The Global Marketing Environment



The Importance of Sociocultural Differences

While cultural differences between the U.S. and foreign nations may seem small, those who ignore them risk failure in marketing programs.

Learning Objectives

Formulate an understanding of social and cultural differences from a global marketing perspective

Key Takeaways

Key Points

  • Cultural environments consist of the influence of religious, family, educational, and social systems within the marketing system. Various features of a culture can create an illusion of similarity.
  • The world has more than 3,000 languages and this can cause marketers many problems in designing advertising campaigns and product labels. Colors have different meanings in different cultures and all cultures have their own unique set of customs and taboos.
  • An individual’s personal values arise from moral or religious beliefs learned through experiences. Aesthetics refers to the concepts of beauty and good taste, which can also vary across cultures.
  • The value of time and a country’s business norms are important to consider when marketing across borders. Religious beliefs can also affect shopping patterns and products purchased, in addition to the consumers ‘ values.

Key Terms

  • aesthetics: The concepts of beauty and good taste; the study of sensory or sensori-emotional values, sometimes called judgments of sentiment and taste. More broadly, scholars in the field define aesthetics as “critical reflection on art, culture, and nature. “

Cultural environments consist of the influence of religious, family, educational, and social systems within the marketing system. Marketers who intend to market products overseas must be sensitive to foreign cultures. While the differences between our cultural background in the United States and those of foreign nations may seem small, marketers who ignore these differences risk failure in implementing marketing programs.

This task is not as easy as it sounds, as various features of a culture can create an illusion of similarity. Even a common language does not guarantee similarity of interpretation. For example, in the U.S. we purchase “cans” of various grocery products, but the British purchase “tins.” The following are a few cultural differences that may cause marketers problems in attempting to market their products overseas.

Language

The importance of language differences cannot be overemphasized, as there are almost 3,000 languages in the world. Language differences cause many problems for marketers in designing advertising campaigns and product labels. Language problems become even more serious once the people of a country speak several languages. For example, in Canada, labels must be in both English and French. In India, there are over 200 different dialects, and a similar situation exists in China.

A map that shows the geographic distribution of languages in India.

Languages in India: India has over 200 different dialects. It is important to consider different languages in a country when creating product campaigns.

Colors

Colors have different meanings in different cultures. For example, in Egypt, the country’s national color of green is considered unacceptable for packaging, because religious leaders once wore it. In Japan, black and white are colors of mourning and should not be used on a product’s package. Similarly, purple is unacceptable in Hispanic nations because it is associated with death.

Customs and Taboos

All cultures have their own unique set of customs and taboos. It is important for marketers to learn about these customs and taboos so that they will know what is acceptable and what is not for their marketing programs.

Values

An individual’s personal values arise from his/her moral or religious beliefs and are learned through experiences. For example, in America we place a very high value on material well-being, and are more likely to purchase status symbols than people in India. Similarly, in India, the Hindu religion forbids the consumption of beef, and fast-food restaurants such as McDonald’s and Burger King would encounter tremendous difficulties without product modification. Additionally, Americans spend large amounts of money on soap, deodorant, and mouthwash because of the value placed on personal cleanliness.

Aesthetics

The phrase “Beauty is in the eye of the beholder” is a very appropriate description for the differences in aesthetics that exist between cultures. For example, Americans believe that suntans are attractive, youthful, and healthy; however, the Japanese do not.

Time

Americans seem to be fanatical about time when compared to other cultures. Punctuality and deadlines are routine business practices in the U.S. However, salespeople who set definite appointments for sales calls in the Middle East and Latin America will have a lot of time on their hands, as business people from both of these cultures are far less bound by time constraints. To many of these cultures, setting a deadline such as “I have to know next week” is considered pushy and rude.

Business Norms

Business norms also vary from one country to the next and may present challenges to foreigners not used to operating within the particular norms of the host country

Religious Beliefs

Religion can affect shopping patterns and products purchased, in addition to the consumers’ values, as discussed earlier. In the United States and other Christian nations, Christmas time is a major sales period. But for other religions, religious holidays do not serve as popular times for purchasing products. Women do not participate in household buying decisions in countries whose religion serves as opposition to women’s rights.

Every culture has a social structure, but some seem less widely defined than others. That is, it is more difficult to move upward in a social structure that is rigid. For example, in the U.S., the two-wage-earner family has led to the development of a more affluent set of consumers. But in other cultures, it is considered unacceptable for women to work outside the home.

Measuring the Economic Environment

A nation’s economic output represents its capacity to produce goods and services, and can help determine market opportunities.

Learning Objectives

Analyze how an economic environment is measured from a global marketing perspective

Key Takeaways

Key Points

  • Economic growth is the increase in the amount of the goods and services produced by an economy over time. It is conventionally measured as a percentage change in the Gross Domestic Product ( GDP ) or Gross National Product (GNP).
  • Inflation or deflation can make it difficult to measure economic growth. To express real growth rather than changes in prices for the same goods, statistics on economic growth are often adjusted for inflation or deflation.
  • A way of classifying the economic growth of countries is to divide them into three groups: (a) industrialized, (b) developing, and (c) less-developed nations.
  • Usually, the most significant marketing opportunities exist among the industrialized nations, but they also have stable population bases and market saturation for many products.
  • Developing nations have growing population bases, and although they currently import limited goods and services, there exists a long-run potential for growth in these nations.

Key Terms

  • per capita incomes: The average income or income per person that is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross National Income) and dividing it by the total population. It does not attempt to reflect the distribution of income or wealth.
  • Industrialized: A highly developed economy and advanced technological infrastructure relative to other, less-developed nations. Developed countries have post-industrial economies, meaning the service sector provides more wealth than the industrial sector.
  • developing nation: Countries with more advanced economies than less-developed nations (nations with a low living standard, undeveloped industrial base, and low Human Development Index (HDI)), but which have not yet fully demonstrated the signs of a developed country.

Economic growth is the increase in the amount of the goods and services produced by an economy over time. It is conventionally measured as a percentage change in the Gross Domestic Product (GDP) or Gross National Product (GNP). These two measures, which are calculated slightly differently, total the amounts paid for the goods and services that a country produced. As an example of measuring economic growth, a country that creates 9,000,000 in goods and services in 2010 and then creates 9,090,000 in 2011 has a nominal economic growth rate of 1% for 2011.

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GDP per Capita (2008): The GDP varies for economies across the globe.

In order to compare per capita economic growth among countries, the total sales of the countries to be compared may be quoted in a single currency. This requires converting the value of currencies of various countries into a selected currency, for example U.S. dollars. One way to do this conversion is to rely on exchange rates among the currencies, for example, how many Mexican pesos buy a single U.S. dollar? Another approach is to use the purchasing power parity method. This method is based on how much consumers must pay for the same “basket of goods” in each country.

Inflation or deflation can make it difficult to measure economic growth. If GDP, for example, goes up in a country by 1% in a year, was this due solely to rising prices (inflation) or because more goods and services were produced and saved? To express real growth rather than changes in prices for the same goods, statistics on economic growth are often adjusted for inflation or deflation.

For example, a table may show changes in GDP in the period 1990 to 2000, as expressed in 1990 U.S. dollars. This means that the single currency being used is the U.S. dollar, with the purchasing power it had in the U.S. in 1990. The table might mention whether the figures are “inflation-adjusted” or real. If no adjustments were made for inflation, the table might make no mention of inflation-adjustment or might mention that the prices are nominal.

A way of classifying the economic growth of countries is to divide them into three groups: (a) industrialized, (b) developing, and (c) less-developed nations. The industrialized nations are generally considered to be the United States, Japan, Canada, Russia, Australia and most of Western Europe. The economies of these nations are characterized by private enterprise and a consumer orientation. They have high literacy, modem technology, and higher per capita incomes. Developing nations are those that are making the transition from economies based on agricultural and raw materials production to industrial economies. Many Latin American nations fit into this category, and they exhibit rising levels of education, technology, and per capita incomes. Finally, there are many less-developed nations in today’s world. These nations have low standards of living, low literacy rates, and very limited technology.

Usually, the most significant marketing opportunities exist among the industrialized nations, as they have higher levels of income, one of the necessary ingredients for the formation of markets. However, most industrialized nations also have stable population bases, and market saturation for many products already exists.

The developing nations, on the other hand, have growing population bases, and although they currently import limited goods and services, there exists a long-run potential for growth in these nations. Dependent societies seek products that satisfy basic needs like food, clothing, housing, medical care, and education. Marketers in such nations must be educators, emphasizing information in their market programs. As the degree of economic development increases, so does the sophistication of the marketing effort focused on the countries.

Political and Regulatory Environment

Political stability, trade blocs, tariffs, and expropriation are risks that should be evaluated prior to marketing in foreign countries.

Learning Objectives

Show how international political and trade regulations impact global marketing

Key Takeaways

Key Points

  • Business activity tends to grow and thrive when a nation is politically stable. When a nation is politically unstable, multinational firms can still conduct business profitably.
  • US companies make one-third of their revenues from products marketed abroad, in places such as Asia and Latin America. The North American Free Trade Agreement (NAFTA) further boosts export sales by enabling companies to sell goods at lower prices because of reduced tariffs.
  • The creation of the single European market in 1992 was expected to change marketing worldwide. It meant the birth of a market that was larger than the United States, and the introduction of European Currency (Euros) in place of the individual currencies of member nations.
  • Most nations encourage free trade by inviting firms to invest and to conduct business there, while encouraging domestic firms to engage in overseas business. However, some governments such as Communist nations openly oppose free trade.
  • Multinational firms face the risk of expropriation which place them at the mercy of foreign governments, which are sometimes unstable, and which can change the laws they enforce at any point in time to meet their needs.

Key Terms

  • expropriation: The act of expropriating; the surrender of a claim to private property; the act of depriving of private propriety rights.

Political and Regulatory Environment

The nationalistic spirit that encourages self-reliance in many nations has led them to engage in practices that have been very damaging to other countries’ marketing organizations.

For example, foreign governments can intervene in marketing programs in the following ways:

  • Contracts for the supply and delivery of goods and services
  • The registration and enforcement of trademarks, brand names, and labeling
  • Patents
  • Marketing communications
  • Pricing
  • Product safety, acceptability, and environmental issues

Political Stability

Business activity tends to grow and thrive when a nation is politically stable. When a nation is politically unstable, multinational firms can still conduct business profitably. Most firms prefer to engage in the export business rather than invest considerable sums of money in investments in foreign subsidiaries. Inventories will be low and currency will be converted rapidly. The result is that consumers in the foreign nation pay high prices, get less satisfactory products, and have fewer jobs.

Trading Blocs and Agreements

US companies make one-third of their revenues from products marketed abroad, in places such as Asia and Latin America. The North American Free Trade Agreement (NAFTA) further boosts export sales by enabling companies to sell goods at lower prices because of reduced tariffs.

Members sign the North American Free Trade Agreement.

NAFTA Member Countries: Events, such as the signing of the North American Free Trade Agreement (NAFTA), highlight the differences among special interest groups and the competition that takes place between them to capture policymakers’ attention.

Regional trading blocs represent a group of nations that join together and formally agree to reduce trade barriers among themselves. The Association of Southeast Asian Nations (ASEAN) is an example of a regional trading block. This agreement allows for the free exchange of trade, service, labor, and capital across the 10 independent member nations. In addition, ASEAN promotes the regional integration of transportation and energy infrastructure.

One of the potentially interesting results of trade agreements like ASEAN or NAFTA is that many products previously restricted by dumping laws, which are laws designed to keep out foreign products, would be allowed for sale.

Almost all the countries in the Western hemisphere have entered into one or more regional trade agreements. Such agreements are designed to facilitate trade through the establishment of a free trade area, customs union or customs market. Free trade areas and customs unions eliminate trade barriers between member countries while maintaining trade barriers with non-member countries. Customs unions maintain common tariffs and rates for non-member countries. A common market provides for harmonious fiscal and monetary policies while free trade areas and customs unions do not.

The creation of the single European market in 1992 was expected to change the way marketing is done worldwide. It meant the birth of a market that was larger than the United States, and the introduction of European Currency Units (Euros) in place of the individual currencies of member nations. Experience in multilingual marketing would help non-European companies succeed in this gigantic market. With new technologies such as multilingual processing programs, it would be possible to target potential customers anywhere in Europe, in any language, with the same marketing campaign.

Progress toward European unification has been slow, so many doubt that complete unification will ever be achieved. However, on January 1, 1999, 11 of the 15 member nations took a significant step toward unification by adopting the Euro as the common currency. These 11 nations represented 290 million people and a USD 6.5 trillion market. Still, with 14 different languages and distinct national customs, it is unlikely that the European Union (EU) will ever become the “United States of Europe.”

Tariffs

Most nations encourage free trade by inviting firms to invest and to conduct business there, while encouraging domestic firms to engage in overseas business. These nations do not usually try to strictly regulate imports or discriminate against foreign-based firms. There are, however, some governments that openly oppose free trade. For example, many Communist nations desire self-sufficiency, so they may restrict trade with non-Communist nations.

The most common form of restriction of trade is the tariff, which is a tax placed on imported goods. Protective tariffs are established in order to protect domestic manufacturers against competitors by raising the prices of imported goods. Not surprisingly, US companies with a strong business tradition in a foreign country may support tariffs to discourage entry by other US competitors.

Expropriation

All multinational firms face the risk of expropriation. That is, the foreign government takes ownership of plants, sometimes without compensating the owners. However, in many expropriations there have been payment, and it is often equitable. Many of these facilities end up as private rather than government organizations. Because of the risk of expropriation, multinational firms are at the mercy of foreign governments, which are sometimes unstable, and which can change the laws they enforce at any point in time to meet their needs.

Demographics of New Markets

Evaluating the demographic profile of a country can help assess whether or not there is demand for the product or service being marketed.

Learning Objectives

Relate the uses of demographic evaluation to global marketing

Key Takeaways

Key Points

  • A demographic profile typically involves age bands, social class bands, and gender delineations. It can also include religious affiliations, income brackets, and a variety of other characteristics used to separate a country’s population into groups similar to a company’s customer.
  • Researchers want to determine what segments or subgroups exist in the overall population, in order to develop a marketing strategy and marketing plan specific to the population.
  • Critics of demographic profiling argue that such broad-brush generalizations can only offer a limited insight, and that their practical usefulness is debatable.

Key Terms

  • generational cohort: A group of individuals (within some population definition) who experience the same event within the same time interval. The notion of a group of people bound together by the sharing of the experience of common historical events developed in the early 1920s. Today, the concept has found its way into popular culture through well-known phrases like “baby boomer” and “Generation X”.

New Market Demographics

Marketers typically combine several variables to define a demographic profile. A demographic profile (often shortened to a “demographic”) is a term used in marketing and broadcasting to describe a demographic grouping or a market segment. This typically involves age bands (as teenagers do not wish to purchase denture fixant), social class bands (as the rich may want different products than middle and lower classes, and may be willing to pay more) and gender (partially because different physical attributes require different hygiene and clothing products, and partially because of the male/female mindsets). It can also include religious affiliations, income brackets, and a variety of other characteristics used to separate a country’s population into groups similar to a company’s core customer. A demographic profile also provides enough information about the typical member of this group to create a mental picture of this hypothetical aggregate. For example, a marketer might speak of the single, female, middle-class, age 18 to 24, college-educated demographic.

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Country of Birth : Demographics can be measured in a variety of ways. The map shows an estimation of Sweden’s foreign-born residents in 2001.

Researchers typically have two objectives in this regard: first, to determine what segments or subgroups exist in the overall population; and second, to create a clear and complete picture of the characteristics displayed by typical members of each segment. Once these profiles are constructed, they can be used to develop a marketing strategy and marketing plan. The five types of demographics for marketing are age, gender, income level, race, and ethnicity.

After evaluating the demographic information, determining what segment or subgroup exists within the population, recommendations are made to change, increase, decrease or expand on the type of goods or services offered. Marketers data may alter the way or where a product or service is sold in order to reach a market segment that has the most potential as buyers.

A demographic profile can be used to determine when and where advertising should be placed so as to achieve maximum results. In all such cases, it is important that the advertiser get the most results for their money, and so careful research is done to match the demographic profile of the target market to the demographic profile of the advertising medium. For instance, shortly after the cancellation of Star Trek in 1969, NBC’s marketing department complained that it was premature. They explained that their newly instituted demographic audience profiling techniques indicated that the series’ main young urban audience was highly desirable for advertisers. In 1971, CBS acted on their own marketing department’s demographic findings about their television network’s programming and canceled several series that appealed primarily to older and rural audiences. This move was nicknamed “the rural purge. ”

A good way to figure out the intended demographic of a television show, TV channel, or magazine is to study the ads that accompany it. For example, in the United States, the television program “The Price is Right” most frequently airs from 11 a.m. to Noon. The commercials on it (besides the use of product placement in the show itself) are often for things like arthritis pain relievers and diapers. This indicates that the target demographics are senior citizens and parents with young children, both of whom would be home at that time of day and see that show. Another example would be MTV, with its many ads for digital audio players, indicating that the channel is targeted to young adults and teenagers and/or fans of music.

Criticisms of Demographic Profiling

Demographic profiling is essentially an exercise in making generalizations about groups of people. As with all such generalizations, many individuals within these groups will not confirm to the profile. Demographic information is aggregate and offers probabilistic data about groups, not about specific individuals. Critics of demographic profiling argue that such broad-brush generalizations can only offer a limited insight, and that their practical usefulness is debatable.

Most demographic information is also culturally based. The generational cohort information above, for example, applies primarily to North America (and to Western Europe, to a lesser extent), and it may be unfruitful to generalize conclusions more widely as different nations face different situations and potential challenges.

Natural Resources, Infrastructure, and Technology of New Markets

The natural resources, infrastructure, and technology of a nation will determine the ease and viability of entering that country’s market.

Learning Objectives

Outline the impact natural resources, infrastructure and technology has on new markets within the global marketing environment

Key Takeaways

Key Points

  • A country’s natural resources will determine what types of businesses can achieve the highest profitability there due to access to low-cost inputs. For example, a country with abundant arable land and government farming subsidies may support companies wanting to go into organic food production.
  • A country’s infrastructure will help determine the ease of doing business within that nation. For example, a country with poor road conditions and intense traffic may not be the best place to start a business that requires goods to be transported from city to city by land.
  • A country’s technological capabilities will help determine what types of operations are possible in that nation. For example, in a country where people are not used to operating computers would not be an ideal place for a customer support call center.

Key Terms

  • inexhaustible: Unlikely to be depleted in foreseeable future
  • ubiquitous resource: Existing or occurring everywhere

Natural Resources

Natural resources are materials and components (something that can be used) that can be found within the environment. They occur naturally within environments that exist relatively undisturbed by mankind. A natural resource is often characterized by amounts of biodiversity and geo-diversity existent in various ecosystems. Some of them are essential for our survival while most are used for satisfying our wants. Every man-made product is composed of natural resources at its fundamental level. A natural resource may exist as a separate entity, such as fresh water, or as a living organism, such as fish. It may exist in an alternate form which must be processed to obtain the resource such as metal ores, oil, and most forms of energy. There is much debate worldwide over natural resource allocations, partly due to increasing scarcity but also because the exportation of natural resources is the basis for many economies. Natural resources that can be found everywhere, such as sunlight and air, are known as ubiquitous resources. However, most resources are not ubiquitous and only occur in small sporadic areas; these resources are known as localized resources. There are very few resources that are considered inexhaustible – solar radiation, geothermal energy, and air (though access to clean air may not be). The vast majority of resources are exhaustible, which means they have a finite quantity, and can be depleted if managed improperly.

New Market Implications

A country’s abundant natural resources will help determine what types of businesses can achieve the highest profitability there due to access to low-cost inputs. For example, a country with abundant arable land and government farming subsidies may support companies wanting to go into organic food production. Other environmental factors such as demographics and demand will also weigh in on a company’s potential success in a country.

Infrastructure

Infrastructure are basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function. It can be generally defined as the set of interconnected structural elements that provide a framework supporting an entire structure of development. It is an important term for judging a country or region’s development. The term typically refers to the technical structures that support a society, such as roads, bridges, water supply, sewers, electrical grids, telecommunications, and so forth.Viewed functionally, infrastructure facilitates the production of goods and services and the distribution of finished products to markets, as well as basic social services such as schools and hospitals. For example, roads enable the transport of raw materials to a factory. In military parlance, the term refers to the buildings and permanent installations necessary for the support, redeployment, and operation of military forces.

New Market Implications

A country’s infrastructure will help determine the ease of doing business within that nation. For example, a country with poor road conditions and intense traffic may not be the best place to start a business that requires goods to be transported from city to city by land.

A road with potholes in Poland.

Infrastructure: Poor road infrastructure, like potholes, can create difficulties for businesses that rely on road transportation.

Technology

The level of technological development of a nation affects the attractiveness of doing business there, as well as the type of operations that are possible. Consider some of the following technological problems that firms may encounter in doing business overseas:

  • Foreign workers must be trained to operate unfamiliar equipment
  • Poor transportation systems increase production and physical distribution costs
  • Maintenance standards vary from one nation to the next
  • Poor communication facilities hinder advertising through the mass media
  • Lack of data processing facilities makes the tasks of planning, implementing, and controlling marketing strategy more difficult

New Market Implications

A country’s technological capabilities will help determine what types of operations are possible in that nation. For example, in a country where people are not used to operating computers would not be an ideal place for a customer support call center.