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PEST

INTERNATIONAL BUSINESS

Dr. Manohar Pandit

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BenefitsGreater range of mode of entry e.g. via

trade, licensing, subcontracting, franchising

(locational specialization)Better access to external resources and

capabilities that may need to complement

their core competencies(outsourcing)Fewer constrains on geographic dispersion

of the value chain(spatial mobility)

WHY GO INTERNATIONAL

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INTERNAL ENVIRONMENT

International Business is an attitude of mind,approach of the company with a globaloutlook, seeking profits around the world on a

planned and systemic basisAudit

Resources

CapabilitiesCore Competencies leading to competitive

advantage

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INTERNAL ANALYSIS

MarketingProducts/services

Price/promotion

Distribution/location

People

Management

Office staff/other

Sales force

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INTERNAL ANALYSIS

Operations/facilities

Implementation

Facilities/equipment

Cost management/efficiency

Finances

Profitability

Debt position/capital structure

Inventory/receivable management

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RESOURCES

Resources are firms capital equipment, skill of

individual employees, patents, finance, and

talented managers

Ta n gi b le R es o ur ce s Assets that can be seenand quantified

Intangib le Res ources Organizational

culture, reputation, intellectual property rights,

patents, trademarks, copyrights, networks, Family

commitment

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RESOURCES

By themselves, resources do not create a

strategic advantage for the firm

Firm needs Capabil it ies

Capabilities can create competitive

advantage for International Business

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INTERCOUNTRY DIFFERENCES

AFFECTING INTERNATIONAL BUSINESS

International

Business

Cultural

Factors

Legal and Political

Factors

Economic

Systems

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GLOBAL ENVIRONMENTAL SCAN

Competition

Legal restraints

Government controls

WeatherFickle consumers

Natural disasters

and many other uncontrollable elements can,and frequently do, affect the profitable

outcome of good, sound marketing plans

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GLOBAL ENVIRONMENTAL SCAN

The marketer cannot control or influence these

uncontrollable elements but instead must adjust

or adapt to them

What makes marketing interesting is thechallenge of molding the controllable 4 Ps within

the framework of the uncontrollable elements

(competition, politics, laws, consumer behavior,level of technology, and so forth) in such a way

that marketing objectives are achieved

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ENVIRONMENT

Governments

Politics

Legal/regulatory

bodies

Local/national/regional cultures

Infrastructures

Nongovernmental

organizations

Intergovernmental

organizations

Non market Factors

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Culture

Heterogeneity

(a measure of

differences across

markets andwithin markets) of

customer tastes

and preferences

Competitors in the

market

Product offerings

ENVIRONMENT

Market Factors

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POLITICAL ECONOMY

Economic, Political, Legal and Cultural Systems

are interdependent

Politicians Shape Laws

Laws help Economic Activity

Economic Activity affects Culture

Culture influences Nation

Understanding inter-relation of these factors

help in International Business

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POLITICAL ECONOMY

Political System

System of government in nation

Parliamentary, Absolutist

Democratic vs Totalitarian

Elected, Dictator, Communist Totalitarianism

Individualism vs CollectivismRepresentative Democracy, Socialism, Communism

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ECONOMIC ENVIRONMENTAL

CONSIDERATIONS

Economic Factors:

Stage of Economic Development

Economic InfrastructureConsumer Income and Purchasing Power

Currency Exchange Rates

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ECONOMIC ENVIRONMENTAL FACTORS

Market Economy

Government role to encourage free and fair

competition, discourage monopolyCommand Economy or CPE

Govt. Sets Goals and Decides Price and

Quantity to be ProducedMixed Economy

Mix of Market & C P E

Stage of Economic Development

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Economic infrastructure

Countryscommunication, transportation,

financial, & distribution systems

Critical for determining how, where, & to

whom to do business, market

LG in India

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Consumer Income & Purchasing Power

Marketers must consider the average

household incomes of the consumers

Inflation

Growth rate

PPPBig Mac

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Currency Exchange Rates

A currency exchange rate is the price of

one countrys currency expressed in

terms of anothercountryscurrency.

Failure to consider exchange rates can

have severe consequences

Asian currency crisis


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POLITICAL ECONOMY

Legal Systems

Common Law

Civil Law

Theocratic Law

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Key Legal IssuesHR

Contracts, Visa, Recruitment,Work norms, Repatriation

MarketingPackaging Norms - legalrequirements, IPR-Trademark,Copyright, Patents

Infringement, Unfair competitionCounterfeiting, Gray Market

POLITICAL ECONOMY

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Key Legal Issues

Finance

Trade and Investment Regulations

Financial Flow Regulations

Taxation

Reporting Requirements

Ownership Regulations

Dispute Resolutions

POLITICAL ECONOMY

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INTER-COUNTRY DIFFERENCES

AFFECTING INTERNATIONAL BUSINESS

InternationalBusiness

Cultural

Factors

Legal and Political

Factors

Economic

Systems

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SOCIAL / CULTURE

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" Culture is more often a source of conflict than

of synergy. Cultural differences are a nuisance

at best and often a disaster."Prof. Geert Hofstede,

Emeritus Professor, Maastricht University

The collective programming of the mind

distinguishing the members of one group orcategory of people from another is culture

CULTURE

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LEVELS OF CULTURE

National Culture

Sub Culture

Organisational

Culture

Occupational

Culture

National cultures belong to anthropology; organizational cultures tosociology. Organizational cultures are rooted in practices, they are tosome extent manageable; national cultures, rooted in values. Valuesare acquired in childhood, national cultures are remarkably stableover time

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Culture Its Characteristics

Prescriptive - Purchase Decisions That

Are Socially Acceptable

Socially Shared - Based On Social

Interaction & Creation

Facilitates - Advertising & Communication

CommunicationLearned - Not Genetically Passed

on, Learned & Acquired

CULTURE

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Culture Its Characteristics

Subjective - Different Ideas About Same Object.

Unique & Arbitrary

Enduring - Shared & Passed From Generations

To Generations

Cumulative - Broader Based, Adapts New Ideas,

Discards OldDynamic - Adapts To New Situations And

Knowledge

CULTURE

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A cross-cultural analysis involves the

study of similarities and differences

among consumers in two or more nations

or societiesThe cross-cultural analysis creates an

understanding about values, customs,

symbols, & languages of other societies.

CULTURAL ENVIRONMENTAL FACTORS

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Occupational

Culture

Culture as a system of values and normsValues Abstract ideas about what a groupbelieves to be good, right, and desirable. Valuesare shared assumptions of how things ought to

beNorms Social rules and guidelines thatprescribe appropriate behaviour in particularsituationsValues influence the behavior of the consumers

McDonalds in India (Veg outlets) Business lunch

CULTURAL VALUE DIMENSIONS

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Customs are the norms and

expectations about the way people

do things in a specific countryCosmeticsFrench view

Japanese Valentines Day

Touching feet in IndiaCelebrationsIndia, Worldwide

Customs

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The Foreign Corrupt Practices Act makes ita crime for U.S. corporations to bribe an

official of a foreign government orpolitical party to obtain or retain businessin a foreign country

Bribes are a tax deductible expense in France

& GreeceCooperation money in Indonesia

Customs and Practices


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Cultural symbols are things that

represent ideas and concepts.

Semiotics is the study of thesesymbols.

Improper use of symbols can be

disastrous for global marketers

Symbols


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Coke with the ParthenonSymbols


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Nike AirSymbols


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SwastikSymbols


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Language serves as a window on the

culture of a society

The best language to communicate withconsumers in is their own

The most powerful aspect of culture that

Can become political weapon Has created a nation

Words carry values

Language


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Over 3,000 languages spoken world-wide

Japanese, Mandarin, Cantonese

Every language has limitations exceptSanskrit

Vicks in Germany

Pepsi in Arabic countries

Jalapeno , J and Y ( :- )Makaya Ntini

Water in English

Language


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Some words can not be translated. Theseare conceptsShraddha AnubhutiAvatar

In back translation, a translated word isretranslated into the original language by a

different interpreter (error checking control)Yeh aansoo mere dil ki juban hai

Language & Back Translation


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When Parker Pen marketed a ball-point pen inMexico, its ads was Parker Pens "won't leak inyour pocket and embarrass you"

was mistranslated to "No te embarazarchorrendose en tu bolsillo" which means

Parker Pens "Won't leak in your pocket andimpregnate you".

Printed T-shirt for the Spanish market whichpromoted the Pope's visit. Instead of "I sawthe Pope" (el Papa), the shirts read "I saw thePotato" (la papa)

Language & Back Translation


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CommunicationChances of miscommunication increase

substantially when the people are from

different cultures. Different interpretationsSuspect

American vs British English

Boeings 767 aircraft - a mirror finish.

Expensive to resolve

Nova is No go in Spanish. Chevy failure


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Nonverbal CommunicationGestures, both intended and self-directed, such

as anger, fear, joy, frustration, pensive, puzzled

Facial expressions, such as smiles, frowns, andyawns

Posture and stance

Clothing and hair styles (hair being more likeclothes than like skin, both subject to the fashionof the day)

Walking behaviourInterpersonal distance

Touch conveys emotions


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Colour symbolismEye contact and direction of gaze, particularly in

listening behaviour

Architecture and interior design

Artefacts and nonverbal symbols, such as lapel pins,walking sticks, and jewellery

Graphic symbols, such as pictures to indicatemensroomorhandlewithcare

Smell (olfaction), including body odours, perfumes,and incense

Speech rate, pitch, inflection, and volume


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Gift-Giving and HospitalityGifting rituals

Tiffany in Japan, nos.

Knifes and scissorsFlowers

Apparels

HandkerchiefsForcing to eat more, similar to one for the road

Showing emotional bonding


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Cultural context of various countriesIn a low-context culture, the words used by the

speaker explicitly convey the speakers message to

the listener. Anglo-Saxon countries, such as Canada,

the UK, and the USA, and Germany etc are low-

context cultures

In a high-context culture, the context in which a

conversation occurs cultural clues are important inunderstanding what is being communicated as in

Arab countries and Japan


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Saying

NOAmerica, India, Arabic countries


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Cultural context of various countries

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ReligionHinduism rather emphasizes spiritual

accomplishment than economic success.

Cycles of death and rebirth.MokshaProtestant ethic makes a virtue of high

savings rates, striving for efficiency, and

reinvestment of profits to improve futureproductivity, all are necessary for the

smooth functioning of a capitalist economy


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Other factors that affect the culture

Social Structure

Individuals, Families, and Groups

Oriental and Western social valuesBelongingness,

for whom one works not the position

Social StratificationClass and Caste

IndividualismCollectivism


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Culture plays significant role in influencingconsumer perception, that influencespreference and purchase

Marketing Mix can be effective as long asit is relevant to given culture

ROLE OF CULTURE IN MARKETING

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WE ALL ARE DIFFERENT

Ethnocentrism

PolycentrismGeocentrism

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IF THE WORLD WAS A VILLAGE OF

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How many would be from which majorregions of the world?

How many would speak what languages?

How many would practice what religions?How many would have what degree of

education?

How many would be malnourished?

How many would have regular access toclean drinking water?


100 PEOPLE

DR.MANOHARPANDIT


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100 PEOPLE

61 Asians12 Europeans

14 from the Western Hemisphere, both

north and south13 Africans

50 would be female

50 would be male74 would be nonwhite

26 would be white

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100 PEOPLE

33 would die of famine

1 would be near death;

1 would be near birth7 would have a college education

8 would own a computer

11 would be homosexual

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ETHNOCENTRISM

Definition

Ethnocentrism derives from the Greek word

for people, ethnos and English word,

center

Tunnel vision is what the Ethnocentrism

is generally referred as

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PROBLEM WITH ETHNOCENTRISM?

Ethnocentrism leads to misunderstandingother persons

One falsely distort what is meaningful andfunctional to other peoples through our own

cultural reference. One see their ways in terms

ofoneslife experience, not their context

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One does not understand that he/she doesnot understand

One is not aware that he/she can develop

more valid understandings about how theyexperience life

Very few Westerners understand Indian

spiritualism, when they understand Indianperspective


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Expression of Ethnocentrism

Violence

Discrimination

Proselytizing

Verbal aggressiveness


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EffectsCreates the feeling that ones own culture is

superior to othergroupscultures

Moves one to criticize, subordinate,

undermine, and develop conflictingrelationships with other groups

Ethnocentric feelings can even cause anindividual or group to fear for their own

existenceBy implication other people's ways of thinking,

behaviour are aberrant, strange and inferior


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STEREOTYPE

DISCRIMINATION

Generalized attitudetowards members ofa group

Behaviors directed

towards people onthe basis of theirgroup membership

Generalized beliefabout members of agroup

PREJUDICE


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Extreme effects of Ethnocentrism

Racism

ColonialismEthnic cleansing


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Environmental Adaptation

Ability to effectively interpret the influenceand impact of the culture in which you hopeto do businessCultural adjustments

Establish a frame of reference

Avoid measuring and assessing markets

against the fixed values and assumptions of

your own culture

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THE SELF-REFERENCE CRITERION

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THE SELF REFERENCE CRITERION

AND ETHNOCENTRISM

The key to successful internationalmarketing is adaptation to the

environmental differences from one

market to anotherPrimary obstacles to success in

international marketing are

SRCAssociated ethnocentrism

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THE SELF-REFERENCE CRITERION

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Ethnocentrism is notion that ones ownculture or company knows the best

Ethnocentrism and the SRC can influence an

evaluation of the appropriateness of adomestically designed marketing mix for aforeign market

The most effective way to control the

influence of ethnocentrism and the SRC is torecognize their effects on our behavior

THE SELF REFERENCE CRITERION

AND ETHNOCENTRISM

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SELF REFERENCE CRITERION (SRC)

As unconscious reference to ones own

cultural values, experiences, and knowledge

as a basis for decision-making is madeThe SRC significantly influences ability of

international managers to objectively

evaluate environmental factors and make

business decision

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APPROACH TO ELIMINATE SRC

Step 1:Define the business problem or goal inhome-country traits, habits, or norms

Step 2:Define the business problem or goal inforeign country cultural traits, habits, or

norms. Make no value judgmentsStep 3:Isolate the SRC influence in the problem and

examine it carefully to see how it complicates theproblem

Step 4:Redefine the problem without the SRCinfluence and solve for the optimum businessgoal situation

2013 ib pest

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