L A C O N I C S U M U P. Environmental Uncontrollables : KEY CHARACTERISTICS: difficult to comprehend, take account of and harness to advantage.

L A C O N I C

S U M U P

Environmental Uncontrollables :

KEY CHARACTERISTICS:difficult to comprehend, take account of and harness to advantage.

Such products and services include those which are generally indigenous by nature and/or of relatively small value and very common.

Particularly true of foodstuffs. Sadza in Zimbabwe, a staple food made from maize meal, would not go down well in Beverley Hills, California. Neither would Middle Eastern sheeps eyes menus.

Products of a more technical nature, like computers, on the other hand, have a universal appeal.

Summing UpSumming Up

Environmental Uncontrollables :Summing UpSumming Up

Fast Food Fad

Why Do Different People Behave the Way they Do ? How do we

Determine the basis of this behavior ?

Child Labor

Qualitative / Quantitative Reasoning

Making Profit but Not Profiteering

Living Relationship


Culture and Self Reference Criterion:

"The integrated sum total of learned behavioral traits that are manifest and shared by members of society“

Culture, therefore, according to this definition, is not transmitted genealogically.

It is not, also innate, but learned. Facets of culture are interrelated and it is shared by members of a group who define the boundaries.

To add to the complexity, Often different cultures exist side by side within countries,

Self Reference Criterion is the natural tendency to judge situations, beliefs and actions in different cultures according to one’s own cultural norms.



Understanding Self Reference Criterion is important within international business to ensure cultural acceptance within a foreign market.

The self reference criterion (SRC) “Perception of market needs can be blocked by one's own cultural experience.”

A four point approach whereby one could systematically reduce this perception:

a)Define the problem or goal in terms of home country traits, habits and norms. b)Define the problem or goal in terms of the foreign culture traits, habits and norms. c) Isolate the SRC influence in the problem and examine it carefully to see how it complicates the pattern. d) Redefine the problem without the SRC influence and solve for the foreign market situation.



The problem with this approach is that……..culture may be hidden or non apparent.

Unearthing the factors in may, therefore, be difficult.

Nonetheless, the approach gives useful guidelines on the extent for the need of standardization or adaption in marketing planning.

Emanating Theories….

Diffusion theory (Characterized by a normal distribution. )

In this case the innovators are a small percentage who like to be seen to lead, then the others, increasingly more conservative, take the innovation on.



Diffusion theory



The adoption process itself is done in a series of stages from awareness of the product, through to interest, evaluation, trial and either adoption or rejection (in the case of non adopters).

The speed of the adoption process depends on the relative advantage provided by the product, how compatible or not it is with current values or experiences, its complexity, divisibility (how quickly it can be tried) and how quickly it can be communicated to the potential market.

In international marketing an assessment of the product or service in terms of these latter factors is very useful to the speed of its adoption.



THE SILENT IMPACTER’S: High (verbal’s) & Low (explicitly)Context Cultures:

In low context cultures, for example like USA, Western Europe, a person's word is not to be relied on, things must be written. On the other hand, in high context cultures, like Japan and the Middle East, a person's word is their bond. It is primarily a question of trust.

Perception:

“the ability to see what is in culture”. The SRC can be a very powerful negative force.

High perceptual skills need to be developed so that no one misperceive a situation, which could lead to negative consequences

Consumer products are likely to be more culturally sensitive than business to business products, primarily because technology can be universally learned.



Perception:

drink can be very universal and yet culture bound. Whilst appealing to a very universal physiological need - thirst - different drink can satiate the same need.

Tea is a very Chinese habit, Coffee English / American but neither are universals in African culture. However, Coca Cola may be acceptable in all three cultures, with even the same promotion appeal.

Nationalism:

a cultural trait which is increasingly surfacing. In Western, developed countries a high degree of interdependence exists. less developed countries do not yet have the same interdependence in general,

and so organizations need to reassess their contribution to the development of nations to make sure that they are not holding them "to hostage".


Environmental Uncontrollables :Elements:

Material Culture (Technology, Infrastructure, Tools, Distribution, Media Reach etc)

Language (Multi lingual countries – India, Zimbabwe)

Aesthetics (Affect design, colors, packaging, brand names, messages, mode of expression)

Education (Promotion, labeling, mkt research, instructions, etc)

Religion (Religion provides the best insight into a society's behavior and helps answer the question why people behave rather than how they behave.)

Attitudes & Values (precursors of human behavior and so it is essential that research is done carefully on these)

Social Organization (refers to way people relate to each other)

drink can be very universal and yet culture bound. Whilst appealing to a very universal physiological need - thirst - different drink can satiate the same need.

Tea is a very Chinese habit, Coffee English / American but neither are universals in African culture. However, Coca Cola may be acceptable in all three cultures, with even the same promotion appeal.

Nationalism:

a cultural trait which is increasingly surfacing. In Western, developed countries a high degree of interdependence exists. less developed countries do not yet have the same interdependence in general,

and so organizations need to reassess their contribution to the development of nations to make sure that they are not holding them "to hostage".


Environmental Uncontrollables :Summing UpSumming Up

Power Distance, Uncertainty Avoidance et all……Power Distance, Uncertainty Avoidance et all……

Terms of Access: Trade Facilitators or Barriers.

THE LEGAL ENVIRONMENT:

Laws, Rules ,Standards – Why So ?

Made up of a set of political, social and legal ground rules.

These form the laws of all production, exchange and distribution and give rise to certain expectations and assurances about the actions of others, and give order and stability to the means of doing business.

The most important rules in any system are those defining, allocating and enforcing property rights, and rules and conventions defining allowable and non-allowable forms of cooperation and competition (standards, rules of contract, fair trading etc).



THE LEGAL ENVIRONMENT:

Rules and conventions specifying entry conditions and boundaries on cooperative and competitive policies also facilitate exchange and coordination.

The establishment and enforcement of standards can reduce transaction costs by increasing the available information to buyers and consumers.

Standards may include basic weights, measures, quality grades and contract forms. Quality standards may be mandatory or voluntary and minimum or multiple grades. These standards help where trade is at a distance. The EU has a strict set of standards regarding horticultural products for example, including hygiene, quality and certificates of origin.



The EU Debate on When is a Chocolate not a Chocolate ?Coca Butter, Coca Solids, Sugar and Milk for some however may even permit Coca Butter equivalent. ORPricing for Cabbage as per Eu directive – Runs into hundreds of pages !!

basic principles are: i.nondiscrimination - each member country must treat the trade of all other member countries equally ii.open markets which are encouraged by GATT through a prohibition of all forms of protection except customs tariffs, and iii.fair trade which prohibits export subsidies on manufactured products and limits the use of export subsidies on primary products.

None of these principles is fully realized, simply because it is impossible to "police" all sovereign governments and dictate what is or is not tariff or non tariff discriminating. The need to systematically evaluate the legal/political environment cannot be overemphasized.



THE LEGAL ENVIRONMENT: Most issues in the legal/political environment centre around the following:-

i."Institutional environment" - made up of political, social and legal ground rules within which the global marketer must operate. ii.Property rights - patents, trademarks. iii.Taxation - what taxation schemes will be faced abroad? iv.Recourse - possibility and length of action with the possibility of image damaging necessitating arbitration. v.Movement of equity and expropriation threats - often necessitating protocols or the signing of trade frameworking agreements.

Efforts to regulate the international legal system include individual country efforts, like the USA International Trade Commission and the GATT system.



The phrase "terms of access" refers to all the conditions that apply to the importation of goods from a foreign country.

The major instruments covered by this phrase include:o import duties, o import restrictions or quotas, o foreign exchange regulations and o preference arrangements.

Tariff systems Tariff barriers/duties (terms of access) a)Tariffs - single column, two column, preferential.b)Duties - ad valorem, specific, alternative, compound, anti-dumping.c)Import charges - variable, temporary, compensatory.



Tariff systems provide either a single rate of duty for each item applicable to all countries, or two or more rates, applicable to different countries or groups of countries. Tariffs are usually grouped into two classifications:

Single-column tariff: The single-column tariff is the simplest type of tariff and consists of a schedule of duties in which the rate applies to imports from all countries on the same basis.

Two-column tariff: Under the two-column tariff, the initial single column of duties is supplemented by a second column of "conventional" duties which show reduced rates agreed through tariff negotiations with other countries. The conventional rates, for example those agreed upon by "convention", are supplied to all countries enjoying MFN (most favoured nation) treatment within the framework of GATT. (Under GATT, nations agree to apply their most favourable tariff or lowest tariff rate to all nations who are signatories to GATT, with some substantial exceptions. )



Preferential tariff : A preferential tariff is a reduced tariff rate applied to imports from certain countries. GATT prohibits the use of preferential tariffs with the major exceptions of historical preference schemes, such as the British Commonwealth preferences and similar arrangements that existed before the GATT convention.

Types of duty Customs duties are of two different types. They are calculated either as a specific amount per unit or specific duty, or as a percentage of the value of the goods or ad valorem, or as a combination of both of these methods.

Ad valorem duties: This duty is expressed as a percentage of the value of goods. The definition of customs value varies from country to country. (US Canada – FOB ; Japan – CIF) Therefore an exporter is well advised to secure information about the valuation practices applied to his product in the country of destination.



Specific duties: These duties are expressed as a specific amount of currency per unit of weight, volume, length or number of other units of measurements; for example, fifty US cents per pound, one dollar per pair, twenty-five cents per square yard. Specific duties are usually expressed in the currency of the importing country, (Chilean Gold Pesos)

Alternative duties: In this case both ad valorem and specific duties are set out in the custom tariff for a given product. Normally, the applicable rate is the one that yields the higher amount of duty.

Compound or mixed duties: These duties provide for specific plus ad valorem rates to be levied on the same articles.



Anti-dumping duties: The term dumping refers to the sale of a product at a price lower than that normally charged in a domestic market or country of origin.

To offset the impact of dumping, most countries have introduced legislation providing for the imposition of antidumping duties if injury is caused to domestic producers.

Such duties take the form of special additional import charges designed to cover the difference between the export price and the "normal" price, which usually refers to the price paid by consumers in the exporting countries.



Other import charges :

Variable import levies: Several countries, including Sweden and the European Union, apply a system of variable import levies to their imports of various agricultural products. The objective of these levies is to raise the price of imported products to the domestic price level.

Temporary import surcharges: Temporary surcharges have been introduced from time to time by certain countries, such as the UK and the USA, to provide additional protection for local industry and, in particular, in response to balance of payments deficits.



Non-tariff barriers :

A non-tariff trade barrier is defined by economists as any measure, public or private, that causes internationally traded goods and services to be allocated in such a way as to reduce potential real-world income.

Potential real-world income is the attainable level when resources are allocated in the most economically efficient manner.

To the businessman a non-tariff barrier is any measure, other than tariffs, that provides a barrier or obstacle to the sale of his / her products & services in a foreign market. The major non-tariff trade barriers include……



Quotas and trade control: These are specific limits and controls. The trade distortion of a quota is even more severe than a tariff because once the quota has been filled, the price mechanism is not allowed to operate. The good is simply unavailable at any price.

"State trading" refers to the practice of monopolising trade in certain commodities: the Swedish government controls the import of all alcoholic beverages and tobacco products, and the French government controls all imports of coal.

Discriminatory government and private procurement policies: These are the rules and regulations that discriminate against foreign supplies and are commonly referred to as "Buy British" or "Buy American" policies.

Restrictive customs procedures The rules and regulations for classifying and valuing commodities as a basis for levying import duties can be administered in a way that makes compliance difficult and expensive.



Selective monetary controls

Selective monetary policies are definite barriers to trade. For example, many countries from time to time require importers to place on deposit at no interest an amount equal to the value of imported goods. These regulations in effect raise the price of foreign goods by the cost of money for the term of the required deposit.

Restrictive administrative and technical regulations These include safety and health, packaging, child labor, RM import content, phytosanitary norms etc. regulations. Some of these regulations are intended to keep out foreign foods while others are directed towards legitimate domestic objectives.

For example, the safety and pollution regulations being developed in the United States for automobiles are motivated almost entirely by legitimate concerns about highway safety and pollution..

US DoA: Ruling of approx. 5” tomatoes….goes to the Mexican Cattle. !!


From Provisional Agreement to an InstitutionSumming UpSumming Up

GATT trade rounds (50 years of provisions !!) – An umbrella treaty for trade in goods.

Year Place/name Subjects covered Countries1947 Geneva Tariffs 231949 Annecy Tariffs 131951 Torquay Tariffs 381956 Geneva Tariffs 26

1960-1961 GenevaDillon Round

Tariffs 26

1964-1967 GenevaKennedy Round

Tariffs and anti-dumping measures 62

1973-1979 GenevaTokyo Round

Tariffs, non-tariff measures, “framework”agreements

102

1986-1994 GenevaUruguay Round

Tariffs, non-tariff measures, rules, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO, etc

123

GATT trade rounds

From Provisional Agreement to an Institution

GATT to WTO:

i.Birth: GATT Never ratified by the USA.ii.The last and largest GATT round, the Uruguay Round which lasted from 1986 to 1994 led to the WTO’s creation. iii.Whereas GATT had mainly dealt with trade in goods, the WTO and its agreements now cover trade in services, and in traded inventions, creations and designs (intellectual property).iv.WTO deals with the rules of trade between nations at a global or near-global level.v.Defined and charted out se of rulesvi.Dispute settlement body.vii.Forum for negotiations.viii.153 country members.ix.Multilateral trading system – trade without discriminationx.1 January 1995 this is said to have marked the biggest reform of international trade since after the Second World War.

Free trade Yes – But Fair Trade – WHO KNOWS ??


From Provisional Agreement to an InstitutionSumming UpSumming Up

In a nutshellThe basic structure of the WTO agreements: how the six main areas fit together — the umbrella WTO Agreement, goods, services, intellectual property, disputes and trade policy reviews.Umbrella AGREEMENT ESTABLISHING WTO

Goods Services Intellectual property

Basic principles GATT GATS TRIPSAdditional details Other goods

agreements and annexes

Services annexes

Market access commitments Countries’ schedules of commitments

Countries’ schedules of commitments(and MFN exemptions)

Dispute settlement DISPUTE SETTLEMENTTransparency TRADE POLICY REVIEWS

Straight Extension

PRODUCT

Dual AdaptationCommunication Adaptation

Product Adaptation Productinvention

PROMOTION

Do not change Adapt Product Develop new product

Adapt Promotion

Deciding on the Marketing Program Summing UpSumming Up

Straight Line Extension:- Find customers for the product as it is [after finding usage]- eg Camera’s, consumer electronics, machine tools.

Product Adaptation:- altering the product to meet local conditions.- eg- general foods coffee blends - British with more milk, French – black coffee, no

frills packaging in India, nokia higher volume ring tones, Hyatt – fen-shui in Singapore etc.

Product Invention: [backward / forward]- theory of IPLC.- eg National Cash Register: Crank operated in Latin America.

Promotion:KFC [artificial, mechanical, unhealthy] in Japanese households.- My old Kentucky

household.

Summing UpSumming Up Deciding on the Marketing Program

L A C O N I C S U M U P. Environmental Uncontrollables : KEY CHARACTERISTICS: difficult to comprehend, take account of and harness to advantage.

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