Environment of International Business and its significance
The
international business environment plays a very important role in shaping the
international business strategies of a company.
There are five competing concepts under which organizations conduct
their marketing activity.
·
The
production concept:
This is one of the oldest concept of
marketing. It was very famous in
1900s. The production concept holds that
consumers will favor those products that are widely available and low in
cost. Henry Ford is a pioneer who
perfected this concept. Ford put all of
his talent into perfecting the mass production of automobiles to bring down
their cost so that Americans can buy it.
·
The
product concept:
In this concept the focus is on making superior
products. According to this concept,
customers will favour those products that offers the most quality, performance,
or innovation features. Product –
oriented companies often design their products with little or no customer
input. Too often they don’t even look at
the competitors products because “they were not invented here.” Product concept
leads to marketing myopia (marketing blindness) which means concentrating more
on products and less on customer needs.
The best example for marketing myopia is DuPont. In 1972, DuPont researchers invented Kevlar
which they consider as its most important new fibre since nylon. Kevlar has the same strength as steel with
only 1/5th weight of steel.
DuPont asked its division to find applications for this miracle
fibre. DuPont’s executives imagined a billion-dollar market for Kevlar. Now, after years later Kevlar is still
waiting for a break through. True,
Kevlar is a very good fibre for bullet proof vests, but there is no very high
demand for bullet proof vests. This is a
proof for marketing myopia.
·
The
Selling Concept:
In
this concept focus on aggressive selling, and promotional effort. The concept assumes that customers are
resistant to buying and they have to be coaxed into buying with whole battery
of effective selling and promotional tools.
The selling concept is practiced most aggressively with ‘Unsought goods’
those goods that buyers normally do not think of buying, such as insurance,
encyclopedias and funeral plots.
·
The
marketing concept:
It
aims to satisfy the needs and wants of the customer and his needs. It assumes that customer is the king of the
market and to satisfy his need and wants gives profit through customer
satisfaction. This concept which
appeared in 1960 stresses more on marketing environment and satisfying the
customer needs.
But
by 1990’s the marketing concept has become outdated and a new marketing concept
got evolved called strategic marketing concept.
·
Strategic
Marketing Concept:
This concept shifts its focus from
the customer or the product to the customer in the context of the boarder external
environment. Hence to succeed in this
modern era of strategic marketing it is not just satisfying needs and wants of
a customer yields profit for a company.
To generate profit in this new thought of marketing, a company has to
have a thorough understanding of the customer in relation to his external
environment which includes competition, government policy, rules and
regulations, political & economic changes etc. In other words, the marketer has to think globally. There are two main factors which have caused
this ‘new’ evolution of strategic management thought. They are
A Globalization
A Fast development in
the fields of communication and technology.
Hence, strategic marketing places
more importance to external environment of business. A firm in international business, encounters
different sets of environment. They are.
A Internal Environment
A Domestic environment
A Foreign Environment
A Global Environment
The internal environment consists of
mission and vision of the firm, organization structure, top management
commitment to quality, decision making cost competitiveness, innovativeness
etc. The home country environment is
called as domestic environment of the company.
It includes government policies, rules and regulations. Foreign environment here refers to the
relevant foreign market. The global
environment refers to those global factors which are relevant to business such
as the to principles and agreements, other international conventions/ treaties/
declarations/ protocol etc, economic and business conditions in other
countries. A company which has to do
business globally must follow two important things
Adopt
Internationally acceptable standards and practices.
A Avoid Self Reference
Criterion. (SLC) Self reference
criterion refers to an unconscious reference two one’s own cultural values,
experiences and knowledge as the basis of decisions. The SRC is one of the most difficult to
break. Lee proposes a systematic four
step framework for eliminating this form of myopia.
1. Define the problem in
terms of home-country cultural traits, habits and norms.
2. Define the problem in
terms of foreign cultural traits, habits and norms.
3. Isolate SRC influence
in the problem and examine carefully to see how it complicates the problem.
4. Redefine the problem
without the SRC influence and solve the foreign market situation.
There are a number of
examples of mighty multination seriously burning their finger became of the
failure to adapt to local market conditions (For example) Procter and Gamble
(P&G) stormed into the Japanese market with American products, American
managers, American sales methods and promotion strategies. The result was disastrous. P&G which entered Japan in 1973 lost
money until 1987, but by 1991 P&G because Japan’s second largest foreign
market. This is because it avoided SRC
and adapted its business strategies to suit Japan’s market.
Hence, in short, the
business environment is very important determinant of business strategy. When the business environments of different
countries are dissimilar, an international firm will have to design different
strategies to suit the environments of these markets. The various environmental factors that
affects international business are discussed below:
Economic
Environment
It
includes the following economic factors
Nature of the economy: The
general level of development of the economy has lot of implications for
business countries, and even different region with in a country, show great
differences in the level and pattern of economic development.
The
classification of the economic is done on the basis of the per capita income
(ie the average annual income per person).
Accordingly, countries are broadly classified as low income, middle
income, and high income economies.
Low income economies: These are
the economies with very low level of per capita income. All economies with per capita GNI 825 us
dollars or less in year 2004 are main regarded as low income economies.
High income economies: Those with
a per capita income of 10,066 Us dollars and above fall in the category of high
income economies. There are two main
types of high income economies namely industrial economies and oil exporters.
Middle income economies: Those with
a per capita income ranging between US 826 and 10,065 dollars fall into middle
income economies.
The
low income economies are also referred to as the third world. The high income and middle income economies
represent the first and the second world respectively.
The
low income and middle income economies are developing economies. They are referred to as the south as
most of them are in the southern hemisphere.
The developed economies are referred to as North, as most of them are in
Northern hemisphere. Exception to this
includes Australia and New Zealand.
Classification by income does not
necessarily reflect development status.
In the group of high income economies, the industrial economies are
developed economies. All the oil
exporters (Kuwait, UAE etc) are not developed economies. They are regarded as developing
economies. Besides income, other
criteria such as employment generation, standard of life are applied to judge
whether an economy is developed or not.
All developed economies have certain common features. They are
A Sophisticated
technology.
A Continuous
innovation.
A Low share in primary
sector (agriculture) and dominance in tertiary (service) and secondary
(industry) sectors.
A Market-friendly
economic policies.
A Open trade and
investment policies.
A Democratic rights.
A Consumer choice etc.
Sometimes the terms less developed
countries (LDC) and more developed countries (MDC) are used to refer the
developing and developed countries. The
use of the term under developed countries to refer the developing countries is
also common.
Further, in the developing
economies, the inequality in the distribution of income is very high and as a
result, a large proportion of the population lives in abject poverty. They are also characterized by high birth
rates and population growth rates. Death
rates are also higher than in developed countries.
Within the category of low income
economies, some times a special category, namely least developed countries is
identified. These countries have very
low GNI and usually face Geographical isolation or exposed to
natural disasters. There are about 50 least
development countries including Bangladesh, Bhutan, Nepal, Maldives, Mali,
Uganda, Myanmar, Sudan, Zambia, Zimbabwe and Yemen.
There are, on the otherhand,
developing economics which have been experiencing rapid industrialization such
as Hong Kong, South Korea, Singapore and Taiwan (Taipei, china) – Asian
tigers. They are sometimes referred to
as newly industrializing economies.
These countries show high growth rate over a consistent long period and
per capita income. Those economies which
are in transition from centralized economic system to the market economy are
referred to as transition economies (eg) USSR.
International comparison of GNI or
GNP alone does not give a true picture of nature of economies of nations. A more accurate picture is given by assessing
percapita income at purchasing power parity (PPP) too. For example, in 2003 per capita income of
India was estimated at 530 US dollars in PPP terms. It was estimated at 2880 us dollars. What it means is that a bundle of goods which
cost 530 US dollars in India will cost 2880 US dollars in USA. In other words, having 530 us dollars in
India is equivalent to having 2880 dollars in USA.
Structure of economy: The structure of economy consists of
A Primary
sector (Agriculture)
A Secondary
sector (Industrial)
A Tertiary
sector (Services)
Usually as the economy develops, the
share of the primary sector in the (GNP) declines.
GNP
(Gross National Product):
The dollar value at current market price of all final goods and services
produced annually by the nation’s economy.
All developed countries have very low share of primary sector. The contribution of service sector to the GNP
and employment is high in developed countries.
On the other hand, developing countries show a high share of primary
sector (Agriculture) in its GNP.
Economic
Policies: It
includes Industrial policy, Trade Policy, Foreign exchange policy, foreign
investment and technology policy and fiscal policy.
Trade policy and Industrial policy
are integrated. Both are governed by
international organizations like WTO, WB, and IMF. Any industrial / Trade Policies formulated
must have compliance to WTO rules and regulations. Trade policies can easily affect the business
of a country. A country adopting
restrictive import policy, will protect its domestic industries from
international competition.
Exchange policy also affects
business. With the abolition of exchange
controls in 1970’s, have encouraged countries like India to invest in business
abroad. This is achieved by cross –
border movement of capital from one country to another.
Foreign investment and technology
also affects business. Before 1980, flow
of funds, foreign investment, and technology is highly restricted. But after 1980, due to globalisation there is
a rapid flow of foreign investment and flow of technology a cross borders.
Government’s strategy in respect to
Public expenditure and revenue is called as fiscal policy. Government usually use tax incentives to
encourage certain activities. For example,
when an industry suffers from recession, a reduction of tax like excise duty or
sales tax or corporate tax may help to rebuild the industry.
The Monetary policy also affects
business. The central bank by its policy
towards availability of credit to its customers can expand or contract
business.
Economic
Conditions: General
economic conditions affect business. An
economic boom is characterized by high level of output, employment, rising
demand and prices. A recession has the
opposite of these characteristics.
For example US economy accounts for
well over ¼th of the global economy.
This implies that the growth trend in US economy can affect the overall
growth trend of global economy by more than 25%. This can be understood from the following
example. The slowdown of US economy in 2000 – 2001,
greatly affected India. The IT industry
in US was so badly hit during this period that the companies, in order to
survive the recession period, resorted to massive lay- offs. During Feb – March 2001, CISCO laid off 8000,
Lucent 10,000 of its employees. Besides,
a number of people were benched – people currently without work in the company
waiting for projects. As the US IT firms
were major clients of Indian IT majors, companies like Infosys, Wipro, HCL and
many others were hit hard. The American
tech flue thus affected the business of Indian firms, their share prices, the
nation’s export earnings and the lucrative employment market.
Then the question comes how to judge
the economic conditions/ nature of a country?.
Great economists like Gorden Wu and Kenichi ohmae have developed some
economic barometers. Gorden Wu’s
economic barometer works well in developing countries. It is spilt in to 5 phases. Accordingly, as a developing country begins
to experience real economic growth.
A Step1: People start to eat out.
A Step2: They start to buy new cloths.
A Step3: Consumers start accumulating new
appliances.
A Step4: they buy motor cycle, a Car, or apartments
A Step5: People start travelling overseas.
Kenichi ohmae also speaks of the differing
demand pattern as a region state moves up
the ladder of economic development.
For example, at about 3000 dollars per capita GNP, a region desires to
get more involved with the global economy, both as a market for and as a
supplier of basic consumer goods,
usually increases steadily. Below that
level, - between, say 1500 dollars and 3000 dollars per capita the emphasis is
more on motorbikes as it is today in Thailand.
At 5000 dollars demand for better quality of products, infrastructures
and services and quality of life considerations such as environmental
considerations emerge out.
Hence nature of economy, its policies,
structure economic conditions greatly affect the business decisions. The following is a classic example.
In the 1970s, the sales of
Boeing 737 began to decline as a result of decline in orders from developed
economies like the US. Therefore, the
company turned its attention to the under developed countries, mainly the
Middle East, Africa and South America.
But it need to modify the plane to the third world aviation. The company redesigned the wings to allow
shorter landings and added thrust to engines for quicker take offs. It also redesigned its landing gear and
installed low pressure tyre so that the plane can stick to the ground when it
touched down. The gamble worked. The company started selling two or three
737’s to developing nations throughout the world compared to batches of 20 or
30 to the us airlines in the past. This
made boeing 737 as the best selling commercial jet in the history.
Social and
Cultural Environment
The
social or cultural environment consists of language, customs, traditions
beliefs, tastes and preferences, social stratifications, social institutions
etc. what is liked by the people in one culture may not be liked by people in
another culture. Many companies modify
their tastes and preferences to suit a particular population. Significant tastes and preferences also
varies within the same population for example India. India is a country of different states. Each state representing a specific culture
and language. The culture and tradition
of North Indians greatly vary from that of South Indians. South Indians prefer to have more of rice
with curd and curry as food where as diet preference of North Indians includes
more of dhal (magu) with chapatthis (roshi).
Another example is Nescafe.
Nescafe has about three fourth share of the Mumbai market (North Indian
– city) where as its share in south Indian cities like Bangalore and Chennai is
insignificant. On the other hand Bru - a
coffee brand, has its large share in chennai and Bangalore cities where as its
sales and profit in Mumbai city is less.
It may be noted that while Nescafe advertisement projects an
international/cosmopolitan image of the product, the Bru advertisement has its
backdrop of south India, particularly Tamil Nadu culture. This is a typical example that tastes,
preferences varies with different regions and culture within the same country.
What is
culture?
Culture
is a set of learned core values, beliefs, standards, knowledge, morals, laws
and behaviours shared by individuals and societies that determines how an
individual acts, feels and views oneself and others. A society’s culture is passed from generation
to generation.
The culture consists of three
elements
i. Knowledge and beliefs
This
refers to the people’s prevailing notions of reality. It includes myths and metaphysical beliefs as
well as scientific realities.
ii. Ideals
It
refers to the standards or norms of the society. It is used to judge what is right or wrong in
a given situation. Norms are enforced by
sanctions (ie) by rewarding the right behaviour and punishing the wrong
behaviour.
iii. Preferences
It
refers to those things in life which are attractive unattractive as objects of
desire.
Cultural
characteristics are very important in the formulation of business
strategies. The cost of ignoring
customs, traditions, taboos, tastes and preferences etc can be very high. For example in Italy, a US company that setup
a corn-processing plant found that its marketing efforts failed because
Italians thought of corn as ‘pig food’.
Cultural
adaptation
Adaptation
is very essential for survival. The type
of clothing, food and dwelling, suitable for the climatic and weather
conditions are forms of adaptations. The
term cultural adaptation refers to ways in which an individual fits into a
particular social environment. It is
often necessary to know the process and nature of the cultural adaptation for
successful formulation of business strategies.
(for example) while introducing new ideas, techniques, products in a new
market segment it is always necessary to analyse how different consumers adapt
to new things and factors favouring and disfavouring adaptations.
Cultural
shock
Changes in cultural changes produces
cultural shock a feeling of confusion, insecurity, and anxiety caused by
strangeness of new environment (For example) If a youngster, born and brought
up in a large city, is posted to a bank office in a remote village, he may
experience a cultural shock. Similarly,
a villager may experience a cultural shock when he takes up a job in a large
modern company.
Cultural
transmission
The elements of culture is
transmitted from one generation to another.
The transmissive quality of culture is cumulative. Every generation in a culture accumulates a
set of new values, ideals, knowledge & preferences which is passed on to
the next generation. The reference group
which includes parents, teachers and elders play a vital role in transmission
of cultures. Literature, film, T.V and
some other electronic gadgets, social institutions, advertising and marketing
techniques, also on play very important roles in cultural transmission. Cultural transmission also promotes cultural
diffusion (ie) spread of culture from one place to another.
During
the formulation of business strategies of a new product, it is very essential
to know about cultural transmission.
This enables the company to find out the best communication channel to attract
that cultural group.
Cultural
conformity
Conforming
to a cultural norms is called as cultural conformity. The knowledge of the nature and extent of
cultural conformity and its deviance will sometimes be helpful in business
decision – making. If a society is, by
and large, charaterised by blind conformity, it would be very difficult to
market new revolutionary ideas in such society.
Special efforts may be required in such a society to change the
attitudes of the people in favour of unconventional ideas. Cultural deviances sometimes provide
excellent opportunities of growth of new business (for example) In England and
Japan the younger generation took up coffee drinking in order to defy their tea
-drinking parents.
Cultural
lag
Cultural
changes do not take place at the same rate.
A rapid change may take place in one part of the culture may require
readjustment to changes in other parts of the culture. In other words, the other part is
experiencing a cultural lag. Cultural
lag is caused by factors like ignorance, resistance to changes, religious
sentiments, wrong notions, conservatism, political factors etc.
To
successfully market a new idea or a product it is necessary to identify the
factors causing the lag and to overcome them by taking appropriate measures.
Cultural
traits
The
characteristics of a culture is called as cultural traits. The following are some of cultural traits.
Low-context
and high context cultures
A
high – context culture is one that places great value on the intangible aspects
of a negotiation or business deal.
Individuals from such cultures look beyond the facts and figures and
take into considerations such factors as personal relationship, attitudes
towards respect, religion and trust. A
low-context culture on the other hand gives more importance only to tangible
aspects of Business (ie) only to facts and figures of business and not on the
personal attributes or personalities.
Masculine
and Feminine cultures
Societies
with so-called masculine values appreciate aggressiveness and assertiveness
while respecting the goal of material acquisition.
A
Feminine culture on the otherhand appreciates inter-personal relationships,
puts quality of life before material acquisition and applauds concern for
individuals and less fortunates.
Business
people from feminine cultures are often more reserved and less time – driven
than those from masculine cultures where achievements are more important than
building a long-term relationship. The masculine
culture has a leader and followers.
Monochronic
and polychronic societies
In
a monochronic society, time is used for ordering one’s life, for setting
priorities and for doing tasks in a sequential order – one thing at a
time. Most of the societies of the
developed world are monochronic. In
contrasts, in polychronic society, which uses time to accomplish diverse goals
simultaneously. It is characteristics of
emerging societies.
Universalism
Vs particularism
Universalism
is a belief that an idea or practice can be applied as it is universally. It is very similar to self-Reference
Criterion (SRC). On the other hand,
particularism holds that the environment dictates how ideas should be applied.
In
cultures with high universalism, the focus is more on the rules than on
relationships. Business contracts are
adhered to very closely, and people believe that a deal is a deal. In cultures with high particularism, the
focus is on relationships and trust than on formal rules. In a particularist culture, legal contracts
are often modified, and as people get to know each other better, they often
change the ways in which deals are executed.
It
is recommended that when individuals from particularist culture do business in
a Universalist culture, they should be prepared for rational, professional arguments
and a “let’s get down to business” attitude.
Conversely,
when individuals from universalist cultures do business in a particularist
environment, they should be prepared for more personal meandering in business.
Individualism
Vs communitarians
In
Individualism, people regard themselves as individuals while in
communitarianism they regard themselves as part of a group. Countries such as USA, Soviet Union and
czechoslovakia have high individualism.
Japan for example follows communitarian culture. Another best example is Republic of Maldives.
It
is recommended that when people from cultures with high individualism deal with
those from communitarianism cultures, they should have patience for the time
taken to consent and to consult, and they should aim to build lasting
relationships. When people from cultures
with high communitarianism deal with those from individualist cultures, they
should be prepared to make quick decisions and commit their organization to these
decisions.
Neutral Vs emotional : A
neutral culture is one in which emotions are held in check, whereas an
emotional culture is one in which emotions are openly and naturally expressed.
Japan,
UK, Republic of Maldives are regarded as high neutral cultures. People in these countries try not to show
their feelings. They act stoically and
maintain their composure. Mexico,
Netherlands and Switzerland are examples of high emotional cultures.
It
is recommended that when individuals from emotional cultures do business in
neutral cultures, they should document things well on paper and then perform
business. They should realize that lack
of emotion does not mean disinterest boredom.
On the other Land, when neutral cultures do business in emotional
cultures, they should respond warmly to boisterous attitude of people in
emotional culture.
Specific Vs diffuse: A specific
culture is one in which individuals have a large public space they readily let
others enter and share, and a small private space they guard closely and share
with close friends and associates.
A
diffuse culture is one in which both private and public spaces are almost one
and the same. Austria, UK, USA,
Switzerland are all specific cultures whereas Venezuela, China and Spain are
diffuse cultures.
It
is recommended that when specific people do business in diffuse culture, they
should respect a person’s title, age and background connections. Conversely, when individuals from diffuse
culture do business in specific cultures, they should try to get to the point
and be efficient.
Achievement Vs Ascription: An
achievement culture is one in which people are accorded status based on how
well they perform their functions. An
ascription culture is one in which status is attributed based on who or what a
person is. Achievement culture high
achievers whereas ascription cultures accord status based on age, gender, or
social connections.
It
is recommended that when individuals from achievement cultures do business in
ascription culture, they should make sure that their group had older, senior
and formal position holders who can impress the other side.
Cultural Stereotypes: Assigning
image to a group based on their characteristics is called as stereotyping. (For
example)
Nationality: German
Stereotype: The
Germans are rigid people usually humorless and obsessed with order and
formality. They don’t smile easily.
Cultural traits: Low
context culture, monochronic, high risk avoidance.
Nationality: Japanese
Stereotypes: Very group
oriented hence adopt communitarnism.
Negotiates in groups or teams and avoids criticism of partners or
proposals - Japanese will work their whole career at a single company.
National
cultural traits: Japanese culture is collectivist in nature,
maintains high - powder distance culture and high risk - avoidance.
Religion
Different
peoples have their own religious convictions, beliefs, sentiments, customs,
rituals and festivals. The cost of
ignoring religious affairs can be very high in International marketing (For
example) when an American fast food chain was planning to enter India, one
political party stated that it would oppose the marketing of beef product in
the country by the multinational. This
is because cow is regarded sacred by the Indians.
Religion
may play a vital role in deciding the weekly holidays, other holidays and
working hours. In Muslim culture Friday
is public holiday where as in Christian religion Sunday in a public
holiday. Hence people doing business
across boarders must take this difference into account. Moreover, in Muslim countries shops are
closed five times a day for prayers. In
countries like India, business decisions are closely associated with religions
sentiments (ie) they are made according to astrological mappings. They are usually done according to
astrological calendar which dictates that anything started during
‘Subhamuhurtha’ time will be good and anything started during ‘rahukala’ will
end in bad. Hence most of the business
decisions in India which includes decisions like launch of a new product, name
of the firm, brand name, starting a new firm are all done at ‘Subhamuhurtha’
time which are based on astrological calendar.
Ethnodomination:
In
many countries, one or other industry or trade is dominated by certain ethnic
group or religious group. This is called
as ethnodimination.
(For
example) Automobile spare parts business in India is dominated by Sikhs.
Language:
It
is another important cultural factor which cannot be ignored while doing
international business. It is estimated
that total number of world languages ranges between 4000 to 10,000. For example Switzerland is a country with
fairly three distinct cultures namely French, German and Italian. India is another typical example for
differences in language within the same country. In India, each state represent a specific
language and culture. In Kerala state
people speak Malayalam, in Tamilnadu state people speak Tamil language, in
Andharapradhesh state people speak Telegu language. The list goes on. In India there are 18 officially recognised
languages. The Arabic language is read
from right to left and many Arabians sequence things from right to left. A multinational blundered in the Middle East
when in the advertisement of its detergent it pictured soiled cloth on the
left, the box of detergent in the middle and clean cloths on the right.
Language
also includes many non - verbal communications, signs and symbols. For example, the thumbs - up sign, with the
thumb held straight up and four fingers kept folder, represents approval in
countries such as USA, UK and Russia, it is highly offensive in Iran and
regarded rude in Australia.
The
‘OK’ sign with thumb and index finger forming a circle and other three fingers
held straight up means every thing is great in the USA and Germany. In most of Europe and Argentina, it means an
absolute zero or worthless. It is
regarded as vulgar gesture in countries such as Spain, Russia, Brazil and
Uruguay. In Japan, it symbolises money,
mostly coins.
Other Social /
Cultural factors:
Consumer
preferences and habits:
What is liked by the people of one
culture may not be liked by those from some other culture. Hence, many companies have to modify their
products and promotion strategies to suit the tastes and preferences of the population
of different countries.
Bicycles
for example, are mostly used as basic means of transportation in India and
China. It is used to carry heavy weights
or even families in India. In Europe and
USA bicycles are used for sporting and exercising. Hence bicycles designed in India have to be
made of heavy steel to withstand heavy loads whereas bicycles designed in
Europe, USA have too be made of aluminum frames which is less in weight and
adds a dimension of aesthetics to bicycles.
This difference in product specification was adopted in Hero cycle
company, India while handling its International business.
Honda
company and its strategy in designing motorcycles is another example. Honda found that in North America, where
motorcycles are used primarily for leisure and sports, consumers look for high
horsepower and speed. Low horsepower and
low maintenance are scoring points in South East Asian countries where
motorcycles are the basic mode of transportation. High speed and easy maintenance are preferred
by shepherds of Australia who use it to drive sheep.
Eating
habits, consumer preferences and the resultant demand pattern vary greatly from
one market to another. For example cola
drinks are taken along with snacks in North America, just as coffee or tea in
India, but they are promoted as thirst quencher in India. Moreover, anytime is coffee time in India but
in Japan and England drinking coffee is a luxury and is adopted by rebellious
young generation against their tea drinking parents. The best example for handling cultural
differences in international marketing is provided by Nestle. They have what is called as country fact
book. This book consists of thorough
analysis and details of the country environment. The country fact book consists of questions
like How do the people of the country rank coffee in the hierarchy of consumer
products? Is the country a high or low
per capita consumption market? How is
coffee used – in bean form, ground or powdered?
If it is ground, how it is brewed?
Does coffee beans are roasted. Do
the people drink coffee in the evening?
Do they sweeten it? At what age
do people begin drinking coffee? Is it a
traditional beverage, as in France, or is it a form of rebellion, as in England
and Japan, where the younger generation has taken up coffee in order to defy
their tea drinking parents. Nestle’,
today brews a large number of varieties of instant coffee to satisfy different
national tastes.
The
values and beliefs associated with colour vary significantly between different
cultures. Blue is considered feminine in
Holland and is regarded as masculine and cold in Sweden. White indicates death and mourning in china
and Korea but in countries like India its a part of bridal dress.
There
are similar differences regarding value associations with numbers. 13 is considered a bad/unlucky number in
several cultures. It is very common in
hospitals, lodges in America where they skip No: 13 while numbering rooms.
Social trends:
There
are also some social - trends that affects international business environment. (For example) The percentage of women in
workforce is sharply rising. Both wife
and husband is working means less time and energy available for cooking at
home. It is estimated that, in the US,
of the three means a day, one and a half are eaten away at home and of the
remainder, half are readily prepared.
Hence hotel business flourishes well in US. Both husband and wife working also means more
income to the family. This increases the
demand for variety of house hold items such as appliances, electronic gadgets,
packaged food products.
Pepsi
Marketing strategy with Baby Boomers:
Pepsi
cola substantially increased its market share and good will by targeting the
baby boomers of US. The baby boomers
refers to those born in the US between 1946 and 1964 the period which
experienced a very high birth rate.
There are 77 million of them right now.
They represent 1/3rd of US population who control ¾th of the wealth in the country.
In the 1960s – Pepsi started
targeting the teens and youths of the baby boomers – who had high disposable
incomes and three times the per capita cola consumption than the average. 1961s Pepsi came out with an ad “Now its
pepsi for those who think young”. In
1964, this idea changed to “Come alive, you are in pepsi generation”. Then it became the Choice of a new
generation”. The way in which these ads
were designed is also worth mentioning they used pop music and used celebrities
like Michael Jackson and Lionel Richie in their ad campaigns.
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