Global Marketing Exam 2

What are the factors influencing the political environment of a country?

1. Stability of the Government

2. Government Policies & Regulations

3. Political Sanctions

4. Nationalism

5. Other Determinants

What are the 3 types of political parties that determine the stability of a countrys government?

1. Single Party System

2. Dual Party System

3. Multi Party System

Single Party System

One dominant party, leading to long-term policy stability

(e.g., China)

- Does not exist outside of communist countries. Businesses can predict whats going to happen in these cases.

Dual Party System

Two major political parties; businesses can anticipate policies based on which party is in power

(e.g., U.S.)

-Republicans, pro business

-Democrats, pro people

- 2 different routes to the same goal.

Multi Party System

Frequent government changes, creates uncertainty for businesses

(e.g., India)

-different parties form a coalition

What are the 2 factors that contribute to Government Policies & Regulations?

1. Ownership Controls

2. Financial Controls

Ownership Controls

restricitons of foreign ownership for security reasons.

e.g. American Media companys must be owned by American citizens.

e.g.North Korea restricts foreign ownership; Kuwait restricts foreign ownership of oil

Financial Controls (3 Factors)

1. Profit Repatriation

2.Differential Taxation

3.Differential Interest Rates

Profit Repatriation

weather or not the country can take the profits they make back to their own country

e.g. forcing a company to export to help reduce a negative trade balance

Differential Taxation

foreign companies are taxed at a higher level compared to local companies

e.g. Coke Brand is 12.5% in a certain country whereas a local brand is only 6%

Differential Interest Rates

local companies get money at a cheaper rate compared to foreign companies

Political Sanctions (2 Factors)

1. Boycotts & Embargoes

2. Political & Social Activists

Boycotts & Embargoes

•A boycott restricts the purchase and importation of good and services from other countries

•An embargo is a refusal to sell to another country

Both together is a SANCTION.

Political & Social Activists

Groups influencing policy through activism

(e.g., protests against Nike's labor practices)

Nationalism

intense loyalty to one's nation or group and promotion of its interests above all others

-usually only lasts for a short time

e.g. was very present after 9/11 other companies had to start donating to American charities in order to break the cycle

Other Determinants (2 Factors)

1. Trade Disputes

2. Targeted Animosity

Trade Disputes

Conflicts between countries affecting businesses (e.g., U.S.-China trade war).

Targeted Animosity

the anger is directed to one country

e.g. Islamic Coca-Cola, Anti-Japan sentiment in China

What are the 3 political risks of Global Business?

1. Confiscation

2. Expropriation

3. Domestication

Confiscation

1 Company

the government sizes the assets of a foreign business with no explanation

e.g.Cuba nationalized U.S. businesses under Fidel Castro

Expropriation

very common

the government seizes the assets and some compensation is given, but far less than the market value

e.g. Venezuela took over CEMEX, a cement company, offering $300M despite a $3B market value.

Domestication

entire industry

assets are seized, some payment is given but then the company is transferred to the public, usually targeting an entire industry

e.g.Saudi Arabia requiring foreign companies to have local partners.

Indigenization Rule

Business sold to local indigenous population.

Politically sensitive products and services

products that have or are perceived to have an effect on:

1. Affect national security - E.g., tiktok

2. Harm the environment - E.g., food companys using plastic

3.Impact the balance of trade - E.g., Heavy import-dependent industries.

4.. Influence public welfare - E.g., Pharmaceuticals.

5. publically visible - E.g., TikTok facing scrutiny in the U.S.

Ex: Coca-Cola's water usage in . India led to factory shutdowns due to public backlash.

PSA's

reports or announcements, carried free by radio and TV stations, that promote government programs, educational projects, voluntary agencies, or social reform

e.g. Pamela Anderson's KFC PSA was a public service announcement advocating against animal cruelty, where she criticized KFC's treatment of chickens and urged consumers to boycott the brand.

6 Strategies to reduce political risks

1. Joint Ventures

2. Expanding the Investment Base

3. Licensing & Franchising

4. Planned Domestication

5. Political Bargaining

6. Political Payoffs (Bribery)

Joint Ventures

Partnering with a local company to reduce foreign ownership risks.

Expanding the Investment Base

Involving local investors to increase business stability.

Licensing & Franchising

Letting local businesses operate under a company's name to avoid ownership disputes.

-Example: Teaching local farmers how to grow potatoes for McDonald's to avoid trade deficit issues.

Planned Domestication

Gradual transfer of ownership to local entities.

Political Bargaining

Using lobbyists to negotiate with the government.

Political Payoffs (Bribery)

Paying officials for business favors (illegal under the U.S. Foreign Corrupt Practices Act (FCPA)).

What are the 3 Bases of Legal Systems?

1. Common Law

2. Civil or Code Law

3. Islamic Law

Common Law

customs, past practices & legal precedents set by the court

-traditions are a vital part of common law

Civil or Code Law (3 types)

rely on statues or codes for the interpretation of the law the legal system is generally divided into 3 separate codes

1. commercial

2. civil

3. criminal

- the primary source of code law are legal codes (Ex. student handbook)

describe common law ownership

prior use determines ownership

describe civil law ownership

doesnt matter if youve been using the brand name for 10 years, you have to register it

describe common law contracts & agreements

legally enforceable in common law countries as long as if you can prove it

describe civil law contracts and agreements

has to be registered or even notarized in civil law countries

describe common law impossibility of performance

"act of god" ie natural disaster

describe civil law impossibility of performance

"unforeseen human acts" ie riot

A contract was entered into to deliver specific quantity of T-shirts. There was torrential rains, which flooded the factory and destroyed the T-shirts. Delivery could not be made. Which legal system will absolve the parties involved from their obligation? Civil law, common-law, or both?

both

A contract was entered into to deliver specific quantity of T-shirts one night. The pipes froze and broke, flooding the factory and destroying the T-shirts Delivery cannot be made. which legal system will absorb the parties involved from their obligation, civil law, common, law, or both?

both

Islamic Law

interpretation of the Koran, which is the holt text of muslims.

-underlying purpose is social justice

What is the unique aspect of Islamic Law?

-Prohibition against the payment of interest, also known as Riba

-interest - the cost of money

- Instead, they make money by becoming a partner in the business, if the business makes money, the bank will get it

- Charge an upfront fee, but they don't say "interest" they say "processing fee"

Intellectual Property Protection

Broad collection of innovations like inventions designs and trade secrets

Patents

protects inventions for x amount of years

what are the 2 types of patents?

first to file

first to invent

What 2 countries used to use the "first to file" rule?

US & Philippines

Example of a governmental violation to a patent

Brazil's government once violated a pharmacy company's patent by allowing the production of a generic version of an HIV drug without the patent holder's consent, citing public health needs.

trademark (def & 2 types)

design, symbol, or logo

1. prior use

2.Registration

What type of trademark law does the USA use vs Other countries?

we use the prior use rule

- whoever used the trademark first has the rights

other countries use registration

are you required to register your patent in the usa?

no but its recommended

Trade Secrets

protection is saught without registration

-not legally protected if you register

-its not a secret

Is it easy to file a patent?

yes, but there is a limit for the number of years you can have the patent without using it

Intellectual Property Rights

copyrights, patents, trademarks & trade secrets

Why should we protect IP Rights?

you can lose valuable assets if you dont

ex. if not protected another company can take the product, tweak it and release it

Marketing laws

All countries have laws regulating marketing activities in promotion, product development, labeling, pricing, and channels of distribution

Marketing Laws: product law ex

USA chocolate- 100g of choc can have up to 60 big parts, Gpdiva has the largest amt of bug parts

Marketing Laws: promotion law ex

advertising to children in China

- they are not allowed to be shows as throwing tantrums

Germany

-coupon value can not be above 10% of the product

T/F There is a judicial body that exists to deal with legal commercial problems arising between citizens of different countries

false, does not exist

What can help resolve country vs country legal disputes?

laws like international code of justice can help resolve this

country vs company

no international laws to help this, one countries law will have to resolve based on the 3 points

3 ways jurisdiction is determined

Jurisdictional Clause: The contract specifies which country’s laws will apply.

Location of Contract Agreement: The country where the contract was signed.

Location of Contract Performance: The country where the business transaction was carried out.

the most clear-cut decisions are made when the contracts or legal documents supporting a business include __________________.

a juridiction clause, you need to have one to protect yourself

what is the first step in resolving a conflict?

try to resolve it informally

Conciliation

Non-binding agreement with a neutral third party.

Private & Confidential.

Advantage: Statements made in conciliation cannot be used in court later.

litigation

Last resort due to high costs and time investment.

arbitration

More formal than conciliation.

Legally binding once agreed upon.

A neutral arbitrator makes the final decision.

is arbitration shorter than litigation?

yes and it is legally binding

what are some deterrents of litigation?

-creating a poor image

-unfair treatment in court

-difficulty in collecting a judgement that may otherwise have been collected in a mutually agreed settlement through arbitration

Why do we use Marketing Research?

-to make better decisions

-local support

-everything should be reported with data

Methods of Market Size Estimation

1. Expert Opinion

2. Analogy Method

3. Trade Audit

Expert Opinion

asking at least 3 people in the field what they think

-triangulation

triangulation

the use of multiple methods to study one research question

Analogy Method def

-Compare country A to another country in the same stage of development

Use a related product with known demand

Example: Demand for DVDs in Poland based on color TVs in use, compared to Hungary

-does not take into account different social, economic & political factors or tech leapfrogging where a country uses something way before the other country

Analogy Method (2 steps)

1. Identify a Country

-same stage of economic development

-market size is known

2. Identify a related product for which demand is known

ex. dryer sheets, related product: detergent, dryer sheets, machine, etc.

Analogy Method (equation/example)

Cross Multiply

Trade Audit Equation

Market Size = Local Production + imports - exports

Trade Audit

-Hard because its difficult to get import and export numbers

- usually the numbers given are all of the industry

-Chain Ratio Method

Chain Ratio Method

Commonly Used

1. Rough base # (population of country)

2. Use %'s to get a market size potential

Secondary Data

data already collected by someone else for another purpose

Syndicated Data

data collected in real time

ex. when we buy something, a company gets the data, summarizes it and sells it to different companys

Primary Data

Data that has been generated by the researcher himself/herself,

3 Problems w/ Secondary Data

1. Comparability of Data

2. Functional Equivalence

3. Conceptual Equivalence

Comparability of Data

Units of measurement are different in different parts of the world

ex. yen vs dollars

Functional Equivalence

the degree to which similair acticities or porducts in different countries fulfill similair functions

ex. is the product used in the same manner in a different country?

Bicycle in USA- recreation

Bicycle in Thailand- transportation

Conceptual Equivalence

the degree to which a given concept has the same meaning in different environments

ex. nuclear family in USA (mom, dad, brother)

nuclear family in another country (parents, cousins, aunts, uncles)

When should you consider using triangulation?

when a comparision has to be done

What are some problems with gathering primary data?

language issues

translation issues

back translation

parallel translation

decentering

sampling issues

willingness to respond

2 ways to conduct market research

1. outside foreign based agency

2. domestic company with a branch in the foreign country

-company, agency & consumer should all work together to ensure accurate marketing research

5 Steps to the Planning Process

1. Selecting the target market

2. Selecting goals for the target market,

3 choosing the mode of entry

4. developing a marketing plan,

5 implementation and control

Identifying the Target Market (5 variables)

1- screening- matching company and country means

2 demand related (population, GDP growth rate)

3. supply related (total manufacturers sale, marketing expenses, distribution costs)

4. Competition (# and strength of competitors)

5 Context (socioeconomic & political factors)

What are other factors that contribute to idenitfying the target market?

- a companys strategic objectives

- nature of the product

-country importance

What are the 4 marketing entry strategies?

1. Exporting

2. Contractual Agreements

3. Strategic Alliances

4. Wholly Owned Subsididiaries

4 Criteria for Evaluating Entry Strategy

1. Resource Commitment

2. Risk

3. Control

4. Returns

Resource Commitment

How much financial & human resources we have to use when entering a new market

Risk

The amount of political and economic risk that the company will be exposed to

control

The extent of control the company will have over its marketing program

Returns

How much profit does the investment provide?