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Global Marketing EnvironmentsGlobal Marketing Environments

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Economic EnvironmentEconomic EnvironmentThe Rostow Modernization Model:The Rostow Modernization Model: Economic growth requires advancing from one stage to the other. The modernization Economic growth requires advancing from one stage to the other. The modernization

stages are:stages are: Traditional SocietyTraditional Society – Countries in the traditional society are characterized by an economic – Countries in the traditional society are characterized by an economic

structure that is dominated by agriculture. Economic change and improvements are not structure that is dominated by agriculture. Economic change and improvements are not sufficient to sustain any growth in per capita output which is low.sufficient to sustain any growth in per capita output which is low.

Transitional SocietyTransitional Society – The transitional society stage is characterized by increased – The transitional society stage is characterized by increased productivity in agriculture and modern manufacturing begins to emerge. In manufacturing low productivity in agriculture and modern manufacturing begins to emerge. In manufacturing low productivity remains the norm.productivity remains the norm.

Take-OffTake-Off – During take-off, growth becomes the norm and improvements in production leads – During take-off, growth becomes the norm and improvements in production leads to the emergence of leading sectors. Incomes rise and new class of entrepreneurs emerge.to the emergence of leading sectors. Incomes rise and new class of entrepreneurs emerge.

The Drive to MaturityThe Drive to Maturity – In the drive-to-maturity stage, modern technology is fully adopted in – In the drive-to-maturity stage, modern technology is fully adopted in all economic activity, and new leading sectors emerge. The economy demonstrates the all economic activity, and new leading sectors emerge. The economy demonstrates the technological and entrepreneurial skill to produce anything it chooses to. The economy looks technological and entrepreneurial skill to produce anything it chooses to. The economy looks beyond the country’s border for development.beyond the country’s border for development.

High Mass ConsumptionHigh Mass Consumption – In the age of high mass consumption, leading sectors shift – In the age of high mass consumption, leading sectors shift towards durable goods. A surge occurs in per capita income and increased allocation to towards durable goods. A surge occurs in per capita income and increased allocation to social welfare programmes. The masses can afford goods beyond food, clothing and shelter.social welfare programmes. The masses can afford goods beyond food, clothing and shelter.

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Economic Environment…Economic Environment…The Marxist-Leninst Model of Economic Development:The Marxist-Leninst Model of Economic Development: According to this model, advancement is a function of the control of means of production, production According to this model, advancement is a function of the control of means of production, production

outcomes of resource allocation and the development of a mindset devoid of materialist needs.outcomes of resource allocation and the development of a mindset devoid of materialist needs. Primitive SocietyPrimitive Society – This stage is characterized by the joint tribal ownership of primitive means – This stage is characterized by the joint tribal ownership of primitive means

production centered on agricultural tasks.production centered on agricultural tasks.

The Slavery-Based SocietyThe Slavery-Based Society – This stage emerges as a result of tribes’ dominance over other – This stage emerges as a result of tribes’ dominance over other tribes and claim ownership of conquered tribes and their property.tribes and claim ownership of conquered tribes and their property.

FeudalismFeudalism – This stage is characterized by the feudal lords, who own the land and its dwellers. – This stage is characterized by the feudal lords, who own the land and its dwellers.

BourgeoisieBourgeoisie – This stage establishes lucrative means of production and achieves high – This stage establishes lucrative means of production and achieves high productivity at the expense of exploited workers.productivity at the expense of exploited workers.

Capitalism Capitalism – The shift of production to the industrial sector and in its later stages, by imperialism – The shift of production to the industrial sector and in its later stages, by imperialism where capital loses its national identity by crossing borders.where capital loses its national identity by crossing borders.

ImperialismImperialism – Here capital loses its national identity by crossing borders. – Here capital loses its national identity by crossing borders.

SocialismSocialism – A transition stage of economic and political development by the disappearance of – A transition stage of economic and political development by the disappearance of private property and its replacement with collective state property.private property and its replacement with collective state property.

CommunismCommunism - A stage of economic and political development which is characterized by state and - A stage of economic and political development which is characterized by state and cooperative ownership of all means of production and property cooperative ownership of all means of production and property

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Levels of Economic DevelopmentLevels of Economic Development Developed CountriesDeveloped Countries – Highly industrialized countries with well developed – Highly industrialized countries with well developed

service sectors, mature markets and intense competition. They are service sectors, mature markets and intense competition. They are

characterized by the World Bank as high-income with a GNP per capita of characterized by the World Bank as high-income with a GNP per capita of

US$9,266.US$9,266.

Emerging MarketsEmerging Markets – Countries that are developing rapidly and have great – Countries that are developing rapidly and have great

economic potential. They are characterized by the World Bank as middle-economic potential. They are characterized by the World Bank as middle-income countries with a GNP per capita of US$766. to US$9,265.income countries with a GNP per capita of US$766. to US$9,265.

Developing CountriesDeveloping Countries – Countries are primarily agrarian, often neglected – Countries are primarily agrarian, often neglected or underserved by the large multinationals and are characterized by the or underserved by the large multinationals and are characterized by the

World Bank as low-income countries with a GNP per capita of less than World Bank as low-income countries with a GNP per capita of less than US$755.US$755.

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Macro and Micro EnvironmentMacro and Micro Environment

A country’s economy is based on its sources A country’s economy is based on its sources of domestic livelihood and the allocation of of domestic livelihood and the allocation of those resources. The economic environment those resources. The economic environment can be viewed from two different angles – can be viewed from two different angles – The Macro view and the Micro view.The Macro view and the Micro view.

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Macro and Micro Environment…Macro and Micro Environment…

Factors which contribute to the Macroeconomic Environment:Factors which contribute to the Macroeconomic Environment: Population and IncomePopulation and Income Structure of ConsumptionStructure of Consumption Other economic indicators such as production indicators, prices, finance …Other economic indicators such as production indicators, prices, finance … Concept of economic advancementConcept of economic advancement Economic systemsEconomic systems Mutual economic dependenceMutual economic dependence

Factors which contribute to the Microeconomic Environment:Factors which contribute to the Microeconomic Environment: Sources of competitionSources of competition Competitive advantageCompetitive advantage

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Evaluation of Economic EnvironmentsEvaluation of Economic Environments

S.NoS.No Financial Financial ConsiderationsConsiderations

Technical and Technical and Engineering Engineering Feasibility Feasibility

ConsiderationsConsiderations

Marketing Marketing ConsiderationsConsiderations

Economic and Legal Economic and Legal ConsiderationsConsiderations

Political and Social Political and Social ConsiderationsConsiderations

11CapitalCapitalAcquisition plan Acquisition plan

Raw materials Raw materials availability availability

Market sizeMarket size Legal systemsLegal systems Internal political Internal political stabilitystability

22Length of Payback Length of Payback periodperiod

Geography / ClimateGeography / Climate Market potential Market potential Host governmentHost governmentattitude towardsattitude towardsForeign Foreign investment investment

Relations with Relations with neighbouring neighbouring countries countries

33Projected cashProjected cashinflows inflows

Site locations andSite locations andaccess access

Distribution costsDistribution costs Restrictions on Restrictions on ownership ownership

Political/Social Political/Social traditions traditions

44Projected cashProjected cashoutflows outflows

Availability of local Availability of local labour and labour and managementmanagement

CompetitionCompetition Tax lawsTax laws Religious / Racial / Religious / Racial / Language factors Language factors

55ROIROI Infrastructure Infrastructure Promotion costs Promotion costs Import / Export Import / Export

restrictions restrictions Labour organizations Labour organizations and attitudes and attitudes

66 Monetary Monetary ExchangeExchangeconsiderationsconsiderations

Time taken toTime taken toestablish salesestablish saleschannels channels

Capital flow Capital flow restrictions restrictions

Skill / technical level of Skill / technical level of labour force labour force

77Land title acquisition Land title acquisition

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Legal EnvironmentLegal Environment

Countries enact laws to control foreign businesses in their Countries enact laws to control foreign businesses in their

economies, and some of these laws are discriminatory against economies, and some of these laws are discriminatory against

foreign goods and businesses. Laws are sometimes designed to foreign goods and businesses. Laws are sometimes designed to

allow reciprocity with nations on good trading terms with the country. allow reciprocity with nations on good trading terms with the country.

Extremely favourable laws may be passed to attract foreign Extremely favourable laws may be passed to attract foreign

investment.investment.

Laws that are framed for goods/services entering foreign markets Laws that are framed for goods/services entering foreign markets

are of various types.are of various types. Tariffs.Tariffs. Antidumping Laws.Antidumping Laws.

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International LawsInternational Laws

International law is a huge area of study. Let us consider certain International law is a huge area of study. Let us consider certain

areas of international law that are of particular relevance to the areas of international law that are of particular relevance to the

marketer.marketer.

Protection of PropertyProtection of Property – Property here refers to the patents, – Property here refers to the patents,

trademarks, etc…trademarks, etc…

Regional LawsRegional Laws – These laws pertain to specific areas involving a group – These laws pertain to specific areas involving a group

of countries tie together through some kind of regional co-operation. of countries tie together through some kind of regional co-operation. Ex: Ex: ASEANASEAN

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DisputesDisputes

Despite the inclusion of all precautionary clauses, disputes may emerge. Despite the inclusion of all precautionary clauses, disputes may emerge. The following are some of the methods used to settle disputes.The following are some of the methods used to settle disputes.

ArbitrationArbitration – In arbitration, parties to a dispute agree to take their case to a third – In arbitration, parties to a dispute agree to take their case to a third party in the form of agency of independent arbitration. They submit whatever party in the form of agency of independent arbitration. They submit whatever documents of evidence they feel are relevant and agree to accept the judgement documents of evidence they feel are relevant and agree to accept the judgement of the arbitrators waiving their rights to appeal through court systems.of the arbitrators waiving their rights to appeal through court systems.

Arbitration has several advantages over litigation. It is a faster process over court Arbitration has several advantages over litigation. It is a faster process over court procedures. Results are achieved faster and less expensive as the proceedings procedures. Results are achieved faster and less expensive as the proceedings are less complex. The main drawback of international arbitration is that its use are less complex. The main drawback of international arbitration is that its use forecloses further appeals.forecloses further appeals.

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Disputes…Disputes…

Judicial SettlementJudicial Settlement – The International Court of Justice will decide on the – The International Court of Justice will decide on the dispute submitted to it in accordance with international law and shall use the dispute submitted to it in accordance with international law and shall use the sources of international law in the following order:sources of international law in the following order:

International ConventionsInternational Conventions

International CustomsInternational Customs

General Principles of Law recognized by civilized nationsGeneral Principles of Law recognized by civilized nations

Judicial decisions or works of jurists as a subsidiary means for determining the Judicial decisions or works of jurists as a subsidiary means for determining the rules of international lawrules of international law

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Disputes…Disputes… NegotiationsNegotiations – Negotiations are also means of settlement of international – Negotiations are also means of settlement of international

disputes. It is less formal method than judicial settlement. Sometimes disputes. It is less formal method than judicial settlement. Sometimes disputes are settled only through negotiations.disputes are settled only through negotiations.

Good OfficesGood Offices – When two states are not able to resolve their disputes, a – When two states are not able to resolve their disputes, a third state may offer its good offices for the same. An international third state may offer its good offices for the same. An international organization or some individuals may also offer these offices. The third organization or some individuals may also offer these offices. The third state/individual/international organization creates a conducive environment state/individual/international organization creates a conducive environment for the settlement of disputes, some general suggestions may be put for the settlement of disputes, some general suggestions may be put forward, but the third party does not take active part in the negotiations.forward, but the third party does not take active part in the negotiations.

Mediation Mediation – In the case of mediation, the third state not only offers its – In the case of mediation, the third state not only offers its services but also actively participates in the talks to resolve the dispute services but also actively participates in the talks to resolve the dispute

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Political EnvironmentPolitical Environment

Political Environment connotes diverse happenings such as civil Political Environment connotes diverse happenings such as civil

difficulties, acts of terrorism against businesses and conflicts difficulties, acts of terrorism against businesses and conflicts

between countries in a particular region. Political stability has been between countries in a particular region. Political stability has been

found to be one of the crucial variables that companies weigh, when found to be one of the crucial variables that companies weigh, when

considering going overseas. If risks of violence, restriction of considering going overseas. If risks of violence, restriction of

operations, or restrictions on repatriation of capital and remittances operations, or restrictions on repatriation of capital and remittances

of profits are high in a particular country, it is necessary to know of profits are high in a particular country, it is necessary to know

how to monitor that country’s ongoing political situation how to monitor that country’s ongoing political situation

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Sources of Political ProblemsSources of Political Problems

Political SovereigntyPolitical Sovereignty – This refers to a country’s desire to assert its authority over – This refers to a country’s desire to assert its authority over foreign businesses through various sanctions. Such sanctions are regular and foreign businesses through various sanctions. Such sanctions are regular and therefore predictable. Many of the developing countries impose restrictions on foreign therefore predictable. Many of the developing countries impose restrictions on foreign business to protect their independence. These countries are possessive about their business to protect their independence. These countries are possessive about their political freedom and want to protect it at all costs, even if it means going at a slow political freedom and want to protect it at all costs, even if it means going at a slow economic pace without the help of MNC’s. The industrialized nations, whose political economic pace without the help of MNC’s. The industrialized nations, whose political sovereignty has been secure for a long time, require a more open policy for the sovereignty has been secure for a long time, require a more open policy for the economic realities of today’s world. In order to reduce unemployment, limit inflation, economic realities of today’s world. In order to reduce unemployment, limit inflation, deliver health services…these countries seek foreign technology. In these countries, deliver health services…these countries seek foreign technology. In these countries, multinationalism of business is politically acceptable and economically desirable.multinationalism of business is politically acceptable and economically desirable.

Political ConflictPolitical Conflict – Several countries in different parts of the world undergo political – Several countries in different parts of the world undergo political conflict of various sorts such as turmoil, internal war…Political change, sometimes conflict of various sorts such as turmoil, internal war…Political change, sometimes leads to a more favourable business climate. The effect of political conflict on leads to a more favourable business climate. The effect of political conflict on business may be direct or indirect. business may be direct or indirect. Direct effectsDirect effects would be violence against the firm would be violence against the firm such as damaging company property, going on strikes…such as damaging company property, going on strikes… Indirect effectsIndirect effects occur occur because of changes in the government policy.because of changes in the government policy.

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Sources of Political Problems…Sources of Political Problems… Political InterventionPolitical Intervention – Political intervention can be defined as a decision – Political intervention can be defined as a decision

on the part of the host country government that may force a change in the on the part of the host country government that may force a change in the operations, policies and strategies of a foreign firm. The intervention may operations, policies and strategies of a foreign firm. The intervention may vary from some sort of control to complete takeover, or annexation of the vary from some sort of control to complete takeover, or annexation of the foreign enterprise. The magnitude of the intervention would vary according foreign enterprise. The magnitude of the intervention would vary according to the company’s business in the country and the nature of the intervention. to the company’s business in the country and the nature of the intervention. There are different types of intervention:There are different types of intervention:

ExpropriationExpropriation DomesticationDomestication Exchange ControlExchange Control Import RestrictionsImport Restrictions Market ControlMarket Control Tax ControlTax Control Price ControlPrice Control Labour RestrictionsLabour Restrictions

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Sources of Political Problems…Sources of Political Problems… ExpropriationExpropriation – Official seizure of foreign property by a host country whose intention – Official seizure of foreign property by a host country whose intention

is to use the seized property in the public interest. Expropriation is recognized by is to use the seized property in the public interest. Expropriation is recognized by international law as the right of sovereign states, provided the expropriated firms are international law as the right of sovereign states, provided the expropriated firms are given prompt compensation, at fair market value, in convertible currencies.given prompt compensation, at fair market value, in convertible currencies.

DomesticationDomestication – This could be defined as creeping expropriation or a process by – This could be defined as creeping expropriation or a process by which controls and restrictions placed on the foreign firm gradually reduce the control which controls and restrictions placed on the foreign firm gradually reduce the control of the owners. Although domestication may ultimately lead to expropriation, in a way of the owners. Although domestication may ultimately lead to expropriation, in a way it offers a compromise to both parties. The MNC continues to operate in the country it offers a compromise to both parties. The MNC continues to operate in the country while the host government is able to maintain leverage on the foreign firm through while the host government is able to maintain leverage on the foreign firm through imposing different controls. Domestication involves several measures:imposing different controls. Domestication involves several measures:

Gradual transfer of ownership to nationalsGradual transfer of ownership to nationals Promotion of large number of nationals to higher levels of managementPromotion of large number of nationals to higher levels of management Greater decision making powers accorded to nationalsGreater decision making powers accorded to nationals More products produced locally than imported for assemblyMore products produced locally than imported for assembly Specific export regulations designed to dictate participation in world marketsSpecific export regulations designed to dictate participation in world markets

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Sources of Political Problems…Sources of Political Problems… Exchange ControlExchange Control – Countries having difficulties with the balanced of trade often impose – Countries having difficulties with the balanced of trade often impose

restrictions on the free use of foreign exchange (restrictions on the free use of foreign exchange (Ex:Ex: Repatriation of fundsRepatriation of funds). The exchange control ). The exchange control may also be an effort to encourage domestic industry.may also be an effort to encourage domestic industry.

Import RestrictionsImport Restrictions – This is primarily imposed to protect and support the domestic industries. – This is primarily imposed to protect and support the domestic industries.

Market ControlMarket Control – The government of a country sometimes imposes market control to prevent – The government of a country sometimes imposes market control to prevent foreign companies from competing in certain markets.foreign companies from competing in certain markets.

Tax ControlTax Control – This may be imposed by means of excessive and unconventional taxes on foreign – This may be imposed by means of excessive and unconventional taxes on foreign business. This is primarily done for three reasons.business. This is primarily done for three reasons.

Indirect way of warning them that they are no longer wanted in that countryIndirect way of warning them that they are no longer wanted in that country When the host country is in dire need of new revenuesWhen the host country is in dire need of new revenues When the host government learns that the foreign company has abused differences in international taxation When the host government learns that the foreign company has abused differences in international taxation

and have deprived the country of due revenueand have deprived the country of due revenue

Price ControlPrice Control – For the sake of public interest in difficult economic times, countries often resort – For the sake of public interest in difficult economic times, countries often resort to price control. Countries use price control in various ways to improve their economies by setting to price control. Countries use price control in various ways to improve their economies by setting an official price on essential products such as drugs, sugar, cereals, etc…an official price on essential products such as drugs, sugar, cereals, etc…

Labour RestrictionsLabour Restrictions – In many countries, labour unions are very strong and have great political – In many countries, labour unions are very strong and have great political clout. In these countries labour restrictions are an effective form of government intervention. clout. In these countries labour restrictions are an effective form of government intervention. Using its strength the unions may be able to talk the government into passing very restrictive Using its strength the unions may be able to talk the government into passing very restrictive laws that support labour at heavy cost to business.laws that support labour at heavy cost to business.

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Factors which Influence the Political Factors which Influence the Political EnvironmentEnvironment

Type of governmentType of government

Government stabilityGovernment stability

Government economic managementGovernment economic management

International stance of governmentInternational stance of government

Change in government policyChange in government policy

Relationship with parent company’s home governmentRelationship with parent company’s home government

Attitude towards foreign managersAttitude towards foreign managers

Administrative proceduresAdministrative procedures

Closeness of government to people Closeness of government to people

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Political Risk AssessmentPolitical Risk Assessment

There are normally three methods to analyse the political risk:There are normally three methods to analyse the political risk: Grand TourGrand Tour – An executive or a team of executives visit the country, hold – An executive or a team of executives visit the country, hold

meetings with government, officials, local businessmen etc…and based on these meetings with government, officials, local businessmen etc…and based on these findings, they may come to a conclusion.findings, they may come to a conclusion.

Old HandOld Hand – In this approach, the advice of an outside consultant or expert is – In this approach, the advice of an outside consultant or expert is sought. These may be seasoned educators, diplomats, businesspersons, etc…sought. These may be seasoned educators, diplomats, businesspersons, etc…Their decision helps the decision making process.Their decision helps the decision making process.

Delphi TechniqueDelphi Technique – Here a group of experts are asked to share their opinions – Here a group of experts are asked to share their opinions independently on a given problem, in a form that can be scored in order to independently on a given problem, in a form that can be scored in order to produce a statistical distribution or opinion. These experts are shown the produce a statistical distribution or opinion. These experts are shown the resulting distribution and given a choice to alter their original views. This process resulting distribution and given a choice to alter their original views. This process is repeated several times. This technique is used to rate different political factors, is repeated several times. This technique is used to rate different political factors, like the stability of the government, the role of its armed forces, political conflicts, like the stability of the government, the role of its armed forces, political conflicts, etc… Based on the findings, the final decision is made.etc… Based on the findings, the final decision is made.

Cultural EnvironmentCultural Environment Doing business across national boundaries requires interaction with Doing business across national boundaries requires interaction with

people nurtured in different cultural environments. Culture normally people nurtured in different cultural environments. Culture normally has the following characteristics:has the following characteristics:

People over time; transmit the culture of their group from People over time; transmit the culture of their group from generation to generationgeneration to generation

One part of the culture is deeply connected with another part, One part of the culture is deeply connected with another part, such as religion with marriage, business with social status, etc…such as religion with marriage, business with social status, etc…

The tenets of culture are accepted by most members of the The tenets of culture are accepted by most members of the group.group.

Culture does not stand still, but changes slowly over time.Culture does not stand still, but changes slowly over time.

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Cultural Environment…Cultural Environment…

When we talk about culture, there are certain factors to be considered:When we talk about culture, there are certain factors to be considered:

Material LifeMaterial Life – Refers to economics, that is, what people do to derive their livelihood. The tools, – Refers to economics, that is, what people do to derive their livelihood. The tools, knowledge, techniques, methods and processes that a culture utilizes to produce goods and knowledge, techniques, methods and processes that a culture utilizes to produce goods and services as well as their distribution and consumption, all are a part of material life. Material life services as well as their distribution and consumption, all are a part of material life. Material life reflects the standard of living and degree of technological advancement.reflects the standard of living and degree of technological advancement.

Social InteractionsSocial Interactions – Social interactions establish the roles that people play in a society and – Social interactions establish the roles that people play in a society and their authority / responsibility patterns. These roles and patterns are supported by society’s their authority / responsibility patterns. These roles and patterns are supported by society’s institutional framework, which includes education, marriage, etc…institutional framework, which includes education, marriage, etc…

LanguageLanguage

AestheticsAesthetics – Aesthetics include the art, drama, music, architecture, etc…pertaining to a society – Aesthetics include the art, drama, music, architecture, etc…pertaining to a society

Religion and FaithReligion and Faith – Religion influences a culture’s outlook on life, its meaning and concept – Religion influences a culture’s outlook on life, its meaning and concept

EthicsEthics – The concept of what is right and wrong is based on culture – The concept of what is right and wrong is based on culture

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Cross-Cultural Analysis of Consumer Cross-Cultural Analysis of Consumer BehaviourBehaviour

Determine the relevant motivations in the cultureDetermine the relevant motivations in the culture Determine characteristic behavior patternsDetermine characteristic behavior patterns Determine what broad cultural values are relevant to the Determine what broad cultural values are relevant to the

productproduct Determine characteristic forms of decision makingDetermine characteristic forms of decision making Evaluate promotion methods appropriate to the cultureEvaluate promotion methods appropriate to the culture Determine appropriate institutions for the product in the Determine appropriate institutions for the product in the

minds of customersminds of customers Adapt to the cultural changes from time to timeAdapt to the cultural changes from time to time

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Impact of Culture on Marketing DecisionsImpact of Culture on Marketing Decisions

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Customer’sCulture

LifestyleBehaviour patterns

Actions in the market place

Impact on firm’smarketingdecisions