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UNIT 5 i

Extending marketing

Unit 5

BBM 104/05
Principles of Marketing

Extending Marketing

ii WAWASAN OPEN UNIVERSITY
BBM 104/05 Principles of Marketing

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UNIT 5 iii
Extending marketing

Contents
Unit 5 Extending Marketing
Unit overview 1

Unit objectives 2

5.1 Creating a competitive advantage 3

Objectives 3

Introduction 3

Competitor analysis 4
Identifying competitors 5
Assessing competitors 6
Selecting competitors to attack and avoid 8
Designing a competitive intelligence system 9

Competitive strategies 10
Approaches to a marketing strategy 10
Basic competitive strategies 11
Competitive positions 13

Suggested answers to activities 18

5.2 The global marketplace 21

Objectives 21

Introduction 21

Global marketing in the 21st century 21

Looking at the global marketing environment 22
The international trade system 23
Economic environment 24
Political-legal environment 25
Cultural environment 25

Deciding whether to go international 27

Deciding which markets to enter 28

3 Market ethics and social responsibility 37 Objectives 37 Introduction 37 Social criticisms of marketing 38 Marketing’s impact on individual consumers 39 Marketing’s impact on the society as a whole 43 Marketing’s impact on other businesses 45 Citizens and public actions to regulate marketing 46 Consumerism 46 Environmentalism 50 Business actions towards socially responsible marketing 56 Enlightened marketing 56 Marketing ethics 57 Suggested answers to activities 61 Summary of Unit 5 65 Course summary 69 Unit practice exercise 71 Suggested answers to self-tests 75 Suggested answers to practice exercise 81 Terminology 85 References 87 .iv WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing Deciding how to enter the market 29 Exporting 29 Joint venturing 30 Direct investment 32 Suggested answers to activities 35 5.

In the first section of this unit. this unit will cover topics on social criticisms of marketing. many marketers are advocating the practice of a borderless market. The second section in this unit will allow you to identify the environmental forces that affect the international ventures. efforts of citizen and public action to regulate marketing. Due to these reasons. The second section of the unit will cover topics on global marketing. you will cover topics on competitors’ analysis and competitive strategies. provided this sourcing presents a competitive advantage to the company. competitor analysis and tracking have become essential tools for an organisation’s sustenance in the market. you learnt the marketing fundamentals starting from understanding marketing. There are many companies being wiped out of business due to their incapability to compete successfully. In this unit. UNIT 5 1 Extending marketing Unit Overview C ongratulations. marketing information system (MIS) and finally the 4P strategies. which encompasses the global marketing environment and various global marketing decisions that need to be taken by marketers. you will be exposed to the real concept of competition and how to manage the impact of competition in your organisation. you have reached the last unit of this course. you will learn how to develop competitive strategies. namely. environmental factors. Today. one of the effective ways to expand your business is to look for opportunities in the foreign market. Finally. In a borderless market simply means that a company brings its products and services to every corner of the earth and sources its raw materials from anywhere in the world. In this unit. creating a competitive advantage. You will also be exposed to different competitive strategies practised by various business entities in the world. You will also get some answers to important questions in your effort to move in to a global market. This unit comprises three major topics. With these inputs. marketing planning. business actions towards socially responsible marketing and marketing ethics. Companies which become stagnant and are not willing to change become obsolete in the market. you will be able to realise the importance of providing quality products and services to gain a competitive advantage. Innovations and creativity have become the essential determinants of success in modern day business practices due to rapid competition. Understanding your consumers is a vital initial step towards planning and developing your marketing efforts. We will also discuss the scope and processes required to launch an international marketing effort in this unit. In the previous units. This has to be followed by an understanding of your competitors and the other elements of your marketing environment. In the first section of this unit. Competitions are moving into a new era in this millennium. you will understand the ways and means to analyse your competitors. Besides that. global marketing and marketing ethics. .

2. 4. economic.2 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing In the third section of this unit. political-legal. Describe the principles of socially responsible marketing. 5. 7. 6. you will be given inputs on the methods used to conduct business without jeopardising the publics’ interests. Discuss entry strategies for international markets. 9. Define consumerism and environmentalism and explain how they affect marketing strategies. 3. Discuss the need to understand competitors as well as customers through competitor analysis. Explain and apply different competitive positions. and cultural environments affect a company’s international marketing decisions. Explain the fundamentals of competitive marketing strategies based on creating value for customers. which is also the final section of this module. Unit Objectives By the end of Unit 5. you should be able to: 1. . 8. You will also be exposed to the broad scope of marketing ethics which are normally never thought of by many business practitioners. Discuss how the international trade system. 10. Explain the role of ethics in marketing and help develop ethical marketing practices. Finally. Describe three key approaches to entering international markets. Identify the major social criticisms of marketing and defend your marketing practices. you will be presented with some ethical issues in marketing which marketers face today.

Just like in a war. Explain the essentials of competitive marketing strategies required to create value for customers. suppliers. it cuts the price of its prepaid starter packs by a third to lure new subscribers in a landscape that has long turned brutally competitive. a penetration rate of 81% out of its 27 million population.5 million mobile phone users as of first half this year. For a further illustration of how competition affects market practices. Nonetheless analysts do not foresee prices falling any much lower. With that. UNIT 5 3 Extending marketing 5. AmResearch telecommunications analyst Fiona Leong sees Maxis’ latest move as a strategy to boost subscriber growth in order to maintain its market leadership”. as telcos are making a loss with the generous preloaded airtime. read the following extract from The Star online: “Telecommunications (telcos) industry. Introduction No business is an island. Analysts believe that the new plans by Maxis would appeal to low volume users and those who want a mobile phone to mainly receive calls. you will need to deal with customers. a second round of painful price slashes was indeed inevitable. Firing the shot is Maxis Communications Bhd. employees and others. pretty much sums up what’s in store for the country’s telecommunications players. The Star 7 October.1 Creating a Competitive Advantage Objectives By the end of this section. the businesses are at war — fighting to gain the share of the same markets. 2006 . Describe why you need to understand competitors as well as customers through competitor analysis. 3. rising capital expenditure and near-saturation cellular penetration rates. there will also be other organisations offering similar products to the same customers. And while that could be good news for consumers in the short term. it is necessary to understand the adversary (competitors). 2. make money and succeed. These other organisations are your competitors and their objectives are also similar to yours — to grow. Source: Tee L S. Discuss the steps involved in carrying out a competitive analysis. Malaysia has some 21. a significant price slashing could end up being painful for the telcos. As it stands now. In almost all cases. resources and territory: the customer. mired by competitive pressures. For the success of your business. Effectively. you should be able to: 1. ‘Telco price war breaks out’.

Besides allowing you to have a direct comparison of your strategies with those of your closest competitors. If you know your enemy and yourself. As shown in Figure 5. value-for-money prices as well as good customer service to build strong customer relationships with your customers. You may use the marketing strategies of brand building (branding) by emphasising high quality products. If you know yourself. For instance. product. . For example. but not your enemy. Sun Tzu wrote a treatise on the Art of War. identifying and assessing competitors and then. From a 21st century perspective. place and promotion with close competitors must be constantly made to ensure the company maintains or improves its competitiveness in the market. The competitor has captured more business and also grabbed some of your old customers with the change. he/she needs to find out all it can about its competitors. you will suffer a loss. Under such circumstances. offers more varieties of shoes and has just had the shop renovated to project a classier image and comfortable physical environment to customers. assume that you own a shoe retailing business and recently your sales have dropped. price. For instance: If you are ignorant of both your enemy and yourself. Competitor analysis When a marketer plans a company’s marketing strategies. let us look at the steps in analysing competitors. the great Chinese military strategist. for every battle won. Comparison of the marketing strategies. many of Sun Tzu’s views on strategy are still relevant today — for both military commanders and business leaders looking at how to win against competitors. competitor analysis also helps you to find ways to create competitive advantage and to minimise your competitive disadvantages. then you are a fool and certain to be defeated in every battle. Here.1.4 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing Around the year 500 BC. we could say that the competitor has created a competitive advantage over you by offering more varieties of shoes and presenting a more impressive shopping environment to its customers. you will win every battle. Now. you need to conduct a competitor analysis to find out your competitor’s strengths and weaknesses are and use the results of the analysis to create a comparable competitive advantage. first. You notice that your main competitor who is located next to your shop. competitor analysis involves. let us say the competitor does not provide good customer service though the shop’s physical environment is impressive and shoes are highly priced. selecting which competitors to attack or avoid.

suppliers of products like Yeohs. Based on the discussion above. Ribena and mineral water can also be considered as competitors for F&N. You can also classify those suppliers who cater to the same need. strengths and weaknesses. UNIT 5 5 Extending marketing Identifying the company’s competitors Assessing competitors’ objectives. which produces Coca-Cola. Kotler and Armstrong (2012) Identifying competitors If you define the term narrowly. all companies which compete for the same share of expenditure by consumers can be considered as competitors. In fact. Fizzy. competitors are suppliers who sell similar type of product or services at similar prices to the same customers as yours.1 There are more than 10 types of “3-in-1” coffee brands in the supermarket. Identify how those brands create competitive advantage for themselves. You have to make a decision on the scope of competition for your product. but not DaimlerChrysler and Jaguar. Milo. At a broader level. should be seen as a potential competitor. the scope of competition is wider than what is mentioned above. . even Mirinda. Activity 5. competitors can be viewed both in a narrow or broad context. Schweppes and other soft drinks can also compete with Coke. So. In a wider sense. anything that is used as a satisfier for the same need. Pepsi Cola is the direct competitor of Coca-Cola in a very narrow definition. For example. as competitors. Thus.1 Steps in analyzing competitors. In practice. McDonald’s might see KFC as a major competitor but not roadside Ramly Burger and Saudi Burger. strategies. This is the first step to create value-added services in order to gain a competitive advantage. in this case quenching of thirst. Proton might view Perodua as a major competitor. and reaction patterns Selecting which competitors to attack or avoid Figure 5.

which are required urgently. There are many instances to show that a company learns from its competitors’ strategies. b. If the company finds that a competitor has discovered a new segment.6 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing Activity 5. You must understand that the collection of the mentioned data is not that easy. This situation explains how the nature of business changes due to competition. this might be a threat. suppliers and dealers to find out their perception of your competitors. motels.2 The first step in creating a competitive advantage is to identify the competitor. this might be an opportunity. As a marketer. Sundry shops are mainly visited for the purchase of perishable goods and convenience goods. The role of sundry shops.. In Malaysia. You can also learn about the competitors’ strengths and weaknesses through secondary data. Prepare a list of accommodation providers (i. you have to assess your competitors’ strength and weaknesses to answer the following critical questions: Step 1: What your competitors do? a. which supply convenience goods. hotels. If the company finds its competitor is reducing price or providing discounts or applying sales promotion strategies. c. you need to gather relevant data of your competitors’ goals and strategies. Try to categorise them according to their standard of service. Many customers buy from hypermarkets during sales periods and store the goods for future use. Developing and maintaining competitor intelligence systems have become a routine for many companies.e. It has been a routine activity for many companies to assess their competitors’ strategies and operations. . the role and the importance of the small-scale retailers have changed due to the emergence of hypermarkets and huge supermarkets. Some even use their competitors’ strategies as the benchmark to improve their services thus raising their own profitability. price range and types. has changed. personal experience and word of mouth. Assessing competitors It is important for a company to monitor its competitors’ strategies and operations. As a first step. Sometimes you can conduct marketing research involving customers. hostels and lodging houses) in your state.

a group of companies will form a price cartel to avoid price competition which can eventually threaten the survival of the company. Step 3: How fast are the competitors likely to react? Depending upon the individual style of functioning. Avoidance is a better option if you feel that the retaliation from your competitor may cause both of you to lose rather than gain. Tesco. The price reductions of competitors will trigger immediate retaliation from other competitors. If this continues. For example. MAS Airline did not reduce its airfare despite having major competition from AirAsia. They distribute leaflets. Giant. UNIT 5 7 Extending marketing d. This example may not apply to products under a monopolistic competition. In some countries. petrol stations in the country are in the category of oligopoly market. you must know how your competitor would react against your strategies. the suppliers of petrol will incur a great loss even though the customers will gain. Accurately forecasting your competitors’ reactions against your strategies would enable you to prepare yourself to defend your current competitive position. comparing your company’s products and processes with those of your competitors or leading firms in other industries to find ways to improve quality and performance. For example. advertise in local newspapers on the price cut items regularly to attract mass customers and have a fairly clear idea as to how their competitors would react to these price cuts. Step 2: What will our competitors do or how will they respond to our strategies? You must be able to understand the basis of your competitors’ objectives and strategies. Under this scenario. You can benchmark your company against other companies. and foresee your competitors’ likely actions in the market. This shows that they keep to their culture of serving the upper middle class and corporate customers and take time to develop a strategic response to the threat from AirAsia. the government has to intervene by fixing the price of petrol to avoid price wars among the petrol suppliers. You must also be able to reasonably forecast their likely reactions against your marketing strategies. Also. For example. . Carrefour and other hypermarkets often compete with each other by slashing prices of some necessity goods. Due to this reason. you may avoid implementing some strategy if you know they will do the same. The nature of rivalry is intense if there is immediate response from your competitors. some of your competitors may take time to react to your strategies while others may react very quickly.

. Based on the discussion in the previous page. you must carefully select whom you want to compete with and with whom you want to avoid competition. why do some customers buy Mercedes Benz while others buy BMW? What are the values created by Mercedes Benz and BMW for their respective customers? An analysis of the values sought by the consumers will help the companies to design their competitive strategies against each other in the automobile market. By doing this. this decision will determine the survival of a company in the market. single. For example. and wealthy. they lead an active lifestyle whereas those who prefer Mercedes Benz are very much family-oriented. This decision is made when you have selected your competitors while you decided on the design of your marketing mix elements. however. You can use customer value analysis to determine the strength of your competitors. you spend less money and resources to compete. Coca-Cola competes with Pepsi Cola rather than 7Up. To understand your competitors well. Sometimes you may choose to compete with weaker competitors rather than the stronger ones. For example. Also. how do they rate the various competitors on their ability to provide these benefits. 1. you have to decide whether to retaliate against your competitor or be quiet. through an analysis of your consumers. AirAsia was small when they started competing with MAS. Total demand may increase due to competitors’ marketing efforts as the overall market size goes up on account of competitive activity. At the same time. the rewards of larger market shares or consolidation of your own position may justify taking on strong competitors. Now it is a very successful airline. go further to understand the benefits and values that each set of customers seek from these products. Some admit that customers who purchase BMW are young. you must investigate your competitors’ strengths and weaknesses in each customer segment. You must understand that it will cost you more to compete with bigger and stronger competitors than with smaller or weaker ones. The analysis must. Also. wealthy and image-conscious. Customer value analysis means that you need to clearly understand. you may sharpen your abilities to compete. Many companies prefer to compete with close competitors.8 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing Selecting competitors to attack and avoid When operating in a competitive environment. Sometimes. You also need to examine how much your product is preferred compared to your competitors’ product and on what criteria. what the benefits in the product offerings that consumers value the most are. It is interesting to note that the existence of competitors can also give you some benefits.

To identify them. However. analyse and use information pertaining to your competitors. present a healthy growth environment to most of their participants. They are prepared to do anything to destroy their competitors. Their existence will help you to get more customers to visit your outlet. particularly in the case of specialty or shopping products. you have identified the importance of understanding your competitors and their strategies. It is a good business practice to support fair competitors and focus your combative energies at bad competitors. The industries where the number of good competitors is substantial as compared to the number of bad competitors. The CIS is a systematic and comprehensive tool that enables you to collect. It interprets and reports the information in a simple format. . There are many instances where the government intervenes to ensure that the competition among two or more rival companies does not go out of control. Secondly. In Malaysia. You must have noticed that customers prefer to buy jewels. watches or even sunglasses at the place where there are many independent outlets. you design the CIS so that you can use it to continuously identify and collect the information and make it available to the decision makers for informed decision making. maintaining and implementing a CIS is not cheap or easy. To set up a good CIS. Industries in general. Competition is a fact of business life. Good competitors build and respect ethical norms in the industry which help shape the nature of competition. Good competitors generally engage in fair play whereas bad ones often break the ethical codes of conduct. However. Thirdly. UNIT 5 9 Extending marketing 2. Bad competitors still exist despite drastic actions taken by the government. Another example is the existence of illegal betting outlets which compete against the authorised betting agencies. comprise good and bad competitors. 3. So the existence of competitors would sometime help you to attract more customers. Designing a competitive intelligence system In the previous section. you must know how to collect it. not all competitors are beneficial to the existence of a company. Smaller companies that cannot afford a CIS can appoint marketing staff to focus on gathering and reporting information in respect of identified competitors. VCD and DVD piracy have cost losses in millions of ringgit to legitimate suppliers. customers have more choices. you need to collect information about their strategies. You can update your product technology or improve your services after setting competitors as your benchmark. The reason is very simple. A good CIS is also capable of evaluating the validity and reliability of information. More established companies may be required to set up a more formal competitive intelligence system (CIS). you must first identify what information you need.

why are there so few smaller companies using them? Competitive strategies After identifying your competitors. Activity 5. Let us discuss these approaches to a marketing strategy and the basic competitive strategies a company can adopt to create a competitive advantage and consolidate its market position. in the form of competitors and other components. The collection of information would sometimes require you to spend on additional resources especially on manpower and IT. Pepsi and Coca-Cola are always at war with each other in their bid to capture a larger market share or retaliate against competitive moves. Initially. MAS surprisingly increased its airfares. The strategy development process should therefore follow a deep and thorough analysis of both internal and external factors that are unique to the company. When you set up your CIS. its strengths and weaknesses as well as the opportunities and threats present in the company’s environment.3 If competitive intelligence systems are very important. This would include an analysis of the company’s own objectives. Celcom and Digi. Approaches to a marketing strategy The nature of competition and competitive strategies varies according to country. MAS also started slashing its prices. you should focus your resources only on information that you really require. Retaliation strategies can also be seen in the cell phone market between Maxis. There are many approaches to designing competitive marketing strategies and not all the approaches are suitable for all companies and their products. The pricing strategy imposed by MAS allowed AirAsia to stay in a comfort zone. The nature of competition is also complex most of the time. Due to this reason. Eventually after six months. . Each company is unique and the environment where it operates may differ from that of other companies. industry and products. There is no single best strategy to gain competitive advantages that would suit all companies. make sure you are aware of the cost incurred to perform such activities. you must develop competitive strategies to provide added values to your customers which enable you to gain a competitive advantage. when AirAsia was riding on lower airfares.10 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing This information should be regularly filed and analysed so that it can be a useful input in your decision making.

Luxury car distributor in Malaysia. BMW (7 Series) and Mercedes Benz (S-Series) to wealthy customers in Malaysia. Michael Porter has identified four competitive positioning strategies for companies. Pizza Hut in Malaysia differentiates itself from Domino’s Pizza and US Pizza by offering more local flavours of pizza. India.com. You are able to so by reducing your production costs through cost efficiency and effectiveness. UNIT 5 11 Extending marketing Basic competitive strategies As discussed in your textbook. thus achieving the cost leadership goal in the airline industry. 2. Shell petrol differentiates itself from Esso. Philippines. NAZA Motors. . Focus: This strategy requires you to focus your effort on serving a specific and defined group of customers rather than serving the entire market. 1. Lamborghini. Differentiation: This strategy requires you to gain a competitive advantage by providing differentiated products and services compared to your competitors. Let us look at the three winning strategies. Overall cost leadership: Under this strategy. AirAsia is a good example of this approach. markets Ferrari. Out of the four. JobStreet. Singapore. The manufacturers of luxury cars rarely involve themselves directly in manufacturing and distributing cheaper models despite having the resources and technology to do so simply because their market focus is on the luxury segment rather than the entire market for automobiles. To develop this competitive advantage.20 per litre. 3. your production costs must be lower than those of any other competitor in the market. It maintains lower operational costs and reduces prices to very low levels. three are winning strategies and one is a losing strategy. Indonesia and Bangladesh) differentiates itself from competitors by offering a comprehensive suite of interactive recruitment services connecting businesses with talent in the region. Caltex and Petronas by claiming that Shell’s V-Power premium petrol adds power to pickup and speed and keeps the engine clean even though it costs an extra RM0. the largest online talent bank in Malaysia and one of the largest in the South Asian region (Malaysia. a company can gain a competitive advantage by maintaining low costs and offering reduced prices to the market.

10 MAY 2011 — Malaysian online recruitment website JobStreet. Jobstreet launches mobile application 10 May 2011 KUALA LUMPUR. Android and RIM (BlackBerry).com alone. Activity 5. This type of companies may not last long in a competitive market. we havemore than 20. Chook Yuh Yng.4 Read the following article and answer the following questions. three strategies focusing on operational excellence or building up consumer intimacy or developing product leadership through innovation have also been suggested as alternative positions that companies can develop.12 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing Many marketers believe that pursuance of clearly defined strategies would enable the company to perform well. In addition.” Chook said that after the JobStreet. Some companies. the suppliers would not be able to really answer it. If the question “what is your company or its product good for?” was raised.” said JobStreet country manager. iPad). “In JobStreet. We therefore expect more people to apply for jobs via their smartphone. Their positioning is not very clear and customers do not have a clear idea of their distinctions. combine two or more of these values and gain a strategic advantage.000 jobs available now. in order to create an appeal for a larger segment of the market.com has launched its mobileapplication for major operating systems — iOS (iPhone. Spend 30 minutes on this activity. “This launch is timely as we are now seeing an uptrend in the usage of Smartphone as well as a boom inemployment opportunities. Maggie is known for instant noodles and Gardenia is known for its tasty breads. “With the application now made available on all major smartphones. we are confident the number of downloads and usage of the JobStreet mobile application will increase very quickly. “Middle-of-the-roaders” often do not have a clear direction and distinction in offering their products or services.000. so far they have not created identities for themselves. Fresh & White and Sparkle brands of toothpaste have been established quite some time ago but have yet to create their product identities and position their brand names in the market.” . the number of downloads has exceeded 100. For example.com mobile application was made available on iPhones last May. Michael Porter suggests that companies position themselves properly and clearly to avoid business failure. Though there are many companies operating in the market.

How far do you think its latest service strategy would affect its competitors? Competitive positions Competitive positions provide you with alternatives on competitive strategies.computerworld. some position themselves as challenger. Table 5.com create value for its customers? 3. followers and nichers.com. If you notice.com.com mobile application can be downloaded free of charge from Apple iTunes.1 shows specific marketing strategies that are available to market leaders. jobseekers can simply type job related keywords into their smartphones or scroll through job categories. challengers. tradition. Again there is no one strategy which is better or superior to others. policy. Users can also receive job alerts and view past searches to facilitate their job hunt. situation.com mobile application made job searching more convenient because it helped jobseekers to find and apply from anywhere. How does JobStreet.” The JobStreet. Companies choose their strategies according to their culture. . customers and market.my/print- article/11808/ 2/2 1. Blackberry Application world and Android Market. Source: Retrieved from Computerworld Malaysia — JobStreet launches mobile application. some companies react immediately to the competitors’ strategies. there are some companies that would like to carry on with their marketing plans without considering much of their competitors’ strategies. “Using the JobStreet mobile application. Some companies would prefer to be a leader in the industry. The jobseekers can view the job description and apply immediately or save the job posting in a folder. resources. others as followers and nichers. anytime. UNIT 5 13 Extending marketing She said the JobStreet. List the possible competitors for JobStreet. On the other hand. www. experience. 2.

therefore.14 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing Companies that position themselves as leaders usually have the largest market share in a given market. Nationwide. The fourth positioning alternative is that of being a market nicher. the following companies can be considered to be the market leaders in their own ways: Maxis. track record. Seng Heng. Volvo always claims that it is the leader in car security. these companies target sub-segments. innovations. you would know that there are several competitors in a given market. customer preference. most industries contain an acknowledged market leader. Rotiboy. They. While one competitor may develop the position of being a challenger. For example in Malaysia. it can also choose a policy to “live and let live”. Smaller divisions of larger companies may also pursue niching strategies. From your own exposure to the market. Instead of pursuing the whole market. the challenger can choose to take on the leader or to concentrate its energies on smaller and weaker competitors and thereby consolidate its own position. Alternatively. Great Eastern Life. . There are also many companies that claim they are leaders in a particular area such as quality. Market challengers are usually runner-up companies in the market and sometimes they can grow fairly large. Secret Recipe. sales. years of establishment and so forth. Redtone. choose to protect their own market through creating enough differentiation. but closely follow the leader in terms of price and quality ranges. A challenger can take a stance of challenging the leader in a bid for leadership or at least an enlarged market share. These companies clearly recognise that the leader has significantly more resources and staying power to combat any competitive challenges they may be able to offer. thereby adopting the market position of a follower. R&D and development of new products. They lead the industry in terms of price changes. F&N’s Coca-Cola and Maybank. specialisation in that particular segment allows them to have a consolidated position and a distinct competitive edge within that segment. For example. the remaining competitors are content to act as followers. SEC. 7 Eleven. However. AirAsia. As we have discussed earlier. Over a period of time. Almost every industry includes companies that specialise in serving market niches. Nichers are often smaller companies with limited resources but can gain a strategic marketing advantage by focusing on very small segments and customising their products and services to produce high levels of satisfaction in that segment.

99. adopts the to avoid retaliation market follower strategies by (for companies observing the market leader and which hold the market challenger’s strategies. when Maxis offered the highest stake in prepaid starter packs at RM8. UNIT 5 15 Extending marketing Type of market Characteristics Examples leader strategies Market leader • Expand total market Maxis is the largest mobile operator strategies • Protect market share (market leader) in Malaysia.50 prepaid SIM packs. Malaysia’s number one strategies customer. Vodafone and Google to deliver quality products with global usage. Celcom made a strategic partnership with HP. Market nicher • Create segments by Redtone. Table 5. foreign workers and tourists who travel abroad. Market follower • Follow closely DIGI. challengers. Full frontal attack and (for companies indirect attack strategies have been which hold the used to increase its market share. DIGI later closely followed the two competitors by offering RM8. giving free highest stake in the value added services to protect market) market share. service a market nicher strategy by mainly (for companies • Multiple niching targeting international call makers. as well as having pursued by other multiple niching of the general companies) public.1 Strategies for market leaders. the market) Celcom attacked the strategies by collaborating with AirAsia and offered its prepaid starter pack at RM4. Market challenger • Full frontal attack Celcom is ranked as the second strategies • Indirect attack largest mobile operator company in Malaysia.80. Maxis • Expand market share continuously expands its market (for companies by offering more packages to all which hold the groups of customers. discounted call provider adopted quality-price. For third or lower instance. This will provide Celcom a competitive advantage over its competitors. which serve small providing attractive calling rates segments not to customers. For instance. second highest Celcom is aggressively collaborating stake in the market) with other companies to gain competitive advantage. followers and nichers . the third largest mobile strategies • Follow at a distance operator in Malaysia. market. as well as aggressively advertising and charging lower price to expand the market share.

opportunities and resources. In the process of performing a competitor analysis. Several basic competitive strategies are outlined in this section. The trend towards in-depth competitor analysis as the means of identifying the company’s major competitors using both an industry and market-based analysis. The trend towards the use of relationship marketing to improve customer satisfaction. strengths and weaknesses.5 Assume that your company is the overall cost leader in the manufacture of hard disk drives for PCs. Some of these are time-tested and some are relatively new. strategies. prepare a sample of recommendations designed to maintain your market leadership position. Four primary competitive positions were reviewed in the section. In a group. The market leader is interested in finding ways to expand the total market because it will benefit most from any increased sales. capturing a 35% market share. 2. Competitive analysis involves closely examining the relevant information regarding competitors’ objectives. The company must then develop a competitive marketing strategy of its own. To be successful. Aggressive leaders also try to expand their own . and reaction patterns and utilising the same for the development of competitive strategies. the company carefully gathers and analyses information on competitors’ strategies and programmes. Summary Two key trends in marketing for the twenty-first century are clearly discernible: 1. The chosen strategy depends on the company’s industrial position and its objectives. The leader must also have an eye towards protecting its share. The first is that of the market leader which faces three challenges: expanding the total market.16 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing Activity 5. A competitive intelligence system (CIS) helps the company acquire and manage competitive information. a company must consider its competitors as well as its actual and potential customers. protecting market share and expanding the market share. Several strategies for accomplishing this protection task are also presented.

the market nicher is a position option open to smaller companies that serves some part of the market that is not attractive to the larger companies. You have been asked by your company director to prepare an effective marketing strategy plan. The analysis of the four competitive position options presented in this section would help you identify the various options that companies would like to use in their positioning strategy. These companies often survive by being specialists in some function that is attractive to the customer in the small market niche that they have chosen for themselves. other runner-up firms or smaller companies in the industry. You may focus your efforts on the Internet if you so choose.1 1. What are the advantages and disadvantages of a market nicher competitive strategy? . Lastly. UNIT 5 17 Extending marketing market share. The third position is that of the market follower which is designated as a runner-up company that chooses not to rock the boat (usually out of fear that it stands to lose more than it might gain). Self-test 5. Discuss why the need to understand competitors as well as customers through competitor analysis is important in your marketing strategy planning. As a newly appointed research manager. Pick a company of your choice and demonstrate how the company could analyse one of its competitors. This is a company that aggressively tries to expand its market share by attacking the leader. 2. 3. The second position is that of the market challenger. your first project is to conduct a competitor analysis for the company. Explain the steps involved in conducting the competitor analysis. 4.

Old Town. Tesco. b. Continuously collect information from the field (sales force. websites) and from published data (government publications. Radix Café captures the market by focusing on the product’s 7 Herbs formula which helps to keep the body healthy and energised. Identify the vital types of competitive information and the best sources of this information.2 The answer may vary according to the location or the city you live in. suppliers.3 The primary reason a small company does not develop and maintain a competitive intelligence system is because it cannot afford the resources necessary to build and operate one. a synonym of the first of all the white coffee producers in Malaysia. Nescafe. Deli-Bes. Gold Choice Tongkat Ali Coffee.g..1 There are more than 10 “3-in-1” coffee brands in Malaysia. Perl Café Kacip Fatimah which targets the women market emphasises that the product contains water soluble Kacip Fatimah extract. Radix Café. Based on the following description. e. trade associations. speeches.18 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing Suggested answers to activities Feedback Activity 5. Nescafe emphasises the perfect cup of coffee to keep its customers awake. the more intense the competition among the accommodation providers. . Activity 5. channels. the bigger the town or the city. it is easy to see why small companies cannot afford to have a competitive intelligence system. For example. Anyway. Gold-mix. Saudi Ali Café. Per’l Café. Gold Leaf. Old Town Coffee emphasises on its brand name “Old Town”. Each brand tries to create its competitive advantage by developing its unique attributes to its respective target market. SunnySide Coffee etc. Aik Cheong. Here is an abbreviated outline of the steps necessary to build and maintain a system: a. CNI. Activity 5. market research firms. Super. articles).

2. This will lead to an increase in the database of job seekers. Jobstreet’s competitors can be newspapers. magazines. Check the information for validity and reliability. Now the customers can apply for jobs via SMS. .4 1. Send key information to relevant decision makers and respond to inquiries from managers about competitors.com. New users — high reliability product for users operating in extreme environmental conditions (heat. and organise it in an appropriate way.com in Malaysia. head- hunters and other online recruitment companies JobsDB. interpret it. rough treatment) where hundreds of gigabit storage is required. UNIT 5 19 Extending marketing c. Activity 5.5 There are three lines of strategy recommended for a market leader: • Expand the total market • Protect the market share • Expand the market share The following is a sample of recommendations that could be made for a hard disk manufacturer. d. Activity 5. its innovative strategy would affect its current competitors because. 3. Expand the total market: a. it will use this information to attract more companies to advertise in the jobstreet. The budget spent on other modes of advertisement by the companies will be affected in the long run. more job seekers are expected to register with JobStreet. cold. It creates value by introducing an innovative service strategy. due to the innovative services. Eventually. To a certain extent.com to recruit. 1.

Gain share by increasing the customer value of core market products. Build up your share in core or served market by taking it from weaker competitors. New uses — store and record music. Increase in promotion — increase advertising and sales promotion. Better customer support and service programmes. video (TiVo type applications). Protect market share: a. particularly in the high price. c. Plug holes in line — fill any hole in the standard line that might allow a competitor an opportunity. More usage of current product — aggressive promotion.20 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing b. rather than reducing price. 3. Continually innovate — new higher capacity. . Expand market share: a. but the focus needs to be on increased value by providing more benefits to the customer. faster drives at reduced price/gigabit. b. 2. high-margin area.

Powerful economic. you should be able to: 1. companies of all sizes can enjoy the opportunities created by the rapid internationalisation of markets but will also be affected by the developments in supply and demand. UNIT 5 21 Extending marketing 5. 2. political and demographic forces are converging to build the foundations of a new global economic order on which the structures of businesses are built. The emergence of new economic powers. we will extend these fundamental concepts to the arena of global marketing.2 The Global Marketplace Objectives By the end of this section. In this section. competition and economic forces in other parts of the world. We will begin by understanding the considerations that affect the company’s decision to go for international markets. On account of globalisation. We will also study the approaches companies use to enter international markets. Global marketing in the 21st century Global marketing in the twenty-first century has become more complex than ever before. the scope of competition and competitive strategic options. terrorism. economic. Identify and describe the approaches used in entering international markets. . Discuss how a company’s international marketing decisions are affected by the international trade system. regional economic agreements. political-legal and cultural environments. Companies are finding it easier to reach distant markets and source their supplies from anywhere in the world. industrial. Introduction In the last section. 3. Comment upon the considerations that must be assessed before the company decides to go international. Today. as well as the different markets are linked as never before. looking into the future is harder than ever. technological. the economies of different countries in the world. In this section. Today. let us look at the components of the international marketing environment and the way they impact the international marketing effort of a company. the spread of technology and the Internet has changed the dimension of marketing and business in every context. you learnt about the importance of understanding competitors.

In the process of going global. Deciding on the global marketing organization Figure 5. 1.2 Major decisions in international marketing. Conducting a comprehensive marketing research would reduce risk of losses. Deciding whether to go international 3. Deciding how to enter the market 5. Companies that stay at home to play it safe might not only lose their chances to enter other markets but also risk losing their domestic markets (Kotler and Armstrong 2012). companies have to make several major decisions in international marketing. The international marketing environment has changed greatly. Kotler and Armstrong (2012) Looking at the global marketing environment It is important for companies to understand the international marketing environment especially in relation to the country in which they are planning to venture into. Deciding on the global marketing program 6. You can refer to Unit 2 of this module to further describe the influences of the macroenvironment and microenvironment on marketing in general. customers continue to spend. Looking at the global marketing environment 2.22 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing Amidst all these forces.2. Deciding which markets to enter 4. As shown in Figure 5. keeping the world economy afloat. . Let us discuss each of these decisions in detail. a company faces six major decisions in international marketing (Kotler and Armstrong 2012). Companies are expanding their markets aggressively into new international markets to capture larger market opportunities.

the General Agreement on Tariffs and Trade (GATT). despite the above trade restrictions. A company must achieve ISO standards to export products to European countries. If you are planning to open a business in Singapore. For example. Companies face many types of trade restrictions in their attempts to secure business abroad. In some countries. barriers certifications and preferences for domestic providers. Type of trade Descriptions restrictions Tariff A tariff is a tax on imported goods. Malaysian companies are not allowed to import any goods from Israel. Progress. For quotas example. For example. the Association of South-East Asian Nations (ASEAN). For example the tariff for imported passenger cars is between 140% to 300% based on engine displacement. diesel fuel. UNIT 5 23 Extending marketing The international trade system For any company that wishes to go international. Embargos Total ban on imports from another country. maximum and minimum price regulations. Malaysia imposes import quotas on rice. For example. standards for products. The World Trade Organization (WTO) and International Monetary Fund (IMF) usually act . your application will be processed within a week. fertilisers and machinery.2 Types of trade restrictions However. These leading forces of economic integration are finding ways and means to reduce trade barriers among member countries. the Asian Pacific Economic Cooperation (APEC). In some other countries. technology. Table 5. embargo and indirect restrictions such as subsidies to local manufacturers and producers to help them maintain their competitiveness. seeds. the Organisation for Economic Cooperation and Development (OECD) and free trade agreements (FTAs) between countries. the approval may take more than 6 months. Government The government provides subsidies to local providers to increase subsidies the competitiveness of local providers. the Malaysian government provides subsidies to local farmers in terms of short-term loans. land. Import Restrictions on the quantity of goods entering a country. it is important to understand the trade system in the international markets and the forces that shape international trade. you will never get approval unless you create a joint venture with the local business partners. health products imported to Malaysia should get clearance from the Ministry of Health. For example. wine and alcohol. Poland imposes import quotas on gasoline. there are some forces which facilitate a company to venture into foreign trade smoothly. quotas. Non-tariff These include health and safety regulations. however has been slow. Forums are held to discuss and debate the possibilities of lifting trade barriers. The most common trade restrictions are tariffs. to give domestic competitors an advantage in the marketplace by making foreign competitors’ goods more expensive than domestic goods. China has import quotas on edible oils.

Second-hand car dealers were also badly affected during the period. you have a situation characterised by a very small number of people with very high incomes. WTO also acts as a mediator to solve trade disputes between countries or big companies from different countries. many companies retrenched their workers.24 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing as facilitators in the process of removing trade barriers. A high unemployment level in a country could lower the per capita income earned and this will further lead to lower purchasing power. etc. Sometimes. During the 1997 financial crisis in Malaysia. the automobile industry is a good example to explain this.6 Malaysia has a trade restriction on imported cars. inflation. and a large population with low or subsistence level of incomes. Just imagine what will happen to our national car manufacturer. When there are wide income disparities. This. Besides the role of reducing trade barriers. Activity 5. you must first understand the economic structure of the other country in terms of employment rates. Proton if our government lifts the trade restrictions completely on the imported cars. During this period. With this example. Is this restriction a tariff. economic stability. quota or embargo? To what extent does this trade restriction allow Malaysia to protect local car manufacturers? Economic environment Before venturing into international business. Some third world countries are still sceptical about the developed nations’ proposals of removing trade barriers completely. In Malaysia. However. if you are planning to set up a manufacturing plant overseas. If this happens. luxury product businesses would suffer immediately. . per capita income. WTO also enforces General Agreement on Tariffs and Trade (GATT) policies worldwide. a country with a high unemployment rate would provide you with a fast and cheap workforce. Patterns of income distribution are another variable that you must study carefully because this has important implications on purchasing power. consumer durables or even hospitality business. many hire-purchase cars were seized by banks due to unsettled monthly installments to finance companies. you should be able to realise why it is important to understand a country’s economic conditions before venturing into the international market. exchange rate policies. in turn had an adverse effect on the performance of other companies. They fear that their products will not be able to meet the standards of products bought from overseas thus they lose their business to foreign MNCs. interest rate. This pattern would significantly affect the size of your market if you are in the household appliances.

never offer pork to Muslims and never offer beef to Hindus. You must be aware of the cultural taboos in foreign cultures. norms. culture also determines the success of your marketing practices in the foreign market. norm. For example. government bureaucracy. to obtain a business license. Malaysia adhered to the fixed exchange rate policy after the 1997 economic crisis and recently changed it to a moveable peg policy which allows the currency to fluctuate controllably. As explained by Kotler and Armstrong (2006). Government bureaucracy can be a real hindrance to a business venture. instances of political instability in Thailand would have affected foreign investments in that country. A Halal certificate is compulsory for restaurants planning to cater for Muslims. In some countries. Anti-American slogans and sentiment in some Middle-East countries could also affect the American businesses from expanding their operations in these nations. If the exchange rate value of the other country drops. The exchange rate policy of a country will influence the value of money you take back to your country after the business. Sometimes. it may take three to six months. encourages foreign investments by providing many tax relief benefits. you should also consider the country’s exchange rate policies. The Penang state government however. getting a business license for export and import could take months for approval. beliefs and behaviour. The culture of the host country always brings in surprises to marketers. When you are looking into the political factor. these factors include the host country attitude towards international business. For example. your profit also will drop and vice versa. As mentioned earlier. Besides that. So when you design global marketing strategies. values and beliefs. Malaysia is also the provider of medium- skilled workers which are not readily available in other neighbouring countries. In Malaysia. For example. in Malaysia it is inappropriate to present a clock to a Chinese counterpart. in some countries. UNIT 5 25 Extending marketing Political-legal environment Each country has its own political environment. Cultural environment It is understood that each country has its own culture. These are some of the norms that foreigners need to follow if they are planning to open a restaurant in Malaysia. This could slow down your business progress in the country. Another factor for you to consider is government bureaucracy. political stability and monetary policies. Marketers should seriously study four political-legal factors before venturing into overseas markets. it is advantageous for you to adjust your products or services according to the local customs. KFC introduced rice in its menu to cater for local customers who prefer to eat fried chicken with rice. . you will receive an operating license easily compared to other countries.

Some marketers often worry about the impact of culture on their global marketing strategies. you must understand how your customer think and react. In Japan. Due to this priority. This article is available in the WOU MyDigitalLibrary E-Course Reserve. On the other hand. companies emphasise relationship-based marketing whereas in western countries. symbols. religions. weights. the companies prefer to do transactions rather than getting to know you better. In America. the power distance is high compared to America. The knowledge of such cultural preferences enables a marketer to appropriately position his product in a foreign market. Uncertainty avoidance is also higher in Japan compared to China. this practice is not usual in western countries. Local languages. . dialects. But there are also many marketers who break cultural barriers by adapting their products and marketing communication appropriately to stabilise their overseas businesses. This means the Japanese prefer to engage in business only after they know and understand you. if you are interested in marketing food products in Dubai. In Japan. Refer to Unit 2 for more examples on the effects of the cultural environment. Reading Please read the article ‘Dimensions of culture’. The packaging should include some basic information on its ingredients. To export food products to Japan. the supermarket groups have established a very reputed image in the Japanese market in terms of protection towards customers and this is paramount to the success of the stores. the number one priority of supermarkets is their customers’ health and welfare. In Asia. your must make sure that the product is endorsed by local authorities as Halal. expiry dates and quality endorsements. Business norms vary from country to country. As mentioned earlier. For example. festivals and ethnic groups are some of the important elements to take into consideration before starting a business venture. In Malaysia. the common norm is to practice transaction-based marketing. it is a common custom for the companies to invite their foreign business partners for a dinner after the working hours. packaging should be done well.26 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing When you are planning to venture abroad. such knowledge could save you from surprises that you may be unprepared for.

UNIT 5 27 Extending marketing Activity 5. Some of the reasons are as follows: • To seek new markets and opportunities. The decision of going international depends on many reasons. However. This is a conscious decision based on the relative attractiveness and growth opportunities in the domestic market itself. In the domestic market. Form a small group and discuss the issues that should be considered. But you would also understand that in terms of growth. • To avoid competition in the local market. wants you to prepare a memo outlining the potential cultural and political issues facing the company if it were to advertise for its clients in China. President of the international division. • To benefit from trade requests from abroad. Deciding whether to go international There are many companies doing very well locally which refuse to venture into the global market. • Are you able to gather information to understand your customers’ preferences abroad? • Are you able to offer attractive products and gain a competitive advantage? . however collect sufficient data and study them first before making any serious decisions. • To utilise resources. Chris Wyatt. They are happy consolidating their grip on the local market and are not really interested in the additional challenges they may have to face if they go international. • Pro-active management action to distribute and manage risk of growth and development. you do not have to worry much about cultural differences. many companies have also successfully ventured into the international market and are doing well. language barriers. On the other hand. operating domestically is much easier and less risky. You must. customs and norms. Many companies conduct marketing research and feasibility studies before investing in foreign ventures. The following are some questions which you need to answer before going abroad.7 Suppose that you are the Regional Director of an advertising agency’s international division. headquartered in Kuala Lumpur. venturing into international business certainly has its advantages. Draft a memo based on these discussions.

In the statement of objectives. Some of the indicators are targeted sales volumes. To be specific. There are some companies that enter international markets on a big scale. you need to start gathering relevant data on the country which you feel would provide you with opportunity. Having too many countries in your agenda in a short period of time may cause you to lose your concentration and focus. you must set your objectives and policies clearly. you may not be able to cope effectively with the different set of challenges presented by each country. you have to screen the various options on the basis of an environmental analysis and create a priority list. The goal of screening is to filter out the least attractive country from the list and to determine the potential markets by using suitable indicators. For this purpose. economic situation. In this way. Before making the selection. usually through a local joint venture. Some companies go into international ventures after getting a lead from the government’s connections. returns on investments. Another matter that you need to consider is the choice of the country you are planning to enter. . a country’s political stability. you should include the target or volume of sales that you expect to achieve. they feel safer since they already have buyers and some assured business. Some companies do not do very well in the overseas market due to massive competition from other big players. socio-cultural factors and technological factors will influence your decisions. At the initial stages of your international marketing effort. Deciding which markets to enter Before you enter the international market. Most companies start on a small scale first. Eventually. you must develop a list of countries you prefer to venture into. it is always less risky for you to look at one country at a time. giving preferences based on an analysis of the strengths and weaknesses for each country on the list. After that. risk factors and profitability ratios.28 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing • Are you able to adapt yourself to the new business culture in the foreign markets? • Do you have trained and knowledgeable staff to handle international market penetration? • Have you considered the trade regulations and restrictions in the country which you are planning to venture into? Many companies enter international market after receiving a request to do so from the dealers and suppliers abroad. The choice you make regarding the country to enter depends on the micro and macroenvironmental factors in general.

it is cheaper for you to sell products through intermediaries. The only concern you may have is how your product will be marketed in the overseas market. you may be required to modify your product line to suit the foreign market. You will not have control over the pricing or positioning of your product in indirect exports. Exports may be both indirect and direct. 2. Exports are done only after you have secured orders from abroad. you may eventually move into direct exporting. The risk and resource requirements are greater in direct exporting since you have to develop your own marketing strategy and implement it abroad. This mode of business does not require you to understand your customers. Trade finance divisions from the banks will provide some short-term financial support for you to complete the business without complications. Usually. UNIT 5 29 Extending marketing Deciding how to enter the market After you have decided to enter a foreign country.3 Market entry strategies. you must determine the best mode of entry. Exporting can be defined as entering a foreign market by selling goods produced in the company’s home country (Kotler and Armstrong 2012). Also. If you are expecting to receive the order frequently from abroad. According to Kotler and Armstrong (2012). Your intermediary will absorb all the risks if the product fails. Direct exporting After going through indirect exporting for some time. Exporting activities would require you to modify your organisation structure to incorporate international tasks. it would be cheaper to form your own export department. there are three market entry strategies as follows: Joint venturing Direct investments Exporting • Licensing • Assembly facilities • Direct • Contract manufacturing • Manufacturing • Indirect • Management contracting facilities • Joint ownership Figure 5. 1. In many instances. Kotler and Armstrong (2012) Exporting Exporting is the simplest way to enter the foreign market. It will be easier to penetrate the markets if your product is already known in the market through indirect exporting efforts earlier. Indirect exporting Indirect exports happen when you sell your products through international intermediaries such as export management companies. . your buyers or the forwarding companies will assist you to market your goods.

. trade mark. manufacturing process. the centre. you can export either through foreign-based distributors or foreign-based agents who sell the goods on behalf of the company. You can also send home-based salespeople abroad at certain times in order to find business. Licensing Licensing refers to an agreement in which one company sells another company the right to use a brand name. Under brand licensing. a. Finally. patent. or trade secret for a specific period and for a specific purpose of time. Japan. Licensing is also a simple way to enter a foreign market with minimum risk. Joint venturing You can also enter foreign markets through joint ventures. is now focusing on brand and technology licensing. You can set up an export department locally that carries out export activities. distribution and perhaps promotion. you will sell your overseas manufacturing rights to your foreign counterpart for a royalty price. This would enable KIA Motors to market the KIA series of cars in Malaysia with less import taxes.30 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing According to Kotler and Armstrong (2012). brand. You can set up an overseas sales branch that handles sales. Your foreign partner will use your manufacturing process. Naza has also obtained the license to assemble Peugeot cars. you can conduct direct exporting in several ways. Lately. Taiwan. there are four types of joint ventures. According Kotler and Armstrong (2012). Korea. b. KIA Motors provides a license to NAZA Motors to assemble and market KIA cars locally. which initially focused on developing new technology licensing agreements in Singapore. you have also given up the possibility of developing your own market overseas and may have created a competitor after the license ends. goodwill and other relevant resources to manufacture and market the product in return for the royalty paid to you. 1. Under this mode. India and China. It means joining forces with foreign companies to produce or market products or services. One major disadvantage of this mode is that you will have less control over the product being produced and marketed. For example. patent. c. trademark. when HP announced the opening of its Asia Pacific IP Licensing Centre in Singapore. companies can license the HP brand and use the HP logo on their own products. By giving license.

consultancy and technology to companies abroad who are expected to provide the capital. which has the potential to rely on its own technology and R&D. the ownership depends on the percentage of shares held by the respective companies. Proton set up a joint venture with Mitsubishi Motors to develop the first version of Proton Saga in Malaysia two decades ago. The price for both types would be significantly different even though the design and features are the same. buy stakes or takeover a foreign business or jointly work on big contracts. obtain local knowledge. 3. you may lose your control over the product manufacturing processes and potential profits. you export intellectual property to another company. similar to licensing. If the deal is successful. Adidas and Reebok found in local sports outlets are mostly made in Taiwan. In some countries. You also can find similar shoes made in US. For example. with one of the partners being a local company from the host country. A joint venture business reduces the political and economic risks. the joint venture mode is imposed by the foreign government as a pre-requisite to obtain the operating license. Normally. Most Japanese car spare parts also have two versions: one made in Japan and another in Taiwan. For example. Contract manufacturing Another option of entering abroad is by allowing contract manufacturing to local participants in the overseas market. UNIT 5 31 Extending marketing 2. the companies involved may start a new business venture together. . Sometimes. expertise. Now Proton Malaysia is an independent entity. Contract manufacturing involves your permission to allow the foreign partner to manufacture your product. Joint ownership (Joint venture) Joint ownership involves two or more companies investing in a business or project overseas. Mitsubishi Motors provided the technology and some management expertise to Proton. The key advantage is that you allow the product to start faster in the foreign market with less risk and effort. branded sports shoes such as Nike. joint venture is the only way to enter the market. Again. They share the ownership according to agreed business shares. 4. This is another mode of low risk overseas venture. In other words. Other strategic reasons to take up a joint venture project are to obtain financial support. you can buy out the company later. Management contracting Management contracting involves the local or domestic company providing management services. Under the joint ownership effort.

The company invests abroad bringing in capital. The joint venture will strengthen Golden Hope’s biodiesel business by capitalising on the potential of MES as a replacement for linear alkybenzene sulphonate in the detergent industry. For example. policies or strategies. ASTRO ALL ASIA RKS NETWORK plc (“ASTRO”) and Yes Television (Hong Kong) Limited entered into a joint venture to develop and strengthen the aggregation and distribution of content through two 24-hour channels dedicated to football fans in the region. Golden Hope Overseas Capital (GHOC) signed a joint venture agreement with Cognis Oleochemicals (HK) Ltd and China’s Lonkey Industrial Co Ltd to establish Guangzhou Keylink Chemical Co Ltd. you can find Sony. . Sarawak campus has joint ownership with the Sarawak State Government and Curtin University of Technology. Motorola and many other companies who have come in through the direct investment route. raw materials and natural resources from foreign countries. In Malaysia. This mode of entry is commonly found in the manufacturing sector. suppliers and the general public. infrastructure.32 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing to gain access to distribution channels and to capture a huge market in the country. Bentley. These companies capitalise on cheap workforce. these issues must be taken into consideration while drafting your agreement with the local partners. technology and other relevant resources. Under this mode. Companies that are involved in direct investments provide vast job opportunities for local people. Many Malaysian companies like to reinvest earnings for growth but foreign companies often prefer to take out these earnings. Acer. including Malaysia. Australia and the local management team manages the Sarawak campus jointly. When you enter into a joint venture. This is one of the key benefits why many governments. Under this mode of entry. One of the disadvantages of a joint venture business is that your foreign partner may disagree with some of your objectives. the biggest form of foreign investment comes from direct investments. the ownership of the company is controlled by the foreign investor who has far greater control over how the company should be managed. the company has full control over its operations and investments. Curtin University of Technology. Curtin University. distribute and sell methyl ester sulphonates (MES). Intel. They develop good relationships with the government. Direct investment In Malaysia. an oleochemical derivative used in the production of detergent. it would cost more for Sony to produce a television set in Japan compared to doing the same in Malaysia. Australia. For example. customers. Perth. on account of lower labour costs in Malaysia. encourage foreign investments. Direct investment provides a win-win situation both for the foreign investors and the local people of the host country. The new company will manufacture.

Australia. In the twenty-first century. In Malaysia. Summary The world is shrinking rapidly with the advent of faster communication. Hair. Activity 5. C W. transportation and financial flows.8 Discuss the advantages and disadvantages of direct investments in a foreign market. UNIT 5 33 Extending marketing Some disadvantages of direct investments are high risks due to currency fluctuations. changes in trends and competition. J F. Contract Manufacturing Direct Licensing Joint ownership Exporting venture Lower risk Higher risk Figure 5. . Economic communities in the world are striving to eliminate trade barriers. McDaniel. Domestically. These companies that operate globally achieve lower costs and higher brand awareness. Name two foreign markets where an apparel manufacturer would be interested in investing and two foreign markets where it would have no interest in investing. the trend shows that companies need to seek and develop new markets to stay competitive. C. J and Gardiner. fall in global demand. Asia-Pacific Edition. uncertainties in the political and economic environments. Summers.4 The various methods of entering the international market place by the degree of risk Source: Adapted from Lamb. Support your answers. companies cannot rely on government protection to survive. M (2009) MKTG. Cengage Learning. many industries are global in nature.

34 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing However. In terms of implementation. companies have to make careful decisions on which country to enter and how to enter. Whichever choice you make. Making a similar judgment to serve all the places may lead to fatal losses. the global market brings you you many surprises. 2. a matter which is very insignificant to you may be very important . you should be able to coordinate the activities to suit the expectations and requirements of the foreign stakeholders. In many instances. It is necessary to conduct feasibility studies before embarking on any serious steps to enter a global market. International ventures require thorough planning. You must consider the questions above seriously before committing to any investments. be prepared to support it with valid findings and background studies. In this section. 4. The risk factor is always there when entering international markets and so are the opportunities. 3. 1. A company may have to overcome many challenges and obstacles to be successful. In conclusion. what will be your option? The answer lies in adapting to the culture of the host country where you plan to do business. Deciding how to enter the market. Planning requires you to decide on the allocation of resources. Deciding which markets to enter. Rigidity may not be the right answer to develop a successful market catering to global requirements. Countries. You must be sure that you know the best way to deal with them. Due to the uncertain nature of the global marketplace. Gift giving in Japanese culture is common but in the Malaysian context. In this situation. Some companies prefer to use safer modes of entry like licensing and indirect exports while some prefer a riskier mode. How to look at the global market environment. customers. people and competition differ from country to country. it can be viewed as bribery. inputs have been given to you on some of the important questions. Global marketing demands extensive learning and adaptation practices. Deciding whether to go international. Another important matter for you to consider is how you can work with new partners from different cultural backgrounds. venturing in the global market has never been an easy task. careful implementation and a good control of tasks. You need to balance your resources locally and abroad. suppliers.

2. The tariff restrictions enable local car manufacturers to stay competitive in the domestic market by charging lower prices to the customers in comparison with the foreign car prices. South Korean and Vietnamese markets with a new line of electronic home appliances. economic and cultural differences you expect to find in this country.2 1. the price of Honda Civic would be lower than Proton Perdana without the import duty. For example. Prepare a summary of the demographic. Assume your boss has asked you for your opinion on how your company should enter the Japanese. This may result in Perdana losing more of its customers to Honda. Malaysia also restricts the number of foreign cars entering the country through Approved Permits (AP). Assume that your company is interested in the global market potential for body massage and SPA treatment centres in Singapore. Self-test 5.6 Tariff and quota Almost all foreign cars need to pay import duties (tariff ) to the Malaysian government. Recommend the strategies your company can choose to enter the global market. customer relationship and business as you enter different markets. 3. So you must decide whether to stand by your usual practices or adapt for the sake of market growth. Identify the joint venture opportunities a roti canai manufacturer would have if it were looking to market to the European Union? Suggested answers to activities Feedback Activity 5. . UNIT 5 35 Extending marketing for others.

political stability and minimal regulations on the control of investments. personal appearance. low costs of labour. ethics. Cultural: family. unstable exchange rate. feelings towards advertising agencies. Foreign countries which are less attractive for direct investments are those where there are political unstability. low raw material costs.36 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing Activity 5. attractive investment incentives. etc. future political situation. The following are the topics that are important in such an assessment. nationalism.7 The memo needs to describe in as much detail as possible the cultural. currency restrictions and limited people for market expansion. Potential foreign countries to invest in would be those where the production costs are low. feelings towards the Malaysian companies. education. political and economic issues the agency will face in expanding into China. Political: Rules and regulations on advertisements.8 You may focus on the advantages and disadvantages of direct investments in a foreign country. Activity 5. Prior permission from the respective authorities. aesthetics. personal sensitivity. . etiquette. religion. current political situation. status.

In this section. you will also study the impact of marketing on the environment. let us look at marketing not only as an important business function but also as a social institution. Bhd (Digi) participated in relief .000 dead and 40. 2006. Many answered the call for assistance as relief teams arrived from all corners of the world. let us examine DIGI’s concept of the social responsibility. Then DIGI Telecommunications Sdn. You will also understand the impact marketing creates for stakeholders. Explain how marketers could adhere to the principles of socially responsible marketing. Introduction In this final section. 4.9 Richter-Scale shook Yokyakarta and its surrounding area. an earthquake measuring 5. you will also become familiar with the methods of conducting marketing efforts through adhering to the codes of social responsibility. suppliers. Define consumerism and environmentalism and describe the roles they play in the formulation of marketing strategies. 2. Reading Extract 5.3 Market Ethics and Social Responsibility Objectives By the end of this section. namely shareholders. UNIT 5 37 Extending marketing 5.1 Digi team visits Yogyakarta KUALA LUMPUR: On May 27. Identify the reasons why marketing is facing major social criticisms. consumerism and citizens. customers. competitors and the public. you should be able to: 1. Before moving on. leaving nearly 5.000 injured. 3. Describe the roles and importance of ethics in carrying out marketing activities. you will cover the criticism on marketing practices. Finally. Firstly.

They warn the consumers and general public on the consequences of consuming some products which are hazardous to health. the following advertisements may cause unpleasantness to some viewers in our society. 2006 Social criticisms of marketing Marketers are criticised for many reasons. The problem arises only when the non-target group is against the approach of the marketing and tends to be very negative or aggressive in nature. the media in Malaysia also report on unlawful practices of some irresponsible individuals. You will find that when a company implements the marketing concept well and is sensitive to consumer interests. Digi contributed toiletries to meet the material needs of 700 residents. However.000 worth of talk-time to local Indonesian subscribers to help them stay connected with loved ones back in their home country. a special team from Digi visited Dusun Bedukan. like so many people around the world. it faces little or no social criticism. Digi team revisited Yogyakarta to see for itself the recovery process in the stricken area while making its own contribution to the people of Yogyakarta.38 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing efforts led by the government as well as contributed RM250. are concerned for the people of Yogyakarta. a local Indonesian non-governmental organisation (NGO) that has been actively conducting relief work in Yogyakarta since May 2006. 16 October. This is why we decided to visit these villages. But we aren’t just satisfied with donating money or goods. sometimes marketing activities are also praised for contributing to the well-being of customers and the society in general. Earlier. not all the criticisms are justified. . From time to time. However. Source: Retrieved from Borneo Post. a village under Desa Pleret which had not received much aid since the earthquake. we wanted to do something different and really meaningful. Digi worked alongside with Aksi Cepat Tanggap (ACT). Digi’s Head of Segment Marketing Yohani Yusof explained the visit to Yogyakarta was part of Digi’s commitment to charitable causes as responsible corporate citizen. Here. ‘Digi team visits Yogyakarta’. This sort of publicity not only tarnishes the image of the company but it can also put it out of business. Four months on. Many NGOs in Malaysia write adverse comments on marketing practices. For example. “We.

there are also some instances when customers may not be able to accept the price in comparison with the products or services acquired. you are also paying for the intangible services and the posh environment which they have created for you. place and promotion correctly. after dining at a restaurant. When we incorporate the integrated marketing approach which blends the product. but contribute to the fixed overhead costs of the organisation. the consumers are happy. you may feel cheated when the operator charges an exorbitant price for a glass of mineral water. The operator may argue that when you dine. UNIT 5 39 Extending marketing Marketing’s impact on individual consumers Marketing influences customers in many ways. For example. . Unfortunately. These elements may be unseen. price. The consumer may not be able to accept this reasoning and will never return to the restaurant anymore if he feels that he has been cheated by artificially high prices.

1. the prices of agricultural goods such as tomatoes. Marketers are also blamed for incorporating the heavy cost of advertisements and promotions into the price of the products or services. Deceptive practices Marketers are sometimes blamed for deceptive practices that mislead the consumers into believing in something which is not true. 2. Customers are given some excuses for not being provided with added services or promotions.00. it does add to the cost of goods sold. vegetables and fruits fluctuate from time to time. For example. Deceptive promotions involve misleading the customers with false claims in the mass media. . Customers also complain about the marketers for marking up the price of goods excessively. the latter on the other hand. Deceptive practices fall into three groups (Kotler and Armstrong 2012). but a hefty price is paid for the brand rather than the value of the actual content of the products. you are told that the pen drive is out of stock or they have already been given to the first five customers. For example. When you visit the supplier. This is called deceptive pricing. transportation and risk. While advertising plays the crucial role of informing the consumers about products and services. It is therefore important for the marketers to detect and understand the customers’ concern over the issue before carrying out major advertising campaigns. they mark up the price on a regular basis and slash it lower on special occasions to show a discounted price which is actually nearer to the real price of the product. These charges are levelled on account of high intermediary costs or the successive layers of costs that are added by each level of distribution. Critics claim that some companies mark up goods excessively and that the prices have no relationship to the costs incurred in producing and marketing the products. Legal action can be taken if the prices are found to be deceptive. Criticism on charging high prices Many marketers are blamed for charging high prices for their products or services. Customers can report such practices to the local authorities. cite their own costs of storage. The farmers and consumers always blame the intermediaries and retailers for such problems. a computer accessory supplier indicates on the banner that you can purchase a 1GB pen drive for RM19. Marketers advertise low prices when in fact. For example. from wholesalers to distribution agents and retailers. no one really knows the cost of the ingredients used to produce these perfumes. in the case of the price of branded perfumes.40 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing Kotler and Armstrong (2012) have cited the following as some of the source of negative impact created by marketing activities on consumers. Some features included in the publicity are not actually found in the product or service.

Once the practices are exposed. Even though quality can be a subjective matter. Other than quality. Sometimes. these people will force the prospective customers into buying products which are not essential or required at that point of time. They are accused of not disclosing the true contents or the complete ingredients of a product in the label. these sales techniques may not survive since the customers will tend to avoid buying from such marketers. Selling of insurance and credit cards are some examples of high-pressure selling. High-pressure selling Customers also frequently complain against the sales personnel who apply high-pressure selling techniques to close a sale. customers will generally identify the products with sub-standard quality. Product safety has also become an issue for customers. most marketers today avoid deceptive practices in this competitive environment. Deceptive practices are easily exposed. 4. For example. This practice enables them to increase customer loyalty and sustain themselves in the business for a longer period of time. UNIT 5 41 Extending marketing Some marketers are accused of practising deceptive packaging. Some marketers who do not show the complete list of ingredients on the label may not disclose that their products contain eggs or egg derivatives and thus mislead the customers on the product contents. Issues on quality Another criticism levelled at marketers is that the products are not up to the expected quality or standards. However. customers may not want to come back to the supplier again. the supplier will lose his customers. some products may provide little extra benefits to the customers in comparison to the competing products in the market. Under the relationship marketing approach. . the casualties are big and sometimes unpredictable. This approach works better than high-pressure selling. Sometimes they tend to accept low quality products if they pay an extremely low price for the products which they have purchased. marketers make all the effort to establish good rapport and long standing relationships with customers while selling the product. Modern marketers are moving towards relationship-based selling rather than transactional-based selling. However. In the long run. In these situations. most marketers today avoid such adverse consequences by delivering products which are at par with or above the expected quality in comparison to the price paid by the customers. Most marketers do not want to take chances by cheating their customers. In the long run. The consequences for the marketers are even greater if the customers pay a high price for sub-standard quality. 3. some vegetarians do not consume eggs.

there are many types of cameras in the market. Activity 5. discuss how you would apply ethical business behaviour to your company’s marketing mix. however.42 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing 5. For example. appreciate that companies do not deliberately design their products to break down earlier because they do not want to lose customers to other brands. some small part may become defective which hampers the product performance and therefore must be replaced. in some cases. While the products are still functional.10 As a marketing director. a product which has a very short life span. Customers may have to buy a brand new camera just because they are unable to find a replacement for minor parts of the camera. these problems occur after the warranty period. they seek constant improvement to ensure that products will consistently meet or exceed customer expectations. laptops and electrical appliances which have similar problems. Issues on search for replacement parts Customers also accuse that some products become obsolete very fast and it is difficult to obtain spare parts for such products.9 Review the claims made by consumers that marketers are harming consumers through planned obsolescence. Normally. Do you agree with these claims? Activity 5. You must. There are also other products such as computers. Critics also argue that marketers plan for the obsolescence of their existing products by introducing new and improved versions which make your older versions obsolete. Conversely. the criticism is that marketers deliberately withhold introduction of new features until the demand for the current version is completely exhausted. . Instead. shoddy or unsafe products and poor services. Consumers feel cheated and irritated if the replacement parts are not easily available.

e. river pollution due to unauthorised development and unplanned projects. The association works closely with other consumer. Code of Repossession of Goods (in collaboration with the Malaysian Hire Purchase Associations. Private companies.my/achievements. the Malaysian Dental Association and the Malaysian Pharmacy Association). damages in school buildings and defective housing projects. Guidelines for Guarantors (in collaboration with Bank Negara and financial institutions). improper disposal of chemical wastes. make millions of ringgit by selling forest resources which belong to everyone. c. f. Guidelines for Credit Card Usage (in collaboration with Bank Negara and financial institutions). . financial institutions and the Ministry of Domestic Trade and Consumer Affairs). dumping of factory wastes. uncontrolled timber logging can cause flash floods. Malaysian Code of Business Ethics (in collaboration with National Advisory Council for Consumer Protection).fomca. For example. Some of the cases have been highlighted in NTV7 — Edisi Siasat showing illegal timber logging. some entrepreneurs act irresponsibly to gain short-term profits by jeopardising the interest of the society as a whole. b. the Federation of Malaysian Consumer Association (FOMCA) has been instrumental in formulating codes. You must be aware of the public debate going on regarding the climate change crisis created by unethical business practices. UNIT 5 43 Extending marketing Marketing’s impact on the society as a whole There are many instances that despite stringent rules and regulations. on the other hand. These include: a. 15 October 2006 Some business entrepreneurs are accused of conducting their business at the expense of the public good. industry and government agencies. d. Formulation of codes/charters/guidelines Working with the respective consumer. charters and guidelines with regard to relevant products and services in Malaysia. Malaysian Code of Advertising Practice (in collaboration with the advertising industry).org. landslides and reduction in water catchment areas and pollute the rivers with mud. Patient’s Charter (in collaboration with the Malaysian Medical Association. open burning. industry and government bodies.html. Source: Retrieved from http://www.

44 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing Another example is an increase in automobile ownership (private good) that requires more highways. textile companies investing in effluent treatment plants. it is hard to prove such practices. they even glorify the bad and rough guys as heroes. the exposure to the Internet make things difficult for the parents to control. parking spaces and police services (public goods). Marketers believe that the advertisements bring many benefits in addition to convey the marketing message to the customers and people who watch the advertisements. The government could also terminate the logging license of those who destroy the forests without following to the rules stipulated by the government even though sometimes. The availability of the media is also limited to reach out to their specific group of customers and marketers end up using generic mass media vehicles that reach both the target segment and the larger population of the non-target segment. 1. marketers take the chance without making any deliberate efforts to limit their marketing communication to the identified target group. Some advertisements pollute students’ and children’s minds with too much violence and sex oriented messages. traffic control. In some instances. it is impossible to prevent non-target groups from watching or seeing some advertisements which are actually targeted to a selected group of customers. etc. Another option is to charge the customers for social costs. The overselling of private goods will result in “social costs”. Therefore. Critics also charge the marketers for causing cultural pollution. Sometimes. The costs of newspapers and magazines are low because a big portion of the cost for publications is absorbed by the advertisers. Some examples could be car manufacturers investing in the development of safer and non- polluting vehicles. One of the ways in which marketers could take responsibility for their actions is by ensuring that they bear the total social costs of their operations. In many cases. Marketers also claim that today’s consumers have the alternative not to watch the advertisements if they want. a way must be found to restore a balance between private and public goods. Common examples today are toll taxes or expressway taxes that consumers pay for using the relatively faster expressways to avoid traffic congestion. 2. large agriculturists investing in research on non-chemical fertilisers. 3. . Although in Malaysia. The following are the marketers’ arguments on the charges. such advertisements are under serious scrutiny.

too few social goods. Marketers may argue that the acquisition has actually provided enhanced customer services which may actually be true. UNIT 5 45 Extending marketing Activity 5. sometimes located not far from each other. Reducing the threat of new entries into the market is another criticism levelled at marketers. marketing practices that create barriers to entry and unfair competitive marketing practices. After the purchase. These activities are generally directed at restricting competition in one way or another. In 2002. Maxis claimed that it has the best line coverage on the North-South highway. the customers become the losers. By doing this. a rival mobile service provider from TimedotCom Berhad. banks are encouraged to merge in order to withstand intense global competitions. According to Kotler and Armstrong (2012). It is a good idea for you to take a balanced view of the acquisition because while it may reduce competitive activity. Later these hypermarkets will compete with each other and eventually the weaker ones will close down. Finally. they keep potential competition at check but they also deprive customers of more choices. Competition is reduced when a company acquires another competitor rather than developing its own products. . it may also bring benefits to the consumers. Once this happens. This strategy will eventually wipe out other small mini markets and sundry shop operators in that vicinity. In Malaysia. A well-managed company may take over a poorly managed company and improve its efficiency. Some huge hypermarket operators open up their businesses in small towns. cultural pollution and too much political power? Marketing’s impact on other businesses The activities of one company can harm other companies directly or indirectly. a company can harm other companies in three ways: acquisitions of competitors. Some large companies can tie up with major suppliers to set barriers for entry in the market. Maxis purchased Timecel. they monopolise the area and eventually will start to mark up their prices to gain high profits.11 Do you agree that marketing creates false wants and too much materialism. The acquiring company may gain economies of scale that lead to lower costs and lower prices. Maxis has also reduced its competition and obtained competitive advantage over other telecommunication service providers. Through the acquisition.

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Some companies practise unfair marketing with the intention to eliminate their
competitors from the market. These companies set very low price to destroy the
smaller competitors or literally “price them out” of the market. Even though there
are laws to protect weaker firms, it is usually very difficult to prove such intentions
and practices.

Citizens and public actions to regulate marketing
Citizens and the general public usually form their own channels to address their
dissatisfaction or grievances over unfair trade practices. Kotler and Armstrong
(2006) have divided these group actions or channels into three categories, namely,
consumerism, environmentalism and public actions to regulate marketing.

Consumerism

The Malaysian government is always sensitive to complaints received from
the public. There are many NGOs and political parties that work to provide
channels for consumers to voice their complaints. All the political parties have
set up their own complaint bureaus to receive and act upon complaints lodged
by customers. There are many instances that government authorities support
these complaint bureaus to take action against errant business practitioners.
The MCA complaint bureau and the Consumer Association of Penang (CAP)
have been instrumental in exposing many errant business practitioners in
Malaysia. CAP publishes a monthly newspaper that highlights the tricks and
trades of many mischievous claims and practices undertaken by some business
entities. The organised movement that enforces the rights of consumers is called
“consumerism”. Organisations working for consumerism aim at making the
consumers more aware of their rights as well as taking organised action to seek a
redressal for consumer complaints.

According to Kotler and Armstrong (2012), traditional sellers’ rights include:

1. To introduce products or services which are not hazardous to personal
health or safety. In Malaysia, all the cigarette packets must print the
warning statement “Smoking is Hazardous to Health, Health Ministry of
Malaysia”.

2. Avoid discrimination by charging the same price for similar products to
customers.

3. To promote the products without engaging in unfair competition. In
Malaysia, petrol stations or distributors are not allowed to carry out price
reduction campaigns.

4. Provide or distribute messages which are not misleading to the customers.
Our government allowed AirAsia to continue its advertising campaign after
investigating public complaints that its advertisements were misleading.

UNIT 5 47
Extending marketing

5. To use any sales promotion tools to attract the customers as long as they
are not misleading. Our local authorities try to ensure that the price
cuts advertised as discounts are genuine. The authorities often inspect
discounted items sold in hypermarkets. Legal action will be taken against
those who mislead the consumers.

Traditional buyers’ rights include:

1. Customers have the right not to buy a product offered for sale. A sales
agent may take you for a dinner, might spend money on gifts, might offer
you a free vacation trip and you can still reject the purchase if you want.
For example, some locally registered companies selling hotel membership
for a fee will invite you to attend a 2 hours preview. In return, they will
offer a free trip to some local resorts during non-peak seasons. There is no
obligation on the part of customers to buy the membership.

2. Customers have the right to ensure the product is safe to use or consume.
For example, some medical products will carry instructions on the
symptoms of consuming the medicine. Some will indicate that it is not
safe to drive after consuming it. In this respect, the buyers must be alert
and should follow the given instruction. The company will not be liable
for any legal damages due to accidents after consuming the product.

3. Customers have the right to expect that the product which they purchase
has all the features and benefits as claimed by the sellers or advertisement
messages. The suppliers often provide warranty for the purchased electronic
goods. Any defects due to production faults are normally replaceable.

Comparing the rights of the sellers and buyers, Kotler and Armstrong feel that
the balance of power is more favourable to the sellers than to buyers. Buyers are
weaker since they often do not have enough information to make the correct
judgment and are sometimes not organised enough to take follow-up action on
their complaints.

To enable the consumers to have a more balanced power equation in the market,
advocates of consumerism feel that the following additional rights should also be
given to the consumers.

1. The right to know about the product accurately and correctly.

2. The right to be protected against products which are doubtful in qualities
and against the normal marketing practices.

3. The right to influence products and marketing practices for a better
quality of life.

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In Malaysia, consumers who believe they have had a bad deal have several remedies
available, including contacting the company or the media; contacting federal, state
or local agencies; and going to the small-claims court. For example, a non-profit
organisation like the National Consumer Complaints Centre (NCCC) provides
Malaysian consumers with an alternative and independent avenue to lodge
complaints and seek assistance.

Reading

Extract 5.2

Malay Mail: Direct sellers say they comply with rules
2 October 2006

DIRECT Selling Association of Malaysia has maintained that
its members do not make outlandish claims about their health
products to dupe customers as alleged.

Its vice-president, Frederick Ng, said direct selling companies
do not make baseless claims as all the benefits offered by their
products are backed by clinical research.

He said in addition, all their products are vetted by the Health
Ministry before they are made available to consumers.

“The Health Ministry has strict guidelines which we must adhere to.
The Ministry will check our products before giving their go-ahead
for us to sell them to consumers,” he said.

Ng was refuting the statement by Malaysian Dietary Supplement
Association protem president Jagdev Singh in The Malay Mail on
Sept 29, that some direct selling agents made outlandish claims
about products which had very little effects or were of no use at all.

Jagdev, commenting on the heavy usage of health supplements
by Malaysians, had also said that such irresponsible agents had
created havoc in the industry for making baseless claims, affecting
genuine players whose products were backed by clinical trials.

Jagdev had also urged consumers to be careful when buying health
supplements from people whose only motivation was money.

Ng said the Domestic Trade and Consumer Affairs Ministry
would also ensure that direct selling companies comply with
Health Ministry regulations.

“What we do is we explain to them the benefits of our products and let them decide. Do you think the direct selling agents have the right to sell and promote their supplementary products in such an aggressive way? Activity 5.” he said. we must ensure that our products are in compliance with Health Ministry regulations.12 Read the above article regarding the action taken by the Malaysian Dietary Supplement Association against some direct selling agents’ outlandish claims about their products.php?option=com_ content&task=view&id=159&Itemid=51 Accesssed 20 October 2006 Activity 5. Discuss what rights buyers have to protect themselves from the irresponsible direct sales agents that make baseless claims about products which have very little positive effects or are of no use at all.2.13 Refer to Extract 5. the association also closely monitors its members. Ng said consumers are not forced to buy the members’ products. UNIT 5 49 Extending marketing “For us to obtain our operating licence. “Any complaint received against our members or their products will be investigated thoroughly.” Source: Retrieved from http://nccc. and we have a code of conduct for our members to adhere to.my/index.” he said. . He added apart from that.org.

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Environmentalism

Environmentalists are concerned with marketing effects on the environment and the
cost to the environment for serving consumer needs and wants. Environmentalism is
an organised movement of concerned citizens, businesses and government agencies
to protect and improve the people’s living environment (Kotler and Armstrong
2006). In Malaysia, there are many environmental groups that are actively involved
in educating the general public on activities which threaten the environment. The
following are some examples:

• Malaysian Environmental NGOs — MENGO is a federation of 18
different NGOs which are concerned about the environment.

• Centre for Environment, Technology and Development, Malaysia —
CETDEM.

• Coalition for Tobacco Free Malaysia — Facts and figures on tobacco
consumption and its effects in Malaysia.

• Force of Nature Aid Foundation — Charitable organisation helping
survivors of natural disasters, tsunami victims etc.

• The Malaysian National Animal Welfare Foundation — MNAWF.

• R.E.A.C.H. — Regional Environmental Awareness Cameron Highlands.

• SEPA — the Sabah Environmental Protection Association.

Source: Retrieved from http://www.mycen.com.my/search/ngo_02.html, Accessed
15 October 2006

Environmentalists are not anti-marketing or anti-business. Their objective is to
ensure that marketers do not damage the environment or nature in their attempt
to serve a specific group of customers. They strive to re-instate the quality of life
which is lost due to the rapid development of technology. They define quality of
life as inclusive of the quality of a healthy environment. They are strictly against
the activities that cause damage to the environment such as pollution and damage
to the ecosystems. If you notice, global warming is one of the key issues that has
attracted the concern of many countries and NGOs. The concerned organisations
in these countries disseminate their messages through documentaries and media to
audiences all over the world on the damages done to nature. People are getting more
alert, worried and aware of these issues. In Malaysia, residents in Shah Alam and
Johor Bahru suffered for weeks due to flash floods. This type of floods has rarely
occurred before. Thousands of people lost their belongings, cars and properties to
the flood. Some NGOs blame the errant contractors who are involved in illegal
logging activities as the major cause of the flood.

UNIT 5 51
Extending marketing

Surprisingly, environmentalists create special opportunities and challenges for
the marketers. Many marketers use the societal marketing approach to win the
customers. For example, TV3’s 8 o’clock news is popular due to its unflinching
effort to reveal the activities of irresponsible traders. Due to its efforts, TV3 receives
the highest viewership in Malaysia compared to any other channel. This is a good
two-in-one strategy. On one hand, it gains popularity and on the other hand, it
makes profits due to incoming advertisement revenues.

In the late 90s, Shell carried out an advertising campaign by spreading the
message that it was involved in a research and development activity to find better
alternatives to petrol. Its advertisement carried an environment friendly message
to the general public which triggered a positive perception on the noble efforts of
the company.

It is reported that consumer interest in environmentally compatible products has
grown dramatically. According to Grimes (1996), various consumer polls show
that shoppers change their purchasing decisions based on concerns about the
environment. The data indicate three trends:

1. Consumers avoid purchasing a product because they believe the product
or package is environmentally harmful.

2. Consumers purchase a product specifically because of environmental
advertising or labelling.

3. Consumers are willing to pay more for products perceived as environmentally
preferable.

Given these strong statements of consumer concern and preferences, it is not
surprising that marketers have increased their advertising and labelling of
“environmentally friendly” products. In Malaysia, the effectiveness of environment
friendly marketing campaigns is still a question mark. An environment friendly
message may not be strong enough to encourage customers to purchase and these
trends are still under study by marketers. Despite this uncertainty, many companies
take the necessary steps to incorporate environment friendly messages into their
advertisements.

In US the scenario is different. Grimes (1996) states that when environmental
marketing mushroomed in the late 1980s and early 1990s, many of the claims
were exaggerated and unsubstantiated. Many agencies and organisations expressed
concerns that there was little truth in environmental advertising. The US Federal
Trade Commission addressed this problem by investigating individual cases of
possible false advertising, such as plastic bags and diapers that claimed to be
biodegradable and aerosol sprays that contained ozone-depleting chemicals yet
claimed to be ozone friendly.

52 WAWASAN OPEN UNIVERSITY
BBM 104/05 Principles of Marketing

Reading

Extract: 5.3

The case of Legpage’s biodegradable transparent tape

LePage’s manufactured a cellophane tape made from wood pulp
and adhesive material called “Biodegradable Transparent Tape.”
The tape was sold with a hard clear non-foam polystyrene plastic
dispenser and attached to a non-corrugated paperboard backcard.
The Federal Trade Commission’s (FTC) complaint charged that
LePage’s represented without substantiation that its Biodegradable
Transparent Tape would “completely break down and return to
nature” (i.e., decompose into elements found in nature) within a
reasonably short period of time after customary disposal as compared
to other transparent tape. The complaint also asserted that the tape
claimed to offer a significant environmental benefit after customary
disposal. The complaint further charged that LePage’s falsely
represented that the plastic tape dispenser and paperboard backcard
of LePage’s Biodegradable Transparent Tape were recyclable. The
FTC contended that the plastic tape dispenser and the paperboard
package were not recyclable, because there were only a few collection
facilities nationwide that would accept the non-foam polystyrene
tape dispenser or the non-corrugated paperboard or cardboard
backcard for recycling.

The consequences

The proposed consent agreement prohibited LePage’s from directly
or impliedly claiming that any of its products or packages are
degradable, biodegradable, photodegradable, or that any product
or package offers any environmental benefits when consumers
dispose of it as trash that is buried in a sanitary landfill, unless
at the time of making such representation, LePage’s possesses
and relies upon competent and reliable scientific evidence that
substantiates its claims.

Similarly, the agreement also proscribed claims that any of LePage’s
products or packages are capable of being recycled, or that recycling
collection programs for its products or packages are available.
The agreement did allow recyclability claims if LePage’s discloses
clearly, prominently and in close proximity to the claim: (a) that
the product or package is recyclable in the few communities with
recycling collection programs for non-foam polystyrene or for non-
corrugated paperboard or cardboard; (b) the approximate number
of U.S. communities with recycling collection programs for the
product or package; or (c) the approximate percentage of U.S.
population to which recycling collection programs for such product

and in addition. Microsoft today announced it will complete its phase out of packaging made of PVC by the end of 2005 — a move the company took with the help of partners such as the Center for Health. product labels or other sales materials. and Lois Gibbs.4 Microsoft phases out PVC from its packaging REDMOND. Studies have shown plasticizers such as phthalates have migrated out of PVC consumer products. PVC cannot be effectively recycled due to the many toxic additives . use and disposal. Environment and Justice (CHEJ). in the case of any non-foam polystyrene product or package.com/articles/swapr96. senior manager of the package engineering management team at Microsoft. PowerPoint. the agreement required LePage’s to distribute a copy of the proposed order to each of its officers. K D (1996) Environmental Marketing Claims. agents. Va. Dec. 2005 — Those (polyvinyl chloride or vinyl) PVC clamshell packs that protect new copies of Microsoft Office Excel. Wash.mlmstartup. promotional materials. Joan Krajewski.htm.-based CHEJ. That’s why Microsoft is phasing out the popular but potentially hazardous PVC in favor of more eco-friendly alternatives. executive director for Falls Church. Word and other products fall short when it comes to protecting the environment and human health. Lastly. It’s dangerous throughout its entire life cycle of production. Microsoft’s environmental attorney. the product or package itself bears a clear identification of the specific plastic resin(s) from which it is made. To learn more about the PVC phase-out and its significance. Accessed 20 October 2006 Reading Extract 5. When produced or burned. and employees who prepared or placed advertisements. representatives. it releases dioxins. Source: Grimes. 7.. http:// www. PressPass: What are some of the dangers associated with PVC? Gibbs: PVC — a combination of plastic and chlorine that we call the poisonous plastic — is the worst plastic from an environmental health perspective. exposing people to toxic additives linked to reproductive defects and other health problems. which are the most potent synthetic chemicals ever tested and can cause cancer and harm the immune and reproductive systems. PressPass spoke with Jay Watts. UNIT 5 53 Extending marketing or package are available.

such as a plastic without chlorine called PET that’s commonly used in recyclable milk cartons and soda bottles. There are many safer alternatives to PVC. so it’s really quite significant. We estimate that we have already eliminated 361.5 million kilograms] of PVC over the next two years. and some of these channel partners have initiated storewide programs to remove PVC as well. plastic-type packaging used on the Xbox 360.6 million pounds [3. too. we anticipate that we will eliminate 1. . PressPass: What is the significance of Microsoft’s taking this action? Krajewski: Microsoft works with the major retailers in the country. and we have put into place requirements for recyclable content in our paper packaging. Also. sugar and vegetable oils. such as the Sustainable Packaging Coalition — an industry working group committed to encouraging a sustainable flow of packaging materials. it’s very significant. our sustainability efforts include more than eliminating PVC.54 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing used to soften or stabilize it which can contaminate the recycling batch. 164. We also participate in industry groups that specifically address sustainability issues. It’s a huge help. We also use alternatives to PET such as corrugated cardboard. because they really wanted to do the right thing throughout the whole lifecycle of their product. That’s really important and we’re very excited about it. Gibbs: A decision by a major corporate leader like Microsoft to phase out PVC sets the bar for other corporations. in asking the big-box retailers not to use PVC in repackaging its products. That heightens their awareness. Microsoft went a step further than they had to. We are still looking at and we have plans to test biodegradable PET alternatives.000 pounds [approx. so when we say we contacted our channel partners and asked that they not use PVC packaging on our products. PressPass: Is Microsoft looking at any other alternative packaging materials? Watts: Yes.000 kilograms] of PVC packaging since July 2005. and this is helping us to educate these other corporations and hopefully move them in the same direction as Microsoft. such as packaging made of cornstarch. and based on our historical product shipments.

packaging and supplier operations. avoiding the use of standard plastic shrink-wrap on our product packages and manuals. plastic and aluminum to cardboard. we design our hardware and software packaging to reduce environmental impact. Environmental Protection Agency as being among the top five of Fortune 500 companies with respect to meeting a National Standard of Excellence for our role in offering Microsoft employees commuter benefits that reduce fuel consumption. This year. and we restrict the use of toxic substances in our manufacturing operations. so I’ll only cover some of them here. We have corporate procedures that conserve environmental resources at our facilities and in our products.S. Improving Air Quality. In addition. ensuring that our surplus equipment is recovered or recycled at an environmentally compliant facility. we participate in programs throughout the world that refurbish thousands of PCs every year and donate them to schools and nongovernmental organizations (NGOs). Our environmental program focuses on three main areas: Recycling and Conservation. At our corporate headquarters in the U. Products and Packaging.. In addition. such as lead and cadmium. We provide employee subsidies and education to promote the use of car pools and van pools. internal campaigns have been organized to encourage employees to use non-Single Occupant Vehicle (SOV) commuting. offer a public transportation pass to employees and provide shuttle services to employees who need to move around our corporate campus during their workday. we were recognized by the U. we address these sustainability commitments on a lot of different fronts. vehicle emissions and traffic congestion across the country. monitors. paper and copper wire cabling. in packaging or plastics for any Microsoft products. servers and other surplus technology. We use no heavy metals.S. Microsoft reduces waste and conserves resources at our facilities. recycling a daily average of 24 tons [21. and we require that our vendors abide by the applicable environmental laws and follow good environmental practices that reflect the spirit of those laws.7 metric tons] of material from glass. We also work with a contractor to recycle our old PCs. UNIT 5 55 Extending marketing PressPass: What other efforts has Microsoft made to be eco- friendly? Krajewski: Since we are a global company. We promote the use of compact discs (CDs) and Web-based . We design our software and hardware products to comply with worldwide environmental regulations. Microsoft contracts for manufacturing throughout the world. And we follow strict policies to ensure that we remain in full compliance with international environmental regulations as well as the specific environmental requirements of each country where we do business.

Enlightened marketing According to Kotler and Armstrong (2006). the philosophy of enlightened marketing holds that a company’s marketing should support the best long-run performance of the marketing system. stopped adding salt to fries and banned smoking in all its outlets in January 2006. In summary. it is important for you to seriously consider the request of the environmental groups to at least take care of the company’s image in the midst of customers and the general public.mspx Accesssed 20 October 2006 Business actions towards socially responsible marketing Sometimes one may think that environmentalists are a hindrance to marketers.56 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing downloads for computer programs. There are many benefits that can be derived from adhering to their requests. Such changes would deliver superior value to KFC consumers. their demands can suggest a positive strategy and should be incorporated into the marketing plans to win the publics’ confidence. and in the long-term.com/presspass/features/2005/dec05/ 12-07Packaging. companies certainly cannot afford or may not survive bad publicity. Consumer-oriented marketing suggests that the companies develop. KFC restaurants in US. stopped the usage of cholesterol raising trans-fatty acids from their products by April 2007 and replaced it with soya oil. . Kotler and Armstrong (2006) have suggested two approaches to carry out socially responsible marketing activities. Under certain circumstances. and whenever possible we use online instructions in place of paper manuals. it will help KFC to build lasting and profitable customer relationships.microsoft. Source: http://www. namely. the enlightened marketing concept and marketing ethics. organise and implement marketing activities based on consumers’ perspectives. Enlightened marketing consists of the following five principles. please refer to marketing management orientation in Unit 1 of this module). (For further explanation. for instance. if your company is somehow or other involved in environmental issues. Marketers should always strive to understand what their customers want before making some important marketing decisions. Companies looking for short-term gains sometimes face greater losses when they continue to ignore environmentally sensitive or socially responsible practices in marketing. They help to educate the customers on their rights and also provide suggestions on how to develop businesses without hurting the environment. they are not. With extensive media coverage. We also forbid the use of old-growth trees in our packaging. 1. However in actual fact.

14 Discuss how “Enlightened Marketing” helps your company to build long-term profitable customer relationships. 3. The company’s resources should be directed towards adding value to the customers. UNIT 5 57 Extending marketing 2. They understand that forsaking any of these groups may lead to imbalance in terms of long-term survival and growth plans of the company. Customers and the general public also like to be a part of such institutions. Innovative marketing principle suggests that companies should always strive to improve their product and services to meet the ever changing expectations of their customers by finding better and innovative ways to fulfill consumer needs. In other words. they should provide updated product and services to their customers. 4. The principle of societal marketing indicates that responsible companies always make marketing decisions after taking into consideration the consumers’ interests. Companies which are complacent about their existing achievement may not be able to maintain their profitability if they refuse to improve themselves. The Direct Selling Association of Malaysia (DSAM). The company’s marketing strategy should use long-term customer relationships rather than transaction based marketing. It is difficult to get every employee to follow the ethical code of conduct set by the company. The principle of sense-of-mission marketing suggests that the company’s mission should incorporate socially responsible marketing activities rather than focusing on narrow product sales. marketers should strive to provide value-added marketing services to gain customers’ trust and confidence in their products and services. Activity 5. Serving a social mission makes the working environment better. . the company’s interests and long-term societal interests. for instance. In other words. Marketing ethics Marketers today face many ethical dilemmas. has set the code of conduct for members to adhere to. 5. The enforcement of an ethical code of conduct requires commitment from all levels in the organisation as well as from all the partners who are involved in delivering the ultimate value to the consumers.

html for a sample of the code of ethics. They also do not give any room for their staff to bend the ethical code of conduct in any circumstances. enforcement efforts to implement the Anti-Corruption Act can be slow in some countries. sometimes even the finest guidelines are unable to resolve some of the ethical dilemmas faced by the marketers when they carry out their job. Companies are encouraged to develop and practise socially responsible and ethical marketing practices. • Whether to sell products according to the needs of the customers or products which yield the highest profit margin. Accepting or giving bribes is a very serious offence in many countries.58 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing However. • Whether to support excessive spending on the customer under the motive of securing business contracts if all your competitors are also doing so. However. You might also be in a dilemma if your customer asks your sincere opinion on the competitor’s product. You may refer to other examples by looking at the code of ethics of your own organisation or other organisations that you are familiar with if such codes have been developed by these organisations. • How to stem the possibility of some employees accepting financial payment from competitors for leaking some vital information. Those companies that breach the ethical codes set by itself and the society will have image problems that will in the long run. • How to stop illegal pay offs to customers by unethical salespersons as inducement for getting a business contract. . Visit http://www. The following are some examples of morally difficult situations in marketing.my/code. Business standards and practices vary a great deal from one country to the other.org.dsam. One key question to ask is: Does the company need to lower its ethical standards to suit the standards of other countries that it has chosen to work with? Many established companies will answer in a firm “no” because they adhere to their code of ethics in securing new contracts or businesses. corporate conscience and the long-run welfare of consumers. • Whether to continue promoting a product to the customer even though you know your competitor’s product is much better and cheaper. In the international market. Under the societal marketing context. environmentalism poses special challenges for marketers. marketers should develop marketing activities based on personal integrity. undermine the business interests of the company.

High prices. the manager is better prepared to respond to them in a proactive manner. Marketing managers must understand the criticisms that the marketing function may encounter. In working to meet the consumer’s needs. Deceptive practices. By understanding the criticisms. Poor service to disadvantaged consumers. Planned obsolescence. 2. Activity 5. The effort must be considered as a part of the corporate culture of the organisation. Malaysia is ranked 39 under the Transparency International Corruption Perceptions. The primary criticisms of the marketing function with respect to its impact on individual consumers have been categorised in relation to: 1. This ranking should provide a significant impact on the perceptions of individuals. public and businesses as well as on the Malaysian business environment as a whole. serve and satisfy consumer needs and improve the quality of consumers’ lives. marketers may take some actions that are not approved of by all the consumers or the publics within the social sector. Some of the criticisms are justified. 5. 2005. High-pressure selling. Shoddy or unsafe products. It would be good if we could improve our ranking from year to year to portray a positive image of our country. UNIT 5 59 Extending marketing Ethics and social responsibility require a total corporate commitment. some are not. 4. 3. 6. A marketing system should sense. These criticisms have emerged from the failure to practise consumer orientation effectively and adequately. .15 What principle should guide companies and marketing managers on issues of ethics and social responsibility? Summary This section examines the social effects of marketing practices by companies.

2. 4. creating barriers to entry and using unfair marketing practices. Cultural pollution. Criticisms from this larger public body include comments on creating: 1. Too much political power. promotions. Adverse publicity regarding the negative impact of a company’s activities on the environment can ruin a company’s business completely. 3. pricing and product development and services. Too few social goods. Marketing is accused of harming competitors and reducing competition by acquiring competitors. Many companies are taking environmental issues seriously. social mission and social orientation. value creation. critics have also pointed out that the marketing impact on other businesses may not always be good either. A code of ethics needs to be incorporated into company policies and mission statement to ensure widespread practice and serve as an implementation guideline. The policies include guidelines for customer relationships.60 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing A separate set of criticisms is directed towards the marketing function by the society in general. False wants and too much materialism. innovation. staff relations. They understand that marketing is beyond selling products and services. They respect and adhere to legislations which protect the environment. In addition. The current trend indicates that many marketers are practicing environment friendly marketing. This concept is based on the principles of consumer orientation. In the long run. distributors’ relations. Most successful companies have recognised that their companies need to follow enlightened marketing. companies which adhere to a strict code of conduct will certainly reap the benefits. .

Marketers are often less sensitive towards customers and yes. it is hard to survive and prosper with quality products and services let alone expecting to succeed and profit with the worst. high advertising and promotional costs and excessive mark ups lead to high prices harmful to the consumer. Can an organisation be focused on both consumerism and environmentalism at the same time? Explain. You recently learnt that your company is marketing an unsafe product that has already resulted in a few consumer injuries. . you believe that you could quietly introduce an improved version of the product. The latter circumstance can often be tracked back to a function of cost or the sense of urgency in getting a product to market quicker. Publicly acknowledging the problem would damage your brand’s image and would require an expensive product recall. What would you do? Suggested answers to activities Feedback Activity 5. Describe the two philosophies of ethics and social responsibility discussed in this section. However. poor service. 5. avoiding both the recall and the harmful publicity. Review the responses offered by marketers on claims that high distribution costs. 3. At present. Companies cannot build lasting customer value in a competitive world like today if they consistently deliver poor products and services to their target markets. Would a dilemma occur when a marketer has two sets of ethical values — a personal set and a business set? Explain. Is one a better philosophy than the other? Explain. Do you agree with the marketers’ responses? 2. Suppose you are a marketing director of your company.9 Yes. unsafe or shoddy products are often delivered to consumers. rather than intentionally deliver a sub-performing product to customers.3 1. UNIT 5 61 Extending marketing Self-test 5. 4.

Price the products fairly. provided no discrimination exists among similar kinds of buyers. the focus on materialism and cultural pollution are deeply linked to societal values in a given society and the blame cannot be laid solely at the door of advertising. Businesses need to be more ethical in their practices and not resort to activities like misleading advertising. 3. sellers have the right to introduce any product in any size and style. 5. provided they are not unfair or misleading. Activity 5. Heightened social responsibility can be used for improving marketing decisions. simply because they do not lead to long-term profitability. If it is. . Be honest with your customers. Promote products honestly.. many are not. too few social goods.10 As a marketing director. Ensure that the products are marketed to customers ethically. On the other hand. 6. Focus on product quality. traditionally. They also have the right to use any product message. Activity 5. heightened claims of product performance. You would find that while some of these criticisms are justified. etc. Use ethical ways to promote your products. provided it is not defined as unfair competition. they can also spend any amount to promote the product. and the right to use any buying incentive programmes. provided it is not hazardous to personal health or safety. the application of ethical business behaviour in your company’s marketing mix involves the following: 1. they should include proper warnings and controls. 4.62 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing Activity 5.12 According to Kotler and Armstrong (2012). provided it is not misleading or dishonest in content or execution. 2. They have the right to charge any price for a product.11 There has been a tremendous amount of criticism on advertising because it has created too much materialism. Ensure the products are safe to use. too much political power and cultural pollution.

Third. Marketing with integrity means that companies are honest about their product strengths and weaknesses. First. This enlightened philosophy suggests that a company should have “social conscience”. Companies and managers should apply high standards of ethics and morality when making corporate decisions. Though it is claimed that buyers can refuse to buy. in good conscience. critics feel that the buyer has too little information. buyers have rights to expect the product to perform as claimed. Second. there is one principle that suggests such issues to be decided by the free market and legal system. rather than a short-term sale focus and finally it helps companies to define their mission in broad social terms which might be appreciated by the customers. regardless of “what the system allows”. Activity 5. companies and their managers are not responsible for making moral judgments.14 Enlightened marketing helps companies to build their long-term and profitable customer relationships in a few ways.13 Traditionally. enlightened marketing also helps companies to instill an innovative culture to produce more innovative products to maintain and develop a stronger market share. companies which are high in marketing integrity would be able to attract more customers. and the right to influence products and marketing practices in ways that will improve the “quality of life” (Kotler and Armstrong 2012). the right to be protected against questionable products and marketing practices.15 According to Kotler and Armstrong (2006). Companies can. . Customers will be more likely to patronise companies which are sincere and trustworthy. do whatever the system allows. UNIT 5 63 Extending marketing Activity 5. A second principle puts responsibility not on the system but in the hands of individual companies and managers. enlightened marketing helps companies to improve the long-term value of products. Under this principle. Activity 5. education and protection to make wise decisions when facing sophisticated sellers. Buyers therefore also have the right to be well informed about important aspects of the product.

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2. market follower and market nichers have also been discussed in this section. we learnt the three steps in analysing competitors: 1. A market challenger is a company in a strong but not dominant position that is following an aggressive strategy of trying to gain market share. strategies. market research and the Internet) and from published data. Identifying the company’s competitors. The three strategies are: 1. Strategies for market leaders. Competitive advantage is a company’s ability to perform in one or more ways that competitors cannot or will not match. Section 5. Michael Porter’s three basic competitive positioning strategies have been discussed in this section. A company’s competitive intelligence system first identifies the vital types of competitive information and the best sources of this information. suppliers. UNIT 5 65 Extending marketing Summary of Unit 5 Summary There are three sections covered in this unit. Designing a competitive intelligence system is important in order to access information that a company needs about the competitor. Assessing competitors’ objectives. Overall cost leadership. 3. customers’ feedback. Focus. After identifying and evaluating major competitors. the system will help you to continuously collect information from the field (salesperson.1 highlighted the topic of creating competitive advantage. 3. Selecting which competitors to attack or avoid. 2. Then. A market leader is dominant in its industry and has substantial market share. Differentiation. In this section. strengths and weaknesses and reaction patterns. a company must then design competitive marketing strategies to create competitive advantage. A competitive advantage can be obtained by offering superior customer value to customers. market challenger. A market follower is a company in a strong but not dominant position that is content to stay at that .

high-pressure selling and poor service to disadvantaged consumers. You were also exposed to the topic on the principles of socially responsible marketing and should understand that some companies have followed a policy of enlightened marketing. A market follower tends to develop strategies that are similar to those of a market leader and tries to gain the market share from the market leader. Global marketing environment analysis.2 highlighted the inputs on marketing for the global marketplace. There are a few market entry strategies that can be used to enter a global market. Environmentalism is an organised social movement which seeks to minimise the harm done to the environment and quality of life by unethical marketing practices. 5. 6. Section 5. 4. Issues of global marketing in the 21st century and the global marketing environment were discussed in this section.66 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing position. 2. The last section in this unit covers the topics of market ethics and social responsibility. Consumerism is an organised social movement intended to strengthen the rights and power of consumers relative to sellers. deceptive practices. These include exporting. Deciding on the global marketing organisation. There are six major decisions that need to be considered in international marketing: 1. 3. which holds that a company’s marketing . A market nicher is a company that concentrates on a selected target market with focus on one or two narrow market segments and tailors its marketing mix to these specialised markets. education and protection. The marketing impact on society has been criticised for creating false wants and too much materialism. Deciding how to enter the market. too few social goods and cultural pollution. Deciding which country to enter. joint-venturing and direct investment. Deciding which market to enter. Deciding on the global market programme. You have learnt that the marketing impact on individual consumers has been criticised for its high prices. Alert marketers view it as an opportunity to serve consumers better by providing more consumer information.

UNIT 5 67 Extending marketing should support the best long-run performance of the marketing system. by considering both the company goals and long-term societal benefits. .

68 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing .

e. This course provided you with an understanding of why marketers must first segment their market. As the market is large and offers a wide variety of goods and services for customers to purchase. You would have studied the environments that may have an impact the marketplace and the customers. You should be able to analyse ways marketers create competitive advantage and analyse competitors which are keys to effective marketing. promotion and place to optimise their market position. when the discharging of their duties to the customers. price. This course has exposed you to consumer buying behaviour and business buying behaviour. building internal and external partnerships and developing the marketing mix elements into effective marketing strategies for an organisation. it is important that marketers continually systematically gather market information through market research and integrating them into the marketing information system. product. Marketers should be conscious of ethical and social responsibilities. the marketer must use the marketing mix elements. it is important for marketers to be able to focus in terms of their customers’ wants. UNIT 5 69 Extending marketing Course Summary Summary By now you would have an idea over the exciting world of marketing which involves delivering values to the customers by an organisation. you have learnt strategies for global marketing which is imperative for today’s organisation. In the final section. i. You would have an in-depth understanding the underlying principles of managing profitable customers’ relationships. target on the customers they wish to serve and finally position themselves in the consumers’ mind as a preferred provider.. The definition of success in the marketplace is measure by how well a marketer is able to deliver value to the customers in comparison to the competitors. . needs and lifestyle. It is important for every marketer to understand how their customers purchase. In order to be the preferred provider. Therefore.

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the 2100 MHz UMTS band. 2006. a rival mobile service provider. Maxis’ expansion into Indonesia and India is another milestone in our aspiration to be the regional communications leader of choice. Now. Tamil Nadu. In 2002. Orissa. Maxis purchased Timecel. providing both 2G and 3G services. The initial launch phase encompasses 1. Their mobile services are provided over the 900 MHz GSM band and as of recently. In 1999. low-penetration markets. Prior to the purchase. The acquisition of a 51% stake in PT Natrindo Telepon Seluler (NTS). . but have already met tremendous response from the market.3 Million customers. Maxis is currently in the middle of rolling out a Java wide network to establish the company as a national operator. from TimedotCom Berhad. It was started in the year 1995. This marks the beginning of the new world of Maxis — a world beyond voice. subscribers can choose between the two.300 BTS. Assam. Maxis in Indonesia On 29th April 2005. NTS expects to have up to 480 employees by launch date and to increase significantly upon launching. Maxis acquired 51% of PT Natrindo Telepon Seluler. and TimeCell 017. It uses the dialling prefix identifier of “012” and “017”. Maxis in India Maxis completed the acquisition of a 74% stake in Aircel on March 21. Indonesia and a 74% equity interest in Aircel. Operations in the last 5 circles have only been launched in the past few months. North East and Jammu and Kashmir. and beyond borders. which currently has 6. Maxis introduced the popular pre-paid brand “Hotlink”. India provides new growth opportunities for Maxis. West Bengal. Maxis offered phone numbers beginning with 012.1 Maxis Communications Berhad is a mobile phone service provider based in Malaysia. UNIT 5 71 Extending marketing Unit Practice Exercise Case Study 5. These acquisitions give Maxis a strong foothold in two of the world’s most attractive high-growth. Aircel has operations in Chennai.

2006. Licenses are also still pending for all other circles in India. In addition. It is the No 1 provider in the Tamil Nadu and Chennai circle. Having licenses in all circles would enable Maxis to provide connectivity to India’s 1. Aircel serves 3.my/personal/about_us/intl_ventures/ intl_ventures.700 personnel. where it competes head on with major national players.maxis. with a similar number planned for 2007. A further 1. EDGE services are expected to be launched at the end of the year. and is EDGE capable. As of September 2006.com. Aircel currently have 1. with an additional outsourced workforce of 1.200 BTS will be rolled out this year. Aircel’s network provides 2G and GPRS services. It aims to extend its coverage to over 20 cities to serve enterprise broadband customers.000 BTS. Aircel’s current and proposed footprint is illustrated below.72 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing Aircel is also in the process of rolling out operations in Bihar and Himachal Pradesh.asp Accessed 8 October 2006 . Jammu & Kashmir Uttar Pradesh Bihar North East Himachal Pradesh Punjab Haryana Assam Delhi Rajasthan West Bengal Gujarat Kolkata Madhya Pradesh Orissa Mumbai Andhra Pradesh Maharashtra Karnataka Chennai Metro circle Tamilnadu Present operations Kerala Launching in Q4’2006 Awaiting licences Source: http://www. where services are expected to begin in Quarter 4.300 personnels.8 million subscribers with a network comprising over 3.1 billion population. Aircel is the first in India to launch wireless Internet services using WiMAX technology.

UNIT 5 73 Extending marketing Questions 1. Discuss the benefits derived by Maxis in this International venture? 2. What are the competitive advantages for Maxis in acquiring Aircel and Natrindo? . In your opinion. what factors should Maxis consider in its international venture? 3.

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etc. • Investigate how the market. their strengths and weaknesses. 3. Proton could analyse Perodua’s strategies through the following: • Compile the latest advertisements and study the marketing themes and messages. • Talk to Perodua’s customers on the reasons they prefer Perodua compared to Proton. customer and general public are responding to its advertising campaigns through observations and market research. strategies. 2. are. • Observe the internal sales data to identify the changes in relation to Perodua’s marketing campaign. their strategies. With this information in hand. The rivalry never ends. To prepare an effective marketing strategy. Competitive intelligence must be collected. . Competitor analysis first involves identifying the company’s major competitors. he/she can select competitors to attack or avoid. A company must therefore continuously analyse competitors and develop competitive marketing strategies so as to create a competitive advantage over its competitors. strengths and weaknesses and reaction patterns. interpreted and distributed continuously. The research manager will then gather information on competitors’ objectives. UNIT 5 75 Extending marketing Suggested Answers to Self-tests Feedback Self-test 5.1 1. a company must consider its competitors as well as its customers. Building profitable customer relationships requires satisfying target consumer needs better than competitors do. • Set up a marketing intelligence unit to specifically monitor its movements. The research manager should be able to obtain full and reliable information about any competitor affecting the company’s marketing decisions. Assessing competitors is needed to find out what the competitors’ objectives. Proton and Perodua have been competing with each other for many years.

76 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing 4. trade regulations such as local content rules.2 1. . • It facilitates high value added providers. • It specialises on a specific target. language and ethnocentricity. companies may examine the economic health of Singapore using its gross domestic product. 2. A company can also choose to invest directly by buying an existing company or starting a foreign subsidiary in the foreign country. its economy conditions. Global entry strategies like licensing or franchising allow greater control. Joint ventures involve greater commitment. norms and customs. You also need to examine Singapore’s cultural environment. Exporting of goods involves little commitment but allows little control over how products are sold. symbols. Different foreign market entry strategies represent different levels of commitment of a company. • The market may grow big enough to attract larger competitors. • It generally helps to achieve a high margin. Advantages of the strategy: • It enables a company to better meet the needs of its target group than other companies. and labour and human rights regulations. Singapore’s political and legal environment. that is its values. Disadvantages of the strategy: • The niche may dry up and disappear. its economic infrastructure and its level of economic development to classify it as a developing or developed country. • The company can charge higher prices. superstitions. Self-test 5. In evaluating potential foreign markets.

less risk than other methods. loss of potential profits. Self-test 5. There are four levels of joint ventures the roti canai manufacturer could assess: License: • Advantages: relatively easy. • Disadvantages: less control. at the end of contract it may have created a competitor. more control. may give up profits if licensee is very successful. Contract manufacturing: • Advantages: chance to start fast in a new area. • Disadvantages: may limit opportunity to set up own operation. could form partnership at end of agreement. receives a fee or royalty. could have option to buy part of managing company. inherently more risk.3 1. generate profits from the beginning. Addressing each of the three instances individually. Joint ownership: • Advantages: greater opportunity for profit. . • Disadvantages: partners may not always agree on policies and strategy. less risk. UNIT 5 77 Extending marketing 3. Management contracting: • Advantages: less risk. There is not enough profit for extra channel players to enjoy. • Disadvantages: decreased control over manufacturing. the students should agree with the marketers that too “many” intermediaries will not last a long time in most markets.

a company has an obligation to establish a corporate ethics policy. Companies and managers are not responsible for making moral judgments. A marketer may easily have two sets of personal values — one for his/her personal life and one for his/her business life. The second philosophy puts responsibility not in the system but in the hands of individual companies and managers. do whatever the system allows. But to avoid conflict between these sets of values. customer service. consumerism is an organised movement of citizens and government agencies to improve the right and power of buyers in relation to sellers. but there were laws to prohibit unconscionable pricing when emergencies were declared. it is a significant contributor. During the 2004 fall hurricane season. but rather the focus of the movement. One simply has to look at the short but fast-paced history of ethical drugs being advertised and promoted to the consumer to appreciate how advertising costs can impact the retail price of a drug. An organisation can therefore be centered on both consumerism and environmentalism. Realistically. Although not the primary driver of raising drug prices. 4. Either the market correction mechanisms resolve the problem or the authorities do. the answer is yes. Consumerism and environmentalism are not mutually exclusive. This policy should define as many moral situations in which employees may find themselves as possible. You could easily read into this definition that business is not an integral part of the consumerism movement. By definition. The text discusses the type of situations to be covered in an ethics policy as: distributor relations. Excessive mark-ups do not last long. in all conscience. so they can. . pricing.78 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing The argument about high advertising and promotion costs has merit. 2. 3. but these organisations are generally not profit-oriented commercial entities that sell to consumers (Kotler and Armstrong 2006). The first of the two philosophies states that “issues” are decided by the free market and legal system. product development and general ethical standards (Kotler and Armstrong 2006). many unethical businesspersons tried to take advantage of the Floridians who were unfortunate enough to incur damages. advertising standards.

and they do need to have a “social conscience” that guides them to the “right” answer. • Make the announcement as soon as possible. . I personally believe that companies and individuals are responsible for deciding moral issues that they may encounter in the course of business. There are only three rules for this situation: • Always be prepared for a problem like this. 5. • Do not lie. UNIT 5 79 Extending marketing Without a doubt. you will have considerable debate on this issue.

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• The holdings of 74% in India and 51% in Indonesia will provide Maxis full control over the companies. There are no providers in Tamil Nadu and Chennai circle.8 million customers. . • As telecommunication is considered a utility industry.1 1. • Experience derived by Maxis in the Malaysian competitive market would be very useful for it to be successful. providing competitive advantages. thus reducing the risk of uncertainty. • Maxis would also be able to exchange the resources and technology from Indonesia and India. • Aircel is facing a rapid growth with readily available 3. purchasing controlling shares are rare opportunities that cannot be missed. • Achieving economies of scale by utilising their satellite technology and resources. • Indonesia and India with high population densities will provide huge market potential for Maxis. Maxis would be able to turn around these companies and in directions for it to achieve its objectives. Advantages • Able to become the regional communications leader of choice. • Would be able to venture into new growth opportunities in overseas markets. UNIT 5 81 Extending marketing Suggested Answers to Unit Practice Exercise Feedback Case Study 5.

languages and belief systems. price. places. • Other marketing matters: Decisions on product packages. India could provide more inputs on technology and Malaysia could provide more inputs on marketing strategies. • This takeover project will make Maxis bigger. 3. • Technology: The technological infrastructure varies according to different countries. policies on the existing staff and managing changes. • Can choose and apply the best technology and management practices among the three countries. new organisational structure and design. intermediaries (distribution channels). • Cultural and social issues: It should be cautious in the use of proper language in both countries due to the existence of different ethnic groups with different values.82 WAWASAN OPEN UNIVERSITY BBM 104/05 Principles of Marketing 2. • Other management issues: The mentioned joint venture gives control to Maxis on the operations. Now it has to think of the resources restructuring plans. For example. Competitive advantages are as follows: • Efficient use of resources would lead to reduction of cost per unit of production which in turn would result in economies of scale. . • Able to provide very competitive services to the customers due to advantages of economies of scale. • Legal matters: Rules and regulations for each country vary. Favouring any one particular group may result in fatal mistakes. thus giving it a competitive edge compared to other small players. and design and implementation of communication strategies. Small-scale competitors may have to leave the industry. Maxis should be cautious in the following areas: • Political stability and changes in the political power in both countries. Its ability to provide also depends on the availability of infrastructure facilities in both countries. Maxis should be able to understand and adhere to different rules and regulations imposed by both countries. public relations activities.

UNIT 5 83 Extending marketing • Will boost the image of Maxis as the leading provider of telecommunication services. Maxis would be able to apply this strategy at the international level to encourage more subscriptions. Will attract more customers. For example it would be cheaper to call from Maxis to Maxis compared to Maxis to other service providers. .

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UNIT 5 85 Extending marketing Terminology Competitive advantage Kelebihan bersaing ゲѝӬ࢓ Competitive marketing Strategi pemasaran ゲѝᏖഎㄪ⬹ゲѝ៬⬹ strategy kompetitif Competitor analysis Analisis pesaing ゲѝߚᵤゲѝᗻߚᵤ Competitor-centered Syarikat yang ゲѝᇐ৥݀ৌ company berorientasikan pesaing Consumerism Kepenggunaan ֱᡸ⍜䌍㗙ᴗⲞ䖤ࡼ Customer value analysis Analisis nilai pelanggan 乒ᅶӋؐߚᵤ Customer-centered Syarikat yang ᅶ᠋ᇐ৥݀ৌ company berorientasikan pelanggan Direct investment Pelaburan langsung Ⳉ᥹ᡩ䌘 Embargo Embargo ⽕ℶ䗮ଚ⽕ℶ䰤ࠊ Environmentalism Berorientasikan ⦃๗ֱᡸ䆎⦃๗䆎 persekitaran Joint venturing Pelaburan bersama ড়䌘 Licensing Perlesenan থ㒭䆌ৃ䆕ˈ⡍䆌 Management contracting Pengurusan kontrak ㅵ⧚ᡓࣙ Market challenger Pencabar pasaran Ꮦഎᣥ៬㗙 Market follower Pengikut pasaran Ꮦഎ䎳䱣㗙 Market leader Peneraju pasaran ᏖഎЏᇐ㗙 Market-centered company Syarikat yang Ꮦഎᇐ৥݀ৌ berorientasikan pasaran Non-tariff trade barriers Halangan perdagangan 䴲݇⿢䌌ᯧຕ൦ yang tidak mengenakan tarif Quota Kuota 䜡乱䰤乱 .

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K D (1996) Environmental Marketing Claims.asp (Accessed 8 October 2006) Microsoft phases out PVC from its packaging. Tan C T and Tse. http://biz. Pearson Education Australia. Shcutte H. P. S. K (2005). Prentice Hall. UNIT 5 87 Extending marketing References Brassington.microsoft.org. com.com. Kotler. 2nd edn. ‘Digi team visits Yogyakarta’. Lasserre P. Leong S M. Asian Original Publications. G (2012) Principles of Marketing. 2006 http:// nccc. New York: McGraw-Hill.thestar. G (2003) Principles of Marketing. http://my. Adam. M and Walker. Pearson Education Asia. F and Pettitt. W and D’Amico.my/index. 3rd edn.com/presspass/ features/2005/dec05/12-07Packaging. com/articles/swapr96. New Jersey: Pearson Prentice Hall. http://www. 2 October. M (1989) Marketing. 2006.jobstreet. 7 October. 9th edn.com launches SMS Apply. S (2002) Principles of Marketing. (1999) Strategies for Asia Pacific: Beyond Crisis. http://www. Etzel. G. Armstrong. Kotler. L S ‘Telco price war breaks out’. 3rd edn. .asp?file=/2006/10/7/bizweek/15634704&sec=bizweek. Tee. Borneo Post. Ang S H. P and Armstrong. (Accessed 20 October 2006) JobStreet.my/bizweek/story. B (1991) Fundamentals of Marketing. http://www. 1st edn. Malay Mail. P.htm.my/personal/about_us/intl_ ventures/intl_ventures.mlmstartup. 14th edn. W.maxis. New York University Press.mspx (Accessed 20 October 2006) Stanton.php?option=com_content&task=view&id=159&Itemid=51 (Accessed 20 October 2006) Grimes. Principles of Marketing and Asian Perspective. Brown.com/aboutus/preleases60. 2006 ‘Direct sellers say they comply with rules’. John Wiley & Sons. Maxis international ventures. L and Armstrong. (Accessed 15 October 2006) Zikmund.htm (Accessed 15 September 2006) Kotler.16 October. The Star.