In Partial Fulfilment of the Requirements for the Course

Economic Analysis in a Globalized Environment (ADM B002)

Second Trimester, S.Y. 2017-2018

In Partial Fulfilment of the Requirements for the Course

GLOBALIZED MARKETING (ADM C009)

Second Trimester, S.Y. 2017-2018

Submitted by:
Hyacinth Ximonette R. Amurao

Submitted to:
Dr. Nolan Guillao
 GLOBALIZED MARKETING – GLOBAL CULTURAL ANALYSIS

CULTURE - The complex whole which includes knowledge, belief, art,

morals, custom and any other capabilities and habits acquired by an
individual as a member of the society.
CLASSIFICATIONS OF CULTURE
a. HIGH CULTURE – Encompasses the cultural products of aesthetic
value, which a society collectively esteem as exemplary art (high
art, music, film)

b. TRADITIONAL CULTURE – considered as the form in which traditions

are expressed. Form part of the identity and heritage of a traditional
/indigenous community. (traditional costume, dance etc.)

c. POPULAR CULTURE/ AKA POP CULTURE – is the entirety

of attitudes, ideas, images, perspectives, and
other phenomena within the mainstream of a given culture.

d. FOLK CULTURE – Folk culture refers to a culture traditionally

practiced by a small, homogeneous, rural group living in relative
isolation from other groups.

e. CORPORATE CULTURE – Corporate culture refers to the beliefs and

behaviors that determine how a company's employees and
management interact and handle outside business transactions.

UNDERSTANDING CULTURE
THE ICEBERG THEORY
Culture as an iceberg: The iceberg analogy is commonly used to represent
the concept of culture. The iceberg model graphically demonstrates how
culture is made up of a visible structure (above the water) and an invisible
structure (below the water). Just as the visible part of the iceberg is only a
small fraction of what lies beneath the water, so too are the visible cultural
characteristics only one part of a much larger whole.
Visible Cultural Characteristics include behaviors and practices:
Clothing, dance, language, physical features, food, music, architecture,
gestures, greetings, devotional practices and more.
Invisible Cultural Factors include perceptions, attitudes, values and beliefs:
Spiritual beliefs, worldviews, rules of relationships, approach to the family,
motivations, tolerance for change, attitudes to rules, communication styles,
modes of thinking, comfort with risk, the difference between public and
private, gender differences and more.
Failure to understand and recognise these parts of culture and the layers
that compose them, as well as how they influence each other is the main
reason misunderstandings occur when doing business internationally.
Why We Need To Understand Culture
a. Values
 Values of a society dictate what is acceptable and
unacceptable behavior.

b. Symbols
 Symbols in relation to cultural influences refers to language,
both spoken and unspoken.
 Language is a symbol of cultural pride.

c. Rituals
 Rituals are patterns of behaviors that are learned and
repeated.

d. Thought Processes
 Thought processes may vary among different cultures. This
could affect the way a marketing strategy is perceived.
CULTURAL DIMENSION MODELS EXPERTS
A. EDWARD HALL

 Proxemics – Personal Space in Different Cultures

 Intimate distance – 6 to 18 inches (15-45cm)
This level of physical distance often indicates a closer
relationship or greater comfort between individuals.
 Personal distance – 1.5 to 4 feet (45-120cm)
Physical distance at this level usually occurs between
people who are family members or close friends.
 Social distance – 4 to 12 feet (1,20m-3,50m)
This level of physical distance is often used with
individuals who are acquaintances.
 Public distance – 12 to 25 feet (3,50-7,50m)
Physical distance at this level is often used in public
speaking situations.

 Chronemics (Polychronic and Monochronic) – Study of the role of

time of in communication.
 Polychronic Cultures like to do multiple things at the
same time.
 Monochronic Cultures like to do just one thing at a time.

 High and Low Context Culture – used to describe broad-brush

cultural differences between societies.
 High Context – refers to societies or groups where people
have close connections over a long period of time.
 Low Context – refers to societies where people tend to
have many connections but of shorter duration or for
some specific reason.

B. RICHARD LEWIS
  He developed a model to define and simplify inter-cultural
analysis, with the aim to improve interaction between different
cultures.
 This model serves as a blueprint of cultures by placing countries
in three categories:

a. Linear-actives value structure and control. As logical planners,

they do things one at a time in a scheduled manner, and tend
to be efficient and precise. Germans and Swiss are examples
of linear-actives.

b. Multi-actives emphasize relationships – loud and emotional

disputes are quickly forgotten once they reach agreement.
They are lively talkative who priorities work based on feelings,
and easily switch tasks depending on whatever seems urgent
or more interesting. Italians and Arabs fall in this category.

c. Reactives favor courtesy and respect in relationships. Unlike

multi-actives, they seek harmony and will avoid confrontation
to preserve the peace, before trying again. Chinese and Finns
are reactives.

We Can Use The Lewis Model To:

 Analyze how different cultures are programmed, including our

own.
 Understand the three categories, and find out where our
personal orientation falls in.
 Identify the commonalities between different cultures and
exploit them to build empathy.

C. GEERT HOFTEDE

Hofstede's Cultural Dimensions

1. Power Distance Index

 “Power distance is the extent to which the less powerful
members of organizations and institutions (like the
family) accept and expect that power is distributed
unequally.”
 This dimension does not measure the level of power
distribution in a given culture, but rather analyzes the
way people feel about it.
 Low Power-Distance scores mean that a culture expects
and accepts that power relations are democratic and
members are viewed as equals.
 High Power-Distance scores mean that less powerful
members of the society accept their place and realize
the existence of formal hierarchical positions.

2. Individualism Vs. Collectivism

  “The degree to which individuals are integrated into
groups.”
 This dimension has no political connotation and refers to
the group rather than the individual.
 Cultures that are individualistic place importance on
attaining personal goals.
 In collectivist societies, the goals of the group and its
wellbeing are valued over those of the individual.

3. Uncertainty Avoidance Index

 “A society’s tolerance for uncertainty and ambiguity.”
 This is a dimension that measures the way a society deals
with unknown situations, unexpected events, and the
stress of change.
 Cultures that score high on this index are less tolerant of
change and tend to minimize the anxiety of the
unknown by implementing rigid rules, regulations,
and/or laws.
 Societies that score low on this index are more open to
change and have fewer rules and laws and more loose
guidelines.

4. Masculinity Vs. Femininity

 “The distribution of emotional roles between the
genders.”
 This dimension measures the level of importance a
culture places on stereotypically masculine values such
as assertiveness, ambition, power, and materialism as
well as stereotypically feminine values such as an
emphasis on human relationships.
 Cultures that are high on the masculinity scale generally
have more prominent differences between genders
and tend to be more competitive and ambitious.
 Those that score low on this dimension have fewer
differences between genders and place a higher value
on relationship building.

5. Long-term Orientation vs. Short-term Orientation

 This dimension describes a society’s time horizon.
 Short-term oriented cultures value traditional methods,
take a considerable amount of time to build
relationships, and in general view time as circular. This
means the past and the present are interconnected
and that which cannot be done today can be done
tomorrow.
 The opposite of this is long-term orientation, which sees
time as linear and looks to the future rather than the
present or the past. It is goal-oriented and values
rewards.

6. Indulgence vs. Restraint

 This dimension measures a culture’s ability to satisfy the
immediate needs and personal desires of its members.
  Those that value restraint have strict social rules and
norms under which satisfaction of drives is regulated and
discouraged.

MARKETING IMPLICATIONS

 Cultural factors must be considered when marketing consumer and

industrial products.
 Environmental sensitivity reflects the extent to which products must
be adapted to the culture-specific needs of different national
markets.

ENVIRONMENTAL SENSITIVITY
 Independent of social class and income, culture is a significant
influence on consumption and purchasing.
 Food is the most culturally-sensitive category of consumer goods.
 A CASE STUDY OF IKEA IN CHINA

REPORTER: HYACINTH XIMONETTE R. AMURAO

TOPIC: GLOBAL CULTURAL ANALYSIS

INTRODUCTION
The purpose of this report is intending to understand how the diverse
culture impacts on the operation of the company in the global business.
Meanwhile, it is also aiming to come up with an effective solution of dealing
with the cultural differences for managing the cross national activities.
With the continuous rapid development of the globalization, in
particular, the increasing of global trading and corporation, it is inevitable
that different cultures meet together. However, since the complex of the
culture in difference areas, exhibiting the multifaceted characteristic, the
culture conflict is unavoidable as well. The people from diverse culture find
it is difficult to communicate with each other, not only due to the language
barrier, but also the influenced by the difference of the culture styles. As the
diversity of culture enhances the ambiguity and confusion and it
deteriorates the effectiveness of the team working, the companies or
organizations involving in the global market are directly facing the
challenge with regard to adopting in cultural diversity. In the end, the cross-
cultural management is getting more and more important, and it is able to
bridge the gaps between the difference cultures. The management of the
across cultures becomes a priority for multinational companies and the
global organizations in pursuing their international strategy.
In order to further understand the impact of culture on real life basis,
we will consider studying the case study of IKEA in China which would
provide the cultural view from a marketing perspective. Marketing which
forms a key aspect of the company's strategy to enter a new region needs
to be customized according to the culture of the region. IKEA Shanghai
focused on the local culture and behavior while creating its marketing
strategy for the local customers.
 IKEA Shanghai's marketing mix of 4 P's will further elaborate on this
customization to meet local culture.

PRODUCT
Ian Duffy, IKEA's CEO of Asia-Pacific region, said "IKEA's localization in
China is to appeal to Chinese customers' taste. For example, the range of
products offered in the Chinese market should match the customers'
preference. The showrooms should be designed and arranged in
accordance with a Chinese style".
The company adapted such a product strategy that was in sync with
the oriental design which achieved success. The company took into
consideration of the Chinese eating habits and produces its range of
cooking style cutlery which were 3 kinds of meat cleavers and 3 kinds of
chopsticks together with Western style of knives and forks. Anders Dahlvig,
IKEA's CEO, states that "that 5% of the products IKEA sells in China is for China
only, in contrast to 1% in IKEA's European market".
While the company is known for creating furniture and fixings which
have a simple design, they introduced specific designs for the Chinese New
Year which were dark in color as preferred by the Chinese customers while
designs which have an oriental touch to it. Thus company further imbibed
the local culture in its products by placing logo of a red rooster indicating
the New Year, which is considered as auspicious by the Chinese customers
and hence it was a move which was well appreciated by the local buyers.
One of the areas which the company has not looked into it is its form
of simple packaging while the Chinese customers prefer a brighter and
fancy packaging which also matches the goods inside. However the
company communicates and focuses to say to its customers that it uses
simple and recyclable wrappings. Another point which the company
makes and is in line with the customer preference is that they do not use
such expensive packaging and hence are able to keep the end costs low,
which remains the critical selling point of the company.

PRICE
Understanding the Chinese customer preference for items tagged as
low priced, the company focuses on reducing prices, which has effectively
attracted more customers. Initially when the company entered the Chinese
market, it focused on customers in the tier 1 segment of income as their
buyers, however when the company realized the preference of cheaper
priced goods by tier 1 segment of customers as well it further reduced its
prices substantially thus attracting more customers from all classes of
income. From 2000 to 2005, IKEA managed to reduce the general price of
its products by 46% to 70%.
Initially, when the company started operations in China, a large
number of products were being imported thus inviting more duty and
import taxes on it making the final price go higher. This was perceived by
the Chinese customers as a brand with expensive products, later on the
company decided to source locally and thus cutting down the prices
which were easily affordable by the customers. Other moves to cut cost
were too expensive product brochures which were thick to a thinner
brochure with cheaper quality of paper. Thus it can be seen that the
company understands price as a critical part of their selling process and
customizing it according to the local culture preference which is for lower
priced goods.

PLACE
Proposes that according to the view from culture, any option of
place or distribution is one of the two elements of the marketing mix, which
are important in reaching out towards the customer. Since distribution also
interacts with the consumers in an indirect manner, it can be termed as a
key point in the cultural consideration as an efficient distribution can result
in better priced products. For this reason, the company established efficient
and low cost network of distribution channel and thus managed to reduce
price or keep them in control. The company built its own logistics center
rather than depending on other providers which was seen as a key move
to cost cutting since they could contain more than 300,000 cubic meters of
products. These actions by the company solidify the fact that the company
has always looked out to keep operation costs in check and thereby offer
the best prices possible to the Chinese customers, which is one of their key
preference.

PROMOTION
The company's strategy of promotion mainly includes its mixture of
advertising, sales promotion, public relations and other marketing tools.
While the company uses these set of tools to effectively communicate
customer value it also needs to be careful while delivering such messages
so as to be in the boundary of the local culture.
The company does not market its products specifically to each type
of customer but rather let the customers to make their own choices through
its catalogues. As seen from the literature review that independence and
liberty in decision making is well appreciated by employees of a firm, it may
well apply to the Chinese customers as well who would like to make their
own decision rather than be told what to buy.
Using local faces for better assimilation in an advertisement is useful
to get customers' attention. Hence, characters in IKEA's commercials are
mostly Chinese trying to show that IKEA is suitable for a Chinese home.
The company also blends well with the Chinese cultural value
developing relations rather than just a business deal by selling things at the
right price when they are needed and not bring guided by profits by selling
umbrellas when it is raining at the standard price.

CONCLUSION
Based on the case study of Ikea along with Hofstede's cultural
dimensions framework we can propose that culture has a critical influence
on any international business performance as it involves not only the
consumers or the end users of services or products of the company but also
employee's performance and communication skills. While the Hofstede
model provides a useful tool to quantify the new regions location on four
important dimensions, the case study provides a product and service
based view for the new company to focus on with regards to culture of that
place. In the current scenario where there is an increase of travel of
company executives, culture is much more exposed than it was before thus
an employee transferred from a high power distance country like USA to
low power distance country like Malaysia may have aggressive
communication style which could be perceived in a negative manner,
thereby causing turbulence in the management of the company in that
region. While at the same time the importance a company gives to tis
marketing mix which is customized according to local requirements as seen
in the case IKEA also remains critical.
Some of the limitations of this approach would be the critique of
Hofstede model by other researchers wherein they state that he quantifying
of cultural issues may possibly hamper validity of research. This also remains
the same case for various companies entering different regions with an
entirely different culture thus creating culture clash possibilities. The
employees of the parent firm may be working with newly hired employees
in a foreign region either in person or remotely however culture would play
a key role if the new development has to take place smoothly.