Intro to Marketing Section 8 (Global marketing & Ethics

Ethical issues

An extra layer of complexity when it comes to global marketing

• Marketers realize they’re visitors of another nation and thus must be mindful of the ethical priorities there

Environmental concerns

The use of natural resources, refuse from manufacturing processes, trash from packages of consumer goods, etc

• 2 tonnes of household and industrial waste is produced per person per year

Global labour issues

Concerns regarding working conditions and wages for workers in developing nations

Cultural imperialism

The belief that one culture is better than the others

Globalization

The increased flow of offerings, ideas, people, funds, and other similar things around the world as well as the evolution of markets.

Has impacts politically, socially, culturally, and environmentally

What has globalization allowed to happen?

Globalization has made it possible for unprofitable markets to become profitable and has created economies of scale where research, production, and marketing are carried

The 4 sets of factors used to assess a country’s market(s) and can provide a bigger picture for a country’s potential as a market for offerings

PEST

• Political

• Economic

• Sociocultural

• Technology

Trade Sanctions

Restrictions/penalties put in place on one nation by another for sending and receiving offerings or investments

e.g. Canada putting sanctions on Crimea following Russia’s Occupation of Ukraine

Embargo

A type of trade sanction that doesn’t allow trading with a particular country and/or the trading of certain goods

Tariffs/duties

Taxes levied on goods imported to a nation to make imported goods costlier and less competitive with domestic products or to penalize trade practices viewed as unfair

Quotas

The maximum amount of a product that can be brought into a country can also reduce the availability of imported goods

What else can tariffs and quotas do?

They can reduce foreign competition, raise prices, lower demand, and have large impacts on a firm’s ability to sell in another nation

Boycott

The refusal to deal with an organization as a means of protesting

e.g. Boycotting Starbucks and McDonald’s as they support Israel

Exchange control

The regulation of the exchange rate (the measurement of how much one currency is worth in relation to another)

Trade agreement

An agreement between governments meant to manage and promote trade activities for certain regions; when countries sign a trade agreement, it’s called a trading bloc

e.g. NAFTA

General economic evaluation

Using measures like the relative levels of imports and trades, economy, and standardized measures of imports

Trade deficit

When countries import more goods than it exports

Trade surplus

When countries export more goods than it imports

Gross domestic products (GDP)

The value of offerings produced by a country to a year; higher GDP means consumption is growing, and thus allows for more marketing opportunities

Human development index (HDI)

A United Nations measure of life expectancy, access to education, and capabilities of income in terms of meeting needs

Market size and population growth

When companies pay attention to the growth in the global population and demand BRIC Nations

e.g. Purina taking advantage of the growing number of pet owners in BRIC Nations and getting massive growth in China as a result

Market size and population growth (con’t)

Less developed nations are experiencing high growth rates, while developed nations are experiencing stagnant or negative growth rates

Where a population is based (i.e if they’re rural or urban) is also important as if affects how an offering delivered to them

Real income

When firms make adjustments to a current product or change the price to better suit the needs of a country

e.g. Coke lowering the prices for their bottles to 40 cents each in India

Socio-cultural factors

Understanding another nation’s culture to aid in the success of any global marketing endeavour

Geert Hofstede’s cultural dimensions

A cultural classification scheme firms can use to avoid offending a nation

The 6 dimensions of Geert Hofstede’s cultural dimensions

1. Power distance: Willingness to accept social inequality as natural.

2. Uncertainty avoidance: The extent to which the society relies on orderliness, consistency, structure, and formalized procedures to address situations that arise in daily life.

3. Individualism: Perceived obligation to and dependence on groups.

4. Masculinity: The extent to which dominant values are male-oriented. A lower masculinity ranking indicates that men and women are treated equally in all aspects of society; a higher masculinity ranking suggests that men dominate in positions of power. 49

5. Time orientation: Short- versus long-term orientation. A country that tends to have a long-term orientation values long-term commitments and is willing to accept a longer time horizon for, say, the success of a new product introduction.

6. Indulgence: The extent to which society allows for the gratification of fun and enjoyment needs or else suppresses and regulates such

Socio-cultural factors (con’t)

Communication forms differ from place to place

e.g. Written and verbal means may be used in North American and European Nations, while non verbal cues like handshakes may be used in Asia

The 4 infrastructure elements marketers are concerned with while analyzing tech and infrastructure capabilities

• Transportation to move goods to consumers

• Distribution to deliver products quickly and at a good rate

• Communications for allowing customers to find info about offerings in their areas

• Commerce systems like banks and laws to let markets function

BRIC Countries

The growth & expansion of four countries with the greatest change; consists of Brazil, Russia, India, and China

Brazil

• regional powerhouse

•eighth largest economy

• expansion of its literate population

• imposition of social programs

Russia

• Overall growth prospects appear promising, especially as a consumer market

• The number of Russian Internet users, currently at 108.7 million, is growing

• Faces an aging population, a low birthrate, a volatile economy, as well as ethical dilemmas due to corruption

A large amount of major foreign retailers (e.g. McDonald’s, Starbucks, and Tiffany) have pulled out the nation as a result of the Russia-Ukraine War

India

• Represents 15% of world population (1.3 billion)

• Expanding middle and upper classes

• A median age of 28.1 years

• Imposition of social programs

• Retail environment/system is archaic (still made up of small, independent stores and lacks supply chain management systems

China

• Improved living standards

• Maintains a thriving retail market

• Unequal economic distribution

• Population growth has slowed

• Population is aging

Exporting

Marketing goods in one country and sending them to another. Requires the least financial risk (payment can be demanded before shipment), but has a limited return

Indirect exporting

Selling goods in the host country through an intermediary; has less risk, but smaller returns

Direct exporting

Selling goods in the host country with no intermediary; is riskier, but offers greater returns

Strategic alliance

A collaboration between firms that’s a global entry strategy for entering a foreign nation, but the firms don’t invest in one another as it isn’t an equity partnership

e.g. Spotify and Uber, both having headquarters in different countries, collaborating to allow customers to control music during rides while still operating independently

Joint venture

When a firm that’s entering a new market pools its resources with an existing, local firm to create a new company; ownership, profits, and control are shared. Is less riskier than a direct investment

What may cause issues with joint ventures?

Changes in political situations, disagreement between, restrictions placed by governments that impact the movement of profits, or if goals aren’t defined out of the gate, as well as differences in organizational culture and management

Direct investment

When a firm maintains complete control of all aspects of operations and productions in a foreign nation; is often carried out through the creation of 100% subsidiaries. The firm is exposed to significant risk when doing so

e.g. Bombardier (a Canadian Based firm), has operations in 12 countries

What must firms consider when choosing a global marketing strategy?

1. The difficulties in understanding the cultural nuances of a country

2. Subcultures in a country must be considered

3. Consumers in a different country may view products differently, and thus offers must be positioned differently

The three potential global product strategies

1. Sell the same product in both the host and foreign country

• e.g Apple keeping their products the same in all the countries they’re sold in

1. Sell a product in a foreign country but with small changes

• e.g. Ikea adding risers to their furniture sold in India as people there clean their floors with water

1. Sell a completely new offering

Glocalization

When firms offer standardized products worldwide but change ad campaigns to better cater to local markets.

e.g. Pringles advertising their chips in English, but offering different flavours depending on the country, such as paprika in Germany and Italy

Global distribution strategies

-Some global channels are very long and complex, which increases costs and the final price of the product

Consumers shop at local, small local stores as they lack adequate transport to get to shopping outlets, so suppliers must be creative in delivering to these outlets.

e.g. Unilever training 113,000 women in India to serve as distributors, thus allowing Unilever to reach more customers in that country

Global communication strategies

Figuring out what needs to be changed in order be effective in the global marketplace as literacy levels are different in each country.

Firms must choose whether to adapt to language differences as certain words or expressions can vary (e.g. thong meaning sandles in the U.K; cultural and religious differences also matter

Global communication strategies

-Longines watches running an ad with a gloved arm and hand wearing their watches in Muslim nations as bare arms may be considered raunchy there

-Citibank’s Chinese name translates to “Star-spangled bank”

-Nike electing to have their Chinese name sound similar to their English name

Global pricing strategies

When firms adjust their pricing to reflect local structures as a result of tariffs, quotas, exchange policies, and other factors

e.g. Zara is cheap in its home country of Spain, but is 40% more expensive everywhere else thanks to transport costs and currency fluctuations

Business ethics

Distinguishing between right and wrong actions and decisions that might arise in a business setting

Marketing ethics

ExaminEling ethical situations that are specific to the domain of marketing, including societal, global, or individual consumer issues

Ethical climate

A set of values, morals, and principles within a firm that guides the decision-making and behaviours

e.g. Johnson & Johnson’s credo of putting users of their products first and their stockholders last

What factors go toward an effective ethical climate?

A commitment from management and a shared understanding of the values among the employees and how they apply to the business practices of the firm. After an understanding is achieved, rules must be put in place to monitor all transactions in the business and to reward/punish behaviours

Why may people act unethically

People may act unethically if they believe what they’re doing is beneficial for the firm

e.g. A brand manager may put a flawed design into production to get a bonus as opposed to delaying production to fix the flaw

Corporate social responsibility (CSR)

A set of voluntary actions carried out by a company to operate in a socially, economically, and environmentally friendly manner

Corporate social responsibility (CSR) (con’t)

Addressing the concerns of stakeholders as well as the ethical, social, and environmental impacts of its business operations.

How is corporate social responsibility (CSR) carried out?

Employees must keep up high ethical standards and see how their own choices have an impact on the collective decisions of the firm

The linkage between CSR and ethics

Firms should implement programs that are socially responsible, and employees must act in ways that are ethically responsible

How may a company be ethical but socially irresponsible?

Their actions may only impact employees and shareholders of the firm, and no one else

How may a company be unethical but socially responsible?

Walmart is making great strides to lower its carbon footprint and donating millions to charity, but underpaying its employees

What can companies get from acting socially responsible?

Companies can receive tangible and intangible benefits

The planning phases of integrating ethics into marketing strategies

1. Planning phase

2. Implementation phase

3. Control phase

Planning phase

Including ethical statements within the mission statement in order to guide a SWOT analysis for a firm, as well as what level of commitment to its ethical policies and standards the firm’s willing to declare publicly

Implementation phase

The consideration of ethical issues when delivering offerings to markets and asking whether or not the firm should target a market, sell an offering in a certain way, or relocate production to another country to make use of cheaper labour.

Control phase

The evaluation of management on their actions from an ethical perspective, as well as the checks to make sure any ethical issues raised were implemented successfully. These systems must also be able to react to change in the event of scandals, data breeches, or disasters

Consumerism

A movement protecting consumers from having their rights infringed upon by businesses

What may happen to companies that don’t act ethically and socially responsibly?

They may be targeted by consumer advocacy groups, and receive negative backlash and boycotts

How are employees impacted by CSR initiatives?

They’re provided with safe and positive workplaces, as well as benefits, flexible hours, etc

How are customers impacted by CSR initiatives?

The use of trends such as the protection of their privacy, the offering of environmentally friendly products, and the promotion of good health

e.g. ParticipACTION promoting a healthy lifestyle for kids and teenagers

How are marketplaces impacted by CSR initiatives?

Firms will engage in activities that will improve the community and physical environment

What are the four steps in creating a framework for ethical decision-making?

1. Identify issues

2. Gather information and identify stakeholders

3. Brainstorm and evaluate alternatives

4. Choose a course of action

Identify issues

Figuring out what the issue is

e.g Data collected by a research firm is misused. Potential issues could be the participants weren’t told what the data would be used for or if the data will or was used for malicious purposes

Gather information and identify stakeholders

The firm concentrates on collecting info important to the issue (including info of legal nature), as well talk to individuals that have a part in how the issue may be solved

• These individuals could be current or former employees, stockholders, government officials, and other community members

Brainstorm and evaluate alternatives

All the involved parties come to together to think about a relevant course of action needed to solve the issue

e.g. Stopping the problematic research outlined in step 1

Choose a course of action

Deciding between the choices based on their advantages and disadvantages and settling on a course of action that best suits the firm’s needs

The political component

• Tariffs

• Quotas

• Boycotts

• Exchange control

• Trade agreements

• Trade sanctions

The economic component

• General environments

• Market sizes and population growth rates

• Real income

The sociocultural component

• Power distance

• Uncertainty avoidance

• Individualism

• Masculinity

• Time orientation

The technology & infrastructure component

• Transportation

• Distribution channels

• Communication

• Commerce

Dumping

Selling goods below their domestic price(s)/ cost(s) in a foreign nation

What approach do firms take when they enter a new foreign market?

A less-risky approach

When does a firm’s decision to enter a new market start?

When they receive an order for a product or service from another country

What’s a risk with franchising as a global strategy?

The franchisee will break away and compete under a different name

Global strategy

Going from less risky to increasingly riskier strategies over a period of time.

Product adaptation

Is determined by the level of economic development, as well as differences in product and technical standards

Why might a firm decide to enter a new, foreign market?

They may move due to issues in the domestic market that raise costs to uneconomic levels, such as high national labour costs, shortages of skilled workers and rising energy charges.

How has the importance of corporate social responsibility been underlined?

It’s been found a majority of Canadians have rewarded or punished companies for their corporate citizenship

Which countries are involved in the USMCA trade agreement?

Canada/US/Mexico

Which of the following represents the primary ethical dilemma for marketing managers of publicly held firms?

Balancing stockholder interests with the needs of society

Why’s global STP more complicated than domestic STP?

Foreign consumers view products and their roles differently

The global product strategy

When marketing managers specifically three potential global product or service options from selling the same product to introducing an entirely new product

What is the major challenge in developing a global marketing (or IMC) strategy?

Identifying the elements of an advertising campaign that need to be adapted in the global marketplace

What’s a guideline to avoiding ethical issues in a firm?

The long-term goals of the firm must be aligned with the short-term goals of each person within the firm

What’s the ideal basis on which firms should implement programs on?

Programs should be socially responsible and have the employees act in an ethically responsible manner

What ranks as the top unethical behaviour by employees as reported by chief marketing officers?

Participating in misleading or deceptive sales tactics