full-page news paper ads urging U.S. consumers not to use Allegra, a Hoechst anti hay fever treatment because Hoechst continued to sell mifepristone outside the United States. Thus, Hoechst faced ethical criticism whether to marketed the abortion poll in the United States or not. Subsequently to donated its U.S. mifepristone patent rights to the population Council, a nonprofit research organization. Notes -

Critics have also complained that MNEs promote products to people who do not understand the products negative consequences. The most famous case involved infant formula sales in developing countries where infant mortality increased when bottle-feeding supplanted breast-feeding. Because of law incomes and poor education mothers frequently over diluted formula and gave it to their babies in unhygienic conditions. Critics argued that promoting formula manufacturers claimed that other factors increased bottle-feeding specifically more working mothers and fewer products and services being made in the home. The promotion they argued persuaded people to give up their “home brews” in favor of the most nutritious breast milk substitute available. Regardless the world health organization passed a voluntary code to restrict formula promotion in developing countries. Critics hit nestle hardest because its name-identified products facilitated the organization of a boycott. The company ceased advertising that could discourage breast-feeding limited free formula supplies at hospitals and banned personal gifts to health officials. Despite these events few governments have4 prohibited infant formula sales or promotion. In the absence of regulations (for infant formula and other products and other products), how far companies should go to protect consumers is unclear. The controversy has been compounded by the transmission of HIV virus through breast milk a particular problem in Africa where many women are HIV/AIDS infected. At the same time pharmaceutical companies have responded to the pressure by offering AIDS drugs to African consumers at prices substantially below those in their home countries. However is it ethical to sell at a low price in some markets but not to consumers in their home markets? Is it unethical for a company to give in to the pressure groups that organize a boycott? A French company Roussel Uclaf development the abortion poll RU 486, now called mifepristone. A German company Hoechst then acquired Rousse Uclaf. Hoechst fearful of adverse publicity initially for bade the sale of mifepristone except in the three countries (the United Kingdom, France and Switzerland) Where Roussel Unlaf had already begun selling it. The French health ministry has insisted that the product remain in sale

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