Sales, Exports And International Marketing (se21)

Sales, exports and international marketing (SE21)

Chapter 3

The international environment

Introduction to (changing and foreign) environment The foreign environment includes: economic forces, political/legal forces, socio-cultural forces, and competition. Great turbulence internationally: disintegration of the Soviet Union, experiments with market economies, the EU moving increasingly toward a single internal market, the expansion of international trade, the opening of investment opportunities by China, and economic/political crises in some countries. Terrorism has expanded to a world-wide phenomenon, affecting individual lives and businesses. Security as business strongly develops (in answer).

Economic Forces

Demand for products, affected by: • population size • size and distribution of income and wealth.

Market development The extent of economic development of a country is classified in various ways, like: developed, developing and newly industrialized. (Other schemes of classification may also be used.)

Big emerging markets (BMEs) give major marketing opportunities. Table 3.1 (The world by income): countries are grouped by the World Bank. General classifications are of only limited usefulness to the international marketer. A company may develop its own system of classification for its own use - as GE did (Exhibit 3.1.).

Gini coefficient

http://william­king.www.drexel.edu/top/prin/txt/factors/dist4.html

Most developed European nations have Gini coefficients between 0.24 and 0.36. United States Gini coefficient is above 0.4, indicating greater inequality. Using the Gini can help quantify differences in welfare and compensation policies and philosophies. Gini coefficient can be misleading when used to make political comparisons between large and small countries. The Gini coefficient for the entire world has been estimated by various parties to be between 0.56 and 0.66. (2006-2007)

Some areas of change.

Asia and Latin America are areas of major change and growth. Table 3.2 gives selected indicators for Asian areas. Exhibit 3.2 indicates East Asia’s expected future growth industries. China attracting additional producers and marketers of consumer goods, as economy has been growing rapidly. Figure 3.1 indicates high-growth areas in China. Market opening in some Latin American countries, leading to rapid growth and attracting increasing investment by Asian countries. Russia’s middle class becoming more important.

Socio-cultural environment

Socio-cultural environment influences customers, managers, and marketing intermediaries. Foreign consumers differ from domestic consumers in all aspects of buyer behaviour: the what, why, who, how, when and where. There are differences between areas (as in the EU) and between groups. Exhibit 3.3 provides some guidelines for managing cultural differences.

The nature of culture Culture may be viewed as the sum of a group's learned behaviour patterns, attitudes, and material things. (Many different definitions are used.) Table 3.3 presents some indicators of a person’s culture. Culture usually changes slowly over time, though governmental or other organizations may attempt to force more rapid change. There are cultural universals that all cultures have: language, sports, status, differentiation, etc. The dimensions of culture are summarized in Table 3.4. Table 3.5 shows some value orientations with regard to selected variables. Table 3.6 shows clusters of countries with significant similarities in values. Exhibit 3.4 discusses views of ‘Asian values.’ Understanding the general patterns and themes of culture is not enough for the international marketer. He/she must learn the specifics of the culture which affect the marketing of the firm’s products or services.

Culture and communication Communication is both by language and behaviour (non-verbal communication). Knowing what people mean by their behaviours, and how they view time, space, things, friendships, and agreements is essential for the international marketer. Anthropologist Edward T. Hall’s theory of high- and low-context culture helps us better understand the powerful effect culture has on communication. A key factor in his theory is context. This relates to the framework, background, and surrounding circumstances in which communication or an event takes place. 

In high context cultures (like Japan), the situation, relationships, and unspoken understandings may carry more meaning and importance than the words themselves. (see also next slides for more info about high & low context cultures) In low context cultures (like many European nations and the U.S), the meaning of the message can usually be wholly or partially isolated from the context in which the message occurs.

High-context cultures (including much of the Middle East, Asia, Africa, and South America) are relational, collectivist, intuitive, and contemplative. This means that people in these cultures emphasize interpersonal relationships. Developing trust is an important first step to any business transaction. According to Hall, these cultures are collectivist, preferring group harmony and consensus to individual achievement. And people in these cultures are less governed by reason than by intuition or feelings. Words are not so important as context, which might include the speaker’s tone of voice, facial expression, gestures, posture—and even the person’s family history and status. A Japanese manager explained his culture’s communication style to an American: “We are a homogeneous people and don’t have to speak as much as you do here. When we say one word, we understand ten, but here you have to say ten to understand one.” High-context communication tends to be more indirect and more formal. Flowery language, humility, and elaborate apologies are typical.

Low-context cultures (including North America and much of Western Europe) are logical, linear, individualistic, and action-oriented. People from low-context cultures value logic, facts, and directness. Solving a problem means lining up the facts and evaluating one after another. Decisions are based on fact rather than intuition. Discussions end with actions. And communicators are expected to be straightforward, concise, and efficient in telling what action is expected. To be absolutely clear, they strive to use precise words and intend them to be taken literally. Explicit contracts conclude negotiations. This is very different from communicators in high-context cultures who depend less on language precision and legal documents. High-context business people may even distrust contracts and be offended by the lack of trust they suggest.

Self-reference criterion (SRC) Most people initially define problems in terms of their own culture. The SRC effect, or “likely cultural bias”, occurs when an individual is only able to define problems in terms of his/her own culture. Lee (1966) coined the term “self-reference criterion” as a useful concept to avoid cultural bias. He suggested that problems should be defined first in terms of cultural traits, habits, or norms of the home society. They should be redefined without value judgments, in terms of the foreign cultural traits, habits, and norms. He indicated that the difference between these two specifications is an indication; the likely cultural bias, or SRC effect, which can be then isolated and carefully examined to see how it influences the concept or the problem. The value of this approach lies in forcing the manager, posing the problem to make specific his or her assumptions about the cultural elements affecting the problem, and to question whether or not they hold for another culture.  The international marketer should learn how to define problems in terms of the local culture as well as his/her own culture. The comparison can then indicate possible areas for mutually agreeable solutions. Culture affects all international and export marketing activity. Exhibit 3.5 indicates some of the many ways in which this is evident.

Political & legal environment & economic integration See the separate Chapter 3 notes-file for some helpful comments Also look at: http://www.geert-hofstede.com For explanation and comparisons of Hofstede’s Cultural Dimensions.