MKT 363: Global Marketing Exam 1

Globalization

Is integration of markets, nation-states, and technologies to a degree never witnessed before.

- Mass Marketing

Free Market

Minimal government intervention and regulation in business.

Value

= Benefits / Price

Global Localization

The practice of global branding and localized marketing adaptation to differences in local culture, legislation, etc.

Market Capitalism

-Individuals and firms allocate resources

-Production resources are privately owned

-Driven by consumers

-Government's role is to promote competition among firms and ensure consumer protection

Centrally Planned Socialism

-Opposite of market capitalism

-State holds broad powers to serve the public interest; decides what goods and services are produced and in what quantities

-Consumers can spend only what is available

-Government owns entire industries and controls distribution

-Demand typically exceeds supply

-Little reliance on product differentiation, advertising, pricing strategy

-China, India, and the former USSR now moving towards some market allocation and private ownership

Centrally Planned Capitialism

Eco system which command sources allocation is used intensively in an environment of private resource ownership.

- Sweden and Japan

Economic Freedom

The freedom to own property, to make a profit, and to make choices about what to produce, buy, and sell.

- Ranges from "free", "repressed", and "unrated"

More Economic Free -> Market Oriented -> Easier

4 Stages of Market Development

- Low - Income Countries

- Lower - Middle Countries

- Upper - Middle Countries

- High - Income Countries

Low-Income Countries

- GNP per capita of $1,025 or $655

- High birth rates

- Low literacy rates

- High percentage with farming

Lower-Middle Countries

- GNP per capita of $1,026 to $3,995

- Cheap labor

- Rapidly consumer markets (expanding)

- BBC nations and India

Upper-Middle Countries

- Rapid industrialize

- Rising wages

- Increase Urbanization

- High literature rates

- EX: Russia

High-Income Countries

- Advances, developed, industrialized

- Service sector more 50% of GNI

- Scientists and professionals

- Future oriented

General Agreements on Tariffs & Trade

- Handled trade disputes

- Lacked enforcement power

- Replaced by WTO in 1995

Hierarchy of Agreements

- Economic Union

- Common Market Abolish

- Tariff + CET + Factor Movement

- Customs Union Abolish Tariffs

Free Trade Area

2 or more countries agree to abolish tariffs and other barriers to trade among themselves.

Economic Union = European Union

- Creation of unified bank

- Use of same flag

- Political union

- Common policies

- Agriculture, social policy, transport, etc.

North America -> NAFTA -> USMA

- Free Trade

- Canada, US, Mexico

Culture

"Ways of living, built it up by a group of human beings, that are transmitted from one generation to another."

- Culture Institutions

- Family, education, religion, government, business

Global Consumer Cultures

- Persons who share meaningful sets of consumption related symbols

- Pub culture, coffee culture, fast food culture, credit card culture

Syntax

The arrangement of words and phrases to create well-formed sentences in a language.

Semantics

the set of rules by which we derive meaning from morphemes, words, and sentences in a given language; also, the study of meaning.

Phonology

The sound system of a language

Morphology

Structure of words

High Context Culture

-Information resides in context

-Emphasis on background, basic values, societal status

-Less emphasis on legal paperwork

-Focus on personal reputation

Saudi Arabia, Japan

Low Context Culture

-Messages are explicit and specific

-Words carry all information

-Reliance on legal paperwork

-Focus on non-personal documentation of credibility

Switzerland, US, Germany

Request for Proposal (RFP)

A type of procurement document used to request proposals from prospective sellers of products or services. In some application areas, it may have a narrower or more specific meaning.

Hofstede's Cultural Typology

- Power Distance: unequal sectors of power

- Individualism/Collectivism: watch out for themselves; look at it as a group

- Masculinity

- Uncertainty Avoidance: how comfortable people are in ambiguous situations

- Long-Term Orientation: (china spec.) thinks in terms of generations (long-long term)

Culture Myopia

Perceiving one's own culture as superior and having a very narrow or shortsighted view of cultures other than your own.

Diffusion Theory

Mental stages which the individual passes the time of his/her knowledge innovation to time of product adoption or purchase.

- Awareness

- Interest

- Evaluation

- Trial

- Adoption

Diffusion Theory: Characteristics of Innovation

- Relative Advantage

- Compadability

- Complexity

- Divisibility

- Communicability

Sovereign State

Is bound to respect the independence of every other sovereign state and the courts in one country will not sit in judgement on acts of government of another done within its territory.

Political Environment

- Governmental institutions, political parties, and organizations through which a country's people and rulers exercise power

- Reflected by each nation's political culture

- Issues for foreign investors

Political Risk

Risk of change in political environment that would adversely affect a company's ability to operate and profitably.

- If the risk is high, country will have difficult time attracting foreign direct investment

Expropriation

Governmental action to dispossess a foreign company or investor.

Nationalization

A government takes control of some or all of enterprises in an entire industry.

Creeping Expropriation

Limits economic activities of foreign firms

- May include: price controls, limits on profits, etc.

Cuba; Helms Burton Act

Expropriation of 1.8B of firms and land under Castro

- Act punishes foreign firms from profitting off those exports.

International Law

Rules and principles that nation-states consider binding among themselves.

- World Court or International Court of Justice (ICJ)

- Judicial arm of United Nations

Grease Payments

Legal payments to speed up or ensure performance of normal government duties.

- Help run businesses smoothly

- Small nominal fee

Common Law

Case Law; British Heritage focus on legal tradition (US, based on precedent) - not codified - legislation

- Laws can stay more current

- Don't know what judges or jury will decide

Civil Law

Roman Heritage, legislation, no judges, codified.

- More straightforward with laws

- More certainty

Islamic Law

Legal system in Middle Eastern countries

- Sharia: comprehensive code governing muslim conduct in all areas of life.

- Koran: Holy Book; code laws

- Hadith: Like common law

- Life, sayings, practices of Muhammad

- Forbidden practices od "Haram"

Jurisdiction

Extent which company subject to jurisdiction of host-country courts.

- Subject to jurisdiction if company "doing business" in state/country

- Revlon vs United Overseas Limited

- Determine in which country jurisdiction is happening

Sidestepping Legal Issues

Expert legal help, prevents conflict, establish jurisdiction, avoid bribery.

Patent

Is a form of intellectual property that gives its owner the legal right to exclude others from making, using, selling and importing an invention for a limited period of years, in exchange for publishing an enabling public disclosure of the invention.

- 20 years

- Has to be filed

Trademark

A brand that has exclusive legal protection for both its brand name and its design.

- Forever if being used

Copyright

An exclusive right granted by the federal government allowing the owner to reproduce and sell an artistic or published work.

- 70 years

Counterfeiting

Illegal uses of intellectual property, patents, trademarks, and copyrights.

Associative Counterfeit/Imitation

Uses a product name that differs slightly from a well-known brand but is close enough that consumers will mistake it for the genuine product.

Piracy

Stealing copyrighted work by downloading or copying it in order to keep, sell, or give it away without permission and without paying.

Protecting Intellectual Property

-In the U.S., registration is with the Federal Patent Office

-In Europe, applicants use the European Patent Office or register country-by-country

-Soon the Community Patent Convention will cover 27 countries

AntiTrust Laws

Laws that are designed to combat restrictive business practices and to encourage competition.

- Sherman Act of 1890

Licensing and Trade Secrets

- Trade secrets are confidential information or knowledge that has commercial value and is not in the public domain and for which steps have been taken to keep it secret

- To prevent disclosure, use confidentiality contracts

- The Uniform Trade Secrets Act has been adopted by most U.S. states

- TRIPS,Trade-Related Aspects of Intellectual Property Rights signed by members of GATT

Foriegn Corrupt Practices Act (FCPA)

FCPA requires control procedures, management authorization of transactions, and authorization for access to assets; it does not require an internal audit department.

Omnibus Trade and Competitiveness Act

Allows for "grease" payments to cut red tape; i.e., getting shipments through customs, getting permits.

Litigation

The process of a lawsuit

Formal Arbitration

Resembles a trial although procedural rules are much less restrictive than litigation.