Slide 6.

Chapter 6

The political and economic

environment

Svend Hollensen, Global Marketing, 7e © Pearson Education Limited 2017

SWOT analysis
Source

Internal situation
(controllable)

External situation
(uncontrollable)

2
Slide 2.3

Layers of the marketing/business environment

Johnson, Whittington and Scholes, Exploring Strategy, 9th Edition, © Pearson Education Limited 2011
 The PESTEL framework (1)
The PESTEL framework categorises environmental
influenes into six main types:
political, economic,
social/cultural, technological,
environmental, legal
Thus a PESTEL analysis provides six factors which
can have a potential influence ( opportunities or
threats) if you for example decide to launch your
product – DIY product - on your chosen market
 The PESTEL framework (2)
• Political Factors: For example, Government policies,
taxation changes, foreign trade regulations, political
risk in foreign markets, changes in trade blocks (EU)

• Economic Factors: For example, business cycles,

interest rates, personal disposable income, exchange
rates, unemployment rates, GDP trends

• Socio-cultural Factors: For example, population

changes, income distribution, lifestyle changes,
consumerism, changes in culture and fashion
 The PESTEL framework (3)
• Technological Factors: For example, new discoveries and
technology developments, innovations, rates of obsolescence,
increased spending on R&D

• Environmental (‘Green’) Factors: For example, environmental

protection regulations, energy consumption, global warming,
waste disposal and re-cycling

• Legal Factors: For example, competition laws, health and

safety laws, employment laws, licensing laws
 Purpose - Using the PESTEL framework

• Apply selectively –identify specific factors which

impact the industry, market and your company in
question
• Identify factors which are important currently but also
consider which will become more important in the next
few years
• Use data to support the points and analyse trends using
up-to-date information
• Identify opportunities and threats – the main point of
the exercise!
Figure 6.1 Barriers in the political/legal environment
Slide 6.9

What is this?

What term is used to describe trade

laws that favour local firms and
discriminate against foreign ones?

Trade barriers

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 6.10

Categories of trade barriers

Tariff barriers: Non-tariff barriers:

•Specific • Quotas
•Ad valorem • Embargoes
•Discriminatory • Administrative
delays
• Local-content
requirements

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 6.11

What is this?

_____ are tools used by governments to

protect local companies from outside
competition. They are direct taxes and
charges imposed on imports.

Tariffs

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 6.12

Why do countries
levy tariffs?

To protect domestic producers

To generate revenue

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

 Levels of Economic Integration

Political Union

Economic Union

Common Market

Custom Market

Customs Union

Free Trade
Area

Increasing
level of
integration
 Typology of Economic Integration Models

Characteristics
Type Inside Region Versus External world Examples
Free Trade Area No trading barriers Each country decides on EFTA
trading terms
Custom Union No trading barriers Common trading terms Andean Community
(Bolivia,
Colombia, Ecuador, Peru & Venezuela)

Common Market * No trading barriers Common trading terms Mercosur

* Free movement of (Argentina, Brazil, Paraguay,
production factors Uruguay)
( goods, land, labour )

Economic Union * No trading barriers Common trading terms (EU)

* Free movement of
production factors.
* Common currency
* Tax harmonization
* Common fiscal policy
Political Union * Like Economic Union Common foreign policy USA
* Common coordination of
economic & social policy
* Common parliament

73
 European Union

1. Members
* 28 countries
2. Political Structure
* Economic Union (Political Union)
* The European Commission
* European Parliament

3. Currency
* 18 countries - EURO
* 10 countries - national

4. Coverage
* 450 mio. inhabitants

5. GDP
* 11 trillion EURO
NAFTA

1. Members
* USA, Canada and Mexico
2. Structure
* Free trade area
* 99% af all goods traded without tariffs
* Free movement of labour not included
* Free flow of investments (FDI)
3.Coverage
* 380 mio. inhabitants
4. BNP *
Below EU
 Chapter 6 : Political & Economic environment

Group exercise :
Identify and discuss which potential external factors e.g.
Political and Economic issues in your potential
countries - can be supposed to have an impact on the
sales of your DIY workshop tool.
 Chapter 6 review questions – sit two and two ask your student
fellow to explain the term/model and vice versa – be a positive
but critical examiner

 Describe and discuss the purpose of conducting a PESTEL-

analysis
 What is meant by an industry?
 What is meant by a market?
 Describe and discuss the different types of barriers for free
movement of goods?
 Why does a country implement trade barriers what is the
purpose doing that?

18 Juni 2009
Slide 7.19

Chapter 7
The sociocultural environment

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.20

Learning objectives (1)

 Discuss how the sociocultural environment
will affect the attractiveness of a potential
market
 Define culture and name some of its
elements
 High- and low context cultures (Hall)
 Explain the ‘4+1(2)’ dimensions in
Hofstede’s model

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.21

Learning objectives (2)

 Discuss the strengths and weaknesses of

Hofstede’s model

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.22

Culture - Definitions

Culture is ‘the collective programming

of the mind which distinguishes the
members of one human group from
another’ (Hofstede, 1980).

Culture is the learned ways in which a

society understands, deci- des and
communicates (Hollensen)

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.23

Characteristics of culture

 Culture is learned
 Culture is interrelated
 Culture is shared

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.24

Figure 7.1 The visible and invisible parts of culture

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Slide 7.25

National culture
Business/industry culture
Company culture
Individual behaviour/
decision maker

Figure 7.2 The different layers of culture

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011
Slide 7.26

Hall’s communication
context

Low-context High-context
cultures cultures

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.27

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.28

Figure 7.3 The contextual continuum of differing cultures

Source: Usunier, J.-C. (2000). International Marketing, Pearson Education Limited

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.29

Components of Culture – Terpstra & Sarathy`s Model

Religion
Values & Attitudes
Language

Aesthetics
Culture Education

Law &
Politics Social Organisations
Technology &
Material Culture

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.30

The role of language in

global marketing
 Language is important in information-
gathering and evaluation efforts
 Language provides access to local society
 Language capability is important to
company communications
 Language enables the interpretation of
context

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.31

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.32

Hofstedes national culture

dimensions model (original)

Power distance Individualism

National culture

Uncertainty
Masculinity avoidance

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.33

Hofstede’s 4 + 1 dimension model of

national cultures

Power distance

Uncertainty avoidance
Time perspective
Individualism

Masculinity

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.34

Hofstede culture dimensions: Definitions (1)

Power distance:
Is defined as ”the extent to which the less powerful members of organizations
accept and expect that power is distributed unequally
High power distance:
Indicates that hierarchy is clearly established and executed in society –
power is concentrated among few people and people accept that power is
distributed unequally
Low power distance:
People question authority and attempt to distribute power – power is spread
among people and relations are more egalitarian
Uncertainty avoidance:
Is defined as the degree to which people in a country prefer formal rules and
fixed patterns

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.35

Hofstede culture dimensions – Definitions(2)

Individualism vs. Collectivism:

Is defined as if people in a country learn to act as individuals rather than
members of a group – the degree to which people in a society are
integrated into groups
Masculinity vs. Feminity:
Is defined as if the masculine values such as achievement, performance,
success, money, big cars, career dominate over feminine values such as
quality of life, the family, caring for the weak, soft values
Long-term orientation vs. Short-term orientation (time perspective):
A low degree of this index (= short-term) indicates that traditions are
honored and kept. A high degree in this index (= long term) views
adaptation and problem-solving as a necessity

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.36

Hofstede culture dimensions – The sixth

dimension - definitions (3)

Indulgence stands for a society that allows

relatively free gratification of basic and natural
human drives related to enjoying and having fun

Restraint stands for a society that suppresses

gratification of needs and regulates it by means of
strict social norms

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.37

Uncertainty avoidance index (UAI) and

Masculinity vs. feminity

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.38

Power distancee index (PDI) and

Individualism vs. collectivism (IDV)

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.39

Home page Geert Hofstede

 www.hofstede-insights.com
 Do your own comparison among up to 4 countries

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.40

Hofstedes model – Strenghts and

weaknesses

Strenghts :
 Survey - 116.000 respondents
The population (IBM employees) controlled across countries
No other studies compares so many cultures in so much detail
Weaknesses :
It assumes that national territory and border limit the culture
 A single industry, only one company - IT industry
Technical difficulties due to an overlap between the
dimensions, e.g. small power distance/feminine and large
power distance/masculine

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.41

Hofstedes model - Weaknesses

An old research - Hofstede started to research back in the

1970’s, first 40 countries and then later he extended with
50 countries
The theory is static, not dynamic
 The theory needs more diversity, the six dimensions are
too few to explain cultural differences

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.42

What is this?

What term refers to one’s unconscious

reference to one’s own cultural values
when attempting to understand another
culture?

Self-reference criterion (SRC)

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.43

Group exercise
Chapter 7 : Sociocultural environment

Question :
With reference to a chosen country
identify and discuss which social and cultural
issues can be supposed to have an impact on the
sales of your DIY product ? (Try to back your answer
in the question with relevant cultural theory)

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011

Slide 7.44

Chapter 7 review questions – sit two and two ask your

student fellow to explain the term/model and vice versa –
be a positive but critical examiner

The cultural iceberg

The different layers of culture
Low context culture versus high context culture
Elements of culture – Terpstra & Sarathy’s model
Hofstedes framework – the six dimensions

Hollensen: Global Marketing, 5th Edition, © Pearson Education Limited 2011