INTERNATIONAL MARKETING MKTG3417

1. INTERNATIONAL MARKETINGMKTG3417 Professor: Bob Carpenter

2. Cultural and Political ConsiderationsClass 2

3. Today’s Agenda • Dynamic Nature of International Markets (Video) • Differences in Culture • Group work Organization • Differences in Politics • Assignments

4. 1. The importance of culture to an international marketer 2. The origins and elements of culture 3. The role of values, beliefs, and attitudes in reflecting culture 4. The impact of cultural borrowing © 2006 McGraw-Hill Ryerson, Ltd. All rights reserved.

5. 5. The necessity for adapting to cultural change 6. The extent and implications of gender bias in international business 7. The importance of cultural differences in business ethics

6. Layers of Culture Material Symbols Artifacts of Language Organizational Rituals Culture Stories Beliefs Organizational Culture Values Assumptions

7. Culture is the human-made part of human environment – the sum total of knowledge, beliefs, art, morals, laws, customs, and any other capabilities and habits acquired by humans as members of society Importance of culture in international marketing A successful marketer must be a student of culture Culture is pervasive in all marketing activities— in pricing, promotion, channels of distribution, product, packaging, and styling

8. Introduction • Markets are the result of the three-way interaction of a marketer’s efforts, economic conditions, and all other elements of culture • Marketers are constantly adjusting their efforts to cultural demands of the market, but they also are acting as agents of change whenever the product or idea being marketed is innovative • Do you agree that marketers are agents of change?

9. Definitions and Origins of Culture Culture is the sum of the “values, rituals, symbols, beliefs, and thought processes that are learned, shared by a group of people, and transmitted from generation to generation” Culture has been conceptualized as: • “Software of the mind”; culture is a guide for humans on how to think and behave, it is a problem-solving tool (Hofstede) • “An invisible barrier… a completely different way of organizing life, of thinking, and of conceiving the underlying assumptions about the family and the state, the economic system, and even Man himself” (Hall)

10. Definitions and Origins of Culture

11. Elements of Culture International marketers must design products, distribution systems, and promotional programs with due consideration to culture, which was defined as including five elements: • Beliefs, and Attitudes • Cultural values • Rituals • Symbols • Spirituality

12. “A value is an enduring belief that a specific mode of conduct or end-state of existence is personally or socially preferable to an opposite or converse mode of conduct or end-state of existence” • A belief is a mental acceptance of and conviction in the truth, actuality, or validity of something • An attitude is a mental predisposition to view a particular person, or idea in either positive or negative terms

13. Values, Beliefs, and Attitudes Beliefs and attitudes are not independent from each other; they work in unison with values in what Rokeach termsaValue-Belief-Attitude system. All values are beliefs, but not all beliefs are values • Terminal values – values concerning desirable end-states of existence • Instrumental values- values concerning desirable modes of conduct

14. Elements of Culture: Cultural Values • Differences in cultural values, which are found to exist among countries, affects consumer behaviour • Hofstede, who studied over 90,000 people in 66 countries, found that the cultures differed along four primary dimensions: • Individualism/Collective Index (IDV), which focuses on self-orientation • Power Distance Index (PDI), which focuses on authority orientation • Uncertainty Avoidance Index (UAI), which focuses on risk orientation; and • Masculinity/Femininity Index (MAS), which focuses on assertiveness and achievement

15. Individualism/Collectivism Index • The Individualism/Collective Index refers to the preference for behaviour that promotes one’s self-interest • High IDV cultures reflect an “I” mentality and tend to reward and accept individual initiative • Low IDV cultures reflect a “we” mentality and generally subjugate the individual to the group • Collectivism pertains to societies in which people from birth onward are integrated into strong, cohesive groups, which protect them in exchange for unquestioning loyalty © 2006 McGraw-Hill Ryerson, Ltd. All rights reserved.

16. Power Distance Index • The Power Distance Index measures the tolerance of social inequality between superiors and subordinates within a social system • Cultures with high PDI scores tend to be hierarchical and value power and social status • High PDI cultures believe that those who hold power are entitled to privileges • Cultures with low PDI scores value equality and reflect egalitarian views

17. Uncertainty Avoidance Index • The Uncertainty Avoidance Index measures the tolerance of uncertainty and ambiguity among members of a society • High UAI cultures are highly intolerant of ambiguity, experience anxiety and stress, and accord a high level of authority to rules as a means of avoiding risk • Low UAI cultures are associated with a low level of anxiety and stress, a tolerance of deviance and dissent, and a willingness to take risks

18. Cultural Values and Consumer Behaviour

19. Elements of Culture: Rituals and Symbols • Rituals are patterns of behaviour and interaction that are learned and repeated, and they vary from country to country, e.g., extended lunch hours in Spain and Greece • Language as Symbols: the “languages” of time, space, things, friendships, and agreements • French attempting to preserve the purity of their language

20. Elements of Culture: Rituals and Symbols • In Canada, language has been the focus of political disputes including secession • Differences in language vocabulary varies widely • Aesthetics as symbols: the arts, folklore, music, drama, and dance of a culture influences marketing

21. Language and Culture ... Error … • During its 1994 launch campaign, the telecom company Orange had to change its ads in Northern Ireland. "The future's bright … the future's Orange." That campaign is an advertising legend. However, in the North the term Orange suggests the Orange Order. The implied message that the future is bright, the future is Protestant, loyalist... didn't sit well with the Catholic Irish population.

22. Language and Culture ... Error … Crayola has changed color names over time due to the civil rights movement and other social pressures. In 1962, Binney & Smith replaced flesh with peach, in recognition of the wide variety of skin tones. More recently, in 1999, they changed indian red to chestnut. The color was not named after Native Americans, it was actually named for a special pigment that came from India. But school children often assumed the incorrect origin of the name.

23. Language and Culture ... Error … I was visiting Bangalore, India when the local news was widely reporting the legal consequences of a marketing mistake by Pepsi. Pepsi is being sued in a Hyderabad, India city court in a public interest litigation for glorifying child labor in a television ad. In the ad, the Indian cricket team is in a celebratory huddle when a young boy serves them Pepsi.

24. Factual versus Interpretive Cultural Knowledge There are two kinds of knowledge about cultures both of which are necessary Factual knowledge is usually obvious and must be learned, e.g., different meanings of colours, and different tastes; it deals with facts about a culture Interpretive knowledge is the ability to understand and appreciate the nuances of different cultural traits and patterns, e.g., the meaning of time, and attitudes toward people

25. Cultural Sensitivity and Tolerance Successful foreign marketing begins with cultural sensitivity Cultural sensitivity – being attuned to the nuances of culture so that a new culture can be viewed objectively, evaluated, and appreciated

26. Cultural Change and Cultural Borrowing • International marketers should appreciate how cultures change and accept or reject new ideas • How cultures change, e.g., war (changes in Japan after World War II) or by natural disaster • Hofstede has shown that consumers’ acceptance of innovations varies across cultures – innovation was associated with higher individualism (IDV), and lower power distance (PDI) and uncertainty avoidance (UAI) • International marketers should be aware of the extent to which cultures borrow ideas to help in the marketing of products from one culture to another • Cultural borrowing is a responsible effort to learn from others’ cultural ways in the quest for better solutions to a society’s particular problems

27. Working women in masculine societies like Saudi Arabia Acceptance of genetically modified foods (or “Frankenfood”) in Europe Resistance to Change Although some cultures embrace change, others are resistant to it Examples of cultures that resist change:

28. Planned and Unplanned Cultural Change • Cultures that are resistant to change represent a major hurdle in marketing products. Cultural change can be accomplished by: • First, determine which cultural factors conflict with an innovation, thus creating resistance to its acceptance • Second, change those factors from obstacles to acceptance into stimulants for change • Third, marketers can cause change by introducing an idea or product and deliberately setting about to overcome resistance and to cause change that accelerates the rate of acceptance • Firms can use a strategy of planned change by deliberately changing those aspects of the culture offering resistance to predetermined marketing goals, e.g., introducing western foods and baseball into Japan

29. Required Adaptation 1. Degree of Adaptation 2. Imperatives, Electives, and Exclusives 3. Communication Styles

30. Required Adaptation 4. Formality and Tempo 5. P-Time versus M-Time 6. Negations Emphasis

31. Imperatives, Electives, and Exclusives 1. Cultural imperatives: business customs and expectations that must be met and conformed to or avoided if relationships are to be successful. 2. Cultural electives: areas of behaviour or customs that cultural aliens may wish to conform to or participate in but that are not required. 3. Cultural exclusives: those customs or behaviour patterns reserved exclusively for the locals and from which foreigner is barred. 4. Communication Styles: Face-to Face Communication & Internet Communications

32. Contextual background of Various Countries

33. Gender Bias in International Business

34. Business Ethics 1. Corruption Defined 2. The Western Focus on Bribery 3. Bribery: Variations on a Theme 4. Ethically and Socially Responsible Decisions

35. The Western Focus on Bribery A major complaint of North American business was that other countries did not have legislation as restrictive as do the United States and Canada Global antibribery laws led to an accord by member nations of OECD to force their companies to follow rules similar to those that bind U.S. and Canadian firms To date, 33 of the world’s largest trading nations, including Canada, have signed the OECD Convention on combating the bribery of foreign public officials in international business transactions

36. The Western Focus on Bribery

37. Bribery: Variations on a Theme Bribery and Extortion Subornation and Facilitation Payments Agent’s Fees

38. Ethically and Socially Responsible Decisions To behave in an ethically and socially responsible way should be the hallmark of every businessperson’s behaviour. • Five broad areas where difficulties arise in making • decisions, establishing policies, and engaging in business • operations: • Employment practices and policies • Consumer protection • Environmental protection • Political payments and involvement in political affairs of the country • Basic human rights and fundamental freedoms © 2006 McGraw-Hill Ryerson, Ltd. All rights reserved.

39. Ethically and Socially Responsible Decisions Three ethical principles to help distinguish between right and wrong. Utilitarian ethics … Does the action optimize the “common good” or benefits of all the constituencies? And, who are the pertinent constituencies. Rights of the Parties … Does the action respect the rights of the parties involved? Justice or fairness … Does the action respect the cannons of justice or fairness to all parties involved?

40. Group Work

41. Group Project • Forming groups • Learning to work together • Group project for this course

42. Forming Groups

43. Group Project and Presentation The mystique and culture of wine … From the Vineyards of Mexico To the Chinese market

44. The Learning Tower of Pizza Exercise This is a competition You are to build a tower Towers will be judged based on: • Height • Beauty • Stability You may use up to 20 index cards and 20 paper clips. You must be able to carry your tower up to the front for judging

45. The Learning Tower of Pizza Exercise Form groups Agree objectives for your group Make a design for a tower and plan how you will construct it. Plan decorations for your tower.

46. The Learning Tower of Pizza Exercise Get materials! You have about 20 minutes

47. Group Project and Presentation • Your team will assume roles in a Mexican wine company and develop a marketing plan to enter and be profitable in the Chinese market. • You will present your marketing plan to your bank in support of your application for an increased line of credit to support your new marketing initiative. • Due date July24th

48. Any Questions?What are your groups?

49. Political Considerations

50. 1. What does the sovereignty of nations mean and how can it affect the stability of government policies, political parties and nationalism. 2. The political risks of global business and the factors that affect stability 3. The importance of the political system to international marketing and its effect on foreign investments © 2006 McGraw-Hill Ryerson, Ltd. All rights reserved.