Lecture Two International Business Environment Dr Joanna Pokorska

Reading Hollensen: Chapters: 5, 6, and 7 Articles as per the reading list

Lecture Objectives To examine how international marketing environment impacts upon international marketing decisions To understand how variables interlink To discuss the key economic facilitators To understand how marketers may try to influence the environment in international marketing context

Environment

Environment It is not the marketing environment itself that is important but the firm’s ability to cope with it. Bradley, F (1999) International Marketing Strategy, New York: Prentice Hall

Global Marketing Environment It can be defined as: ‘Those variables, largely out of the organization’s control but which it must account for, within which it conducts its business globally’ Considerable variations between countries in the laws governing business conduct There is no global ‘standard practice’

Why should you account for environmental factors?

Marketing environment

The Political Environment Includes any national or international political factors which may affect an organization’s decision making, planning, implementation, and control mechanisms Marketers have to work within the political framework of the host country Important question – what role does the target market’s government play in the economy? Its level of participation in economic development?

Political risks and considerations Ownership Risk Operating Risk (import restrictions, local content laws, labour restrictions, etc) Transfer Risk (exchange control) Considerations: 1. Avoiding local production 2. Partnering with local companies 3. Flexibility

The Legal Environment Key Aspects of International Legal Environment: Local domestic laws – can limit what can be exported/imported International laws – patents, trademarks, copyrights and tariff reduction etc. If involved in disputes with international trading partners, the organization will need to understand the law systems

The Legal Environment Common law Civil law Islamic law Socialist law

Common Law vs Civil Law

Islamic Law Derived from the Quran & the Hadith Legal system in many Middle Eastern countries Sharia is a comprehensive code governing Muslim conduct in all areas of life

Socialist Law Arose from the Marxist ideological system Legal system used in Communist states Economic power was centralised Business laws absent Economy liberalisation is forcing many socialist countries to improve their legal system

Intellectual Property Must be registered in each country where business is conducted Patent – exclusive rights to inventor Trademark – distinctive logo used for differentiation Copyright – establishes ownership Infringement of intellectual property Protecting intellectual property Federal Patent Office/European Patent Office etc International Convention for the Protection of Industrial Property

The Economic Environment Market potential can be gauged by assessing population size, growth, density, distribution, age distribution, disposable income and its distribution

The Economic Environment Developed Economies account for 80% of world trade Emerging Economies huge and growing consumer demand government directed economic reforms ‘dual economies’ Less Developed Countries (LDCs) low GDP, limited manufacturing base infrastructure weaknesses heavy reliance on one product/one trading partner

The Economic Environment An Economic Environmental Analysis can involve asking: How big is the population and at what rate is it growing? Where is the population located and how dense is it? What is the population age and distribution? What is its disposable income and distribution?

The Socio-Economic Environment Global socio-cultural environment is manifested in a number of ways Social class and income have significant impact on purchases of consumer goods and services Spain and Portugal are highest consumers of fish in the EU; Scandinavians consumed most bread and cereals Switzerland is the largest consumer of coffee in the world; Greece the smallest French the largest consumer of mineral water Germans the largest consumer of beer The impact of the ageing global population The increasing global trends of urbanisation

The Competitive Environment Competition is intensifying internationally and locally due to trade liberalization and privatization Assessing competitors involve (Kotler, 2003): Identifying the organization’s competitors Determining competitors’ objectives Identifying competitors’ strategies Assessing competitors’ strengths and weaknesses Estimating competitors’ reactions Selecting competitors to attack and avoid

Considerations What form of government does your target market possess? How open is it to free enterprise? What law regime does your country have? What is the societal attitude towards rules? How could these factors affect your business plans? Is your target country currently being embargoed/boycotted? If so, why and by whom? Is your product/service affected?  How politically risky is your target country? What factors contribute to political risk in your country?  What political risk insurance is available? What events does it cover? In particular, what coverage would be available for your product/target market?  What regulations specific to your business can you find? How might they affect your plans?