selected aspects of cultural differences and their influence on the international marketing mix

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University of Economics, Prague

International Business – Central European Business Realities

Selected Aspects of Cultural Differences and their

Influence on the International Marketing Mix

Author: Anne Sakseide Svendsen

Thesis instructor: Marketa Lhotakova

Scholar year: 2010/2011


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Declaration:

I hereby declare that I am the sole author of the thesis entitled ―Selected Aspects of Cultural

Differences and their Influence on the International Marketing Mix―. I have duly marked out

all quotations. The used literature and sources are stated in the attached list of references.

In Prague on 24th of May 2011

Anne Sakseide Svendsen


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Acknowledgement

I hereby wish to express my appreciation and gratitude to the supervisor of my thesis, Ing.

Markéta Lhotáková, Ph.D.


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Table of contents

Introduction ....................................................................................................... 3

1 Culture ................................................................................................... 6

1.1 Research through history ..................................................................... 8

1.1.1 Hofstede ..................................................................................... 8

1.1.2 Trompenaars ............................................................................ 11

1.2 Elements of culture ........................................................................... 14

1.2.1 Values & norms ....................................................................... 14

1.2.2 Non-verbal communication ..................................................... 15

1.2.3 Language ................................................................................. 16

1.2.4 Demographic ........................................................................... 18

2 International marketing ....................................................................... 19

2.1 International marketing mix .............................................................. 21

2.1.1 Product ..................................................................................... 21

2.1.2 International price .................................................................... 24

2.1.3 International distribution ......................................................... 30

2.1.4 International promotion ........................................................... 33

3 Case study: Häagen-Dazs .................................................................... 43

3.1 The brand Häagen-Dazs 哈根达斯（hā gēn dá sī ） ....................... 43

3.1.1 History/development ............................................................... 44

3.1.2 Product portfolio ...................................................................... 45

3.1.3 Home market strategy – the United States of America ........... 47

3.2 China ................................................................................................. 51

3.2.1 Basic information .................................................................... 51

3.2.2 History ..................................................................................... 52

3.2.3 Economy and international trade ............................................. 58

3.2.4 Culture ..................................................................................... 59

3.2.5 China and Hofstedet ................................................................ 64

3.3 Häagen- Dazs‘ in China .................................................................... 67

3.3.1 Häagen-Dazs‘ in China ............................................................ 67

3.3.2 Distribution .............................................................................. 68

3.3.3 Product ..................................................................................... 70

3.3.4 Promotion ................................................................................ 74

3.3.5 Price ......................................................................................... 85


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4 Recommendations ............................................................................... 87

Conclusion, limitation and further research .................................................... 93

Bibliography.................................................................................................... 95

Appendix ....................................................................................................... 100

Figure list ...................................................................................................... 102

Table list ........................................................................................................ 102


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Introduction

During the last decades large changes has happened regarding trade in the world.

From having a world with large trading barriers, both political and economical, the

world has developed to become one global market place. This provides companies allover the world major opportunities, but also causes many treats.

While the consumers experience the globalisation by a growing product

spectrum and in some cases lower prices, the companies have to deal with higher and

stronger global competition. This results in that it is not only important for a company

to have good knowledge about their own country and local competitors, but also

possible treats from abroad. But there are not only disadvantages for the companies, the

increasing ratio of international trade and international trade agreements lowers the

barriers for companies to do business abroad. With this possibility companies can do

business abroad and target a larger market, this can increase the sale and reduce the

costs with economy of scale.

There are many issues a company have to take into consideration before making

the decision about going abroad. First the company have to consider if they actually

have the resources to enter a new market, both regarding finance and knowledge, as

well as what challenges they might experience in the target country. Even though many

international agreements that makes the process easier exists, different countries have

different customs of dealing with both formal issues like tax and banking system, and

informal issues or a natural barrier like culture.

While the formal issues can be dealt with by help from consultation companies

or with specific education, the informal issues are in many cases omitted because

companies do not realize that there are differences. Culture is an important business

element which can make the difference between success and failure. The differences

between two cultures do not have to vary to a large extent, but they still have to be

considered. Even for a company expansion to a neighbour country might result in

cultural problems with for example language or norms. Hence knowledge about culture

plays an important role in a company‘s decision making process.

The topic of this master thesis is ―Selected Aspects of Cultural Differences and

their Influence on the International Marketing Mix.‖ The thesis will contain a

theoretical and practical part with focus on the main issues a company have to take into

consideration when developing an international marketing mix.


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The beginning of the thesis will contain a theoretical overview of culture and

some of the main research which has been done through history: Hofstede and

Trompenaars. Then four selected variables which influence the culture will be

discussed. The variables demonstrate the effect culture has on the customer behaviour

and the marketing mix and is based on a cultural model from the book ―Consumer

Behaviour. Implications for marketing strategy‖1.

Further on theory about the marketing mix will be discussed, with the usage of

Philip Kotlers‘ four P‘s2, as well as how the culture elements influence the international

marketing mix.

The practical part will consist of a case study of the international marketing mix

Häagen-Dazs uses on the Chinese market. It will start with general knowledge about

Häagen-Dazs, their products and their strategy in the United States. Then continue with

basic information about China, Chinas‘ history and culture which is relevant to

understand the changes Häagen-Dazs have made on their marketing mix used in China.

The thesis will then continue with analyses of Häagen-Dazs‘ marketing mix on the

Chinese market with emphasis on the element which is adapted to the Chinese culture

and why these changes have been made. The practical part will also include Hofstede‘s

analyses about China and see if these analyses are applicable on the marketing mix that

Häagen-Dazs is using on the Chinese market. As a closure of the practical part further

recommendations for Häagen-Dazs‘ marketing mix in China have been conducted with

emphasis on the further adaption to the Chinese culture.

The thesis will then finalise with the conclusion, bibliography and the appendix.

In the start of the development of these thesis three hypothesis where prepared

with the purpose of being a guideline and goals for the thesis. The hypotheses are as

following:

1.

If culture affects the marketing mix, then companies have to take this

into consideration when developing a marketing mix.

2. Culture plays an important role in the people‘s life and this has to be

taken into consideration to be able to develop an effective and purposeful

marketing mix.

1

Consumer behavoiur - Implications for Marketing Strategy (2007). Quester, Neal & Pettigrew.2 Principles of Marketing (2005). P. Kotler & G. Armstrong. NJ: Pearson/Prentice-Hall, Upper Saddle

River. 11th

edition.


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3. Hofstede‘s research is still genuine today based on the marketing mix

Häagen-Dazs is using on the Chinese market.

The methods used for proving these hypotheses are secondary sources as books,

journalistic articles and internet articles. The information have been gathered over a

period of five months and then analysed based on the topic.


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1 Culture

―A culture is a way of life of a group of people-the behaviours, beliefs, values,

and symbols that they accept, generally without thinking about them, and that are

passed along by communication and imitation from one generation to the next.‖

3

This isone of the many definitions of culture which can be found today. The research about

this topic is very wide and it has gone on for many centuries.

According to Lars Perner, Ph.D.4 there are some characteristics that equal when

you are looking at cultures in the world, this is the main elements that the culture is

based on and has developed from.

One of these characteristics is that culture is learned rather than congenital.

During the years of growth a child will learn about for example the norms of the culture,

communication style or unwritten laws either by acting or thought by someone else.

This can either be from people close to them, like parents or siblings, but also be people

they look up to like politicians or movie stars. The cultural elements that the child will

learn have all developed within limits of what are acceptable in the society. The cultural

elements should not violate the acceptable behaviour in the society, and if they do this

can result in legal problems or problems related with socialization in the society and the

punishment is ranked according to the degree of the offence. Since culture is learned

from the childhood it becomes a natural part of people‘s life, and in many cases a

person can react unconscious on culture related issues according to their habits. One

example is that people in Scandinavia have been learned from they are small that they

shall eat all the food on their plate as a sign that they liked the food and that they are

grateful to the host. While in many Asian countries an empty plate is a sigh that you are

still hungry and that the host should offer you more food and if you then reject the offer

it is an insult to the host. The problems might occur when Scandinavians comes to Asia,

or the other way, and the guest acts unconscious according to the habit from their

culture.

Another characteristic is that culture is comprehensive. This means that the

culture is extensive with many elements that are logically brought together and they will

support the main values and norms of the culture when they are followed correctly. ―For

3TimelessTime (n.d.) CULTURE MATTERS- Maximising People Contribution through Collective

Behaviour. Retrieved 22th of May 2011 from http://www.timelesstime.co.uk/white-papers/culture-

matters-maximising-people-contribution/4USC Marshall (nd.) Culture. Retrieved 22

th of May 2011 from

http://www.consumerpsychologist.com/intl_Culture.html


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example, bowing and a strong desire to avoid the loss of face are unified in their

manifestation of the importance of respect. ―5

One last characteristic that should be mentioned is that the culture is static or

dynamic based on how quickly the people in the society accept changes. In cultures

based on strong, traditional values, like many Arabian countries, the cultural changes

have been much slower compared to cultures that accept changes to a higher extend,

like the inhabitants in America.

There are today as well different levels of culture in the society. This is national

culture, organizational culture, subculture and individual culture.6 The national culture

is the culture which is to some extent equal for the whole country. This can for example

be if the culture is individualistic or afraid of changes. The cultural research by Prof.

Geert Hofstede, which will be discussed later, is discussing cultural dimensions on a

national level.

The second cultural level is the organizational culture level. Organizational

culture is ―the norms, values, and beliefs concerning the organization shared by member

of the organization‖7 This culture is specific for the organization, and is based on the

national culture in the country.

The fourth culture level is the subcultures which are found in the country. ―A

cultural subgroup differentiated by status, ethnic background, residence, religion, or

other factors that functionally unify the group and act collectively on each member.‖8

This can for example be Punks or Goths.

The last cultural level is individual culture. This is the individuals‘ norms, values

and beliefs. It is based on all of the ment ioned levels in addition to the individuals‘

mindset and experiences.

All these levels of culture companies have to take into consideration when

making business decisions. The reason for this is that the levels influence the

consumer s‘ purchasing decision.

5 USC Marshall (nd.) Culture. Retrieved 5

th of January 2011 from

http://www.consumerpsychologist.com/intl_Culture.html6 L. Smirnova (2007). Understanding Culture.Retrieved 22

th of May 2011 from

http://www.lisaconsulting.com/en/weblog/2007/07/24/culture4/7 Multinational Management - A strategic approach (2008), J.B.Cullen, K.P.Parboteeah , Thomson Higher

Education, 4th

edition. P. 538 The American Heritage® Dictionary of the English Language (2009). Subculture. Retrieved 22th of

May 2011 from http://www.thefreedictionary.com/subculture


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1.1

Research through history

Through the history there has been done much research about culture and how it

influences the business environment. Some of the research is more known than other

and the next section will focus on research frequently used both business education and

in companies, this is Hofstede‘s model of national culture and Seven Dimensions of

Culture by Trompenaars.

1.1.1 Hofstede

The first cultural model was introduced by Prof. Geert Hofstede, a world-famous

Dutch scientist, in the beginning of the 1980s. Between 1967 till 1973 a survey was

conducted by IBM and it had 116 000 responders from 70 countries9

. The result was a

model identifying four cultural value dimensions based on the largest 40 countries from

the survey. At a later stage the analyses have been updated to include 74 countries and

regions as well as one additional dimension.

Today Hofstede‘s model of national culture includes five dimensions; Power

Distance, Individualism, Masculinity, Uncertainty Avoidance, and Long-Term

Orientation.

The first dimension Power Distance relates to how people deal with power andinequality. In other words, how much control and power an employer has over the

employees and if the power is divided equality or not.

In countries with high power distance the power is divided unequally in the

society and high hierarchies are commonly used. Respect is a keyword in these

countries, everyone knows their place in the society and the future has to some extent

been predetermined for the people according to your social group. The hierarchal

structure is visible in all stages of a person‘s life; as children they are taught to obey

their parents and elders, when they start at school they have to obey the teachers and in

the workplace they have to respect and obey their boss.

Countries with high power distance are commonly found in (for example

Malaysia) and the Arab World, while countries in Northern Europe (such as Sweden)

usually have low power distance.10

9

Multinational Management - A strategic approach (2008), J.B.Cullen, K.P.Parboteeah , Thomson HigherEducation, 4

th edition p.54

10 Intercultural communication (2009). Milena Bočánková a kol. Vysoka skola ekonomicka v Praze. .


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The second dimension is individualism. Individualism ―is the relationship

between the individual and the group in the society.‖11 In countries with a highly

individualistic culture the people are perceived as unique, they are responsible for

themselves and in business life promotions are based on individual performance. United

States, Australia and the United Kingdom are all examples of countries with high

individualism.

On the opposite end of the spectrum to individualistic countries are collectivistic

countries. "Collectivism means the subjugation of the individual to a group - whether to

a race, class or state does not matter. Collectivism holds that man must be chained to

collective action and collective thought for the sake of what is called 'the common

good."12 This means that a person should not have their own opinions unless it is in the

best interest of the whole group, if they do have a different opinion compared with the

group this can be looked on as a loyalty break One of the main issues related to business

promotions in collectivistic societies is that promotions usually happen slowly and is

based on seniority. Although a person might go directly into a management position if

they have family members in high positions in the company as family relationships are

highly regarded in collectivistic cultures.

When looking at collectivistic countries we can see a pattern related to the size

and also the power distance. In highly populated countries, as for example China and

Indonesia, the power distance is quite high and these have a collectivistic society. The

reason for this might be the issue about control especially when the population is so

high. Additionally the Confucius‘ theories where collectivism and respect are the main

aspects have been central throughout history in many Asian countries.

The third dimension masculinity is related to weather the general values in

society are male or female related. Typically male related values are linked to

achievement, self-fulfilment and money. It is also related to how the leader positions are

divided in the companies between males and females. In countries where the

masculinity is high men are dominating the important leader positions. Some examples

of countries with a high masculinity are Great Britain and Japan.

Feminine values are the care for other people, emphasis on relationships and

sympathy for the weak. The feminine values can be found for example in Scandinavia

11 Multinational Management - A strategic approach (2008), J.B.Cullen, K.P.Parboteeah , Thomson

Higher Education, 4th

edition. p. 5812 Fare Rideau (1944). The Only Path to Tomorrow. Retrieved5


http://fare.tunes.org/liberty/library/toptt.html


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where women‘s return to work after giving birth is encouraged by government

supported universal day care and a one year paid parental leave is available for parents

(it can go to the mother or father or a combination).

The dimension which describes how people react to change, differences or

unknown situations is called uncertainty avoidance. In countries with high uncertainty

avoidance the society reacts negatively to change and frequently cause stress or

frustration. To make the inhabitants most comfortable there should be precise laws and

regulation and a structured social system. The inhabitants also believe that the

authorities are usually correct and it is important that the government lives up to this.

In countries with low uncertainty avoidance flexibility is desired and the level of

formality is usually low. In these countries, for example the United States, innovation is

commonly promoted while in countries with high uncertainty avoidance the probability

that innovations will be implemented is higher. 13

The last dimension, long-term orientation, is not one of the original dimensions

but was added later to explain the rapid economic growth that has occurred in many

Asian countries. This dimension deals with how the inhabitants deal with time, if they

are focusing on the future or on the past and present.

When it comes to the values associated with long term orientation these are

related to saving resources by only using what is necessary, adaptation of traditions to a

modern context and planning according to what will gain them the most in the future.

In short term oriented countries people are living in the moment. They usually

feel a social pressure to be on the same level as their social group with material things,

even if this will result in overspending. The short term oriented countries also have a

respect for traditions and are not willing to change these traditions if it‘s not necessary.

Countries that are short term oriented are countries like Canada, Norway and the United

Kingdome, while China, Hong Gong and Taiwan are long term oriented.

13 Multinational Management - A strategic approach (2008), J.B.Cullen, K.P.Parboteeah , Thomson


edition, p. 58


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1.1.2 Trompenaars

Another well-known Dutch scientist that studied culture is Fons Trompenaars.

Together with Charles Hampden-Turner, he developed a cultural model called ―Seven

Dimensions of Culture‖ that was released in 1998 after over ten years of research. The

questionnaire was conducted in 28 countries with at least 500 responses in each country

and was later tested on 55 national cultures.14

The main difference between the Trompenaars and Hofstede was the research

methods used. While Hofstede mostly used direct questions, Trompenaars used case

studies within his questionnaire to see how people would react in real life.15 In this way

Trompenaars research is more accurate according to how people behave, while Hofstede

relates to how people feel they should behave, because it can be a contrast between this.

In addition to this it was a large time gap between when the research was

conducted, this time gap is approximately twenty years. Within twenty years many

changes has happened in the culture and because of this some of the finding of

Trompenaars and Hofstede do not correspond. This is for example regarding the

collectivism that both of the scientists have included in their research, but the finding in

this category is not the same.

The model is based on the fact that all people come into situations where they

have to solve problems related to the problem of survival. Even if the problems might

be similar in all countries the way people react differs according to their culture‘s values

and norms. The model is therefore responding to three different problems that people

may experience; the first relates to how people relates to each other, which is the topic

in the first five dimensions, and the two last dimensions relates to how the culture deals

with time and how they deals with nature.16

Since some of the dimensions in Trompenaars model are quite equal to

Hofstede‘s‘ dimensions I have decided not to go into detail about these dimensions andinstead refer to the part about Hofstede cultural model.

First universalism vs. particularism is taking into consideration how people treat

each other and if rules or personal relationship is the most important thing. In

universalistic cultures the people should treat each other based on law, religion or

14Provenmodels b.v (2011) Seven dimensions of culture. Retrieved 15


http://www.provenmodels.com/58015 Multinational Management - A strategic approach (2008), J.B.Cullen, K.P.Parboteeah , Thomson


edition, p 7216 Multinational Management - A strategic approach (2008), J.B.Cullen, K.P.Parboteeah , Thomson


edition, p 68


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cultural principles, who you know and your personal relationship with the person does

not matter like it does in particularistic cultures. Here the laws are looked at as

guidelines for how to act, but every situation should be evaluated separately. Typical

universalistic cultures is United States and United Kingdom while South Korea and

Mexico have particularistic cultures

Second individualism versus collectivism, it is one of the dimensions that

Hofstede and Trompenaars have in common and this will therefore not be discussed

further in this part.

Neutral vs. affective is also a dimension that relates to how people relates to

each other, but this time in connection to if they show emotions or not. While is some

cultures emotions is a common way to show their opinion and how they feel, it is in

other cultures looked at as a sign of weakness. In neutral cultures people are supposed

to reveal thoughts through feeling and communication should be objective and task

oriented. On the contrary in affective cultures emotions are a common part of the

conversation together with gesturing to emphasis their opinion. According to

Trompenaars research Sweden is one of the most neutral countries while China is one of

the most affective.

The fourth dimension by Trompenaars is specific vs. diffuse is related to how

involved a person is in their work relationship. In specific cultures the people is direct in

their relationship and precise in their communication. Work related issues belong at

work and they separate work and family to a large extend. In diffuse cultures the line

between family and work is not that strict and it is important to build up a relationship

with people so they know they can trust each other.

The last dimension relating to how people interact with each other is

achievement vs. ascription. This dimension is related to if the person is given their

status according to whom they are and who they know or if they earn it by what they do.

In achievement cultures like Norway you earn your status according to what you

perform and your accomplishments. It does not help to know the right people unless you

have achieved something in the past. In ascription cultures on the other hand people can

be get status based on their background, their profession or their title. In ascription

cultures the usage of profession titles are commonly used and the age and a person‘s

seniority is important.

The sixth dimension is related to the societies‘ attitudes to time, where they areeither future-oriented or past-oriented. In past-oriented cultures they assume that the life


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is following a predetermine path based on tradition, fate or the will of God. Due to this

they often feel that when it comes to a decision it is best that an old person, who have

lived long and has more experience, is the best person for a decision. In this category

we have countries like China, Great Britain and Japan.

In future-oriented cultures the people look at the future as something positive

that they can change according to their actions. Long term planning for companies is

most profitable and controlling that everything is going according to the plan is

important.17 The United States and Brazil are both future-oriented countries.

The last dimension from Trompenaars is about internal vs. external control, in

other words if we are controlling our fate or if the environment around us do. In cultures

who focus on internal control the people believes that they have control over the

environment and the main issue is themselves and their group.

Countries with external-oriented culture on the other hand are more flexible and

open for a compromise, they are also more being more comfortable with changes and

are adopting more easily. 18

On the top list of countries that is focused on internal-control we have Poland

and Norway, while the countries that is external-focused is Russia, Singapore and

Cuba.19

17 Analytic Technologies (nd.) Differences in Cultures. Retrieved 15


http://www.analytictech.com/mb021/cultural.htm18 Jean Binder (2007). Trompenaars’ d imensions. Retrieved from

http://www.globalprojectmanagement.org/index.php?option=com_content&task=view&id=2319 Multinational Management - A strategic approach (2008), Cullen and Parboteeah, Thomson Higher

Education, 4th

edition, p.78


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1.2

Elements of culture

For a company to communicate efficiently to consumers and potential consumer

they need understand the culture and the elements which is influences it. Today there

are many cultural models expressing these elements, but the choice in this thesis fell on

a model from the book ―Consumer Behaviour. Implications for marketing strategy

(2007).‖20 The reason for this choice is because the model catches the essence of what a

company have to understand about a culture. As shown in ―Figure 1: Variables

influencing cross-cultural marketing strategy,‖ there are four main variables which

influence the marketing strategy; values and norms, non-verbal communication,

language and demographics.

Figure 1: Variables influencing cross-cultural marketing strategy

Source 1. Consumer behavoiur. Implications for Marketing Strategy (2007). Quester, Neal & Pettigrew.

McGraw-Hill Australia. 5th edition

1.2.1 Values & norms

Values and norms are important elements influencing the society in the culture

because these are two of the foundations in a person‘s mind. Both the values and thenorms are usually learned through the childhood, but are changing according to the

environment people live in and the values and norms in this environment. The cultural

values are belief tells us what is good, what is right and acceptable. Norms are

boundaries which are set by the people in the culture based on the values in this culture.

20 Consumer behavoiur. Implications for Marketing Strategy (2007). Quester, Neal & Pettigrew.

McGraw-Hill Australia. 5th

edition

Marketing strategyCulture

Language

Demographics

Values & normes

Non-verbal

commun-ication


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Norms are about the behaviour of the people and reflects the behaviour of the

people and can be used as a guideline to our actions.21 One example is that the norm in

France is to kiss as greetings, while this is not accepted in Japan where physical contact

is kept to a minimum.22 A global example is that people do not yell at others in the

grocery store, because it‘s not especially appropriate behaviour. In both cases there are

no specific law against this, but it is against the norms in the society.

Like culture in general, the values and norms are under constant changing. An

example of values that has changed through history can be seen in China.23

Traditionally the sons in Chinese families were valued higher than the daughters. Hence

many girls were killed at birth because they were looked at as useless. The reason for

this is that girls could not carry the family name further or earn money for the family,

because their job was at home. Due to this the sons were expected to work hard and

obey they their father and in this way give the family name a good reputation. Today the

values in Chine have shifted towards a more sex equality society, partly due to the

Western influence. The traditional family values are still important, but in large cities it

is usual that male and female are working. Education for children, both girls and boys,

are today strongly valued to increase their possibility to obtain success later in their life.

Regardless of this it is important to mention that the development in the countryside has

has been much slower than in the cities and here the traditional values about sons and

daughters are still important and the parents wants to give birth to a boy so that they

have an insurance that someone will take care of them when they goes older.

1.2.2 Non-verbal communication

Non-verbal communication is the communication that is not verbal. This can be

movement and body positioning, clothing and bodily characteristics, physical

environment, time, symbols and physical objects. According to research non-verbal

communication represents 55% of the impression we make and only 38% from the way

we speak.24 This indicates that the words themselves are not that important, but how we

behave and appear is influencing more than we might be aware of.

21 Chris Brogan (2008). Laws rules norms and habits. Retrieved 5

th of January 2011from

http://www.chrisbrogan.com/laws-rules-norms-and-habits/22

Consumer behavoiur. Implications for Marketing Strategy (2007). Quester, Neal & Pettigrew.McGraw-Hill Australia. 5

th edition p. 526

23 Thinkquest Team (1998). Living and Values. Retrieved 5th of January 2011from

http://library.thinkquest.org/20443/g_living.html24 Dragonbridge Corporation (nd.) Interpersonal Communication Training. Retrieved from

http://www.dragonbridgecorp.com/training.php


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When it comes to how companies have to be aware of non-verbal

communication in their marketing mix, this will in most cases be related to the product

and the promotion. Regarding the product itself non verbal communication can affect

design, symbols used on products and usage of colour. In promotion it can influence

how sales people are dressed, greeting customer as well as the colours used in

promotion campaigns.

As mentioned, symbols can be an important element when a company is dealing

with products and promotion. The definition of symbols is: ―signs or objects

representing something (e.g. status).‖25 This can for example be a number, a colour, a

shape or an animal. Some examples on this can be in Ghana and Singapore number 7

means bad luck, while in India, Slovakia and USA it symbolizes good luck. Another

example is the animal deer. This is in United State associated with speed and grace,

while in Brazil it symbolizes homosexuality.

When it comes to colours it can be a very sensitive issue because one colour can

symbolize different things in different countries. One example can be that the

comprehension of the colour red in different countries. In China red is considered as a

colour of good luck and is worn by the brides while in the Middle East red symbolize

evil or danger, while in Amsterdam red is usually connected with the Red Light

district.26

Many companies have actually failed on the international market just because

they haven‘t done their research when it comes to use of colours. One example of a

failure due to this was made by a manufacturer of water-sports product that wanted to

go into the Malaysian market. The problem was that the companies predominated

colour was green who is associated with the jungle and illness.27 The result was that the

Malaysians where willing to buy the product due to superstition regarding the colour

and the company had to change their predominated colour to increase the sale.

1.2.3 Language

In the world today many thousands of languages are spoken, but no one knows

precisely how many languages there are. Some languages can be understood by a large

25 Consumer behavoiur. Implications for Marketing Strategy (2007). Quester, Neal & Pettigrew.


edition p. 54326Color-Wheel-Artist.com (2008) The Meaning of Red. Retrieved from http://www.color-wheel-

artist.com/meanings-of-red.html27 Consumer behavoiur. Implications for Marketing Strategy (2007). Quester, Neal & Pettigrew.


edition p. 543


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amount of people like Mandarin Chinese, Hindu, Spanish and English, while other

languages are just understood by a small tribe at a small geographical area. 28 But

language is not only about what language you use, but also about how you use the

words in the language and the meaning of the words.

When it comes to the issue about how the word are being used this can be

divided into explicit messages and implicit messages. In low-context countries the use

of explicit messages in communication is very common. The message is then literally

and the words are most important and not the context they are being set to. When it

comes to implicit messages this is more common in high-context cultures and the

communication style is more diffuse. The communication is then being more presented

‗in pictures‘ and it can be hard for the conversation partners if they do not have a fairly

good understanding about the other partner.

In most countries the word ―yes‖ means actually yes, but when you take it into

the context of negotiation with Japanese the meaning is actually ―yes, I understand what

you are saying‖ instead of ―yes I agree with you‖ like most Europeans or Americans are

used to.29 In most Asia countries it is also considered impolite to say no and due to this

the answer will not be straight forward.

One of the main problems for many companies has been the translation process

from one language to another. Many companies have done the mistake of translating to

literary and it has resulted in a marketing disasters. One example of this can be the well

know mistake from the company Kentucky Fried Chicken. When their slogan "finger-

lickin' good" where translating into Chinese the meaning was changed into "eat your

fingers off."30 This is only one of many translation mistakes that has happened in

marketing the recent years and this has made the translators of marketing campaigns

more focused on translating the ideas instead of the words and in this way be able to

avoid the mistakes to a larger extend.

Another issue regarding language is the written alphabet. There are today

approximately 50 different written alphabets in the world and most of these are used in

28Vistawide (2011). Top 30 languages of the world. Retrieved 2th of February from

http://www.vistawide.com/languages/top_30_languages.htm29

International Business (2007) Griffin & Pustay. Pearson Education International p. 9030 Learn English Network (n.d.) English Horror Mistakes. Retrieved 30


http://www.learnenglish.de/mistakes/HorrorMistakes.htm


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Asia. Just in South Asia there are more than ten alphabets, while in whole Europe only

three alphabets are used.31

The main advantage with written alphabets is that this is not a ―hidden‖ cultural

element like values or norms, but a cultural element which it is easy for companies to

find information about. In today‘s technological society there are as well computer

programs suitable for all alphabets, but it might result in higher costs for the company.

External communication will also be influences by usage of different alphabets, but the

translation process for the company will not be that different from translating from one

language to another.

1.2.4 Demographic

Demographics are commonly used in marketing to look at the characteristics ofhuman populations and population segments to identify consumer markets.32 This can

be age, occupation, income, status, sex, education, religion or family size. The

demographical information is usually quite easy to find for the company through the

official authorities in the different countries and they are usually being updated on a

regular basic by national population censuses.

Regarding demographic in connection with the marketing mix it is commonly

used in the preparation for stage, i.e. segmentation. Demographics as a part of thesegmentation are a commonly used tool for companies to target the customers suitable

for their product, but also to see what products which are suitable for the population.

For example with the knowledge about the family size a company can see if a large

packaging size or a small one is most preferred for their product. Or if a company is

going to launch a product suitable for students at a college level they will have

information about the size of the target group.

When it comes to the usage of demographic in segmentation it is commonly

used in addition to another segmentation strategy. The reason for this is that

demographic is not saying anything about the customers‘ attitude and behaviour, these

two factors are also not demographically driven or demographical related. 33

Demographic is therefore commonly used to identify and describe the segment.

31 L. LO (2011). Timeline. Retrieved 12th of May 2011 from

http://www.ancientscripts.com/ws_timeline.html32

American Heritage Dictionary (n.d.) Demographics. Retrieved 12th

of May 2011 from

http://www.answers.com/topic/demographics#ixzz1DvTM4P4U33 International marketing: theory, practices and new trends. (2010) Machková, Král, Lhotáková,

Karlíček, Malý, Štěrbová. Praha: Oeconomica.


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2 International marketing

International marketing is ―the business of presenting and promoting goods or

services in such a way as to make customers want to buy them‖34 outside their domestic

market. International marketing has the same purpose as domestic marketing, but whenconducting an international marketing strategy more factors have to be taken into

consideration.

The first factor a company has to look at is the international market

environment. This consists of the political, legal and regulatory- (P), the economical-

(E), the social and cultural- (S) and the technological environment (T). These factors are

together forming the PEST analysis which analyses the external macro environment

which the company is rarely able to control. 35 Some selected factors of the analyses are

listed in ―Table 1 PEST factors‖. These are some of the factors a company have to

consider before entering the market. The cultural factors in the PEST analyses will be

discussed to a large extent later in this thesis.

Table 1 PEST factors

PEST factors

Political Analysis Economic Analysis

Political stability

Legal framework for contract enforcement

Intellectual property protection Trade regulations & tariffs

Anti-trust laws

Pricing regulations

Taxation - tax rates and incentives

Wage legislation - minimum wage and

overtime

Work week

Industrial safety regulations

Product labeling requirements

Economic system in countries of operation

Government intervention in the free market

Comparative advantages of host country Exchange rates & stability of host country

currency

Efficiency of financial markets

Infrastructure quality

Skill level of workforce

Labor costs

Economic growth rate

Unemployment rate

Inflation rate & interest rates

Social Analysis Technological Analysis Class structure

Education

Culture (demographics, gender roles, etc.)

Entrepreneurial spirit

Attitudes (health, environmental consciousness)

Leisure interests

Recent technological developments

Technology's impact on product offering

Impact on cost structure

Impact on value chain structure

Rate of technological diffusion

Source 2 NetMBA.com (n.d.) PEST Analysis. Retrieved from http://www.netmba.com/strategy/pest/

34 GlossaryOfMarketing.com (n.d.) Marketing. Retrieved 22th of May 2011 from

http://www.glossaryofmarketing.com/definition/marketing.html35 NetMBA.com (n.d.). PEST Analysis. Retrieved 22

th of May 2011 from

http://www.netmba.com/strategy/pest


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Another decision companies have to make before expanding abroad is what

marketing approach they will use. There are three main strategies: ethnocentric

approach, polycentric approach and geocentric approach.36 With the ethnocentric

approach companies use the same marketing strategy on their domestic market and

abroad. The company can in this way reduce costs for adapting their marketing mix, but

will not be able to react to customer preferences on the international market.

With the usage of a polycentric approach the company adapts the whole

marketing mix based on thorough research of every market it approach. This strategy

requires high investments, but some companies feel that this is well invested money

because the customers in the different countries receive offers customized to their

needs.

In the last strategy, geocentric approach, the company standardizes their

marketing mix to sell product or services globally. The main difference between this

approach and the ethnocentric approach is that with a geocentric approach global

analyses have been conducted and decisions are made based on this. With an

ethnocentric approach the company uses an already established marketing mix and

copies this to the new market.

Based on the advantages and disadvantages mentioned in ―Table 2 Advantages

and Disadvantages of Standardized International Marketing‖ and ―Table 3 Advantages

and Disadvantages of Customized International Marketing‖ the company has to take

into consideration what strategy will be most effective and profitable for them.

Table 2 Advantages and Disadvantages of Standardized International Marketing

Standardized international marketing

Advantages Disadvantages

Reduces marketing costs

Facilitates centralized control of marketing

Promotes efficiency in R&D

Result in economy of scale of production

Reflects the trend towards a single global

marketplace

Ignored different conditions of product use

Ignores local legal differences

Ignores differences in buying behaviour

pattern

Inhibits local marketing initiatives

Ignores other differences in individual

markets

Source 3 International Business - A managerial perspective (2007). Griffin & Pustay. Pearson Education

International. 5th edition. P.449

36 International Business - A managerial perspective (2007). Griffin & Pustay. Pearson Education

International. 5th

edition. P.449


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Table 3 Advantages and Disadvantages of Customized International Marketing

Customized international marketing

Advantages Disadvantages

Ignores different conditions of product use

Acknowledges local legal differences

Accounts for differences in buying

behaviour

Promotes local marketing initiatives

Accounts for other differences in individual

markets

Increases marketing costs

Inhibits centralized control of marketing

Creates inefficiency in R&D

Reduces economy of scale of production

Ignores the trend towards a single global

marketplace

Source 4 International Business - A managerial perspective (2007). Griffin & Pustay. Pearson Education

International. 5th edition. P.449

2.1

International marketing mix

The marketing mix is a central and important part of the marketing strategy

which a company prepare wherever they are doing business on their domestic market or

abroad. The marketing mix is ―a planned mix of the controllable elements of a product's

marketing plan commonly termed as 4Ps: product, price, place, and promotion. These

four elements are adjusted until the right combination is found that serves the needs of

the product's customers, while generating optimum income.‖37 For the best result the

company should develop a marketing mix which supports itself through the whole mix.

The marketing mix should as well support the corporate goals for the company as well

as the marketing strategy. When the company has found the best combination the

optimum for the company has been created.

2.1.1 Product

The product is the main element in the marketing mix and it play an importantrole in the international marketing strategy. It can be looked at as the main element

because the other elements are in some way dependent on the product.

Historically products were a reaction to a need that customers wanted satisfied.

―In today‘s marketing, product is not only a certain set of physical features but rather a

complex solution that is offered to customers to satisfy their need and wishes.‖38 One

37 WebFinance, Inc. (n.d.). Marketing mix. Retrieved 23th of March 2011 from

http://www.businessdictionary.com/definition/marketing-mix.html38 International marketing: theory, practices and new trends. (2010) Machková, Král, Lhotáková,



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reason for this is that consumers are getting more aware of their needs, but also because

in many societies citizens have covered their physical needs and want to fulfil other

needs they have. In the education sector the usage of ‗Maslow‘s hierarchy of needs‘ is

commonly used to describe the needs and wants the consumers have (―Appendix 3

Maslow's hierarchy of needs‖).

Looking at the product itself it consists of three or four levels or dimensions

depending on the research material you are looking at. For the purposes of this section a

model consisting of four dimensions has been used as it reflects and emphasizes the

product dimensions in a manner more congruent to this discussion.

Figure 2 Four levels of a product

Source 5 Strategic Marketing (2010). A. Whalley. Andrew Whalley & Ventus Publishing ApS

The first dimension is the core benefits of the product. This is the physical and

technical features of the product which satisfy the need or the want of the customers. An

example can be that a customer wants to satisfy the need of being transported from

place A to place B in a specific time and the product can then be a bus, a car or other

means of transportation that can cover this.

The second dimension is the basic product; for example the quality, design or

the packaging. This is characteristics of the product, how they are presented to add

value to the customers and also the benefit the customers expect to achieve by using the

product.

The third dimension is the augmented product consisting of supporting features

that are included in the product or can be brought additionally. It consists of warranties,

customer service, delivery or other features that can help persuading the customers if

they have doubts.


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The last dimension is the perceived product. In other words how the customers

see the product in their mind. This is one of the hardest parts for a company to control

because different customers have different views on what they like and dislike based on

their life experience and personalities, for example. But a company has the possibility to

influence the customers view via positioning. The main purpose of this is to ―create a

clear position for the brand in consumers‘ mind; it should differentiate it from its

competitors and represents a clear benefit or value to the customer.‖39

When a company is deciding to go abroad they have to make one main decision

concerning the product, this is whether they should adapt their products to the foreign

market or standardized the products. This decision should be based on an in depth

analyses about the country, for example with the usage of PEST analysis which

examines the political, technological, economical and social environment in the target

country. The most common reasons for adapting a product are technical norms, legal

requirements, or cultural and economical differences on the target market. Because

changes of the product are quite expensive many companies try to avoid this if it is

possible.

Regarding the adaption that is related to the cultural issues this can be looked at

through the different dimension that is visible in ―Figure 2 Four levels of a product.‖

The most expensive adaptation for a company occurs when changes have to be made in

the first dimension, the core benefits of the product. The reason for this is that the

switching costs for a company to change the manufacturing process are in most cases

very high. In this dimension cultural issues like demographic, for example family size,

and values (if the usage of this product acceptable in this culture) can influence if the

core benefits of the product have to be changed or not.

In the second dimension cultural issues such as language and non-verbal issues

is influence the product. Especially the design and packaging is influenced by colours,

symbol or if the product has a soft or a hard design. According to research Hofstedet

cultural dimension is commonly influencing the product design in many cultures. In

culture societies with high masculinity the design on the products are harder and

stronger while in feminine cultures the design is softer.

The third dimension, the support features, is influenced by the values in the

society and also by the formal laws in the country. Commonly in high developed

39 International marketing: theory, practices and new trends. (2010) Machková, Král, Lhotáková,



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countries there are more regulations regarding warranties and return policies for the

products then in developing countries. The reason for this can be that consumers in

developed countries have higher expectations regarding the features of the products and

their durability. Consumer protection is commonly higher in developed countries as

well, resulting in a higher consumer power.

The fourth and last dimension, the perceived product, is again influenced by the

values in the society. Brand image is all about how the brand is represented in the mind

of the consumers and the company therefore have to do a thorough job with finding the

best representation of the brand that reflects the image they want to the customers to

perceive.

One example related to the brand image is the cultural values towards luxury

brands in different cultures. In some areas of the United States, for example in Los

Angeles, luxury brands like Dior or Dolce & Gabbana demonstrate the status the owner

has in the society. Hence these brands focus on the status, prestige and elegancy when

they are branding their products. On the other hand, in Scandinavian societies there is

an unwritten rule regarding how to act and behave regarding demonstrating wealth or

financial achievements called the Jante law. The Jante Law was written in 1933 by the

Danish- Norwegian author Aksel Sandemose in the novel ―A fugitive crosses his

tracks‖, original title ―En flyktning krysser sitt spor .‖ Originally it contains ten rules,

but it can be briefly summarize as ―you should not think you are better than anyone

else.‖ Today almost 80 years after it was written the Jante Law is still a part of the

Scandinavian society. To show off one's wealth and financial achievements with luxury

brands and exclusive cars is perceived as negative and condescending above others.

Even so luxury brands have a good possibility of success in Scandinavia if they are

aware of the Jante Law and adapt their brand image according to this.

2.1.2 International price

The only element in the international marketing mix which is directly

influencing the economic revenue for a company is the price. In addition it can be an

important strategic weapon in the fight against the competitors. Choosing the right price

can be the difference between failure and success so it is an important element which

has to be considered in detail.


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Factors in fl uencing the in ternational pr ice

There are many factors influencing the price a company can charge for a

product, both internally and externally (Figure 3 Factors influencing the price).

Figure 3 Factors influencing the price

Source 6 G. Pfajfar (2009) I nternational pri cing decisions. Retrieved from miha.ef.uni-lj.si/_dokumenti3plus2/190198/Lecture7_pricing.ppt

The internal factors influencing the price strategy can be divided into two

categories; firm-level factors and product factors,40 while the external factors can be

divided into environmental factors and market factors. To give a clearer picture of what

the different factors contain ‗Figure 4 Internal and external factors‘ has been developed.

Figure 4 Internal and external factors

Internal factors External factors

Product factors

- Stage in Product life cycle

- Place in product line

- Most important product features

- Product positioning

- Product cost structure

Environmental factors

- Government influences and constraints

- Inflation

- Currency fluctuations

- Business cycle stage

Firm-level factors

- Corporate and marketing objectives

- Competitive strategy

-

Firm positioning- Product development

- Production location

- Market entry modes

Market factors

- Customers‘ perceptions - Customers‘ ability to pay

-

Nature of competition- Competitors‘ objectives, strategies,

strengths and weaknesses

Source 7 Pfajfar (2009) International pricing decisions. Retrieved from miha.ef.uni-

lj.si/_dokumenti3plus2/190198/Lecture7_pricing.ppt

Concerning the internal factors this is factors that the company to some extend

can influence themselves. Especially ―Firm-level factors‖ are determent by the internal

40 G. Pfajfar (2009) International pricing decisions. Retrieved 20

th of March 2011 from miha.ef.uni-

lj.si/_dokumenti3plus2/190198/Lecture7_pricing.ppt

Internal factors

Firm-level factors

Product factors

Pricing strategy

External factors

Environmental

factors

Market factors


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strategies the company have developed; both corporate strategy and market strategy.

The product factors are as well partly determined by the internal strategy as well as by

the market and the customers purchasing behavoiur.

The external factors on the other hand are determined by factors outside the

power of the company. These factors the company have to learn to handle based on

knowledge and experience. The company might be able to influence some of them, like

customers‘ perceptions and government constrains (last one is only able to influence in

some markets), but factors as nature of competition and currency fluctuation is out of

the reach of the company.

Especially when dealing with international business taxations and currency

fluctuations are important indicators on how hard or easy it will be for a company to do

business on the market.

The last years the issue concerning taxation has been easier for companies to

relate and the reason for this is the high number of trade agreements that has been

developed. This has resulted in a more transparent taxations and tariff system and it is

now more predictable for companies to do business within these trade areas. There are

today a high number of regional trade agreements in the world where the largest

agreements are related to the World Trade Organization (WTO). WTO has in 2008 153

members from all over the world.41

The issue with currency fluctuation have also been solved for some countries

within the European Union (EU). In 2011 17 countries are officially using the currency

Euro and in addition some countries are using it, but are not officially included in the

Euro zone.42 For these countries the trade within the Euro zone has reduced their risk of

unwanted changes in relationship with currency fluctuation. There are also other

advantages for the businesses within the Euro zone like reduction in costs because there

is no need for currency exchange, the companies have better access to capital and it is

easier for the companies to develop plans for the future.43

41 World Trade Organization (2008). Members and Observers. Retrieved 20

th of March 2011 from

http://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm42 European central bank (2011). Map of euro area 1999-2011. Retrieved 20th of March 2011 from

http://www.ecb.int/euro/intro/html/map.en.html43 European Commission (2009). The Euro- Business Benefits. Retrieved 20


http://www.eubusiness.com/topics/euro/business


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I nternational pricing strategies

The international price strategies a company choose is depending on the

companies‘ goal for the market and the factors discussed above. As with the other

element in the marketing mix the company have the possibility to standardize or adapt

their price strategy to their new market. Regarding price this is called price

standardization, two-tiered pricing or price differentiation.44

Price standardization means that a company charge the same price for their

product or service no matter what market they are present on and it can be defined as:

―Pre-established uniform price for a good or service, based on its historical price,

replacement cost, or an analysis of its competitive position in the market.‖ 45 This

strategy is commonly used in relation to a global positioning. Especially in today‘s

world where internet and other technological communication methods makes it possible

for people to buy products from other countries, the usage of price standardization can

be the best solution for some companies. The main disadvantage with this strategy is

that the price is not adapted to for example purchase power in the country or the market

price. This can result in a price gap between what the company is offering and the

market price.

The second strategy a company can use is two-tiered pricing. This means that

the company use one price on the international market and one price on the domestic

market. In this way the international price is covering the charges related to the

international business, and the domestic price is covering the costs related to

administration, research and development and accounting costs.46 This method is as

well commonly used on the price on entrance tickets for tourist attractions in developing

countries where the share of foreign tourists is high. The reason for this is that the

foreign tourists can afford to spend more money than the locals and local businesses

exploit this.47

Price differentiation is defined as ―a pricing strategy in which a company sells

the same product at different prices in different markets.‖48 With the usage of this

strategy the local management team in the targeted country defines the price according

44 International Business (2007). Griffin & Pustay. Pearson Education International. 5

th edition. P. 456

45 WebFinance, Inc. (n.d.). Standard price. Retrieved 20th of March 2011fromhttp://www.businessdictionary.com/definition/standard-price.html46

International Business (2007). Griffin & Pustay. Pearson Education International. 5th

edition. P. 45647 www.braun-rentacar.com (2010). Two-Tier Pricing. Retrieved 20th of March 2011 from

http://www.braun-rentacar.com/Two-tier%20pricing.htm48 GlossaryOfMarketing.com (n.d.). Price differentiation. Retrieved 20


http://www.glossaryofmarketing.com/definition/price-differentiation.html

http://www.braun-rentacar.com/http://www.braun-rentacar.com/


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to the analyses made about the market. One of the advantages related to this strategy is

that the company can respond faster to changes in the market, for example the internal

and external factors discussed earlier. In addition to this ―in a market with

heterogeneous tastes and different product valuations, companies may increase their

profits by segmenting consumers and charging differential prices, which allows for the

extraction of additional consumer surplus.‖49

Further there are more pricing decisions which have to be taken into

consideration when using price discrimination. This can be the usage of for example

premium pricing or penetration pricing.

Premium pricing is defined as ―Practice in which a product is sold at a price

higher than that of competing brands to give it snob appeal through an aura of

'exclusivity.'‖50 The marketing objective is to maximize profit with fewer, but more

profitable sales. With this strategy it is usual to target a small group, but people with a

higher purchasing power who are willing to pay more for the image of the product.

Premium pricing is commonly used for luxury brands and high quality technologies and

services.

According to the research ―Luxury markets and premium pricing‖ by Yeoman

and McMahon-Beattie there has been changes in the society. Because of increasing

income and lack of time more people choose to spend more money on things that was

not common before. ―The concept of luxury is incredibly fluid, and changes

dramatically across time and culture. In the past, it was associated with champagne,

caviar, designer clothes and sports cars. Nowadays, with increased affluence, luxury is a

blurred genre which is no longer the preserve of the elite. More and more consumers

have traded up as the old values of tradition and nobility have become less important.

People are enjoying much more material comfort in comparison with previous

generations, resulting in a trend of a cultural shift for personal fulfilment and aspiration

through experience. Therefore, it could be argued that luxury is increasingly about

experience and authenticity (Yeoman et al., 2005), rather than monetary value.‖51 They

49 A. Wolk & C. Ebling (2008). Multi-Channel Price Differentiation: An Empirical Investigation of

Existence and Causes. Retrieved 20th of March 2011 fromhttp://ijrm.feb.uvt.nl/uploads/Forthcoming_Wolk&Ebling.pdf50

WebFinance, Inc. (n.d.). Premium pricing. Retrieved 20th

of March 2011 fromhttp://www.businessdictionary.com/definition/premium-pricing.html51

I. Yeoman & U. McMahon-Beattie (2005). Luxury markets and premium pricing. Journal of Revenueand Pricing Management, Vol. 4, No. 4, 2006, pp. 319 – 328. Retrieved 21th of March 2011 fromhttp://www.tomorrowstourist.com/pdf/luxury.pdf


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state further that this is an increasing trend that companies have to be aware of because

it will influence the way the consumers think in the future.

The opposite pricing strategy is price penetration. Penetration pricing is

commonly used if a company wants to penetrate a market to gain market shares or when

a company needs to use up spare resources (e.g. factory capacity). With this strategy the

company charge a low price for their product and services in first phase on the new

market and when they achieve their targeted market shares the price will increase. For

this strategy to be successful the demand for the goods has to be highly elastic and the

company have to have the capacity, both regarding production and distribution to be

able to meet the increasing demand. ―A successful penetration pricing strategy may lead

to large sales volumes/market shares and therefore lower costs per unit. The effects of

economies of both scale and experience lead to lower production costs, which justify

the use of penetration pricing strategies to gain market share.‖52

There are two main cultural elements that are influencing the pricing strategy,

this is demography and values. While demography us related to if the customers have

the income to buy the product, the value is related to the willingness of consumer

spending. This can be reflected in Hofstedets analyses regarding long term orientation

and short term orientations. In long term oriented countries, like China, the population

are mainly investing money into the future instead. On the other hand in short term

oriented countries, like the United States, money is looked at as a reward for the hard

work which can be enjoyed.

It is important to notice that these values are changing through time. Even

though Hofstedet analyzed China as the country with the highest Long Term

orientation, China is today one of the largest growing luxury markets in the world

because of their growing purchasing power. According to research KRMG in 2007 the

attitude in the Chinese population regarding the owners of luxury brands are quite good

and it reflected that the users where successful and only 2 percent of the responders

looked at the users as ―superficial‖.53 This indicates that the Chinese culture has shifted

towards a more Short Term Oriented country and that it is more accepted for the

population to buy luxury products.

52 tutor2u (n.d.). pricing strategies - penetration pricing. Retrieved 21th of March 2011 from

http://tutor2u.net/business/marketing/pricing_strategy_penetration.asp53 N. Debnam & G. Svinos (2007). Luxury brands in China. Retrieved 15


http://www.kpmg.com.cn/en/virtual_library/Consumer_markets/CM_Luxury_brand.pdf


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2.1.3 International distribution

International distribution is the factor in the international marketing mix that is

the most complex, complicated and least flexible tool. To create a well functioning and

efficient distribution strategy it requires a lot of strategic planning and high investments.

It is important to mention that international distribution is not just about where the

product is sold abroad, but also the whole process of getting the product from the

manufacturing plant till the end customer.

To develop the best international distribution strategy there are many factors that

has to be evaluated and looked at. These factors are according to ―Food and Agriculture

Organization of the United Nation‖54:

Market needs and preferences

The cost of channel service provision

Incentives for channel members and methods of payment

The size of the end market to be served

Product characteristics required, complexity of product, price, perishability,

packaging

Middlemen characteristics - whether they will push products or be passive

Market and channel concentration and organization

Appropriate contractual agreements

Degree of control.

Based on these factors the company has to decide what distribution channels to

use, if they will distribute directly to the customers themselves or go indirectly through

middlemen or use a combination on both of the options.

Indirect channels are based on whether they are using domestic overseas

intermediaries or foreign intermediaries. With the usage of domestic overseas

intermediaries a company can choose between commission buying agents, country-

controlled buying agents, export management companies (EMCs), export merchants,

export agents or piggy backing. While with the usage of foreign intermediaries the

choice is between foreign sales representatives, foreign sales agents, foreign stocking

and non-stocking agents or state controlled trading companies.55 Definitions and

advantages and disadvantages can be seen in ―Appendix 1 Distribution: Definitions,

advantages and disadvantages.‖

54 Food and Agriculture Organization of the United Nation (1997). Global agricultural marketing

management. (Marketing and Agribusiness Texts - 3). Edition 3. Retrieved 15th

of March 2011 fromhttp://www.fao.org/docrep/W5973E/w5973e0e.htm#channels55

Indira Gandhi National Open University (n.d.). International distribution and sales policy. Retrieved 15


http://www.egyankosh.ac.in/bitstream/123456789/35472/1/Unit-12.pdf P. 3

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The other option a company has is to use direct distribution. ―direct distribution

include sending missionary skiles representatives abroad from the headquarter, setting

up of local sales/branch office in the foreign country or for a region, establishing a

subsidiary abroad, entering into a joint venture or franchising agreement.‖ 56 For

companies with long-term interest in the market this can be the best alternative, but

requires a lot of investments and if the strategy fails it can result in a large loss.

After these decisions there is still one question that the company has to take into

consideration: where and in how many stores should the products is sold. For this there

are three basic distribution strategies a company can use, intensive distribution,

selective distribution or exclusive distribution.

Intensive distribution means to ―Marketing strategy under which a firm sells

through as many outlets as possible, so that the consumers encounter the product

virtually everywhere they go: supermarkets, drug stores, gas stations, etc.‖57 The main

goal with this strategy is to cover the whole market with the usage of all available

outlets and to sell a huge number of products. This strategy is commonly used for

products as soft drinks and snacks where you can in most cases find in every

supermarket or kiosk no matter where in a country you are. For a company to be able to

use this strategy they have to invest a lot of financial resources and have a close

cooperation with the retailers.

Selective distribution is a ―type of product distribution that lies between

intensive distribution and exclusive distribution, and in which only a few retail outlets

cover a specific geographical area. Considered more suitable for high-end items such as

'designer' or prestige goods‖58 but also suitable for products with a long life cycle.

Some of the reasons why a company is choosing this strategy can be to minimize

the distribution costs to receive a higher net profit as well as trying to limit the potential

competition. In addition to this the company has more control over the channels they are

going through.

When choosing this strategy the company is identifying a smaller and more

specific market with specific specifications which the distribution outlet has to fulfil.

56 Indira Gandhi National Open University (n.d.). International distribution and sales policy. Retrieved 15


http://www.egyankosh.ac.in/bitstream/123456789/35472/1/Unit-12.pdf P.457 WebFinance, Inc. (n.d.). Intensive distribution. Retrieved 15th of March 2011 from

http://www.businessdictionary.com/definition/intensive-distribution.html58 WebFinance, Inc. (n.d.). Selective distribution. Retrieved 15


http://www.businessdictionary.com/definition/selective-distribution.html

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This can be related to outlet size, quality of service, market size, customers group or

other specifications which reflects the company‘s corporate strategy. The retailers can

also be chosen based on a geographical area.

Exclusive distribution is a ―situation where suppliers and distributors enter into

an exclusive agreement that only allows the named distributor to sell a specific

product.‖59 In most cases there will be an exclusive, legal distribution agreement where

the agreement is specified, but this depends on the two parties.

This usage of exclusive distribution is commonly used with high end and luxury

products for example with cars or ―Apple had an exclusive distribution deal with AT&T

to provide the iPhone to consumers.‖60

The usage of exclusive distribution agreement is in favour for both the

manufacturer and the distributor or retailer. For the manufacturer the logistic will be

simplified and they will have more control on how their products are marketed and

branded. In addition the usage of fewer and more exclusive retailers can also reinforce

the idea that the product is exclusive and rare. And from the retailers‘ point of view an

exclusive contract mean that the consumers who want the product will come to them to

buy the product.

It is important to emphasize one main difference between the selective and

exclusive distribution and this is; while with selective distribution the retailer is allowed

to sell similar product from other brands, this is not the case with exclusive distribution.

With exclusive distribution the retailers are, by contract, not allowed to carry competing

brand but they on the other hand they are the only the retailer with the right to distribute

the brand in the area.

An increasing trend for consumer purchase today is e-commerce or electronic

commerce. It can be defined as:‖the buying and selling of products and services by

businesses and consumers through an electronic medium, without using any paper

document.‖61 Increasing usage of internet in private homes as well as increasing trust to

the system has resulted in a steady growth of e-commerce. From 2003 till 2010 e-

commerce sales increased from 1,5% till 4% of the total retail sale in the United States

59 WebFinance, Inc. (n.d.). Exclusive distribution. Retrieved 15


http://www.businessdictionary.com/definition/exclusive-distribution.html60 WebFinance, Inc. (n.d.). Exclusive distribution. Retrieved 15th of March 2011 from

http://www.businessdictionary.com/definition/exclusive-distribution.html61 WebFinance, Inc. (n.d.). E-commerce. Retrieved 19

th of May 2011 from

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and the growth will according to prognoses continue.62 Today it accounts for a small

percentage of the total retail sale but according to forecast it will reach over $240 billion

by 2014. Other countries with a high level of e-commerce are the Scandinavian

countries, United Kingdom and the Netherlands63 where more than 50% of the

responders had purchased or sold goods or service over internet the last 3 months.

Looking at how the culture is influencing the international dis

selected aspects of cultural differences and their influence on the international marketing mix

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