Download The Political and Legal Environment

Chapter 3: Understanding the Marketing
Environment & Global Issues
 Deciding to Go Global
The World Factbook
provides valuable
information
on many countries
– “Go” or “no go”
– Which global markets are most attractive?
 We will treat this as a market segmentation
decision (Ch. 7)
 Factors in the External Environment
– Trends that pose opportunities or threats
– SW [OT] (from Ch. 2)
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Decision Model to Enter Foreign Markets
External Factors of Influence
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The [Macro] Economic Environment:
Indicators of Economic Health
 Key economic indicators:
– Gross domestic product (GDP):
– Gross national product (GNP):
– Economic infrastructure
Quality of country’s distribution, financial, and communications
systems
– The Business Cycle
•
•
•
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Prosperity
Recession
Recovery
Depression
Inflation/Unemployment
– Other: savings rate, debt/credit levels
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The Economic Environment:
Level of Economic Development
 Least developed country (LDC)
– Economic base is often agricultural
 Developing countries
– Economy shifts emphasis from
agriculture to industry
 Developed countries
– Offer wide range of opportunities
for international marketers
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Competitive Industry Structure
– Monopoly – one company holds all market share;
can price at will (unless regulated). Example?
– Oligopoly – relatively small # companies hold
majority mkt share; companies control prices. Ex?
– Monopolistic competition – many companies
share market; each has some degree of price control.
Example?
– Perfect competition – many companies producing
homogenous products; none has pricing control. Ex?
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5
The Technological Environment
 Technology used for marketing strategies
– Ex: internet / social media
 Technology used for competitive advantage
– Ex: manufacturing technology, MIS
 Disruptive technologies
– A form of competition as well—potential to change
industry structure
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6
The Political and Legal Environment:
Legal Influences on Business
 Local, state, national, and global laws and
regulations affect businesses
– Ex: New environmental regulations
 Purpose of American law
– To ensure fair competition
– To ensure consumer welfare- make sure that
businesses don’t take advantage of consumers
– Note: Internationally, laws not same
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The Political and Legal Environment:
Political Influences on Business
 Retaliatory actions against American
businesses sometimes occur as a result of
political activity or war
 Political constraints on trade are commonly
imposed
– Economic sanctions
– Nationalization
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The Political and Legal Environment:
Legal Influences on Business
 Regulatory constraints on trade often
restrict the marketing of goods
 Also common—local content rules
– A portion of a product must consist of components
supplied by industries in the host country or
economic community
 Human rights issues may limit foreign
countries business opportunities
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The Sociocultural Environment
 Trends in characteristics of people in society
– Demographic groups/categories
– Cultural values & beliefs
• Product appropriateness
• Brand and product names (translation issues and/or
appropriateness)
• Packaging (colors have cultural implications)
• Example: Skinny Dip Candles sold in Dubai
– Global considerations:
• Norms, customs, mores, and conventions
• Language
• Ethnocentrism - tendency to believe one’s own culture is best
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The Natural Resource Environment*
 Availability of raw materials
 Sustainability of business practices
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Ethical Issues in Global Business
 Truthfulness in business dealings varies
by country (“acceptability” varies)
 Bribery
 Extortion
 Transparency Bribepayers Index
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How “Global” Should a
Global Marketing Strategy Be?
 Choose a marketing-mix strategy:
– Standardization vs. localization
• Standardization:
Offer the same products in all markets
• Localization:
Offer a customized marketing mix for each
country
– Once standardization or localization is chosen,
it’s time to tweak the marketing mix
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 Tweaking the marketing mix
– Product decisions:
• Straight extension strategy:
Market existing product in foreign market
• Product adaptation strategy
Modifies product for foreign market
• Product invention strategy
Develops new product for foreign market
– Promotion decisions:
• Whether or not to modify
• Whether changes in promotional strategies are needed
– Price decisions:
Products are often more expensive to produce for foreign markets.
• Free trade zones
• Gray market goods
• Dumping
– Distribution decisions:
Getting the product to remote locations is often difficult
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