Global Question Answer.

Discuss the conditions that have led to the development of global markets.

According to the Professor Levitt and others who suggest that there is a global market for goods, this phenomenon has resulted from new communications technology, travel and other factors which have led to the markets of the world being more aware of different products and processes. As a result of this awareness, there are segments in each market that have had similar experiences and thus have common needs. These common needs are described as a demand for high quality, reasonably priced, standardized products. There is a strong feeling that within each country’s market there is a growing segment that has been exposed to ideas from around the world and thus have had their tastes and perceived needs affected. There is a strong feeling that world markets are being driven toward a converging commonality of taste and needs leading toward global markets.

Differentiate between a global company and a multinational company.

The main distinction between a global and a multinational company is that a global company assumes there are segments across countries which have the same needs and wants and designs a standardized, high quality, reasonably priced product for those segments and markets it as if there are no differences among the country markets. On the other hand, a multinational company operates in a number of countries and adjusts its products and marketing practices for each market. The multinational company has a specific marketing plan and adapts products for each country market. The philosophy for the multinational company is that there are cultural differences among countries that require specific adaptations for those markets. This is contrasted with the global company which sees the entire world, or major regions of it, as a single entity requiring no specialized adjustments. This distinction may be more myth than fact and reflects Professor Levitt’s opinion.

Discuss the stages if international marketing involvement. Show how strategic orientation of a company changes as it passes through these stages.

Stages of International Marketing Involvement

- No direct foreign marketingi. Company does not actively market products in other countries.

- Infrequent Foreign Marketingi. Company may market internationally in case of surplus… etc, but does not

remain international 100%- Regular foreign marketing

i. Company has permanent productive capacity devoted towards international sales, but primary production done domestically

- International Marketingi. Company is fully committed to international sales and production… products

also start to appear in different cultures, different languages etc.- Global Marketing

i. Companies market is the world, product is designed to please everyone in all target markets

Strategic Orientation – describes the scope of the company

Domestic marketing extension concept: Seeks sales of domestic product in to foreign markets, view international markets as secondary to its domestic product.

Multidomestic Market Orientation: Company recognizes the importance of differences in overseas markets and orients toward international business. Firm operates country-by-country basis. Marketing strategy for each country, in a sense each country is a different company.

Global Market Orientation: Company is global, one company that acts and responds to the world and the world market, functionality of company is to provide product worldwide.

“Culture is pervasive in all marketing activities.” Discuss.

Marketers are constantly in the process of adjusting their efforts to the demands of the culture of their markets. Although in the long run they may affect their market’s culture as a result of their efforts, most current activity involves reconciling marketing activity to the immediate culture.

Besides, every culture includes elements such as cultural values, rituals, symbols, beliefs, and

way of thinking. And these are core components of culture, which are the most important to

know in gaining a foreign market. When designing a product, marketing activities, such as style,

uses and other has to be culturally acceptable, moreover, culture is pervasive in all marketing

activities like pricing, promotion, packaging, distribution, and styling.

What is the popular definition of culture? Where does culture come from?

The popular definition of culture is that a person is either “cultured” or “uncultured” according to his or her ability in certain specialized fields of knowledge.

Most traditional definitions of culture around the notion that 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.

Humans make adaptations to changing environments through innovation.

Individuals learn culture from social institutions through:

- Socialization (growing up)

- Acculturation (adjusting to a new culture)

Geography• Exercises a profound control

– Includes climate, topography, flora, fauna, and microbiology– Influenced history, technology, economics, social institutions and way of thinking

• The ideas of Jared Diamond and Philip Parker– Jared Diamond

► Historically innovations spread faster east to west than north to south– Philip Parker

► Reports strong correlations between latitude (climate) and per capita GDP► Empirical data supports climate’s apparent influence on workers’ wages► Explain social phenomena using principles of physiology

• History– Impact of specific events can be seen reflected in technology, social institutions, cultural

values, and even consumer behavior ► Tobacco was the original source of the Virginia colony’s economic survival in the

1600s • Political Economy

– Three approaches to governance competed for world dominance► Fascism► Communism► Democracy/free enterprise

• Technology– Jet aircraft, air conditioning, televisions, computers, Internet, etc.– None more important than the birth control pill

Social Institutions

• Family– Nepotism – Role of extended family– Favoritism of boys in some cultures

• Religion– First institution infants are exposed to outside the home– Impact of values systems– Misunderstanding of beliefs

• School– Affects all aspects of the culture, from economic development to consumer behavior– No country has been successful economically with less than 50% literacy

• The media– Media time has replaced family time

• TV• Internet

• Government– Influences the thinking and behaviors of adult citizens

• Propaganda• Passage, promulgation, promotion, and enforce of laws

• Corporations– Most innovations are introduced to societies by companies– Spread through media– Change agents

It is stated that members of a society borrow from other cultures to solve problems that they face in common. What does this mean? What is the significance to marketing?

Cultural borrowing entails using the best solutions to a problem that different cultures face. This best solution, borrowed by one culture from another, is incorporated into the borrowing culture’s system, and becomes part of their cultural heritage. This fact is significant to the marketer because although the solutions to the problems are similar they are put together in a unique manner which is strictly American, Chinese, French, etc. In realizing the “similar but different” aspect of culture, the marketer is aided in gaining cultural empathy.

“For the inexperienced marketer, the “similar but different” feature of culture creates an illusion of similarity which usually does not always exist.” Discuss and give examples.

Although some cultures seem similar, they most likely are not. For example, two different countries speaking the same language may use words or phrases which are acceptable to one, but totally unacceptable to the other. Some cultures may have subcultures in which the “similar but different” principle applies.

A common language does not guarantee a similar interpretation of words or phrases. Both British and Americans speak English, but their cultures are sufficiently different so that a single phrase has different meanings to each and can even be completely misunderstood. Many of the obstacles to doing business

in Europe have been or will be eliminated as the European Union takes shape, but marketers, eager to enter the market, must not jump to the conclusion that an economically unified Europe means a common set of consumer wants and needs. Cultural differences among the members of the European Union are the product of centuries of history that will take centuries to erase.

Cultures are dynamic. How do they change? Are there cases where change is not resisted but actually preferred? Explain. What is the relevance to marketing?

Culture is dynamic in nature; it is a living process. But the fact that cultural change is constant seems paradoxical, because another important attribute of culture is that it is conservative and resists change. The dynamic character of culture is significant in assessing new markets even though changes face resistance. Societies change in a variety of ways. Some have change thrust upon them by war (for example, the changes in Japan after World War II) or by natural disaster. More frequently, change is a result of a society seeking ways to solve the problems created by changes in its environment. One view is that culture is the accumulation of a series of the best solutions to problems faced in common by members of a given society. In other words, culture is the means used in adjusting to the environmental and historical components of human existence.

Cultures change gradually with resistance to changes. The resistance varies inversely with the interest a society has in the change. Culture doesn’t resist change if the product is a status-valued imported item, a fashion item, or is given the advantage of inferior feelings about local products. Marketers can expect resistance to their products, with greater resistance to those products with the greatest deviation from the cultural norm or status quo.

“In dealing with foreign businesses, the marketer must be particularly aware of the varying objectives and aspirations of management.” Explain.

The marketer cannot judge what he feels that the objectives of management of a foreign firm are by what they are in similar firms of his own country. With every firm in our country, the objectives and aspirations of management are different. Therefore, it is quite likely that they are quite different in foreign countries. The marketer must deal with a company in a way to correspond with the objectives of the company, or it is possible that he might lose his dealings with that company.

Suggest ways in which persons might prepare themselves to handle unique business customs that may be encountered in a trip abroad.

The businessman should:

a. Learn all he can about foreign cultures by reading, visiting with foreigners and those who have traveled or lived in the countries he will visit.

b. Condition and sensitize himself by projecting himself into possible situations and analyzing his learned belief patterns.

c. Seek advice from consultants, ambassadors, and others who can provide professional guidance.

Distinguish between P-time and M-time.

• Monochronic time:- Tend to concentrate on one thing at a time- Divide time into small units and are concerned with promptness- Most low-context cultures operate on M-Time

• Polychronic time:- Dominant in high-context cultures- Characterized by the simultaneous occurrence of many things- Allows for relationships to build and context to be absorbed as parts of high-context

cultures.• Most cultures offer a mix of P-time and M-time behavior, but have a tendency to be either more

P-time or M-time in regard to the role time plays.• In Japan there is a mix between P-time and M-time. For appointments, Japan is very M-time but

for all other interaction, they are more P-time.

Discuss how a P-time person reacts differently from an M-time person in keeping an appointment.

When business people from M-time and P-time meet, adjustments on both sides need to be made for a harmonious relationship. P-time is characterized by a much “looser” notion of what is “on time” or “late.” Interruptions are routine, delays to be expected. It is not so much putting things off until “manana” but the concept that human activities are not expected to proceed like clockwork.

One study comparing perceptions of punctuality in the U.S. and Brazil found that Brazilian timepieces were less reliable and public clocks less available than it was in the United States. Researchers also found that Brazilians more often described themselves as late arrivers, allowed greater flexibility in defining early and late, were less concerned about being late, and were more likely to blame external factors for their lateness than were Americans.

Often clarity can be gained by specifying tactfully, for example, whether a meeting is to be on “Mexican time” or “American time.” An American who has been working successfully with the Saudis for many years says he has learned to take plenty of things to do when he travels. Others schedule appointments in their offices so they can work until their P-time friend arrives.

What are the three ethical principles that provide a framework to help distinguish between right and wrong? Explain.

Imperatives – customs that must be recognized. The business customs and expectations that must be met and conformed to or avoided if relationships are to be successful.

Electives: Relate to areas of behavior or to customs that cultural aliens may wish to conform to or participate in but that are not required.

Exclusives – customs in which outsiders may not participate and those customs or behavior patterns reserved exclusively for the locals and from which the foreigner is barred.

There are three ethical principles that provide a framework to help the marketer distinguish between right and wrong, determine what ought to be done, and properly justify his or her actions. They are:

- Utilitarian ethics, i.e., does the action optimize the common good or benefits of all constituencies?

- Rights of the parties, i.e., does the action respect the rights of the individuals involved?

- Justice or fairness, i.e., does the action respect the canons of justice or fairness to all parties involved?

Answers to these questions can help the marketer ascertain the degree to which decisions are beneficial or harmful, right or wrong, or whether the consequences of actions are ethical or socially responsible.

Why is working knowledge of party philosophy so important in a political assessment of a market? Discuss.

A working knowledge of party philosophies is necessary if there is a possibility that a change in government policy toward foreign business could result from a change in government or political parties.

A current assessment of political philosophy and attitudes within a country is important in gauging the stability and attractiveness of a government in terms of market potential.

How can a change in the political party in Power affect an investor? Discuss and give examples.

Particularly important to the marketer is knowledge of the philosophies of all major political parties within a country, since any one of them might become dominant and alter prevailing attitudes. In those countries where there are two strong political parties that typically succeed one another in control of the government; it is important to know the direction each party is likely to take. In Great Britain, for example, the Labour Party traditionally has tended to be more restrictive regarding foreign trade than the Conservative Party. The Labour Party, when in control, has limited imports, whereas the Conservative Party has tended to liberalize foreign trade when it is in power. A foreign firm in Britain can expect to seesaw between the liberal trade policies of the Conservatives and the restrictive ones of the Liberals.

An astute international marketer must understand all aspects of the political landscape to be properly informed about the political environment. Unpredictable and drastic shifts in government policies deter investments, whatever the cause of the shift. In short, a current assessment of political philosophy and attitudes within a country is important in gauging the stability and attractiveness of a government in terms of market potential.

What are the most frequently encountered political risks in foreign business? Discuss.

a. Expropriation – the acquisition of a company’s property by the host country. The companies may or may not be compensated.

b. Exchange Controls – used to conserve the supply of foreign exchange. Controls may be levied against foreign companies or types of products.

c. Import Restrictions – restrictions on the imports of raw material, parts, etc., are employed to induce the foreign industry to purchase its supplies locally.

d. Taxes – they are sometimes increased despite prior agreements calling for a specific tax rate.

e. Price Controls – generally applied during inflationary periods to essential products.

f. Labor Problems – unions may have strong government support which allows special labor concessions from the foreign business. Companies may be forced to abide by rules set up by labor unions through the government.

Discuss measures a company might take to lessen its political vulnerability.

Politically Sensitive Products and Issues

• Products that have or are perceived to have an effect on the environment, exchange rates, national and economic security, and the welfare of people and that are publicly visible or subject to public debate, are more likely to be politically sensitive.

• Health is often the subject of public debate, and products that affect or are affected by health issues can be sensitive to political concern.

Forecasting Political Risk

• Political risk assessment is an attempt to forecast political instability to help management identify and evaluate political events and their potential influence on current and future international business decisions.

• The greater the risk to international marketers is the threat of the government actually failing, causing chaos in the streets and markets.

Companies investing in foreign countries can minimize the political and economic risks by:

a. establishing a management of Americans and nationals,

b. employing nationals,

c. selling stock in the company to nationals,

d. sharing the profits and earnings in a fair manner,

e. understanding the traditions of the people in the host country,

f. having the national work with you, not for you.

Political parties seeking publicity or scapegoats for their failure often serve their own interests by focusing public opinion on the negative aspects of MNCs whether true or false.

• Strategies that MNCs use to minimize political vulnerability and risk:- Joint ventures- Expanding the investment base- Licensing - Planned domestication- Political bargaining- Political payoffs

In phases one and two of the international planning process, countries may be dropped from further consideration as potential markets. Discuss some of the conditions in each phase that may exist in a country that would lead a marketer to exclude a country.

In phase one of the planning process, there are a host of reasons why a country would no longer be considered. On balance, those countries that do not offer sufficient potential for further consideration will be eliminated. Some of the reasons why this may occur are that product acceptance within the country could not be achieved without extensive investment and new product development, and the firm does not have sufficient resources to make that investment; the legal structure may be such that it would be

impossible for the company to function within that country. Competition in the country is such that, based on the company’s objectives, resources, etc., it is felt that it would not be a profitable venture. In other words, any problem that would lead to minimum market potential, minimum profit, minimum return on investment, unacceptable competitive levels, unacceptable political stability, unacceptable legal requirements, etc., may all lead to the dropping of a country.

While the major reasons for dropping a country in phase one center around general environmental constraints, the reasons that a country may be dropped in phase two center around the more specific questions of what cultural environmental adaptations are necessary for successful acceptance of the company’s marketing mix, and will adaptation costs allow for profitable market entry. In phase two, the marketing mix is the focal point of analysis. Still, the final determination of whether or not a country is dropped depends upon the anticipated profitability of the market after necessary adaptations are made.

Assume that you are the director of international marketing for a company producing refrigerators. Select one country in Latin America and one in Europe and develop screening criteria to use in evaluating the two countries. Make any additional assumptions about your company that are necessary.

This is a library-type project. Whatever the details of the screening criteria, the major points that should be considered are: (1) company objectives and goals, (2) product-use characteristics, (3) country environmental characteristics.

Describe the alternative market-strategies available to international marketers.Import regulations may be imposed to protect health, conserve foreign exchange, serve as economic reprisals, protect home industry, or provide revenue in the form of tariffsAn entry strategy into the international market should reflect on analysis of market characteristics such as:

- Potential sales- Strategic importance- Strengths of local resources- Cultural differences- Country restrictions

• Companies most often begin with modest export involvement.• A company has four different modes of foreign market entry from which to select:

- Exporting- Contractual agreements- Strategic alliances- Direct foreign investments

Define the country-of-origin effect and give examples.

Country of Origin Effect (COE) can be defined as any influence that country-of-manufacturer has on a consumer’s positive or negative perception of a product. Today a company competing in global markets will manufacture products worldwide and, when the customer is aware of the country of origin, there is the possibility that the place of manufacture will affect product/brand image. Some examples are French wines, German beer, Swiss watches, Cuban cigars, and Irish woolens are some positive COEs. A negative COE is an automobile from Yugoslavia (the Yugo).

What are the three major components of a product? Discuss their importance to product adaptation.

The three major components of a product are: (1) its core, the physical product and all its functional features; (2) the packaging component that includes the physical package in which the product is presented, as well as the brand name, trademark, styling and design features, price and quality levels; (3) the support services component, which completes the product buyers receive and from which the bundle of satisfactions received are derived. This support services component includes repair and maintenance services, installation, delivery, warranty, spare parts, training and instructions, credit, and any other services related to the use and purchase of the product. The importance of each component, as well as the perceived component attributes are functions of culture. What may be desirable in one culture may be unimportant in another. A product is, in a large part, a cultural phenomenon; that is, culture determines the individual’s perception of what a product is and what satisfaction that product provides. Therefore, in developing products for international markets, adaptation of that bundle of utilities or satisfaction received may be necessary to bring the product in line with the culture’s needs. Such adaptation may require changes of any one or all of the product components as defined above.

Discuss the characteristics of an innovation which can account for differential diffusion rates.

The characteristics of an innovation which can account for differential diffusion rates are: (1) relative advantage, (2) compatibility, (3) complexity, (4) trialability, and (5) observability. Relative advantage is the degree to which an innovation is better than the products it replaces or with which it competes. Compatibility is concerned with how consistent a product is with existing value and behavior patterns. Complexity refers to how difficult it is to understand and use the new product. Trialability is the degree to

which a product may be tried, on a limited basis, without complete commitment to the product. And, observability refers to the ease with which the results of an innovation may be communicated to others.

Discuss “environmentally friendly” products and product development.

Germany has a strict Eco-labeling program to identify, for the concerned consumer, products that have a lesser negative impact on the environment than similar products. Under German law, a manufacturer is permitted to display a logo, called the “Blue Angel,” on all products that comply with certain criteria that make it environmentally friendly. More than 3,200 products in 58 product categories have been examined and given the Blue Angel logo. While it is difficult to judge the commercial value of a Blue Angel designation, manufacturers are seeking the eco-label for their products in response to growing consumer demand for environmentally friendly products. Similar national labels are under discussion in France, Denmark, the Netherlands and the United Kingdom. The EC Commission issued guidelines for eco-labeling that became operational in October 1992. Under the EC directive, a product is evaluated on all significant environmental effects throughout its life cycle, from manufacturing to disposal, a cradle-to-grave approach. Companies will be encouraged to continuously update their environmental technology because eco-labels will be granted for only a limited period. As more environmentally friendly products come onto the market, the standards will become tougher, and products that have not been improved will lose their eco-label.

The “Blue Angel” and similar eco-labels are awarded on the basis of a product’s environmental friendliness, that is, how “friendly” when used and when its residue is released into the environment. A detergent formulated to be bio-degradable and not pollute would be judged more friendly than a detergent whose formulation would be harmful when discharged. Aerosol propellants that do not deplete the ozone layer are another example of environmentally friendly products. No country’s laws yet require products to carry an “eco-label” to be sold. The designation that a product is “environmentally friendly” is voluntary and its environmental success depends on the consumer selecting the “eco-friendly” product. However, laws that mandate systems to control solid waste management, while voluntary in one sense, do carry penalties in that consumers may not select their products.

Discuss the distinguishing features of the Japanese distribution system.

Distribution in Japan has long been considered the most effective non-tariff barrier to the Japanese market. The distribution system is different enough from its United States or European counterparts that it should be carefully studied by anyone contemplating entry. The Japanese system has four distinguishing features: 1) a structure dominated by many small wholesalers dealing with many small retailers; 2) channel control by manufacturers; 3) a business philosophy shaped by a unique culture; and 4) laws that protect the foundation of the system, the small retailer.

High Density of Middlemen. There is a density of middlemen, retailers and wholesalers in the Japanese market unparalleled in any Western industrialized country. The traditional structure serves consumers who make small, frequent purchases, at small conveniently located stores. The high density of small stores with small inventories is supported by an equal density of wholesalers. It is not unusual for consumer goods to go through three or four intermediaries before reaching the consumer—producer to primary, secondary, regional, and local wholesaler, and finally to retailer to consumer.

Channel Control. Manufacturers depend on wholesalers for a multitude of services to other members of the distribution network. Financing, physical distribution, warehousing, inventory, promotion and payment collection are provided to other channel members by wholesalers. The system works because wholesalers and all other middlemen downstream are tied to manufacturers by a set of practices and incentives designed to ensure strong marketing support for their products and to exclude rival competitors from the channel.

Business Philosophy.

• Emphasizes loyalty, harmony, and friendship

• Supports long-term dealer-supplier relationships

• The cost of Japanese consumer goods is among the highest in the world

• Japanese law gives the small retailer enormous advantage over the development of larger stores

Large-Scale Retail Store Law. Daitenho – the Large-Scale Retail Store Law- Large stores must have approval from the prefecture government- All proposals first judged by the Ministry of International Trade and Industry (MITI)- Then, if all local retailers unanimously agreed, the plan was approved- Could be a lengthy process- Applied to both domestic and foreign companies• Replaced by the Large-Scale Retail Store Location Act of June 2000- MITI out of the process- Relaxed restrictions

Import-Oriented Distribution Structure

• Demand exceeds supply

• The customer seeks the supply from a limited number of middlemen

• Distribution systems are local

• Few countries fit the import-oriented model today

In an import-oriented or traditional distribution structure, an importer controls a fixed supply of goods and the marketing system develops around the philosophy of selling a limited supply of goods at high prices to a small number of affluent customers.

Discuss the ways Japanese manufacturers control the distribution process from manufacturer to retailer.

Manufacturers depend on wholesalers for a multitude of services to other members of the distribution network. Financing, physical distribution, warehousing, inventory, promotion and payment collection are provided to other channel members by wholesalers. The system works because wholesalers and all other middlemen downstream are tied to manufacturers by a set of practices and incentives designed to ensure strong marketing support for their products and to exclude rival competitors from the channel.

Wholesalers typically act as agent middlemen and extend the manufacturer’s control through the channel to the retail level. Control is maintained by: 1) inventory financing, sales made on consignment with credits extending for several months; 2) cumulative rebates, rebates given annually for any number of reasons including quantity purchases, early payments, achieving sales targets, performing services, maintaining specific inventory levels, participating in sales promotions, loyalty to suppliers, maintaining manufacturer’s price policies, cooperation, and contribution to overall success; 3) merchandise returns, all unsold merchandise may be returned to the manufacturer; and, 4) promotional support, intermediaries receive a host of displays, advertising layouts, management education programs, in-store demonstrations, and other dealer aids which strengthen the relationship among middlemen and the manufacturer.

Review the key variables that affect the marketer’s choice of distribution channels.

The four main variables which affect the marketer’s choice of distribution channels are (1) the availability of middlemen, (2) the cost of their services, (3) the functions performed (and the effectiveness with which each is performed) and (4) the extent of control which the manufacturers can exert over the middlemen’s activities.

• Cost: there are 2 types of channel cost.1. capital or investment cost of developing the channel

2. Continuing cost of maintaining it

• Capital requirements

• Control

• Coverage

• Character

• Continuity

Outline some of the major problems confronting an international advertiser.

Of all the elements of the marketing mix, decisions involving advertising are the ones most often affected by cultural differences among country markets. Consumers reflect their culture, its style, feelings, value systems, attitudes, beliefs, and perceptions. Since advertising’s function is to “interpret or translate the need/want satisfying qualities of product and services in terms of consumer needs, wants, desires, and aspirations,” the emotional appeals, symbols, persuasive approaches and other characteristics of an advertisement must coincide with cultural norms to be effective.

Reconciling international advertising and sales promotion effort with cultural uniqueness of markets is the challenge confronting the international or global marketer. The global advertiser is confronted with legal and tax considerations, language limitations, media limitation and production and cost limitations. These limitations must all be dealt with effectively if a company is to have an effective advertisement.

How can advertisers overcome the problems of low literacy in their market?

They can overcome low literacy by making use of ads that are self-explanatory, and extensive use of radio which doesn’t have written words.

What special media problems confront the international advertiser?

Special problems in media—availability, cost, and coverage—confront the international advertiser. Local variations and lack of market data are also great headaches.

Availability of media varies from country to country due to government restrictions. Countries have either too many or too few media to adequately cover the majority of the population. As far as price goes, the United States ad man must be prepared to haggle greatly over costs. Most media costs are subject to negotiation. Agency discounts are often split with the client to bring costs down. Coverage problems generally arise when trying to reach certain sections of the population. There are many uneconomical media divisions which do not permit enough regionality. Underlying all these problems is the lack of market information which hampers a good communication mix in foreign markets and causes much waste in ad campaigns.

What is sales promotion and how is it used in international marketing?

Sales promotions include all marketing activities other than advertising, personal selling, and publicity that stimulate consumer purchases and improve retailer or middleman effectiveness and cooperation. Sales promotions include such items as cents-off, in store demonstrations, samples, coupons, product tie-ins, contests, sweepstakes, sponsorship of special events, and point-of-purchase displays. Sales promotions are used as short-term efforts directed at consumer and/or retailer to achieve such specific objectives as (1) consumer product trial and/or immediate purchase, (2) consumer introduction to the store, (3) gaining retail point-of-purchase displays, (4) encouraging stores to stock a product, and (5) supporting and augmenting the advertising, personal sales efforts.

Adaptability and maturity are traits needed by all salesmen. Why should they be singled out as especially important for international salesmen?

These two traits are singled out as especially important for international salesmen because the foreign market is extremely different from the domestic market and calls for different policies and more independent decisions and commitments. The traits are credited with being two of the prime causes for failure of international salesmen.

Can a person develop good cultural skills?

Yes. Good cultural skills just as good social skills can be developed. Cultural skills provide the individual with the ability to relate to a different culture, even when the individual is unfamiliar with the details of that particular culture. Anyone being sent to another culture should receive training to develop cultural skills. In addition, they should receive specific schooling on the customs, values, and the social and political institutions of the host country. There are a variety of organizations that provide intercultural training.

Describe the six attributes of a person with good cultural skills.

Someone with cultural skills can: (1) communicate respect and convey verbally and nonverbally a positive regard and sincere interest in people and their culture; (2) tolerate ambiguity and cope with cultural differences and the frustration that frequently develops when things are different and circumstances change; (3) display empathy by understanding other people’s needs and differences from their viewpoint rather than from the individual’s own viewpoint; (4) be nonjudgmental, avoid judging the behavior of others on their own value standards; (5) recognize and control the SRC, that is, recognize their own cultural values as an influence on their perceptions, evaluations, and judgment in a situation; and (6) laugh things off, a good sense of humor helps when frustration levels rise and things do not work out as planned.

Evaluate the three major sources of multinational manpower.

Expatriates—declining in importance as foreign nationals are found to fill marketing positions. The cost of an expatriate is often much greater than a foreign national. The advantages of the expatriate are more adequate technical training, better knowledge of the firm and its product, and often better communication with the parent company. The weakness is that the expatriate often suffers from the cultural differences existing in the host company.

Cosmopolitan personnel—type of expatriate who is not a national of the parent company’s country. Reflects the growing nature of international business. Used nearly exclusively at the top level of management.

Foreign national—an increase in the mobility of foreign nationals is making them more useful to the firm. At the sales level, the foreign national is at an advantage. Salary levels are lower for them as well as their selling expenses, because they are able to transcend legal and cultural barriers. However, they sometimes are too close to the culture which impedes their effectiveness. They sometimes are too close to the culture

which impedes their effectiveness. They are most effective in situations which do not require great technical training.

Which factors complicate the task of motivating the foreign sales force?

The biggest factor is the cultural differences that occur, which cause motivation and behavior to vary from the domestic salesmen. The cultural differences reviewed in Chapters 4 and 7 affect the motivational pattern of the foreign sales force.

Explain the concept of “price escalation” and tell why it can mislead an international marketer.

Price escalation is price increases due to added costs produced by such things as tariffs, taxes, longer lines of distribution, etc. It can mislead many international marketers into thinking that exorbitant prices that are charged in foreign countries for goods that are relatively reasonable in the domestic market can increase profits in the foreign market. This is just the opposite of the real case in many situations where the effects for price escalation, not added profit, account for the high prices.

Types of countertrade:

Types of countertrade

- Barter: Barter is one of the most common methods of Countertrade. "In a barter deal, goods are exchanged for goods - the principal export is paid for with goods (or services) from the importing market.

- Compensation deals:

- Counterpurchase or offset trade: Counterpurchase is generally imposed for two reasons: first, to stimulate exports and second, to alleviate the balance of payment deficit resulting from imported goods."

- Product buyback agreement: "Here, suppliers of capital plant or equipment agree to be paid by the future output of the investment concerned.

Discuss why countertrading is on the increase.

There has been a significant increase in countertrading transactions during the late 1960’s and 1970’s. This is primarily the result of shortages of hard currency available to industrializing nations. For Communist countries, purchase from non-Communist suppliers must be made with monies earned from Western nations; in less developed countries (LDCs), inflation ridden or weak currencies are reserved for top priority purchases while an increasing dollar volume of goods of less importance are being purchased through some form of countertrading.

Discuss the causes and solutions of parallel imports and their effect on price.

Parallel imports develop when importers buy products from distributors in one country and sell them in another to distributors who are not part of the manufacturer’s regular distribution system. This practice is lucrative when wide margins exist between prices for the same products in different countries. There are a variety of conditions that can create the profitable opportunity for a parallel market.

Variations in the value of currencies between countries frequently lead to conditions that make parallel imports profitable. When the dollar was high relative to the West German mark, Cabbage Patch dolls were purchased from German distributors at what amounted to a discount and resold in the United States.

Purposefully restricting the supply of a product in a market is another practice that can cause abnormally high prices and thus make a parallel market lucrative. Such was the case with the Mercedes-Benz automobile whose supply was limited in the U.S. Americans could buy a Mercedes-Benz automobile which was partially supplied by Americans returning to the United States with cars they could sell for double the price they paid in Germany. This situation persisted until the relative value of the dollar to the mark weakened and the price differential created by limited distribution evaporated.

Pricing policies that permit large price differentials between country markets is another condition conducive to the creation of parallel markets. Japanese merchants have long maintained very high prices for consumer products sold within the Japanese market. As a result, prices for Japanese products sold in other countries are often lower than they are in Japan. For example, Japanese can buy Cannon Cameras from New York catalogue retailers and have them shipped to Japan for a price below that of the camera purchased in Japan. In addition to the higher prices for products at home, the rising value of the yen makes these price differentials even wider. For example, the New York price for Panasonic cordless telephones is $59.95 versus $152 in Tokyo and the Sony Walkman is $89.00 versus $165.23.

Foreign companies doing business in Japan generally follow the same pattern of high prices for the products they sell in Japan, thus creating an opportunity for parallel markets in their products also. Eastman Kodak prices its film higher in Japan than in other parts of Asia. Enterprising merchants buy Kodak film in South Korea for a discount and resell it in Japan at 25% less than the authorized Japanese Kodak dealers. For the same reasons, Coca-Cola syrup imported from Los Angeles is cheaper than that purchased through normal channels in Japan.

The possibility of parallel market occurs whenever price differences are greater than the cost of transportation between two markets. In Europe, because of differing taxes and competitive price structures, prices for the same product vary between countries. When this occurs, it is not unusual for companies to find themselves competing in one country with their own products imported from a lower priced country.

Perfume and designer brands like Gucci and Cartier are especially prone to gray markets. To maintain the image of quality and exclusivity, prices for such products traditionally include high profit margins at each level of distribution, differential prices among markets, limited quantities, and distribution that is restricted to upscale retailers. In the U.S., wholesale prices for exclusive brands of fragrances are often 25% more than wholesale prices in other countries. These are the ideal conditions for a lucrative gray market for unauthorized dealers in other countries who buy more than they need at wholesale prices lower than U.S. wholesalers pay. They then sell the excess at a profit to unauthorized U.S. retailers, but at a lower price than the retailer would have to pay to an authorized U.S. distributor.

To prevent parallel markets from developing when such marketing and pricing strategies are used, companies must maintain strong control systems. These control systems are difficult to maintain and there remains the suspicion that some companies are less concerned with controlling gray markets than they claim.

Discuss the various ways in which governments set prices. Why do they engage in such activities?

Governments set prices in various ways:

a. By requiring middlemen to mark up their goods by a governmentally dictated margin. Some manufacturers may have margins governmentally controlled.

b. Setting price limits (floor and ceiling) on actual prices.

c. Restrict price changes—government allows no deviation from original price settings unless officially requested.

d. Governments may compete in the market to control prices.

e. Governments grant subsidies to companies if they lower their prices.

f. Government monopolies and monopsonies.

g. Governments are now forming international agreements in relation to pricing.

Governments engaged in such activities to better control the economic standards of their countries. They can combat inflation or deflation to some extent through price setting and can also control monopolizing situations or economically unhealthy ones.