INTERNATIONAL MARKETING

(MM405)
DEFINITIONS
*Cateora (2009) views international Marketing as
the performance of the business activities designed to
- plan
- price
-promote
-direct the flow of the company’s goods and services to consumers or
users in more than one country for a profit.
*According to Brassington and Pettitt (1997) international
marketing is concerned with marketing across national
boundaries.
*International marketing is simply the application of marketing
principles to more than one country,Keegan (2008).
*The process of conceptualizing and then conveying a final
product or service worldwide with the hopes of reaching the
international marketing community. Business dic.
Definition con’t
*IM is the process of conceptualizing and then conveying a final product or
service worldwide with the hopes of reaching the international marketing
community.
*I-marketing is how you change and blend those P's to satisfy your international
customers in difference segments.
*Global Marketing is selling one product all over the world.
AMA
*The difference between domestic and international marketing is that with
domestic marketing, the firm focuses its efforts on home market alone and with
I-marketing, activities take place in more than one country. Thus accounts for
complexity and diversity found in IM.

NB: Marketing concepts, process and principles are, therefore, universal.

Globalization
*is the process that is increasing the flow of people,
culture, ideas, values, knowledge, technology, and
economy across borders, resulting in a more
interconnected and interdependent world.
-Globalization affects each country in different ways and
can have positive and/or negative consequences,
according to a nation’s specific history, traditions,
culture, priorities, and resources.
OVERVIEW OF INTERNATIONAL MARKETING
EVOLUTION OF INTERNATIONAL TRADE
a]History of silk Trade
b]British Military Merchants
c]Japanese Economy Successes
a) History of silk Trade
THE beginning of last millennium qualified Chinese as the preeminent
international traders.
A well-established Chinese legend, Empress Hsi Ling Shi, wife of Emperor Huang Ti
(also called the Yellow Emperor), was the first person to accidentally discover silk as
weavable fiber.
The empress soon developed sericulture (the cultivation of silkworms) and invented
the reel and loom. Thus began the history of silk.
At first it was reserved for Chinese royalty, but later silk spread gradually through the
Chinese culture.
China kept the production a secret safe from the rest of the world for more than 30
centuries.
The Chinese had a monopoly on the world's silk production until about BC 200 when
Korea saw the emergence of its own silk industry thanks to a handful of Chinese
immigrants who had settled there.
Despite its popularity, however, the secret of silk-making was only to reach Europe
around 550AD, via the Byzantine Empire.
In the seventh century, the Arabs conquered Persia, capturing their magnificent silks
in the process.
By the 13th century, however, Italy had gained dominance and entered the hall of fame
b)British Military Merchants
*At the start of the last century the British military
merchants and manufacturers dominated the scenes and
international commerce. (World W1=Tripple entente)= and
WW11)
They traded in ammunition(bullets, shells, missiles,grenades
and ammo).
c)Japanese Economy successes
At the start of the last decade of the last century, Japanese
economy successes had rendered the military competition
obsolete.
This economic miracle was the result of assistance of the
United States, but chiefly due to the economic
interventionism of the Japanese government.
*Trans-Pacific trade overtook Trans-Atlantic trade .
Japanese made TV sets.
Japanese coal, metal related industry and Steel plant
experienced an annual growth 1960 rate of 25%.
~ Japan was to remain the world's biggest producer of raw silk,
and practically the only major exporter of raw silk, until the
1970s
Examples of Economic Activities that can be
internationalised
Education services in America
Textile Business in Europe
Agricultural produce in Israel
Beverage business in China
Bottled drink Canned drink
Observed common Trend in the world market
*Globalization of markets
=1s process of increasing the connectivity and interdependence of the world's
markets and businesses as a result of massively increased cultural exchange.
The process is accelerated by:
i)democratic free enterprise model
Four fundamental factors are:
-private ownership
-individual initiative
-profit maximisation
-competition.
Producers are free to do anything they want, without government interference.
ii) new communication technologies
-TV
-cell-phones communication becomes cheap and fast.
-computer
-internet
iii)Markets are burgeoning in emerging economies.
 Markets are demanding.
 There are high rates of emigration to the developed world.
 Markets are fragmented.
 Populations are youthful and growing.
 There is limited income.
 Infrastructure is weak.
 Technology is underdeveloped.
 Distribution channels are weak.
 Markets are changing rapidly.
 There are Economic and Political reforms

iv)Firms compete for the same global market.

Arguably, trade causes peace and prosperity to the host country and investors.
Discuss
Two faces of globalization
1)opportunities
-gaining access to new customers.
For example, United States accounts for only about 5 percent of the
world’s population. Selling goods and services to the other 95 percent
of people on the planet can be very appealing
-lowering Costs
can increase it sales volume by entering a new country
purchase supplies in greater numbers. This can provide a firm with
stronger leverage when negotiating prices with its suppliers.
-Offshoring reduces costs
Offshoring involves relocating a business activity to another country.
For example,many American companies have closed down operations
at home in favor of creating new operations in countries such as
China and India that offer cheaper labor.
-Diversification of Business Risk
A familiar cliché warns “don’t put all of your eggs in one basket.”
Challenges
-Political risk refers to the potential for government upheaval or
interference with business to harm an operation within a country.
-Economic risk refers to the potential for a country’s economic
conditions and policies, property rights protections, and currency
exchange rates to harm a firm’s operations within a country.
-Cultural risk refers to the potential for a company’s operations in a
country to struggle because of differences in language, customs,
norms, and customer preferences
-Natural disaster
-Diseases
-Battle to balance economic growth and stewardship of the environment
continues.
-This hamper commerce and human progress.
Will advance in science bring solution to aids/hiv?
Will they make weapons and warfare obsolete, or they will bring
forth disasters? (Cateora, Gilly, Graham
IM from organization’s perspective.
*International marketing can no longer be relegated to a subject of
organization or a division but should involve everyone.
Reasons
-shared values
-same vision
-same culture
-same strategy orientation leading to synergies, unity and conceited efforts
*Definitions of success now transcend national boundaries.
-partnership in R&D
-foreign markets with growth potential
-transferrable expertise
-advanced technology
*The concepts of domestic business here become anachronistic.
-saturated markets
-obsolete technology
-unskilled labor force
*To succeed, corporation must use global strategies in;
i]R &D
~lower costs;
~ pursuing innovation for emerging markets,
~access to customer insights
~ adjust product features to meet the needs of emerging-
market
~develop entirely new products for new needs
ii]production location= home or host country and
offshoring.
iii]Marketing-4ps strategies
iv]finance.-sources and financial risk management strategies.
Driving Forces For IM
1)Technology
Faces no physical &cultural boundaries
-Transports everyone to anywhere
-Allows anyone to communicate with anyone who is anywhere
-Makes anything for anyone
- Provides solutions to all problems.
For example with comm. There are cell phones, satellite TV internet
facility, etc.

2) Product development cost

No single national market is able to foot the cost of NPD.

3)Regional Economic Agreements

NAFTA
EU Lower trade barriers within the region resulting
SADAC in expanding trade among member countries.
4.Quality
Greater revenue and greater operating margins are realized.

5. Consumer needs and wants

-converging needs &wants create opportunities for global marketers.

6. Saturation of domestic markets.

7)Scale economies
-increased prdtion
-standardized goods(repetition)
-experience transfer
employee competencies

8) Resource Utilization
-Hr
-machinery
-money
-time
Restraining forces
a) Business practices
i)Requirements
ii Procedures(partnership arrangement, license,etc.)
iii)bribes
iv) nature of contracts
v) Quality standards
b) Costs,
c) National controls -access to markets
-entry to business sectors
-media access- conferencing facilities
-price
• d) Nationalism
• -Buy national products alone
• -Content law
• -indigenization
Restraining Forces con’t
e) War
-effects of war
~mindset
~production
~infrastructure
~Hr
~relations
f) Mgnt myopia and organizational culture;
-only dictates and does not listen
-no room for local initiatives
-lack of in-depth knowledge of foreign markets
-lack of autonomy
International Involvement phases
1)No direct foreign marketing
-No active cultivation of rela/ship with foreign customers
-Company products reach f-customers. How?
2)Infrequent foreign marketing
-Makes no investment.
-Only sells surplus.
3) Regular Foreign marketing
-Invests in important markets(where growth potential is high)
-Employs own or foreign s/reps.
4) International marketing
- Fully committed to and involved in IM
- Seeks markets all over the world
- Sells products that are a resulting planned production
for markets in various countries.
-Sells tailor-made pdts
A company becomes an international or multinational
firm.
E.G, A joint venture between Fedders (US) and
Xinle(China)
5) Global Marketing
Market segmentation decisions are no longer focused on
national borders.
Market segments are defined by income levels and usage
pattern and age group.
-Views the whole world as a single market segment
The Marketer’s task
*The business environment is responsible for challenges which
an I- marketer faces.
International Business Environment
Domestic uncontrollables

DDO
DO
4PS

foreign uncontrollables
The inner circle
- depicts the domestic controllable elements, 4Ps.
The task;
-to blend 4Ps’ activities….How?
-to capitalize on anticipated demand….. What does this
involve?
-to adjust them…..What does it entail?
Adaptation
SRC (self reference criterion)often hinders successful
adaptation.
Example of areas of concern;
-Product –colour, design, size, ingredients, quality..
- packaging-form, size, shape, quality…
-promotion-media, picture
-distribution-channel structure
-Price-sensitivity
The 2nd circle
-Encompasses the PESTLE factors of home country that have a direct effect on the
success of a foreign venture.
Examples
i)Political influence
*US government
-placed a total ban on trade with Libya to condemn its support for terrorist attacks
(profitability, investment, unemployment, cost, partnership arrangements were all
affected.etc)
-imposed restrictions on trade with SA to protest apartheid
(IBM, Exxon ,Hang leaven Bart their international marketing programs were affected
in terms of sales volume, labour force, pdtn capacity, etc.
-Cuba and USA
ii) Competition within the home country can also have profound effects on the
international marketers tasks or plans.
-market share
-technology is made obsolete
-strategic alliance can be disturbed
-competitors’ strong networks can be formed
-resource depletion.
For e.g Kodak and Fiji.
The outer circles
- represents the elements of foreign environment within which
the marketer operates.
The more the country markets in which a company operates,
the greater the possible variety of environmental factors to
contend.
Example;
*China - Commercial contracts “legal person or firm”.
*Indian gvt ordered Coke Cola to reveal its secret
formula.
Orientations
a) Management Orientation
*Refers to the perception and beliefs managers have of IM.
1) Domestic Markets Extension Orientation
-It seeks markets where demand is similar to the home markets
2) Multi-domestic Market Orientation
-The firm focuses its effort on various national mkts and adapts its
programs .
3) Regio-centric Marketing orientation
-The company employs an integrated regional strategy
4)Global marketing Orientation
-Marketing activity has global dimension
-Market coverage is the world
- Strives for efficiencies of scale
- develops a stdised marketing mix applicable across national boundaries.
E-g Coca Cola, Ford motor, Intel.
NB: Uniqueness / responsiveness has to be addressed.
-A Filipino-style spicy burger in
Manila and pork burger in
Thailand all to accommodate local
tastes and customs.
b)Market orientation
i)in-out perspective
*capabilities
ii)outside-in perspective
ENVIRONMENTAL
FACTORS
1) Socio- cultural environment
*Culture can be defined as a society’s accepted basis for
responding to external and internal events, CATEORA (2009).
*Hofstede (1988)
~ defines culture as the collective programming of mind that
distinguishes the members of one category of people from those
of another.
-It includes both conscious and unconscious values, ideas,
norms, attitudes and symbols that shape human behavior and that
are transmitted from one generation to the next. This implies
that culture is dynamic and can be learned and shared.
-To understand fully a society’s actions and its points of view one
has to appreciate the influence of historical events and the
geographical uniqueness to which a culture has had to adapt.
-To interpret a culture’s behavior and attitudes a marketer must
have some idea of a country’s history and geography(Foundation
 Foundation of Culture
1)History
*Refers to recorded major events and practices of the past.
The profound effects of events and practices determine;
~businesses of the country
~how the societies are structured
~relations with the neighbors
~attitude towards current developments
~source of power and authority
~source of wealth
~taste and preference
~relationship with the gvt
~attitude towards foreign brands /people
Geography
-Is the study of Earth’s surface, climate,
continents countries, peoples,
industries and resources.
It enables the marketer to understand
how a society’s culture and economy are
affected as the nation struggles to
supply its people’s needs within the
limits imposed by its physical make- up.
The facets of Geography
*Climate
is a measure of the average pattern of variation in
temperature, humidity, atmospheric pressure, wind,
precipitation, atmospheric particle count and other
meteorological variables in a given region over long periods
of time.
~Temps(frost and intense heat)= affect conditions of
products , packaging material, modes of transport, storage
facility. (E.G Glass consignment).
~Humidity (amnt water vapour in the atmp)=type of material,
metal and packaging.
E.G,Bosch –Siemens washing machines
*Different Spin circles in Ger and Sc’,and Italy and Spain
*Canada’s extreme winter weather is characterized by snow hill
ii)Topography
-Study and depiction (such as charts or maps) of the distribution,
relative positions, and elevations of natural and man-made
features of a particular landscape, such as mountains, rivers,
valleys, and human settlements, railway lines, and roads.
a)Altitude (distance above sea level)
-Affects O2 content and temperature, hence product adaptation.
~Live pdts
~Machinery
-Russia, Kenya ,Bangladesh and Brazil
b)Physical terrain(physical geography)
Natural formidable barrier has precluded the establishment of
commercial routes.
For e-g between Pacific and Atlantic coasts regions of the world.
-In Colombia mountain ranges are a major barrier to travel.
Geographical Variables
1)World population Trends
a)Current population
-Recent estimates place world population at
more that 7.1billion and is expected to grow
to abt 9.4 billon by 2050.
Continents populace- Asia=4.427b,
Africa=1b, Ep=747 -853m,A=880m and
Aust=23,7m.
LDCs are largely responsible for world’s
populace size.
b)Attitude towards Pop growth in (LDCs)
i)Factors that lead to an increase in popu size;
-wealth,labour,motality rate,s-stutus ,recognition,etc.
ii) The prerequisites to population control are;
*adequate incomes
*higher literacy levels
* education for woman
*universal access to healthcare
* family planning
* improving nutrition
* perhaps most important a change in basic cultural
beliefs regarding the importance of large families.
c) Rural/ Urban Migration (mvt of pple from rural to
urban)
Reason
-Access to better sources of
*Education services
*health care services
*improved job opportunities.
Today,more than 40% are urbanites.
-By 2030 61% will live in Cities.
E.G, In 1990 Tokyo had 8 million, now 26million
Mexico city’s environmental condition=
Smog garbage, power cuts, water shortage, poor
sanitation etc.
Prospects for improvement are not encouraging because
most of the world’s urban growth will take place in the
d) Population Decline
BY 2015 European Union population ( 375m)
will decline by 88m to 287m, if present
trends continue . But current estimates give a
figure of 507m

What are the effects of the decline on

international marketing?
*Promotion of population growth in
developed countries
-incentives
2) World Trade Routes
-Incude railways,road ,water, pipeline and air.
Trade routes -bind the world together= global village
What are the implications of binding the world together?
For example; ships travel from the Pacific to Atlantic
via the Panama Canal.
There is a railroad that crosses the isthmus of
Panama
The trade routes among Europe, Asia and
Americans were established by the 1500s.
The majority of world trade is among the most
industrialized and industrializing countries of
Europe, North America and Asia.
3) Communication Links
Effective communication underpins all commerce.
-Knowledge of
~source of goods and services
~lucrative markets and demand levels
-The ability to communicate instantaneously
across vast distances
is aided by technological development-
telegraph, telephones, satellites TV, computer
and internet.
Geographical features such as mountains affect
smooth communication.
4) Material Culture (Technology and Economics)
~Technology refers to;
*communication – TV, compute, internet.
*Transport - aircraft, road, railway and water
*Production – machinery, plants equipment, birth
control techniques
Production of quality goods and services, effective
comm., and efficient transportation of goods and
services are achieved through technology.
~Economics refers to;
*infrastructure
*demand level
*types and quality of goods that demanded
A . society is a group of people involved in
persistent international relationships, or a large social
grouping sharing the same geographical or social
territory, typically subject to the same political
authority and dominant cultural expectations.
Types of Social Institutions
*Include family, religion, school, media, Gvt and
corporations.
-The institutions affect the ways in which people
relate to one another, organize their activities in
order to live in harmony with one another, teach
acceptable behavior to succeeding generations
and govern themselves.
a)Family
Family types nuclear, extended, single parent, childless,
Stepfamily, child-headed and grand-parent family.
Family forms and functions vary substantially around the
world.
-The basic function of a family is to transmit values, beliefs,
practices, rituals and behavior to the next generation.
These serve as the bases for
~Family structure and size
~ individual’s taste and preference.
~Consumption rate
~choice for media
~respect for each other and social security
~relationships between and among members
• b) Religion
*The first social institution infants are exposed to outside
the home takes the form of a church mosque, shrine or
synagogue.
*Effect of religion on value systems of a society and the effect
of value systems on marketing must not be underestimated.
• For e-g
• -Protestantism engenders equal rights (relationship with God
is a personal one) and hard working but forsakes idleness.
-Moslems do not eat or use pdts with pork and alcohol.
• -A Roman Catholics confess to priests, setting up hierarchy
within the church.
-Saudi Arabia rejected a consignment of French perfume
with a stopper in shape of a nude woman.
-Off duty on a holy day or for holy month
• Religion affects people’s habits their outlook on life, products
c) School(an institution for educating people)
-imparts knowledge to people (increase literacy level)
-are potent force in economic development(training and skill dev)
- Schools are seen as leading to positive cultural changes and
progress across the planet. –
- Communicating with a literate market is much easier than with a
market that uses pictures and symbols.
d)Media
-the main means of mass communication are television, radio, and
newspapers, internet.
Media time ( TV and Internet) has replaced family time.
They provide information about;
~Sources of entertainment
~Innovation
~Competition
~ business and job opportunities, etc.
e) GOVERNMENT
Gvt influences thinking and behavior promotion and enforcement of
a variety laws affecting consumption and marketing behavior.
*The Irish GVT is concerned about its citizens’ consumption of
Guiness and other alcoholic products, laws are being tightened again.
*French GVT has been urging citizens to procreate through a “ birth
bonus of” $ 800 given to women in their 7th month of pregnancy.

f) Corporations
-Most innovations are introduced to societies by companies,
merchants and traders
- are the primary conduit for diffusion of innovations because MNCs
have access to ideas around the World.
-Through the efficient distribution of new products and services
based on these new ideas, cultures are changed, and new ways of
thinking are stimulated.
ELEMENTS OF CULTURE
-include values, rituals, symbols, beliefs.
1) Cultural values
Geert Hofstede (2001) found that cultures of the nations studied differed
along four primary dimensions
~Individualism /collectivism Index
~Power distance
~Uncertainty Avoidance Index
~Femininity /Masculinity Index
a) Individualism /collectivism Index(measures the degree self
orientation)
*Cultures that score high in IDV.
-promote self interest
-accept and endorse individual initiative and independence
-reflect “I” mentality
-ties between individual are loose
-looks after him/herself or her immediate family
-reflect more of egalitarian views
*Culture that score low in IDV
-people are integrated into strong, cohesive grps
-reflect “we” mentality
-the group protects members in exchange for unquestionable
loyalty.
-cite knowledge and respect as source of power
-reflect more of non-egalitarian views
- the culture does not promote entrepreneurial activities
b) Uncertainly Avoidance Index- measures the tolerance of
uncertainty and ambiguity among the members of the society
Cultures with high UAI scores are (Japan, France.)
-Intolerant of ambiguity
-Distrustful of new ideas or behaviors
-Have high level of anxiety and stress
-Have a concern with security and rule following (avoid risks).
-Follow tried and tested patterns of behavior
Cultures With Low Scores In
UAI (Us)
-have low level of anxiety and
stress
-have a tolerance of deviance and
dissent
-have a willingness to take risks
-take a more empirical approach
c) Power distance Index
Power Distance Dimension (unequal in physical
and intellectual capabilities)
i)High power distance cultures favour
~ aloofness
~Inequalities grow overtime and is associated with
power and wealth. Asia, Latin America, Panama,
Malaysia, France, Hong Kong
ii)Lower power distance cultures favour;
~equality
~close distance between indvls
~open door technique
US Canada, Britain, Australia. Germany Austria
Cultural Values And Consumer Behavior
CVs affect speed of diffusion of new consumer
services/innovation
-impersonal electronic communication
-e-auctions
1) Rituals -Are patterns of behavior, practices
and interactions that are learned and repeated.
E-gs, graduation and marriage ceremonies, and
funeral,Academy Awards, world soccer, dinner
at a restaurant, grooming, visit to a department
store or doctor in US and in Spain (Should be
honored supported and exploited
2) Symbols
A symbol is an object that represents, stands for, or
suggests an idea, visual image, belief, action, or
material entity. Symbols take the form of words,
sounds, gestures, or visual images and are used to
convey ideas and beliefs.
Language ( a vehicle for comm.)
-is frequently a vehicle for open confrontation, debate
and discussion , e.g, in US.
US is an extremely “verbal” culture & Japan is a highly
“nonverbal” culture.
-Silence and signals are important, e.g, in Japan
For effective communicating, one has to understand the
meaning of words and idiomatic expressions in a given
Examples of words that have different meanings in different cultures;
*Tambo means a roadside inn in Bolivia, Colombia, Ecuador and Peru, a dairy farm in
Argentina and Uruguay, a brothel in Chile.
*A bathroom in England is a place where you have a tub bath and is a toilet
America.
*A vacuum in America is a hoover in England.
Examples of Idiomatic Expression
- Put wool over other people's eyes: to deceive someone into thinking well of
them.
-Speak of the devil: is used when the person you have just been talking about
arrives.
-Steal someone's thunder: To take the credit for something someone else did.
-Take with a grain of salt: This means not to take what someone says too seriously.
E.Gs Airliner ad campaigns.
Advertising copywriters should be concerned less with obvious differences between
languages and more with idiomatic meanings.

A successful international marketer must achieve expert communication which

requires a thorough understanding of the language as well as the ability to speak
3) Aesthetics
*Concerned with the understanding of the beauty expressions and art of
a culture.
Expressions of aesthetics
–drama, dance, dress code, cosmetics, food, dining manners, colours, art,
music, etc.
-Art communicates, a picture is worth a 1000 words so can a dance or a
song.
For e-g,
- the bright reds and yellows in the décor of ethnic Chinese restaurants.
- Shi(four) in Japanese mkt means death, teacups are sold in sets of 5
instead of four.
- Balut in Phillipine.
- Music, Cuba= salsa,
Products styling must be aesthetically pleasing to be successful, as must
advertisements and package designs.
Insensitivity to aesthetic values can offend, create a negative impression
4) Beliefs
*are a result of religious training. The beliefs pple uphold determine
the product they use/eat, places they patronize, media the associate
with and fashion designs they cherish
-Superstitions play quite a large role in a society ‘s belief system.
For example:In some parts of Asia, ghosts, fortune telling,
palmistry, blood types, head-bump, reading phases of the moon,
faith healers, demons and soothsayers can all be integral elements
of society.
-In China 8 connotes Prosperity.
-The Beijing Olympics started on 08 .08 . 08 for a reason
-The Thai when building a new building get timber from the same
forest to avoid quarrelling.
Houses and building structures have one storey.
5) Formality and Tempo
Informality, haste and impatience characterize
American culture and are absent in the Middle East
and Arabic nations. They do not like deadlines.
*At a cocktail party or a dinner, the American manager
is still on duty.
*In Germany you do not use first names unless you
know each other for 10yrs at least, if you are at a
lower, rank never.
*French business practices are formal and consider
Americans crude and unsophisticated.
*A Latin American is highly formal.
To succeed, deal with foreign managers in ways
acceptable to them.
6) TIME
Edward T Hall divides time system in the world into two
sets.. (monochromic and polychromic)
M-time typifies most North Americans, Swiss, Germans and
Scandinavians.
-They concentrate on one thing at a time.
- Are concerned with promptness and punctuality.
Time is tangible, can be divided, saved , lost, wasted, spent.
Polychromic timers
*simultaneous occurrence of many things by a great
involvement with many people.
*Relationship has to be build first
*Work with looser time schedules

*Interruptions are routine

7) Negotiations
*Business negotiations are done on
product, price, terms, quality std, services
associated with the product and
friendship between vendors and customer.

*The seeds to success or failure are sown at

the negotiation table, vis-a –vis face to
face, not only are financial and legal
details are agreed to but, the ambiance of
co-operation is established.
8)Gender
Common issues about Gender in
International Business are;
-bias, favoritism, promotion, wages and
salaries, discrimination
Few women are given International
assignments, esp, in men – dominated
societies,
e-g Asia Middle East, Latin America
-In China there are currently 120 men per
 CULTURAL CHANGE
*Culture is dynamic in nature, is a living process and
from a different perspective it is conservative and can resist change
Sources of change drivers
-war, natural disaster, accidents, poverty, wealth, marriage
WHY IS CHANGE RESISTED
-lacks desirable effects on a very fabric of a social system
-is dysfunctional
-cause health problems in the long run
- cause commotion
WHY ACCEPTED
-time saving, convenience, improves productivity, Cost effectiveness,
peace and harmony ,etc.
Change is a result of a society seeking ways to solve the problems
created by changes in its environment.
What is the impact of your product on market’s lifestyle,
The Economic Environment
There 3 common economic systems
i)Market Allocation
A market economy is an economy in which decisions regarding
investment, production and distribution are based on supply and
demand, and prices of goods and services are determined in a free
price system.
*Consumers determine allocation of resources; what to be produced and
by who,
*Citizens have the right to vote with their wallets for goods of their
choice
*Individuals own productive resources, and those individuals can use
resources in whatever manner they choose
The role of the state in a market economy is to promote competition and
ensure consumer protection.
The system is economic democracy
E-g of free market system; Hong Kong, Singapore, , US, Japan,
Taiwan, UK
ii)Command Allocation
A command economy (planned economy) is an economic system where
the main economic decisions (such as allocating scarce resources like
labour, capital, soil and natural resources) are taken by a central body;
which is usually the government.
*The state has broad powers to serve the public interest.
*The state planners decide which product to make and how to make
them.
*The demand exceeds supply, the elements of the marketing are not
used as strategic variables.
*The government handles marketing mix related activities and avoid
activities such as product differentiation so as to cut out
‘exploitation’ by intermediaries.(no competition hence no
innovation)
*Workers are motivated to contribute to the community interest
rather than working to promote self-interest
iii)Mixed systems
*is an economic system in which decisions about how
resources should be used
- are actually made partly by private sector and partly by
public.
In reality, the is no pure market or command allocation
systems among the world’s economies.
Examples of economic systems and countries that
foster them:
-Free market system (reduced gvt influence)Hong Kong,
Singapore, US, Japan, Taiwan, UK
-Mixed economic system –Sweden (more command)
64%of all expenditures are controlled by government
-Repressed –(Almost command) Moldova, Haiti Sudan,
Stages of Market Development.
Global markets develop at different rate.
The world Bank has developed a 4- category
classification system that uses per capita
gross national Income (GNI) as a base.
i)Low income countries(GNI per capita < $935
-are known as preindustrial countries.
- have the following characteristics
*limited industrialization
*high percent of population
*engaged in agriculture and subsistence farming
*high birth rate
*political instability and unrest
*heavy reliance on foreign-aid ,Africa
The countries represent limited markets for all products
and are not significant locations for competitive threat.

About 40% of the world’s population is included in this

Lower Middle Income Countries
GNI per capita > $936 but < 3,705
Characteristics
Known as less developed countries(LDCs)with
*39% of world population but only 11% of world GNP
*Are at early stage of industrialization
*Domestic market are supplied with clothing and batteries,
building material and packed food by local factories.
*The countries are location for production of standardized or
mature products such as clothing for export markets.
*Consumer markets are expanding
LDC represents an increasingly competitive threat as they
mobilize their relatively cheap and often highly motivated
labor to serve target markets in the rest of the world.
iii)Upper middle income countries; GNI per capita >
$3,706 but < $11,455 (developing, industrializing countries)
Characteristics
*They account for 7% of world population and 7% of world GNP.
*The degree of urbanization increases
*They become formidable competition
*Have high literacy rate
*Strong education systems
*have Innovative logistics and inventory management software,
sophisticated computer and communication systems and
effective financial control systems
Russia GNI PC $ 5,770, Brazil GNI pc $ 4,710
Intel’s World Ahead Initiative is the development of a $550
computer that is powered by a car battery for rural people in
China and India
For example, Malaysia, Chile, Hungary, Venezuela, Russia, Brazil
iv)High income countries
– advanced, developed, industrialized, first world
or post industrial countries.
GNI per capita $11,456 or higher.
*Account for only 16% world population but 70%
of world GNP.
*product and market opportunities in a post
industrial society are more heavily dependent on
NPD and innovations than in industrial
societies.
*Ownership level of basic products is extremely
high in most households.
Critical economic elements
1)BOP
Balance of payments accounts are an accounting record of all monetary transactions
between a country and the rest of the world. These transactions include payments
for the country's exports and imports of goods and services.
A country is said to have a surplus when the net value is positive and a deficit when it
is negative.
A deficit leads to a BOP crisis, also called a currency crisis, occurs when a nation is
unable to pay for essential imports and/or service its debt repayments.
Possible Solutions
*An upwards shift in the value of a nation's currency relative to others but this will make a
nation's exports less competitive and make imports cheaper

* Price controls
*Increase tariffs and tax
2)PPP
Is an economic theory that estimates the amount of adjustment needed on the
exchange rate between countries in order for the exchange to be equivalent to each
currency's purchasing power.
Suppose that one U.S. Dollar (USD) is currently selling for ten Mexican Pesos (MXN) on the
exchange rate market. In the United States wooden baseball bats sell for $40 while in Mexico
3)Types of exchange rates
a)In a fixed exchange rate system
-the government ( the central bank acting on the
government's behalf) intervenes in the currency market so
that the exchange rate stays close to an exchange rate target.
* Fixed rates provide greater certainty for exporters and
importers and under normal circumstances there is less
speculative activity.
b)Free floating
-value of the currency is determined solely by market
demand for and supply of the currency in the foreign
exchange market.
*If a depreciation occurs, the relative price of exports in
overseas markets falls (making exports more competitive)
whilst the relative price of imports in the home markets
ECONOMIC COOPERATION AND INTEGRATION
*GVTS integrate their economies and agree to cooperate in economic
activities. Examples are;
1)Regional Economic Agreement
Governments agree to participate in a joint venture beneficial to each
economy.
2) Free Trade Area
-is formed when two or more countries agree to eliminate tariffs and other
barriers that restrict trade.
Characteristics
Group of countries abolish all internal trade barriers to trade among
themselves.
Independent policies with 3rd country are maintained
> A certificate of origin is used
> Custom inspectors police the borders between member nations.
Examples
European Economic Area EEA includes 30 nations
-North American Free Trade Area Mexico, Canada and US
Mercosur- Brazil, Argentina, Uruguay, Paraguay, Chile Per Bolivia and
3. Customs Union
Characteristics
>Represents the logical evolution of FTA
>External barriers to trade are established
Examples
-Association of South East Asian Nations (ASEAN) (Brunei
Cambodia, India, Malaysia Mayanmar, Laos Philippines,
Singapore, Thailand and Vietnam.
-European Economic Community (west Germany , France
Italy Belgium Netherland and Luxembourg
4. Common Market
>Internal barriers are abolished
>External barriers are established
>Barriers to flow of labor and capital are eliminated.
5.Economic union
>unified central bank is created
>single currency is used
> common policies for agriculture, social service and welfare
and regional development , transport merger taxation and
competition are formulated
6.Political unity
Formation of central government.
Benefits of economic cooperation
Harmonization of business such as packaging requirements,
a common currency that allows consumers to move easily,
compare prices across countries and economic development
that leads to more consumer who can afford to buy more
products.
POLITICAL ENVIRONMENT
All business activities take place in the PE.
Elements
1)State Sovereignty
is independent supreme power and authority that is free from
external control.
*enjoys full legal equality with other states.
*governs its own territory.
*selects its own political, economic and social systems.
*has the power into agreement with other nations(Aust and Can)
*sets requirements for citizenship,
*defines geographical boundaries,
*controls trade and movement of people a goods across its borders
Nations can abridge specific aspects of their sovereign rights in
order to co-exist with other nations, e-g, NAFTA, EU, WTO.
-Foreign investment can also be perceived as a threat to
2) Stability of Gvt Policies
The stability threatened by
-radical shifts in Gvt philosophy when an opposing
political party ascends to power,
-pressure from nationalist(boycots, predjuce)
- pressure from self interest grps weaken economic
conditions.
-bias against f- investment
-conflicts between Gvts are all issues that can affect
stability of a Gvt.
The major concern of I- firms is the continuity of the
set of rules or code of behavior regardless of which
Gvt is in power.
3) POLITICAL PARTIES
One, two or multi-party regimes can be found in a country.
It is important for the marketer to know the philosophies
and doctrines of all major political parties within a
country because any one of them might become
dominant and affects prevailing attitudes and overall
business climate.
For e-g, in Great Britain
The Labor Party traditionally has been more restrictive
regarding foreign trade than the Conservative Party
implying that CP has liberal trade policies and LP
restricts imports and foreign investment.
An astute I marketer must understand all aspects of the
political landscape for him to be properly informed about
the political environment so as to gauge the stability and
4) Forms of Government
i)Monarchy/ Dictatorship
-the ultimate authority to run a state is in the hands of a king/
queen who ruled by divine right.
- monarchies are birthrights that cannot be elected or appointed
The authority of the monarch could include any or all of the
following areas: administration, taxes, justice and foreign policy.
ii)Aristocracy/oligarchy(Ancient Greece, Rome, and India)
-the aristocracy are a class of people (aristocrats) who typically

possess hereditary rank and sometimes specific titles(a

government ruled by an elite class) .

-Only a small group of people holds all the power.
iii)Democracy – a system of a Government in which all the people
5) Nationalism)
Nationalism is an intense feeling of national pride and unity
or an awakening of a nation’s people to pride in their
country.
Nationalism Manifestations
* Buy our country’s product only.
* restrictions on imports., restrictive tariffs,
* control over foreign investment (intrusion)
*an anti- foreign business bias.
*minor harassment
* controls of foreign investment are supported or applauded.
In such situation militant nationalism becomes rampant
When US negotiators pushed Japan to import more
rice to help balance the trade deficit between the two
5) Trade disputes
-affect trade relations
-affect business investments
-firms fail to seize business opportunities
-can cause war to erupt

Banana war
The EU imposed a quota and tariffs that
favor imports from former colonies in the
Caribbean and Africa over Latin American
bananas distributed US firms. The bananas
were to be distributed by European firms.
6) Political risks
Of all the political risks, the most costly are those actions
that result in a transfer of equity from the company to the
government with or without adequate compensation.
i)Confistication – seizing of a company’s assets without
payment. For when Fidel Castro became the leader in
Cuba, US property was confiscated.
ii)Expropriation – the government makes some
reimbursement for seized property but not according to
ISs.
iii)Domestication – a host country gradual causes a
transfer of f – investment to national control and
ownership through a series of government decrees that
mandate local ownership and greater national
involvement in a company’s management.
7) Protectionism
A gvt initiative that is meant to institute
measures that minimize or bar the access to
country’s resources and markets.
For e.g
-Restrictive tariffs,
-quotas,
-legal barriers,
-exchange barriers
all protect the country’s markets from intrusion
by f-companies.
Reasons
-Protection of an infant industry
-Protection of the home market
-Need to keep money at home
-Conservation of natural resources [worldwide
shortages]
-Retaliation and bargaining

8) Economic Risks
The economic risks are an important and
recurring part of the political environment.
a)Exchange controls
Caused by shortages of f-exchange held by
the country or a substantial amount of
capital is leaving the country.
E – controls are levied to conserve the supply
of f-exchange for the most essential uses.
-Currency devalued
-Controls on convertibility
-Product controls, luxuries and necessities
-Tax controls
b) Local Content Law
*Countries often require a portion of any product sold
within the country to have locally made products.
For example,
-Thailand once required that all milk products contain
at least 50% milk from local dairy farmers.
-NAFTA requires 62% local content for all cars coming
from member countries.

c) Import restrictions
-refers to selective restrictions on the import of raw
materials, machines, spare parts to force foreign
industry to purchase more supplies within the host
country and thereby create markets for local industry.
d) Tax controls
-Becomes a political risk when used as a means of controlling
foreign investments.
For example, India taxes Pepsi Company and Coca Cola
company 40% on all soda bottled in India.
e)Price controls
-essential products that command considerable public interest,
such as pharmaceuticals, food, gasoline and cars are often
subjected to price controls.
-controls are applied during inflationary periods as a measure to
control cost of living.
-that are used to;
~force f – companies to sell equity to local interests.
~slow or stop capital investment.
9) Labour problem
In many countries, labor unions have strong government support
that they use effectively in obtaining special concessions from
business, e.g in Germany.
-Lay offs may be forbidden. It is considered as a crisis in France.
-Profits have to be shared.
-Extraordinary number of services may have to be provided.

10)Political sanctions
One or a group of nations may boycott another thereby stopping
all trade between the countries or against the trade of specific
products.
For example, US has long term boycotts of trade with Cuba and
Iran [countries that violate human rights issues].
11)Violence, Terrorism and War
-Violence, destabilizes multinational business operations…HOW?
-Terrorism, State Department reported 3,200 terrorist incidents worldwide
in 2004.
Had many different goals.
MNs are targeted to embarrass a government and its relationship with firms
Generate funds by kidnapping executives to finance terrorist goals
To inflict terror within a country [September 11, 2001]

In the past 30 years, 80% of terrorist attacks against US have been

aimed at American business in other nations. For example,
McDonald’s, KFC and Pizza Hut combined have been bombed in
more than 10 countries including Turkey, Saudi Arabia, Russia,
Lebanon, China [militant Islamic groups] but on 11 September 2001,
it took place in US in a more remarkable way. It exposed US
businesses to a multitude of uncertainties from the growing danger
of political violence to investment risks in emerging markets.
THE LEGAL ENVIRONMENT
Laws governing business activities within and between countries are an
integral part of the legal environment of I – business. The foundation
of a legal system profoundly affects how the law is written, interpreted
and adjudicated.

Bases For Legal Systems

Four heritages form the bases for the majority of the legal systems of the
world.
1) Common law
It is built from tradition, past practices and legal precedents set by the
courts through interpretations of statutes, legal legislation and past
ruling.
Common law seeks interpretation through the past decisions of higher
courts which interpret the same statutes and apply established and
customary principles of law to a similar set of facts. It is derived from
English law. It is found in England, USA and Canada.
2) Code law
It is based on all inclusive system of written rules of law.
Under code law, the legal system is generally divided into 3 separate
codes: commercial, civil and criminal.
For example, under the commercial code in a code law country,
the law governing contracts is made inclusive with the
statement that ‘a person performing a contract shall do so in
conformity with good faith as determined by custom and good
morals’.
For example, in USA under common law, the impossibility of
performance does not excuse compliance with the provisions
of a contract unless compliance is due to the acts of God.
Under code law, acts of God are not limited to solely acts of
nature but are extended to include ‘unavoidable interference
with performance, whether resulting from forces of nature or
unforeseeable human acts, including such things as labour
strikes and riots’.
The code law is derived from Roman law. It is found in Germany,
3) Islamic law [Shari’ah]
*It is basically the interpretation of the Koran.
*It encompasses religious duties and obligations, as well as the
secular aspect of law regulating human acts.
* It defines a complete system that prescribes specific patterns of social
and economic behavior for individuals.
*It includes issues such as property rights, economic decision making
and types of economic freedom.
*The law prohibits payment of interest/riba/usury
*Investment in a business dealing with alcohol, gambling and casino is
prohibited. It is found in Pakistan, Iran, and Saudi Arabia.

4) Marxist – Socialist Tenets

The legal system centers on the economic, political and social policies
of the state which result from changes and developments in a society
due to opposition between the social classes e.g. Soviet Union,
Eastern Europe, China,
Jurisdiction in International Legal Disputes
*Determining whose legal system has jurisdiction when a
commercial dispute arises is another problem in I –
Marketing.
*World Court at The Hague and International Court of
Justice, the principal judicial organ of the United Nations
are only operative in international dispute between
sovereign nations of the world rather than between private
citizens and / or companies.
*They cannot adjudicate disputes between government and a
company or between company and company.
*International commercial disputes must be settled under
the laws of one of the countries concerned unless a
jurisdiction clause was included in the contract or legal
documents supporting a business transaction.
International Dispute Resolution
There are 3 dispute resolution mechanisms / techniques which
business people use in markets.

1) Conciliation [Mediation]
*Is a non binding agreement between parties to resolve disputes
by asking a third party to mediate differences.
~The function of the mediators is to carefully listen to each
party and explore, clarify and discuss the various practical
options and possibilities for a solution with intent that the
parties will agree on a solution.
~The sessions are private and all conferences between the
parties are confidential. High context cultures prefer this
method.
~They start with friendly negotiations and conciliation.
 2) Arbitration
~The parties involved select a disinterested and informed party /
parties as referees to determine the merits of the case and make
a judgment that both parties agree to honour.
~Formal arbitration involves formal rules for the process and
experienced arbitrators.
~ In some countries, decisions reached in formal arbitration are
enforceable under the law.
Examples of arbitral centres:
-Inter – American Commercial Arbitration Commission
-The Canadian – American Commercial Arbitration Commission
London Court of Arbitration
-American Arbitration Association [www.adr.org]
-International Chamber of Commerce [www.iccarbo.org]
3) Litigation
If the above 2 options fail,
the next is litigation.
The case is taken to court
for settlement
Intellectual Property Rights Protection
*Companies spent millions of dollars to establish brand names,
trademarks, symbolize quality and design a host of other product
features meant to entice customers to buy.
*Millions are also spent on research to develop products, processes,
designs and formulas that provide companies with advantage over
competitors.
*They have experienced infringement of their intellectual property
rights.
* Property rights must be legally protected to prevent infringement
[piracy, counterfeiting].
*Counterfeit and pirated goods come from a wide range of industries –
apparel, automotive parts, agricultural chemicals pharmaceuticals,
books, records, films, computer software, baby formula, auto parts
and even cars themselves. Attractive targets are software, music,
moves because they are costly to develop and cheap to reproduce and
distribute over the internet.
Methods of protecting rights
1) Prior use
Whoever establishes first use is typically considered the rightful
owner.
2) Registration.
The first to register a trademark or other property right is
considered the rightful owner.
For example,
Cidesport of Spain had been using Nike for sports apparel
since 1932 and sued Nike [US] sportswear sales. Because
Cidesport does not sell shoes under the Nike label, Nike
[US] will be able to continue selling its brand of sport shoes
in Spain. In many code law countries, ownership is
established by registration than by prior use.
3) International Conventions
Many countries participate in international conventions designed
for mutual recognition and protection of intellectual property
Examples are:
The Paris Convention [US and other 100
countries].
The Inter – American Convention [US
and Latin American]
The Madrid Arrangement [28 European
countries].
 LAWS
1Commercial Laws
Laws that regulate business activities in various sectors.
Types of Commercial laws
i]Marketing law
All countries have laws regulating marketing activities in:
-product development,
-Packaging and labeling,
-pricing,
-promotion,
-channels of distribution.
Diversity in enforcement and interpretation is common
in many countries.
 Ii]Green Marketing Legislation
*Multinational corporations also face a growing variety of legislation
designed to address environmental issue.
*Global concern for the environment extends beyond industrial
pollution, hazardous waste disposal, and rampant deforestation to
include issues that focus directly on consumer products.
*Green marketing laws focus on environmentally friendly products
and on product packaging and solid waste material management.
For example, Germany has passed the most stringent green
marketing laws that regulate the management and recycling of
packaging waste.
*A green dot on a package identifies manufacturers that have
agreed to ensure a regular collection of used packaging
material directly from the consumer’s home or from
designated local collection points.
In European, products that are environmentally friendly are
awarded an eco-label.
iii) Anti trust laws are laws that:
*promote;
-anti-monopoly,
-competition
-full product enjoyment by consumers.
*discourage;
-price discrimination,
-supply restriction;
For e.g Coca Cola was fined $1,8m for
anticompetitive practices by France’s antitrust
authority.
Business ethics
There is no universally accepted definition of
ethics. Each country or society has its own set
of principles that govern the behaviour of
people.
Business is infinitely more complex in IM
because value judgments differ widely among
culturally diverse groups. For example, in US
giving a gift of high value is condemned as it is
perceived as a bribe but in other parts of the
world, it is not only accepted but expected.
Ethically and socially responsible decisions
To behave in an ethically and socially responsible
way should be the hallmark of every business
person’s behavior.
Difficulties arise in making decisions, establishing
policies and engaging in business operations.

Areas of concern are:

Employment practices and policies
Consumer protection
Environmental protection
3 ethical principles:
Utilitarian ethics – does the action optimize the ‘common good’
or benefits of all constituents? And who are the pertinent
constituencies?
Rights of the parties – does the action respect the rights of the
individuals involved?
Justice or fairness – does the action respect the canons of justice
/ fairness to all parties involved?
Transparency International [TI]
-Is an organization dedicated to curbing corruption
through International and national coalitions encouraging
governments to establish and implement effective laws,
policies and anti-corruption programs.
Corruption
It varies considerably around the world, for example,
profits and individualism can be viewed as corruption
in some cultures.
READ ABOUT
-Types of bribes
-Market entry strategies
-Case studies on international marketing
Assignments
First:
In your groups, using practical examples explain elements of one of
the uncontrollable environmental factor.
You will present and submit an e-write-up.(100marks)
Second:
Country market
ai)Analyse home country’s PESTLES including the regulatory
bodies and any influential arrangements. Briefly discuss their
opportunities and threats.
ii)Justify your entry market strategies
iii)Adapt the Ps
bi)Analyse foreign country’s PESTLES including the regulatory
bodies and any influential arrangements. Briefly discuss their
opportunities and threats.
ii)Justify your entry market strategies
iii)Adapt the Ps