INTERNATIONAL MARKETING

• Culture
• Product strategies
• Laws of interest to firms doing business
internationally

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 1

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
• Identify the implications of laws of particular interest to
U.S. firms doing business abroad

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 2

An Effective Billboard Advertisement?

CLOTHES GETS
VERY WASHED WITH SQUEEKY
DIRTY THE CLEAN
CLOTHES ADVERTISED CLOTHES
DETERGENT
BRAND

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 3

International Marketing: Considerations and Outcomes

MKT 465 COVERS

INTERNATIONAL
MARKETING IN
MORE DETAIL

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 4

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)

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 5

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

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 6

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

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 7

Very Brief Review of Economics

• Exchange rates
– Floating (supply and demand)
• When a country imports, it must sell its currency
(causing an increase in supply) to be able to buy
the currency of the country from which it is
importing (whose currency, then, will experience
an increase in demand)
– Floating within a limited range
– Fixed
• Trade balances and their impact on
exchange rates

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 8

The Effects of Imports and Exports on
Currency Supply and Demand
Note that any one transaction will
tend to have a limited effect on the
Customers in a These imports, at supply and demand balance much
country want to buy some level, must be the same that any one small
farmer’s wheat output will not have
something sold by paid for in the
a large impact on the market. When
another country exporting country’s there is a pattern of heavily
currency imbalanced imports and exports,
however, effects can be large.

The supply of the The value of the

importing country’s importing
To obtain the needed currency on the world country’s currency
foreign currency, the market increases decreases
importer must buy it,
paying its own The demand for the The value of the
currency in return exporting country’s exporting
currency on the world country’s currency
market increases increases

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 9

The Role of Government Activity in an
Economy
• Some governments play a larger role in their countries’
economies than in others
• The government may pay for services such as
– Healthcare
– Education
• Such policies will influence disposable income for
consumers
– Much higher taxes will limit the ability to buy discretionary items
– Certain expenses will be eliminated or reduced, and consumes are less
likely to experience catastrophic losses (e.g., from unemployment or
major illness)
– Wealth is transferred from higher income to lower income consumers
– Consumer choice may be reduced as the decision power is assumed by
the government

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 10

Tax Policy Issues
• Income tax
– Levels imposed
– Degree of progressivity
• Property, inheritance, and specialized
• Excise (sales) taxes
– More difficult to make progressive; usually outright
regressive
• “Sin” taxes whose purpose is in part to
discourage “bad” consumption
– Some types
• Alcohol and tobacco (health)
• Petroleum (environmental impact)
• Imported products (trade balance)
• “Luxury” products (“frivolous”)
– Can have a very regressive effect

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 11

Approaches to Product Introduction
● Customization Standardization ●

Completely new Adaptation Products sold across

product made for
each country the World are
Adjustments are made in regions
identical
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!

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 12

Reasons for Standardization

• Avoiding high costs of • Convergence of global

customization, if applicable consumer tastes/needs
• Technological intensity • Country of origin
– Reduced confusion positioning
– International compatibility
among product group
components
– Faster spread of rapid life
cycle products

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 13

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

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 14

 Standardization—Disadvantages

• Unnecessary
features
• Vulnerability to
trade barriers
• Strong local
competitors

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 15

 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

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 16

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

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 17

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
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 18
 Country of Origin Effects
• Perception of product based on associations with
the country
– Quality (e.g., Japan, Germany)
– Elegance and style (e.g., France, Italy)
• Positioning strategies
– Emphasis on origin (e.g., French wine)
– De-emphasis or obfuscation of country of origin (e.g., French
beer, American made shampoo intended only for the U.S.
with instructions in French)
• Today, in practice, the country of origin may be
ambiguous
– High quality products can now be manufactured in many
countries
– The brand name (e.g., Sony) may invoke the that country’s
image (e.g., Japan) rather than the country in which the
product was actually made (e.g., China)

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 19

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!”

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 20

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…

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 21

 U.S. Laws of Interest…

• Anti-trust: It is illegal for U.S. firms to participate in collusion

and other anti-competitive activities abroad. Most countries
have such laws; not all enforce these.
• Foreign Corrupt Influences Act: It is illegal for U.S. firms to pay
bribes abroad.
• Anti-boycott laws: It is illegal for U.S. firms to participate in a
boycott of Israel or even certify that one’s firm does not do
business with Israel. Technically, it is illegal to participate in all
non-U.S. Government sanctioned boycotts, but the emphasis is
on Israel.
• Trading With the Enemy:
– It is illegal to trade at all (with few exceptions) with enemy certain states
(e.g., North Korea, Iran, Libya).
– Exports of certain technologies (mostly with potential for military use) is
heavily restricted.
• Extra-territoriality: U.S. courts will often take jurisdiction over
cases of violations of U.S. law that occurred entirely abroad.

BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 22