INTERNATIONAL MARKETING Culture Product strategies

The Three Men…

Learning Objectives Identify impact of culture on Values Perception of reality Product choices Response to marketing activity Identify the impact of levels of income, costs of living, and fluctuating exchange rates Identify advantages and disadvantages of product standardization, adaptation, and customization under different circumstances

An Effective Billboard Advertisement? VERY DIRTY CLOTHES CLOTHES GETS WASHED WITH THE ADVERTISED DETERGENT BRAND SQUEEKY CLEAN CLOTHES

International Marketing: Considerations and Outcomes MKT 465 COVERS INTERNATIONAL MARKETING IN MORE DETAIL

Definitions Culture: “That complex whole which includes knowledge, belief, art, morals, custom, and any other capabilities and habits acquired by man as a member of society.” Alternative definition: “Meanings that are shared by most people in a group [at least to some extent]”. (Adapted from Peter and Olson, 1994) We tend to associate the word “culture” with behavior. However, the term is technically defined as a set of “shared meanings.” This, obviously, is a somewhat deeper definition, focusing more on the basis for the observed behaviors. A concept related to that of culture is socialization--the way that one learns to be part of a society. For example, mathematics books in the United States may focus on the calculation of interest, which is not a legitimate concept in most countries governed primarily by Muslim law. 4

Cultural Lessons Diet Coke is named Light Coke in Japan—dieting was not well regarded Red circle trademark was unpopular in Asia due to its resemblance of Japanese flag Packaging of products is more important in some countries than in U.S. Advertisement featuring man and dog failed in Africa—dogs were not seem as man’s best friend 5

More Cultural Lessons... Cologne ad featuring a man “attacked” by women failed in Africa Food demonstration did well in Chinese stores but not in Korean ones--older women were insulted by being “taught” by younger representatives Pauses in negotiations Level of formality 6

Japanese consumers expect to see what the food looks like before ordering

Vending Machines

Very Brief Review of Economics Exchange rates Floating (supply and demand) Fixed Trade balances and their impact on exchange rates Global trade implies that purchasers in one country must pay others. Although, as we will see later, transactions often take the form, at least in part, of barter, it is often necessary that a buyer or seller convert money from one currency to another. While certain currencies are “closed,” so that it is generally not possible to freely convert money into some other form, active markets exist for the exchange of others. Between 1947 and the early 1970s, exchange rates between major currencies were “fixed” according to the Bretton Woods Agreement, which also established the first GATT. However, in the 1970s, it became infeasibly expensive for members to support the dollar at its artifically high level, and “floating” exchange rates resulted. Here, the prices of various currencies are essentially determined by supply and demand. Note that, while in the old days, U.S. currency was backed by gold, those who hold American dollars are no longer guaranteed to be able to convert their dollars. The value of the U.S. dollar, and many other currencies, is entirely based on confidence in the currency. One might wonder what keeps a country from going excessively overboard and buying excessively. Basically, when a country spends more than it earns abroad, its currency will experience downward pressure as its supply increases relative to demand. Thus, the value of the currency will decline, and foreign imports will become less attractive as they become more expensive. Conversely, the country’s products will tend to decline in cost (as measured in foreign currency) abroad, and its exports will tend to increase. There are, however, some complications to this picture. One way to increase the “demand” for currency is to borrow heavily abroad. Thus, because of its heavy borrowing, U.S. interest rates, compared to the rest of the World, are rather heavy, and a strong demand for the dollar exists (so that investors can lend this currency to American borrrowers).

Approaches to Product Introduction ● Customization Standardization ● Adaptation Completely new product made for each country Products sold across the World are identical Adjustments are made in regions or countries to accommodate infrastructure, cultural, economic, or other differences Complete customization or standardization are rare—modest adjustments are usually made Not suitable for the Middle East!

Reasons for Standardization Avoiding high costs of customization, if applicable Technological intensity Reduced confusion International compatibility among product group components Faster spread of rapid life cycle products Convergence of global consumer tastes/needs Country of origin positioning

Standardization—Advantages Benefits Economies of scale More resources available for development effort Better quality possible Rapid product life cycles may make extensive adaptation infeasible

Standardization—Disadvantages Unnecessary features Vulnerability to trade barriers Strong local competitors

Product Adaptations Mandatory—required by laws of nature or laws of government Legal requirements Infrastructure “Discretionary”—not required by natural or human laws but often not really “optional” in practice (needed to compete with brands that do offer adaptations) Local tastes Fit into cultural environment

https://www.polleverywhere.com/free_text_polls/GQLqpTT641eIie9

English Language Signs and Packaging

Sheets of Aspirin: Precious Product or Stingy Seller?

Mandatory Adaptation Issues Infrastructure differences—e.g., electricity supplies vary among countries in Voltage Frequency (time between flips in polarity under alternating current) Plugs Conflicting rules between countries—it may not be possible to make a product that would be simultaneously legal in both of two countries

Some Examples of Mandatory Adaptations Artificial sweeteners permitted (different types are approved for use in different countries) Product specifications (e.g., alcohol percentage in beverages) Warning labels Safety features Noise suppression filters Anti-pollution features

https://www.polleverywhere.com/free_text_polls/pI4NGYVN43P5UG5

Flops in the Transplantation of Advertising Man and his dog “Follow the leader—he’s on a Honda!” Detergent ad “Get your teeth their whitest!”

International Brand Adaptations Chevy Nova did not do well in Latin America (“no va.”) A Japanese soft drink which did not sell well in English speaking countries…