THE INTERNATIONAL MARKETING ENVIRONMENT

Models to analyze international marketing environment

- CAGE (Culture, Administration, Geography, Economy)

- PEST (Political, Economic, Socio-Cultural, Technology)

- PESTLE (Political, Economic, Socio-Cultural, Technology, Legal, Environmental)

 Administrative/ Political/ Legal factors

1. Home country environment

- Promotional activities (sponsored by governmental organizations)

- Financial activities

- Information services

- Export-facilitating activities

- Promotional by private organizations

- State trading

2. Host-country environment

- Political risks (Ownership risk, Operating risk, Transfer risk)

- Causes

• Import restrictions 

• Local-content laws 

• Exchange controls 

• Market control 

• Price controls 

• Tax controls 

• Labor restrictions

• Change of government party 

• Nationalization 

• Domestication

3. Trade barriers from home country to host country

- Tariffs

- Non-tariffs

• Quotas (Import quotas, Export quotas)

• Embargoes 

• Administrative delays 

• Local-content requirements

⇒ To protect domestic producers and to generate revenue.

4. Laws that aΛect international marketing

- Laws affecting the entry of goods: Tariffs and quotas.

- Anti-dumping laws: A firm cannot export at a lower price than what it charges in its home market.

- Food safety laws: Sanitary and phytosanitary (SPS) regulations govern the safety of exported foodstuffs from Australia and New Zealand.

- Laws prohibiting deceptive advertising.

Economic factor

 Exchange rate → Devaluation/ Revaluation

- Classification by income

• GDP 

• GNP

• GNP per capita

• Less developed countries (LDC’s)

• Newly industrialized countries (NIC’s)

• Advanced industrialized countries 

- Regional Economic Integration

• BRICS - the new growth markets of the world → the emerging markets where we will see high future growth.

 The socio-cultural environment

 Characteristics of culture: learned, interrelated, shared

- Parts of culture

• The visible daily behavior → ex: body language, clothing, lifestyle, drinking and eating habits.

• Values and social morals → ex: family values, sex roles, friendship patterns.

• Basic cultural assumptions → ex: national identity, ethnic culture, religion.

- Elements of culture

• Language: Verbal, Non-verbal

• Manners and customs 

• Social institutions 

• Education 

• Values and attitudes 

• Aesthetics 

• Religion

- Layers of culture

- High and low context cultures

- Hofstede’s model on national cultures

• Power distance 

• Uncertainty avoidance 

• Individualism VS collectivism 

• Masculinity VS femininity

• Long-term orientation vs. short-term orientation 

• Indulgence

Geographic factor

 Physical remoteness

- Common border

- Sea/river access

- Size of country

- Transportation/communication links

- Climates

CAGE model - Differences between countries

- Cultural distance

- Administration distance

- Geographical distance

- Economic distance