Webster University International Marketing MRKT 5980

11/18/2015 Webster University INTB 5000 Page 2 The World Economic Pyramid *Bases on Purchasing power parity in U.S. $. SOURCE: U.N. World Development Reports Less Than $1,500 $1,500-$20,000 More Than $20,000 Annual per Capita Income*Tiers Population in Millions ,500-1,750 4,000

11/18/2015 Webster University INTB 5000 Page 3 Major Industrialized Countries of the World

11/18/2015 Webster University INTB 5000 Page 4 Market Characteristics Population demographics Population demographics Age distribution, life expectancies, household size, urbanization.Age distribution, life expectancies, household size, urbanization. Income Income Distribution of low, medium, and high incomes.Distribution of low, medium, and high incomes. Gross domestic product per capita.Gross domestic product per capita. Purchasing power parity.Purchasing power parity. Consumption patterns Consumption patterns Income spent on necessities and luxuries.Income spent on necessities and luxuries. Product saturation or diffusion.Product saturation or diffusion. Product form differences.Product form differences.

11/18/2015 Webster University INTB 5000 Page 5 Market Characteristics (continued) Availability and quality of infrastructure Availability and quality of infrastructure Rail traffic networks for distribution capabilities.Rail traffic networks for distribution capabilities. Communication systems for marketing.Communication systems for marketing. Energy (electrical and fuel) consumption.Energy (electrical and fuel) consumption. Foreign involvement in the economy Foreign involvement in the economy Degree of foreign direct investment in country or in a specific industry.Degree of foreign direct investment in country or in a specific industry. Rules governing foreign investment.Rules governing foreign investment. Impact of the economic environment on social development Impact of the economic environment on social development Urbanization, life expectancy, literacy rates, etc.Urbanization, life expectancy, literacy rates, etc. Physical Quality of Life Index (PQLI).Physical Quality of Life Index (PQLI).

11/18/2015 Webster University INTB 5000 Page 6 Regional Economic Integration Levels of economic integration Levels of economic integration Free Trade AreaFree Trade Area Least restrictive. Least restrictive. Goods and services are freely trades among all members. Each country maintains its own trade barriers for nonmembers. Goods and services are freely trades among all members. Each country maintains its own trade barriers for nonmembers. Customs UnionCustoms Union Members establish a common trade policy with respect to nonmembers. Members establish a common trade policy with respect to nonmembers. Common MarketCommon Market Factors of production mobility is emphasized. A common external tariff is adopted. Factors of production mobility is emphasized. A common external tariff is adopted. Economic UnionEconomic Union Integration and harmonization of economic and monetary policies is achieved leading to political union. Integration and harmonization of economic and monetary policies is achieved leading to political union.

11/18/2015 Webster University INTB 5000 Page 7 Free Trade Area Eliminates tariff and quota barriers among member countries. Eliminates tariff and quota barriers among member countries. Each country is free to set its own tariff and quota barriers against nonmember countries. Each country is free to set its own tariff and quota barriers against nonmember countries. Can be formed for certain classes of goods or services only. Can be formed for certain classes of goods or services only.

11/18/2015 Webster University INTB 5000 Page 8 Customs Union Area Tariff and quota barriers among member countries are eliminated. Tariff and quota barriers among member countries are eliminated. Member countries establish common tariff and trade barriers against nonmember countries. Member countries establish common tariff and trade barriers against nonmember countries. Tariff revenues are shared among members according to a prescribed formula. Tariff revenues are shared among members according to a prescribed formula.

11/18/2015 Webster University INTB 5000 Page 9 Common Market Area No trade barriers among member nations. No trade barriers among member nations. No restriction on the movement of labor, capital, or technology across borders. No restriction on the movement of labor, capital, or technology across borders. Member countries establish common tariff and trade barriers against nonmember countries. Member countries establish common tariff and trade barriers against nonmember countries.

11/18/2015 Webster University INTB 5000 Page 10 Economic Union Has all the characteristics of a common market. Has all the characteristics of a common market. Harmonizes taxation. Harmonizes taxation. Harmonizes government spending. Harmonizes government spending. Harmonizes monetary policies. Harmonizes monetary policies. Establishes a common currency. Establishes a common currency.

11/18/2015 Webster University INTB 5000 Page 11 European Integration Expected economic growth from: Expected economic growth from: Eliminating transaction costs.Eliminating transaction costs. Economies of scale will be attained as production becomes concentrated.Economies of scale will be attained as production becomes concentrated. More intense competition from EU companies.More intense competition from EU companies. Operations from one country can be freely expanded to other countries. Operations from one country can be freely expanded to other countries. Products can be freely sold across borders to millions of new consumers. Products can be freely sold across borders to millions of new consumers. There is a “Fortress Europe” fear. There is a “Fortress Europe” fear.

11/18/2015 Webster University INTB 5000 Page 12 North America Integration Is for purely economic reasons. Is for purely economic reasons. There are no constituencies for political integration. There are no constituencies for political integration. NAFTA. NAFTA. “Maquiladoras”. “Maquiladoras”.

11/18/2015 Webster University INTB 5000 Page 13 NAFTA The North American Free Trade Agreement (NAFTA) created the world’s largest free market. The North American Free Trade Agreement (NAFTA) created the world’s largest free market. 390 million U.S., Canadian, and Mexican consumers and a total output of $10 trillion.390 million U.S., Canadian, and Mexican consumers and a total output of $10 trillion.

11/18/2015 Webster University INTB 5000 Page 14 Free Trade Area of the Americas An agreement to form a regional trading zone stretching from Point Barrow, Alaska to Patagonia, Argentina. An agreement to form a regional trading zone stretching from Point Barrow, Alaska to Patagonia, Argentina.  

11/18/2015 Webster University INTB 5000 Page 15 Integration in Asia Association of Southeast Asian Nations (ASEAN) Association of Southeast Asian Nations (ASEAN) East Asia Economic Group East Asia Economic Group Asia-Pacific Economic Cooperation (APEC) Asia-Pacific Economic Cooperation (APEC) South Asian Association for Regional Cooperation (SAARC) South Asian Association for Regional Cooperation (SAARC)

11/18/2015 Webster University INTB 5000 Page 16 Integration in Africa and the Middle East Economic Community of West African States (ECOWAS) Economic Community of West African States (ECOWAS) Afro-Malagasy Economic Union Afro-Malagasy Economic Union East Africa Customs Union East Africa Customs Union West African Economic Community West African Economic Community Maghreb Economic Community Maghreb Economic Community Gulf Cooperation Council (GCC) Gulf Cooperation Council (GCC)

11/18/2015 Webster University INTB 5000 Page 17 Political and Legal Environment Home country political and legal environment The Environmental Superfund Intellectual property rights Gray markets

11/18/2015 Webster University INTB 5000 Page 18 Political and Legal Environment Embargoes and sanctions Embargoes and sanctions “…government actions to distort the free flow of trade in goods, services, or ideas for adversarial and political purposes.“…government actions to distort the free flow of trade in goods, services, or ideas for adversarial and political purposes.

11/18/2015 Webster University INTB 5000 Page 19 Export Control U.S. export control systems U.S. export control systems Export Administration Act (Commerce Department)Export Administration Act (Commerce Department) Munitions Control Act (State Department)Munitions Control Act (State Department) Determinants for export controlsDeterminants for export controls National security, foreign policy, short supply, nuclear nonproliferation. National security, foreign policy, short supply, nuclear nonproliferation. Dual-Use Items Dual-Use Items Goods used for both military and civilian purposes.Goods used for both military and civilian purposes. Controlled for other purposes.Controlled for other purposes. Export license Export license

11/18/2015 Webster University INTB 5000 Page 20 The U.S. Export Control System Determinants for Export Controls National Security Foreign Policy Short Supply Nuclear Nonproliferation Should a Given Product Be Exported To a Given Country To a Given End-user? For a Particular End-user? Decision Steps in the Export Licensing Process

11/18/2015 Webster University INTB 5000 Page 21 Export Controls New Environment Foreign availability of high technology products. Foreign availability of high technology products. Export controls have moved from a “strategic balance” to a ‘tactical balance” approach. Export controls have moved from a “strategic balance” to a ‘tactical balance” approach. Increase in the speed and dissemination of information and innovation. Increase in the speed and dissemination of information and innovation. Issue of equipment size. Issue of equipment size. How much of the latest technology is required before a country may engage in dangerous activities. How much of the latest technology is required before a country may engage in dangerous activities. Loosening of mutual bonds between allied nations. Loosening of mutual bonds between allied nations.

11/18/2015 Webster University INTB 5000 Page 22 Import Controls Tariffs Tariffs Voluntary restraint agreements Voluntary restraint agreements Quota systems Quota systems Administrative problemsAdministrative problems Monetary and social costs to consumers while benefiting protected groups. Monetary and social costs to consumers while benefiting protected groups. Downstream change in the composition of imports to circumvent narrowly defined protectionist measures. Downstream change in the composition of imports to circumvent narrowly defined protectionist measures. The failure of protected firms become more efficient and competitive. The failure of protected firms become more efficient and competitive.

11/18/2015 Webster University INTB 5000 Page 23 International Business Behavior and Regulations Regulating international business behavior Regulating international business behavior Home countries may implement special laws and regulations to ensure that the international business behavior of firms headquartered within them is conducted within moral and ethical boundaries considered appropriate.Home countries may implement special laws and regulations to ensure that the international business behavior of firms headquartered within them is conducted within moral and ethical boundaries considered appropriate. Methods Methods BoycottsBoycotts Antitrust LawsAntitrust Laws Bribery and Corruption LawsBribery and Corruption Laws

11/18/2015 Webster University INTB 5000 Page 24 Risk Political risk Political risk The risk of loss when investing in a given country caused by changes in a country’s political structure or policies.The risk of loss when investing in a given country caused by changes in a country’s political structure or policies. Types of political risk Types of political risk Ownership risk (property and life)Ownership risk (property and life) Operating risk (ongoing operations interference)Operating risk (ongoing operations interference) Transfer Risk (in shifting funds between countries)Transfer Risk (in shifting funds between countries) Go Home Foreigners

11/18/2015 Webster University INTB 5000 Page 25 Political Risk

11/18/2015 Webster University INTB 5000 Page 26 Forms of Host Country Controls Expropriation Expropriation Taking of private property with compensation.Taking of private property with compensation. Confiscation Confiscation Taking of private property without compensation.Taking of private property without compensation. Domestication Domestication To gain control over foreign investment through demanding partial transfer of ownership and imposed regulations.To gain control over foreign investment through demanding partial transfer of ownership and imposed regulations. Raise tax rates.Raise tax rates. Price controls.Price controls.

11/18/2015 Webster University INTB 5000 Page 27 Legal Differences and Restraints The two major legal systems The two major legal systems Common lawCommon law Based on tradition and less dependent on statutes and codes than on precedent and custom. Based on tradition and less dependent on statutes and codes than on precedent and custom. Code lawCode law Based on a comprehensive set of written statutes that spell out legal rules explicitly. Based on a comprehensive set of written statutes that spell out legal rules explicitly.

11/18/2015 Webster University INTB 5000 Page 28 International Environment International Politics International Politics Political relations and conflicts between countries can have a profound impact on firms trying to do business internationally.Political relations and conflicts between countries can have a profound impact on firms trying to do business internationally. If relations between countries improve, business can benefit.If relations between countries improve, business can benefit. International Law International Law No enforceable body of international law exists. Firms are subject to home and host-country laws.No enforceable body of international law exists. Firms are subject to home and host-country laws. Areas of cooperation among nationsAreas of cooperation among nations bilateral treaties guaranteeing fair treatment bilateral treaties guaranteeing fair treatment patent and trademark protection patent and trademark protection

11/18/2015 Webster University INTB 5000 Page 29 Defining the Issue What is marketing research? What is marketing research? Traditional viewTraditional view “the function that links the consumer, customer, and public to the marketer through information.” “the function that links the consumer, customer, and public to the marketer through information.” Redefined viewRedefined view “systematic and objective identification of information, collection, analysis and dissemination of information for the purpose of improving decision making related to the identification and solution of problems and opportunities in marketing.” “systematic and objective identification of information, collection, analysis and dissemination of information for the purpose of improving decision making related to the identification and solution of problems and opportunities in marketing.”

11/18/2015 Webster University INTB 5000 Page 30 International versus Domestic Research Similar but different Similar but different International research involves the use of similar tools and techniques as in domestic research, but the market environments differ.International research involves the use of similar tools and techniques as in domestic research, but the market environments differ. The primary differences The primary differences New parametersNew parameters New environmentsNew environments Number of factors involvedNumber of factors involved Broader definition of competitionBroader definition of competition

11/18/2015 Webster University INTB 5000 Page 31 The Need for Research Reasons that firms may be reluctant to view international research as important: Reasons that firms may be reluctant to view international research as important: Lack of sensitivity to differences in consumer tastes and preferences.Lack of sensitivity to differences in consumer tastes and preferences. Limited appreciation for the different marketing environments abroad.Limited appreciation for the different marketing environments abroad. Lack of familiarity with national and international data sources and the inability to use them.Lack of familiarity with national and international data sources and the inability to use them. Actual but limited business experience in a country or with a specific firm may be used as a substitute for organized research.Actual but limited business experience in a country or with a specific firm may be used as a substitute for organized research.

11/18/2015 Webster University INTB 5000 Page 32 Research Objectives Research objectives vary from firm to firm because of the views of management, the corporate mission, and the marketing situation. Research objectives vary from firm to firm because of the views of management, the corporate mission, and the marketing situation. Information needs are linked closely to the level of international expertise in the firm. Information needs are linked closely to the level of international expertise in the firm.

11/18/2015 Webster University INTB 5000 Page 33 Opportunity Analysis Foreign-market opportunity analysis Foreign-market opportunity analysis Broad-brush approach to narrow down market possibilities.Broad-brush approach to narrow down market possibilities. Cursory analysis of general market variables- total and per capita GNP, mortality rates, and population data.Cursory analysis of general market variables- total and per capita GNP, mortality rates, and population data. Individual market data, product data,market trends, and restrictions.Individual market data, product data,market trends, and restrictions. Consideration of governmental restrictions.Consideration of governmental restrictions.

11/18/2015 Webster University INTB 5000 Page 34 Going International

11/18/2015 Webster University INTB 5000 Page 35 Secondary Data Sources Governments Governments International organizations International organizations Service organizations Service organizations Directories and Newsletters Directories and Newsletters Electronic Information Services Electronic Information Services Other firms Other firms

11/18/2015 Webster University INTB 5000 Page 36 Research Primary research Primary research Conducted to fill specific information needs.Conducted to fill specific information needs. Essential to strategic marketing plan formation.Essential to strategic marketing plan formation. Useful in international market segmentation.Useful in international market segmentation. Determining information requirements Determining information requirements Formulate research questions to determine precisely the information that is sought.Formulate research questions to determine precisely the information that is sought.

11/18/2015 Webster University INTB 5000 Page 37 Determining Research Administration Centralized Centralized The research specifications are designed by the home office and forwarded to country operations for implementation.The research specifications are designed by the home office and forwarded to country operations for implementation. Coordinated Coordinated An intermediary such as an outside research agency brings headquarters and country operations together.An intermediary such as an outside research agency brings headquarters and country operations together. Decentralized Decentralized Corporate headquarters establishes the broad thrust of research and delegates design and implementation to the local countries.Corporate headquarters establishes the broad thrust of research and delegates design and implementation to the local countries.

11/18/2015 Webster University INTB 5000 Page 38 Research Techniques Interviews Interviews Knowledge persons are a valuable information resource (personal bias must be discounted).Knowledge persons are a valuable information resource (personal bias must be discounted). Goal, obtain in-depth information instead of a wide variety of information.Goal, obtain in-depth information instead of a wide variety of information. Focus groups Focus groups Interaction within a group about a specific topic.Interaction within a group about a specific topic. Ideal size, 7-10.Ideal size, Observation Observation Observation results can be influenced by presence of the observer.Observation results can be influenced by presence of the observer. Surveys Surveys Gather quantitative rather than qualitative information through personal or remote contact with the subject population.Gather quantitative rather than qualitative information through personal or remote contact with the subject population.

11/18/2015 Webster University INTB 5000 Page 39 Designing the Survey Questionnaire Question formatQuestion format Structured or unstructured. Structured or unstructured. Direct or indirect. Direct or indirect. Ensure data equivalence. Ensure data equivalence. Question contentQuestion content Consider interviewee’s ability and willingness to answer. Consider interviewee’s ability and willingness to answer. Adapt questions to societal constraints. Adapt questions to societal constraints. Question wordingQuestion wording Use simple unambiguous words, terms and questions. Use simple unambiguous words, terms and questions. Check for errors using translation-re-translation approach and alternative wording for questions. Check for errors using translation-re-translation approach and alternative wording for questions. Pretest the survey. Pretest the survey.

11/18/2015 Webster University INTB 5000 Page 40 The Sampling Plan System data must be: System data must be: RelevantRelevant TimelyTimely FlexibleFlexible AccurateAccurate ExhaustiveExhaustive ConvenientConvenient

11/18/2015 Webster University INTB 5000 Page 41 Environmental Scanning One method consist of obtaining factual input. One method consist of obtaining factual input. Use of Content Analysis. Use of Content Analysis. Conducted by inside and outside corporate groups. Conducted by inside and outside corporate groups.