Chapter 4 - Globalization, Glocalization, and Methods of Entry to Foreign Market

Globalization

• is the increasing connectedness and interdependence of world of cultures and economies (National Geographic).
• facilitates the flow of goods, services, capital, and ideas across borders, leading to greater economic interdependence among nations.
• International business and trade is realized within the process of globalization, which increases international integration of trading and manufacturing of goods, services, capital, technology, and other resources
  • The reason why IBT is practiced is because of globalization. (The result of globalization is IBT)
• is the process by which businesses and other organizations develop international influence or start operating on an international scale.
  • It affects not only the business entity, govt, etc. but also the behavior of the customers,

e.g., pag nagpaplano ng travel, gusto natin sa ibang bansa

• has made it easier for organizations to trade internationally by breaking down barriers to cross-border commerce.
• Advances in technology and global trade agreements have streamlined supply chains and communication, allowing businesses to access new markets and resources worldwide. This interconnectedness has created opportunities for growth and diversity but also requires organizations to navigate complex global landscapes effectively
• The idea behind globalization is that by opening up to the world, all nations can become wealthier. This suggests that when countries trade freely and invest internationally, they can focus on what they do best, boosting productivity and economic growth.

Globalization is generally understood to include two interrelated elements:

1. The opening of international borders to increasingly fast flows of goods, services, finance, people and ideas.
2. The changes in institutions and policies at national and international levels that facilitate or promote such flows

Glocalization

• is a two-level system that combines globalization and localization, first coined by sociologist Roland Robertson and popularized by Japanese global marketing strategies.
• is the simultaneous presence of both universalization (global) and particularization (local) tendencies in modern social, political, and economic systems.
• involves adapting global products or ideas to fit local preferences and cultures while maintaining a broader global identity. This approach recognizes the need to balance standardization with customization to resonate with diverse regional markets and enhance overall relevance and acceptance.
  • e.g., Jollibee and other global fast food, they do not offer pork products in Muslim countries
• Glocalization for businesses entails customizing global products or ideas to fit local preferences and traditions. This adaptation allows companies to enhance their market influence and cater to varied consumer tastes in different areas.
• recognizes the need to adjust offerings to meet specific cultural norms while upholding a consistent global brand identity.
  • offering a product that is global and local at the same time

e.g., sardines, pag binebenta sa US, naka-lubog sa olives, mantika, etc., pag binebenta sa pilipinas, nakalubog sa tomato sauce. They match the products to local preferences.

• helps firms navigate international markets successfully, building stronger ties with local societies and promoting continuous business expansion.
• emphasizes the importance of merging global tactics with localized executions to achieve maximum market reach and customer interaction.
• is a way by which we can protect our domestic industries and culture.

Glocalization in a three-level system

• Glocalization in a three-level system involves increasing international interactions among local entities across different countries, bypassing national levels and challenging the authority of national executives.
• Tapping global markets nang hindi na dumadaan sa national level/government

E.g., PRMSU research and extension and other linkages with universities in other countries, hindi na pinapadaan sa CHED or Office of the Preisdent para makipag-partner sa ibang universities.

• Local political entities like states, provinces, and cities are engaging in international activities due to glocalization's impact on socioeconomic processes. They are shifting focus from national to international connections for greater benefits.
• Despite this, national governments are mandated to regulate broader socioeconomic interactions, empowering national executives to expand their competencies and reduce domestic political constraints.

1. Subnational (local)
2. National
3. Supranational (global)

Reaction to Glocalization

1. Opportunistic Reaction

• The first reaction is hybridization or syncretism, characterized by the blending of global and local elements to create novel combinations.
  • Hybridization - facilitates cultural diversity by evolving traditions in innovative ways and fostering mutual understanding between diverse cultural groups.
• This phenomenon can be observed across various cultural domains, such as food, music, fashion, and language.
• e.g., fusion cuisine merges ingredients and cooking techniques from different cultures, such as sinigang na may kimchi
• e.g., music genres incorporate traditional and modern sounds.
• e.g., process of teaching sa PRMSU (may online, asynchronous approach, etc. pero traditional pa rin, may activities, at nagtuturo na parang nasa isang totoong classroom)
• Looking at glocalization as an opportunity

1. Rebellious Reaction

• resistance and localization, which involves adapting global influences to align with local preferences, values, and contexts. In business and marketing, companies often localize their products by tailoring them to specific cultural norms, languages, and consumer habits.
• can include translating content, adjusting product features, or employing local marketing strategies.
• Localization serves to preserve and protect local identities and traditions amidst global pressures, allowing communities to maintain their unique characteristics while engaging with broader global trends or technologies.
• Together, these reactions highlight the nature of globalization, shaping diverse societies and promoting cultural exchange and innovation worldwide.

e.g. Social media platforms like Facebook and Twitter providing language options and localized content for users in different regions. This includes translating interfaces, providing customer support in local languages, and tailoring advertising campaigns to resonate with specific cultural contexts.

e.g., McDonald's as well, adapting its menu offerings in different countries to align with local tastes and dietary preferences. For instance, offering vegetarian options in India, incorporating regional spices and flavors, or introducing localized promotions during cultural festivals.

Example of country resisting to change: North Korea.

Global Market Entry Strategies

1. Exporting

• is the sale of goods or services produced in one country to customers located in another country.
• is the easiest and simplest way to offer products abroad.
• profit may not be maximized since the international markets tapped are limited.
• involves shipping products across borders to be sold through distributors, retailers, or directly to consumers in the foreign market.
• allows companies to expand their customer base and market reach beyond domestic boundaries without establishing local operations.
• Its difference from other market entry strategies is that there is no need to establish an office in another country.
  • e.g., pag sa Pilipinas ang business mo, you can export without having to establishing an office internationally.

Two basic options in carrying out export operations.

1. Indirect Exporting – markets can be contacted through an intermediary located in the exporter’s home country.
2. Direct Exporting – markets can be reached directly or through an intermediary located in the foreign market.

Advantage:

• • Easiest and less expensive way of entering foreign market compared to other methods of entry.
  • Lower initial investment
  • Allows market expansion that can lead to significant growth in profit and sales (only if you tap multiple international markets)
  • Greater production can lead to economies of scale.
  • Can be an effective strategy in having alternative source of profit when domestic market weakens, and in reviving mature products.
  • Government assistance

Disadvantage:

• Cultural and legal challenges
• Fluctuating exchange rates
• Product adaptation and costs can pose a significant challenge (e.g., sa Japan surplus puro 110v ang appliances nila

1. Licensing

• is a contractual arrangement where a company (licensor) grants permission to another company (licensee) in a foreign market to use its intellectual property, such as patents, trademarks, copyrights, or creative works, in exchange for royalties or fees.
  • • Royalties- are usually paid based on a percentage of sales volume.
• There are two individuals or organizations involved (licensor and licensee)
• Activities are on the burden of the licensee.

Advantage:

• Lower initial investment (for the licensor)
• The licensee is responsible for most of all expenses
• Earning from intellectual property (royalties) is a steady and passive income
• Shared risk / reduced risk
• Spreads brand recognition
• Access to licensee’s expertise or resources
• Licensing allows licensor to keep ownership of the intellectual property

Disadvantage:

• Loss of control - not entirely 100%, but, once na-grant na sa licensee ang intellectual property, pwede na nila gamitin yon sa kahit anong activity unless stipulated na bawal. The problem comes when the licensee becomes involved in an issue, pwede mag-reflect yong negative image na yon sa licensor (damage to reputation of the licensor)
• Relying on licensee’s ability - the licensor cannot push the licensee to their limits in order for them to be more successful (kasi hindi nila pwede icontrol ang licensee). Maaapektuhan din ang profitability ng licensor kapag mahina ang profitability ng licensee.
• Damage to reputation due to poor quality management, poor strategy execution, etc.

Examples of companies who have achieved significant success in licensing:

• Walt Disney
• Coca-cola
• Lego
• Microsoft
• Warner Bros.

1. Franchising

• is a special form of licensing that involves a legal and commercial relationship between the owner of a brand, trademark, or business model (franchisor) and an individual or entity (franchisee) who is authorized to operate a business using the franchisor's brand name, business model, and support systems.
• The franchisee pays initial fees and ongoing royalties to the franchisor in exchange for the right to operate under an established brand and benefit from proven business practices.
• The franchisee may want to innovate a product offered by the franchisor, but they must be permitted by the franchisor, or it must be included in the franchise agreement..

E.g., 7-Eleven has 70,000 franchise outlets worldwide, Jollibee with 1,500 franchise outlets worldwide, McDonalds with an estimated total of over 36,000 restaurants globally

Advantage:

• Increase revenue (on the part of the franchisor, however, they have make sure that they have already established standardization of processes and systems, and a reputable image)
• Fast growth and expansion
• Reduced risk and financial burden
• Economies of scale - there is already a prediction for increased demand when you expand
• Ongoing royalty fee
• Standardization and quality control can maintain brand quality and customer satisfaction (the franchsisor provides standardization that includes support such as trainings, marketing, etc, n exchange for fees)
• No need to start from scratch as a franchisee (franchisors already have a proven business model)

Disadvantage:

• Difficulty in monitoring - franchisor must ensure that the franchisees are earning, because its profitability depends on the profitability of its outlets
• the problem comes when there are too many outlets to monitor. Sometimes, they give a right to a specific franchisee to be the master franchise in a geographic area.
• Threat in maintaining company reputation - sometimes, it goes out of hand when a franchisee integrates their own strategy with the business, which is not included in the agreement
• When a franchisee becomes involved with an issue, it may cause damage to reputation of the franchisor.
• Franchisor can’t capture the entire profit from each franchised outlet - they are only receiving royalties
• Challenges in ensuring consistency and standardization
• Market saturation with franchised locations can lead to competition within the brand - nagkaka-overlap ang mga territories

1. Joint Venture

• is a partnership between two or more companies that agree to collaborate and pool their resources to undertake a specific business project or venture in a foreign market.
• Involves shared ownership, control, risks, and profits between the participating companies while still maintaining their independence as separate entities

E.g., Taxi giant Uber and heavy vehicle manufacturer Volvo announced a joint venture agreement to develop self-driving cars. The two companies planned to jointly invest $300 million in the project, each contributing $150 million. Hence, the ownership ratio between the two companies was 50%-50%.

Universal Robina Corp., the top Filipino food and beverage company, teamed up with Vitasoy, a plant-based drink leader, in 2017. Their joint venture brings together URC's reach and Vitasoy's plant-based know-how to offer these healthy drinks to Filipinos.

Jollibee Foods Corporation (JFC) and Yoshinoya International Philippines Inc.: In June 2021, JFC entered into a 50/50 joint venture with Yoshinoya International Philippines to operate and expand the Yoshinoya brand in the Philippines. This partnership allows JFC to leverage its experience in the Philippine market to grow Yoshinoya's presence, aiming to reach 50 stores in the long term

Advantage:

• Sharing of risks and costs
• Faster market entry
• Access to new knowledge
• expertise and resources
• Access to new markets and distribution networks
• Local partner will be responsible in adhering to legal and regulator requirements

Disadvantage:

• Clash of culture can be a challenge
• Risk if sharing trade secrets
• Conflict in control
• Complexity in decision making

1. Mergers and acquisition

• involve corporate transactions where one company combines with another company (merger) or one company acquires another company (acquisition) to expand its business operations into a foreign market.

1. Merger

• one company combines with another company
• occurs when two separate companies join forces to create a completely new single entity.
• Both companies cease to exist independently and a new name and structured is formed.

1. Acquisition

• one company acquires another company
• occurs when a company takes ownership and control of another company and absorbed in the acquirer’s operations, often losing its independent identity.

Advantage (M&A):

• No need to build from scratch.
• Can give a head start in terms of brand reputation and market share.
• Instant gain on facilities, expertise, experience, knowledge & connections can give market advantage.

E.g., Disney and Pixar Merger (2006)

Disadvantage (M&A):

• Cultural differences that can lead to conflict
• There maybe unexpected liabilities or legal issues from the company - you need to do a thorough background check
• Expensive
• Employee resistance during integration process - nagkakaroon ng resistance pag nagkakaroon ng changes, e.g., layoff

Eg., Nestle a swiss company acquire Purity Extracts in 2014

Microsoft acquired Activision Blizzard (2022)

1. Foreign Direct Investment

• involves an investor or a company buying significant, lasting interest in a company in another country.
• involves establishing ownership or controlling interests in foreign enterprises, assets, or operations, such as factories, facilities, subsidiaries, or joint ventures.
• offers the highest degree of control and investment from among the methods of entry.
• Other countries restrict FDI because they want to protect and safeguard local industries and economies.
• In the Philippines, FDI is welcome under certain regulations.
  • Foreign Investment Act (RA 7042) allows international investors to set up fully own small and medium-sized business and hold 100% equity in firms.
• In the Philippines, it is allowed that 100% of a corporation is foreign owned
• Companies who want to use this strategy should take careful consideration of the associated costs, risks and complexities
• Before entering international markets through FDI, businesses must first check if 100% foreign ownership is allowed in the country they want to enter, or if there is a limit to the percentage of foreign ownership

Eg., Jeff Bezos’ Amazon heavily invested in establishing warehouses and distribution centers in India, Europe and Australia under foreign direct investment.

Advantages:

• Increased control over operations and other activities - because of full ownership
• Access to local resources - (halos lahat ng market entry methods except sa exporting)
• Some countries offer favorable government incentives (tax breaks, subsidies, exemption)
• Establishing a local presence can potentially lead to wider consumer base and larger market share.

Disadvantages:

• High initial investment
• Political and economic risk
• Cultural differences
• Management complexity - nagkakaroon ng problems usually kapag maraming owners

1. Wholly Owned Subsidiary

• is a method of entry for companies seeking a significant and direct presence in a foreign market.
• involves establishing a new legal entity in the target country, completely owned and controlled by the parent company.
• same name pa rin usually pero pwede baguhin

Advantages:

• High control
• Potential for higher profit
• Intellectual property protection

Disadvantage:

• Costly
• Requires high capital investment
• Subject to political-legal, socio-cultural, economic climate

1. Piggybacking

• is a cost-effective and relatively low-risk strategy for companies seeking to enter a foreign market.
• is aka riding on someone else's distribution network, involves leveraging existing partnerships or distribution channels with local companies to enter a foreign market without establishing a direct presence.
• allows companies to utilize established networks and relationships of local partners, distributors, or retailers to introduce and sell products or services in a foreign market efficiently and cost-effectively.
• This is usually used when a company is going through financial challenges/insufficient funds
• No need to establish physical presence/facilities

E.g., Avon, Personal Collection, may mga products doon na di nila owned, nakiki-ride yong mga products na yon for advertising

Advantages:

• Lower risk.
• Allows the rider to test foreign market with minimal investment reducing risk of failure.
• Lower cost entry and fast entry.
• The rider benefits from the carrier’s distribution networks, infrastructures and marketing campaigns.
• The rider can benefit from the carrier’s knowledge about local market, consumer preferences and laws/regulations.

Disadvantage:

• Dependence on carrier - delays and other problems
• Might not be suited for long term commitment
• Carrier can become a competitor - pag same kayo ng inooffer na products

1. Online Selling

• is aka e-commerce or digital retailing, involves selling goods or services through online platforms to customers in foreign markets.
• leverages internet technology and digital platforms to reach and engage with customers globally.
• eliminates the need for a physical store and allows transactions to happen virtually.

Advantage:

• Low barriers of entry
• Easy and fast market entry
• Allows for a wider reach of potential market - product is exposed worldwide
• Allows remote operations
• Low cost

Disadvantage:

• Dependence on technology
• High delivery cost
• Susceptible to fraud
• Security breaches and hacking
• Limitations on the value, characteristics, size and weight of goods

Which market entry to use based on objective?

Note: Objective is not the only basis of deciding which market entry to be used. Financial condition and all aspects including their established connections and linkages with foreign countries, as well as the environment of that foreign country, are considered in deciding if they are capable of implementing a specific market entry.

Chapter 5 - International Marketing

International Marketing

• is the application of marketing principles to satisfy the varied needs and wants of individuals residing across national borders.
• covers designing the marketing mix –product, price place and promotion (4Ps), now extended to include the other Ps: process, people and physical evidence. These together make up the 7Ps of marketing, encompassing everything from how a product is made and sold to how customers experience it and the evidence of its quality.
• is about tailoring all aspects of your business to suit the unique demands of global consumers.

Segmentation, targeting, and positioning (STP)

• are essential concepts in international marketing strategy.
• helps companies understand their customers better, tailor their offerings to meet specific needs, and communicate effectively to stand out in the market.
• magkakasunod
• is done before the 7Ps (you need to identify first the needs and wants of your consumers before you create the product)

1. Segmentation - involves dividing a large, diverse market into smaller, more manageable groups based on similar characteristics or needs.

• dividing the market into segments
• The reason for segmentation is that the business cannot cater to the whole market, but they can do it if they have the means or capability to do so.

E.g., a company selling skincare products might segment their market based on age, skin type, or lifestyle.

1. Targeting - the marketer selects which of these segments to focus on based on factors like segment size, growth potential, and compatibility with the company's resources and objectives.

• Accessibility and profitability of the segment is considered.
• Market size, growth potential, compatibility with organization’s resources and objectives are also considered.

1. Positioning - involves creating a unique and favorable image of the product or brand in the minds of the target market.

• highlighting what sets the product apart from competitors and emphasizing its benefits or value proposition.

Elements of 7Ps

1. Product

• is the commodity or good produced to satisfy the needs and wants of customers.
• can be tangible (good) or intangible (services).
• is aka “value” in marketing: offering your value proposition/ the value that you offer to your customers
• Product differentiation strategy help companies build stronger brands and values.
  • It is important that products should have an impact on the minds of consumers to differentiate them from other products.

Classification of Products

1. Based on Use
   1. Consumer products – products bought by final consumers for personal consumption.
   2. Industrial products – (aka business products) products bought by individuals and organization for further processing or for use in conducting a business. e.g., raw materials

note: pwede mag-overlap. Pwede maging consumer and industrial product at the same time, depende sa paggagamitan.

E.g., ballpen, pwede maging household product, pwede rin pangbenta or gamitin sa business activities

1. Based on Durability - Period of usage ang tinitignan
   1. Durable products – products that do not wear out quickly, and therefore do not have to be purchased frequently. E.g., laptop, appliances,
   2. Non-Durable products - products that are consumed or are only useable for a short period of time because they wear out or become useless
2. Based on Tangibility
   1. Tangible products - products which a person can see, feel or touch and thus they have the physical existence.
   2. Intangible products – products that are not physical in nature. E.g., services
3. Price

• is the amount the consumers are willing to pay for a products or service.
• is not just about setting a number but finding the balance between what customers are willing to pay and the value they perceive in the product
• willingness and capability of the consumers, and the costs incurred must be considered when setting the price.
• Pricing strategies can vary widely, from setting prices based on costs and adding a markup to using dynamic pricing based on demand or offering discounts and promotions.

E.g., Psychological pricing, price adjustment strategy, odd number pricing, pricing introduction strategy, market penetration strategy, price penetration strategy

1. Place

• is aka distribution
• is how products are made available to consumers.
• “Where will the products made available to the customer?”/ “Saan kami makakabili ng products?”
• involves decisions about which channels to use to reach the consumers, whether physical store, online platforms, wholesalers, retailers, direct distribution and other marketing intermediaries.
• The objective here is to ensure that the products are accessible and convenient for consumers wherever they are.

Types of distribution:

1. Distribution channel – (aka intermediaries) set of interdependent organizations and individuals that facilitate the movement and transfer of ownership of commodities from the producers to the final consumers.

• Wholesalers
• Retailers
• Agents
• Distributors

1. Physical distribution - facilitates the movement of goods from the manufacturer to the location of the consumer/industrial user

Elements of an efficient physical distribution:

1. Inventory Control – maintaining control over the size and composition of inventories.

• In order to avoid shortages and surpluses

1. Warehousing – a broad range of physical distribution activities that include storage, assembling, bulk breaking and preparing products for shipping

• store products awaiting delivery

1. Order Processing – receiving, recording, filling and assembling orders for shipment.

• must be systemized and organized to track and monitor easier

1. Materials Handling- the activities involved in moving goods over short distances into, within, and out of warehouses and manufacturing plants.

• short distance

1. Transportation – shipping of products to customers e.g. trucks, railroads, water vessel, airplanes
2. Promotion

• is a marketing communication process that helps companies communicate with consumers and persuade they to buy.
  • In marketing, it is called “communication”
• Creating urgency for customers to buy the product immediately
• Effective promotion builds awareness, interest and motivates target consumers to take action resulting to increased in sales and loyalty towards the product or brand.

Elements of promotes are as follows

• Advertising - can be done in different ways (social media advertising is most dominant nowadays)
• public relations and publicity - events conducted by the company to publicize their products e.g., sponsorships, corporate social responsibilities, news articles and writeups, collaboration with companies
• sales promotions - discounts e.g., buy 1 take 1. 50% off, mark down
• personal selling - seller is needed in order for a product to be sold (usually ginagamit na lang sa products that need to be explained thoroughly to customers) e.g., insurance
• events and experiences - a type of PR and publicity e.g., concert for a cause, medical mission
• online and social media marketing - engagement and involvement of companies in social media e.g., vlogs, blogs, live selling, reels
• mobile marketing - via text
• companies have a marketing information system wherein data collected are organized and used for marketing (nakukuha nila yong info (big data?) kapag nagreregister tayo sa mga websites)
• direct and database marketing - database kung san nandon mga data ng mga potential customers such as occupation e.g., marketing information system, big data?

1. People

• employees and consumers who interact with the company.
• the employee who delivers the product and the consumers who received it.
• Human resources including accountants, financial managers, researchers, production, maintenance staff, etc.
• It's essential to have well-trained, knowledgeable, and motivated staff who can provide excellent customer service and create positive experiences for consumers.

1. Process

• is the flow of activities or mechanism that takes place when there is an interaction between the consumers and the business.
• are procedures and systems a company uses to deliver value to consumers.
• Systems, procedures, or method that we need to integrate for an effective and efficient result
• may include:
  • order processing
  • production processes
  • delivery
  • post-sales service processes - responsibilities of the company does not end after the sale. There are queries from the customers, maintenance, defects, etc

1. Physical Evidence

• the tangible elements that consumers see, touch, or experience when interacting with a product or service.
• Can also be the elements customers see in the physical place that establish a certain experience (e.g., physical environment of a restaurant like cleanliness and orderliness influence buying decision)
• The physical things like packaging, branding, signage, and the physical environment where the product is delivered can influence consumers.
• Strong physical evidence can enhance the perceived value of a product or service and help build trust and credibility with customers.

Factors Affecting International Marketing

Walang notes

Companies go international in the face of the general forces that drive international trade and internationalization.

1. Economic Integration

• is the growing interconnectedness of economies across borders.
• creates larger markets, economies of scale, and opportunities for companies to expand their operations internationally.
• facilitates the movement of goods, services, and capital between countries.
• Factors such as:
  • free trade agreements
  • customs unions
  • economic alliances

1. Technological advancement

• enables companies to streamline their operations, improve supply chain management, and customize marketing efforts to suit different markets.
• Technological advancements, particularly in communication and information technologies, have revolutionized international marketing.
• The internet, social media, and e-commerce platforms have made it easier for companies to reach global audiences, conduct market research, and engage with customers across borders.

1. Efficient transportation

• plays a significant role in facilitating international trade and marketing.
• Advancements in transportation technologies, such as containerization and air freight, have reduced shipping times and costs, making it more feasible for companies to transport goods globally.
• Reliable transportation infrastructure enhances supply chain efficiency and enables companies to meet customer demand in distant markets.

1. Transition to market economy

• The transition of many countries from centrally planned economies to market oriented economies has opened up new opportunities for international marketing.
• Market-oriented reforms encourage entrepreneurship, competition, and foreign investment, creating more favorable business environments for companies to enter and operate in these markets.
• As these economies liberalize and integrate into the global economy, they become attractive destinations for international expansion.

1. Converging consumer needs.

• Globalization has led to an increasing convergence of consumer needs and preferences across countries.
• As consumers become more exposed to global trends, products, and brands through media and digital channels, their expectations and demands become more similar.
• This convergence presents opportunities for companies to develop standardized marketing strategies and products that can be adapted to multiple markets, reducing the need for extensive localization efforts.

PESTLE Analysis

• is a strategic framework used by organizations to assess and understand external factors influencing the business.
• is essential that companies who wants to engage in international marketing should conduct this.

1. Political

• For companies engaging in international marketing, understanding the political environment of target markets is important because it can affect market entry strategies, trade agreements, and overall business operations.
• changes in tax rates
• policies and actions of the government
• political stability of a country
• foreign trade regulations.

1. Economic

• are economic factors relate to the economic system of the country where a company operates.
• Consumer behavior and attitudes and purchase demands are often linked to economic/financial status.
  • Inflation
  • Income - income of the whole country generally and income distribution among the citizens (to see if they have the capability to buy the product)
  • purchasing power - to what extent the power they have to acquire/purchase?
  • interest rates
  • employment rate
  • business cycle - e.g., are they prosperous, are they in recession, is their state of economy blooming?
  • Taxes
  • economic integration
  • infrastructure and Demand & supply - one important consideration is infrastructure in all areas including communication, building, and transportation infrastructure because these affect the efficient delivery of the products and offerings, as well as communication.

1. Sociocultural

• encompass the social and cultural norms, values, beliefs, and lifestyles prevailing in a society.
• Understanding sociocultural forces is essential for international marketers to develop products, services, and marketing campaigns that resonate with the target audience and align with local customs and preferences.
  • demographic trends
  • population growth
  • education levels
  • religious beliefs
  • attitudes towards health and wellness
  • cultural preferences.

1. Technological

• are advancement and innovation in technology.
• For companies engaged in international marketing, leveraging technology effectively can enhance market reach, improve operational efficiency, and enable innovative product development and marketing strategies.
• International activities are also dependent on this
• developments in digital technology
• Automation
• artificial intelligence - the problem with this is that the concerns they can address are limited, so they have to transfer the customer to a real customer service personnel
• communication networks
• e-commerce platforms.

1. Legal

• are laws and ordinances, trade restrictions and regulations, consumers policies and governing agencies that can influence or limit the company’s activity.
• Understanding these helps the business operate within the legal boundaries of the target market.
• Compliance with legal requirements of a country is essential to avoid legal risk and ensure ethical business practices and operations.

1. Environmental

• are the ecological and environmental considerations that can impact business operations and sustainability practices.
• Consumers and stakeholders are placing emphasis on environmental sustainability, making it important for international marketers to integrate environmental considerations into their business strategies and product offerings.
• Some countries offer tax breaks or incentives for companies that prioritize sustainability, making it a financially sound decision as well.
• Through embracing eco-friendly practices, international marketers can not only reduce their environmental footprint but also gain a competitive edge in the global marketplace.
• One of the key considerations of business operations are environment sustainability which is a global aim of all organizations and one of the 17 Sustainable Development Goals
  • climate change
  • environmental regulations
  • resource depletion
  • waste management
  • sustainable practices.

Participants in International Marketing

1. Individuals - consumers who are the lifeblood of business organizations
2. Businesses - linkages and collaboration
3. Governments - sets policies, laws, ordinance we need to adhere to

• Both domestic and international government

1. Non-profit organization - for other activities we engage to,

• Collaboration, partnerships for corporate social responsibility

Chapter 6 - Ethics and International Business and Trade

Ethics

• is a branch of philosophy that seeks virtue.
  • Virtue is conformity of one’s life and conduct to moral and ethical principles.
• deals with morality about what is considered “right” and “wrong” behavior for people.
• are moral principles that rule a person’s or organization’s behavior.
• is the discipline concerned with what is morally good and morally bad and what is morally right and morally wrong.

Business Ethics

• is the set of moral rules and principles that govern how businesses operate, how business decisions are made, and how people are treated.
• are the rules, principles, and standards for deciding what is morally right and wrong when doing business.
• Morally and legally right

International business ethics

• a set of principles that guide ethical decision-making for companies operating across borders.
• a global code of conduct that establishes expected behavior for both businesses and their employees.
• Companies doing business around the world face a constant ethical challenge. Every country has its own laws and customs, which can be very different from what the organization is used to. This can lead to tough decisions. A practice that's perfectly normal in one country might be illegal or frowned upon in another. For example, a company with strong environmental standards might struggle with lax environmental regulations in a new market. Despite these challenges, ethical business practices are important.
• Unethical behavior can hurt the organization's reputation and profitability, and it can also harm the local communities where the company operates. On the other hand, companies that prioritize ethics can have a positive impact.
• By following clear guidelines that consider both global expectations and local contexts, businesses can contribute to a fairer and more sustainable world.

Ethical Issues in International business

1. Child labor – involves using or exploiting children to do jobs for companies or small businesses.
2. Transfer pricing – is the pricing of goods and services between related entities within a multinational corporation.

• producing products in a country where production cost (labor/materials) are low and retail it through their subsidiary in another country where they can sell it at a high price. This is considered ethical
• When done unethically, it can be used to shift profits to low-tax jurisdictions, thereby avoiding taxes in countries where the company actually operates and earns revenue
• It also becomes an issue when they sell it at a very high mark up. (e.g., they incurred production cost of 5 pesos and sold the products at 50 pesos)
• This can only be done by businesses who have subsidiaries in different countries.

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1. Fair trade movement

• aims to combat exploitation by ensuring that producers in developing countries receive fair compensation and work under decent conditions.
• addresses issues such as low wages, poor working conditions, and unfair market practices
• Fair trade certification requires companies to meet rigorous standards, which helps empower small scale farmers and workers, promoting sustainable development and ethical consumption.
• Businesses engaged in fair trade contribute to social equity and environmental sustainability.

1. Bioprospecting

• involves the exploration of biodiversity for new resources that can be developed into commercial products, such as pharmaceuticals and cosmetics.
• While it can lead to significant scientific advancements and economic benefits, bioprospecting becomes unethical when it disregards the rights of indigenous communities and fails to provide fair compensation for their knowledge and resources.
• Ethical bioprospecting requires transparent practices, benefit-sharing agreements, and respect for indigenous rights and biodiversity
• plants , animals, and other microorganisms are considered

E.g., testing products on animals.

1. Biopiracy

• is the exploitation of biological resources and traditional knowledge without proper authorization or compensation to the local communities.
• involves patenting natural substances and indigenous knowledge by corporations, depriving original knowledge holders of their rights and benefits.
• is unethical as it infringes on the intellectual property and cultural heritage of indigenous people.

Ethical approaches in decision making

1. Utilitarian approach – which action results in the most good and least harm
2. Rights-based approach – which action respects the right of everyone involved
3. Fairness or justice approach – which action treats people fairly
4. Common good approach – which action contributes most of the quality of life of the people affected
5. Virtue approach – which action embodies the character that strengthens value

Additional Topic for Review

International Monetary System

• is a set of internationally agreed rules, conventions and supporting institutions that facilitate international trade, cross border investment and generally the reallocation of capital between states that have different currencies.
• provides the global framework of legal agreements, institutions, and both formal and informal economic actors that collectively facilitate international trade, investment, and the movement of capital across countries.
• is established to ensure that there is balance between the movement of capital and movement of trade across borders.
• are implemented by the International Monetary Fund.

International Monetary Fund

• is an organization of 190 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

Role of IMF:

1. provides loans to member countries facing balance of payments problems, helping them stabilize their economies
2. monitors the economic and financial developments of its member countries and the global economy
3. provides recommendations on economic policies to ensure stability and prevent crises
4. bilateral surveillance involves regular consultations with individual member countries, while multilateral surveillance assesses global economic trends and systemic risks.
5. provides expertise in areas such as fiscal policy, monetary policy, exchange rate policy, financial sector regulation, and economic statistics
6. offers training programs for government officials and institutions to enhance their capacity to manage economic policies effectively.

Issues and challenges in International Financial and Monetary System

1. Exchange rate volatility
2. Global Financial Crisis - all countries are affected due to interconnectedness (e.g., when one country experiences recession, some country may be affected due to interconnectedness)
3. Economic Inequality
4. Debt crisis
5. Technological advances - nagkakaroon ng disruptions kapag hindi tayo maka-sabay sa tech advancements ng mga ibang bansa