4/3 PEST and International Adaption

analyzing international political actions

government actions can include tariffs, quotas, boycotts, trade agreements, and exchange control

tariffs

tax

artificially raises prices

lowers demand

quotas

maximum limit

reduces availability of imported goods

may result in raised prices

domestic tariffs and quotas

tariffs and quotas both benefit domestically made products because they reduce foreign competition

exchange control

exchange rates

countertrading (bartering to take the exchange rate out of the equation)

when the US dollar strengthens…

Importers in the U.S. benefit. A stronger dollar means you can buy more foreign goods for the same amount of money. This gives you the option to either keep prices lower (and potentially sell more) or maintain your prices and enjoy higher profit margins. In this case, you are buying goods using a stronger dollar, which gives you more purchasing power.

Exporters in the U.S. are negatively affected. When the dollar is strong, buyers in other countries have to spend more of their local currency to buy the same U.S. goods. This can make American products more expensive compared to local alternatives, possibly reducing demand. To stay competitive, exporters may have to lower their prices, cutting into profit margins. You are selling goods and receiving payment in weaker foreign currencies.

trade agreements

economic analysis

real income (mind inflation)

market size and population growth

general economic environment

evaluating general economic environment

trade deficit vs. trade surplus

gross domestic product (GDP)

exchange rates

human development Indices (quality of life)

ease of doing business Indices

analyzing sociocultural factors

a lack of understanding of international customs typically gets firms in trouble

examples

• diet coke in japan - diet meant “sick”

• chevy nova - “no go” in mexico/south america

• ford pinto - “tiny male genitals” in brazil

• colgate cue - “cue” is the name of a porn magazine in france

• jala jala - discovery in previous year’s MBA class

collectivism vs. individualism (cubes vs. large tables in office) HOFSTEDE psychology

global marketing mix: product or service strategies

sell the same product or service in both the home and host country market

• ex. plane parts need to be the same

sell a product or service similar to that sold in home country but includes minor adaptations

• ex. makeup shades adapting based on countries

• ex. changing restaurant/chain food sizes for different countries

sells totally new products or services

there are advantages and disadvantages to each of these methods

adaptation pros/cons for multi-national product

pros

• address local market needs

• prevents local competitors to “be closer”

• manufacturing in country can even provide a “local angle”

cons

• inconsistent brand message if positioning is significantly different

• costs are higher since economies of scale are lost

• lose Country of Origin angle

• some items shouldn’t be adapted

choosing a global marketing strategy: adaptation positives

cultural nuances, language, and view of product and consumer role

lead to.. different positioning? different marketing execution (4 p’s)?

pizza hut vs. dominoes in china

Reasons for Pizza Hut Success

1. Dine-in versus carryout: Pizza Hut makes itself a fine dining restaurant in China, while Domino's only offers carry-out.

2. Local flavor: Pizza Hut designs flavors specifically for the Chinese, while Domino's uses toppings that are popular in Japan and Taiwan.

3. Traffic: Beijing's traffic jams make Domino's 30-minute delivery promise impossible to achieve.

4. Size: Pizza Hut trims down the pizza size for the Chinese, while Domino's sticks to the American portion.

think globally, act locally

adopt a standardized global strategy

adopt a localized execution