Basic Business Statistics Concepts and

Applicationsby 3rd Edition Berenson

Solutions Manual
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Chapter 6
Contemporary environmental variables in
international marketing

Book Content

Learning Objectives
Learning objectives from the textbook per chapter

Discussion Questions
Sample answers to discussion questions from the textbook

Case Study Solutions

Answers to case study questions

International Marketing Edge (IMEDGE)

Guide to using the IMEDGE feature in class

Teaching Notes

Tutorials
Teaching ideas for tutorials and small groups

Lectures
Teaching ideas for lectures and similar learning spaces

Assignments
Ideas for individual or group assignments

Additional Questions
Further questions not in the textbook for assessment and quizzes

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Book Content

Learning objectives
After reading this chapter you should be able to:

• explain the impact of terrorism on the conduct of international marketing

• identify how health-related issues can affect operations in an international

market

• identify ways in which climate and geography affect consumers in other

countries

• manage the ethical dilemmas that confront international marketers,

especially in emerging markets

• explain the opportunities and constraints created by increasing global

environmental consciousness.

Discussion Questions

1. What trends in health and fitness provide opportunities for

organisations in the international market?

Health-related issues fall into two broad categories – animal-related and human-
related. Animal-related issues include SARS, mad cow disease, bird flu and mercury
in fish. Examples of human-related issues in both developed and underdeveloped
countries include AIDS/HIV, malnutrition, ageing, obesity (lack of fitness and
correct diet) and flow-on impacts such as the increased incidence of diabetes.

These issues have created opportunities for Australian companies, especially for
food products. For example, concerns expressed about manufactured and
chemically enhanced foods and their perceived link to obesity have led to increased
demand for organics foods (e.g. Wholefoods in the US, the Macro line at
Woolworths in Australia). Consumers have become more concerned about the
provenance of their food and are willing to pay premium prices for food
accompanied by detailed information.

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2. What are the impacts of terrorism on the opportunities for businesses
in international markets? Provide example of these impacts.

Terrorism threatens regional economic prospects, creates uncertainty, reduces

confidence and increases risks. Terrorism (or fears about the potential for
terrorism) has had a negative impact on consumers around the world and has
directly affected industries such as tourism and retailing (e.g. reluctance of tourists
to stay at hotels and businesses involved in the 2008 Mumbai terrorist attacks).
The impact of terrorism (or potential for) can be psychological when it discourages
foreign direct investment. Enderwick (2001) categorised the impact into direct (e.g.
front line industries such as airlines), secondary (e.g. insurance rates), response-
generated (e.g. defence spending) and longer term (e.g. overall instability).

Despite the negative impacts of terrorism, there are opportunities for some
Australian industries e.g. producers of defence equipment, intelligence gathering
and security analysis and systems for infrastructure, personal and public safety.

3. How might global warming provide international opportunities for

businesses?

This question gives an opportunity for a lot of debate. How students view
opportunities will depend on their beliefs about global warming and the level of
impact it will have. For example, some may agree with Oxford Professor Norman
Myers who believes that climate change may cause as many as 200 million ‘climate
refugees’ as higher sea levels and decreases in tourists amongst other flow-on
effects will make it physically and economically unviable to exist in low-lying areas
in particular, such as Tuvalu in the South Pacific. Others may believe that climate is
cyclical (longer term perspective and analysis needed) or may be ‘non-believers’.

Opportunities would exist, for example, in energy sources such as nuclear and wind
that emit no carbon (and the sale of carbon credits). Australia, with its uranium
stocks and sugar cane-produced ethanol, is well placed to capitalise. The debate
about the impact of ‘food miles’ may become problematic for Australian and New
Zealand producers given the distance to local markets but would provide
opportunities for more regional food trade.

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Case Study Solutions

Bitter Sweet: not so Fair-Trade Chocolate

Question 1
What are the negative impacts of unethical farming in West Africa on the global
chocolate brands mentioned in this case?

Answer
Media coverage (eg CNN), activist websites and protests will all have a negative
impact on the brand. With a global brand umbrella such as Nestlé, this may have a
negative impact on all of their brands (under the umbrella brand of Nestlé).
There are negative impacts on Brand Reputation. Combatting this negative
perception leads to public relations becoming a focus for the company and this is an
expensive expenditure for the firm. Further, the brand reputation may never
recover fully. As a consequence of the internet there will always be some trace of
the issue.

Question 2
Who is responsible for fair trade in the chocolate market?

Answer
Sub-questions that could be raised: Is it the responsibility of the company? Does
the chocolate company play a role in this change? If so, what role do you think they
should play?
Governments, industry and companies (all).
It is the responsibility (especially when so large) for these companies to play their
role to influence positive change.
Companies at a macro and micro level influence benchmarks in their industry. It is
imperative that the entire industry make a stand.

Question 3
What is CSR? Who are the global-conscious consumers and why do they matter?

Answer
CSR is the obligation the company has to society which falls beyond what is legally
required. Corporate social responsibility (CSR) for marketers means CSR success
translates into positive product evaluations, purchase intentions and customer
satisfaction. Essentially, CSR assists the firm and international marketer in building
a better, stronger brand (Hoeffler and Keller, 2002). Developing and maintaining
corporate social responsibilities within the firm has been shown to lead to a better
global brand and better global brand performances (Madden, Ross and Dillon,
2012).
The socially-conscious global consumer is a consumer who is willing to pay extra for
products or services from a company that has given back to the society. As
previously stated, “the socially conscious consumer” has been identified for some
time now (Anderson and Cunningham, 1972). It is incumbent on companies to
understand this complex set of assumptions consumers are making. Consumers
want companies to give back to the society. Further, this consumer perception of
corporate responsibility is somewhat void of geographical boundaries due to the
internet. For example, what the company does in one country where CSR is
considered appropriate may be perceived in another country as unethical.

Question 4

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What would you do and why?

Answer
There would be many answers here, but highlight the company focus as you are the
international marketing manager, not the government.
We, as marketers, can influence change, but not actually make the change as this
is a regulatory setting in Africa.
What we can do is change the practices of the company related to sourcing of cocoa
and implement fair trade systems.

International Marketing Edge (IMEDGE)

Concept
The IMEDGE section draws on materials covered in each chapter to give students
an opportunity to undertake a practical and hands-on exercise which covers a
specific international marketing topic. Using information from the chapter and other
extra sources, IMEDGE tasks can be done either as group or individual activities.

What are the potential benefits of IMEDGE?

Students
• It requires students to apply theory to a real life scenario using information
from the sources identified in the chapter.
• It consolidates students’ understanding of key concepts covered beyond the
basic theory.
• Unlike case studies, the task involves collecting current on-going data and
applying it to concepts covered.

Instructors

• It is a very useful teaching aid since it asks students to complete a task

which involves looking for current information and applying principles
covered.
• It encourages students to keep abreast of current international marketing
activities.
• It can complement other blended teaching and learning activities applied by
instructors. For example, discussion questions and research assignments.

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Model Answer - IMEDGE - Chapter 6

Other examples

Students should be able to research online examples of how social media has been
used by consumers or other lobbyists to campaign against brands on a global basis.
A number of major international brands, such as KFC, Nike, McDonald’s and Wal-
Mart, have been subject to social media campaigns which encourage consumers to
boycott their products for a variety of reasons such as their contribution to obesity,
unfair labour practices or use of child labour. Another landmark example is that of
Addison Lee (one of the UK’s biggest minicab companies). The company faced a
social media backlash from cycle campaigners after its head had described deaths
and serious injuries among inner-city cyclists as inevitable and primarily the fault of
untrained riders. A vicious social media campaign was run by the cycle campaigners
which resulted in the company losing one of its biggest contracts with the
government.

Potential impact of such actions

The threat of social media campaigns can have diverse impact on brands. These
include:

• A threat on the value of the brand. In P&G’s case, the Pampers brand is
worth close to $9 billon a year and any backlash was viewed as a threat to
the value of the brand.
• Change of international marketing strategy in order to militate against the
negative impact of such campaigns.
• Additional, often unbudgeted costs for managing the damage done to the
brand.
• Loss of consumer confidence in the brand and the company which can also
be manifested in loss of sales. In the case of Addison Lee, the company lost
its biggest contract, which was with the British government, as a result of
the Facebook campaign.

How should firms deal with such actions?

Firms can use various strategies to combat the potential impact of social media
campaigns.

1. Be fast in responding to any complaints raised

Since these campaigns are being run on a 24-hour virtual platform. P&G’s
main response took place in the first 28 hours after the story was covered
by CNN.
2. Integrate response into other marketing communications channels
P&G had interviews covered across all main forms of above line media to
explain its case. A YouTube video was also developed to debunk the
Facebook claims.

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 3. Understand your customers, isolate the haters, and offer another
explanation
P&G used its databases and research on its customers to identify genuine
complaints whose concerns they responded to whilst debunking the rumours
that were spread by consumers who were just out to trash the brand
4. Provide clarity about your new product on every media channel
P&G acknowledged the weakness in lack of detail in its product launch
across all media channels which provided a gap for consumers on Facebook
to raise concerns. If accurate product information details had been provided
across all channels at launch stage, this could have minimised the chances
of an online backlash.
5. Be proactive in joining the conversation with customers and other
stakeholders online. Encourage feedback to the company rather than to the
media, enabling quicker responses to any concerns.
6. Clearly understand emerging importance of social media
Companies should not underestimate the potential influence of social media
in their international marketing strategies given the fact that consumers now
use this platform for communicating and word of mouth information about
products.

Teaching Notes

Tutorials

1. Have students bring in one article from an Australian or New Zealand newspaper
(hard copy or online) and one article from an international newspaper or business
publication (online) that illustrates how climate affects culture and consumption.
For example, students might bring in articles detailing the impact of extreme
weather conditions such as the Queensland floods on communities and their
economic base.

2. Have students bring in advertisements from Australian and offshore companies

they believe are specifically appealing to green consumers or using
‘environmentally friendly’ themes to differentiate. The purpose is to use the
advertisements as a springboard to discuss the increasing global awareness of
environmental issues, the opportunities and threats these present and how
international marketers are responding.

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Lectures

1. When discussing consumerism, a good example of the power of consumers

online is YouTube video ‘United Breaks Guitars’ by Sonsofmaxwell. This Canadian
band, disappointed with the initial denial of responsibility and then minimal
compensation offered by United Airlines for damage to their guitars, put their
dissatisfaction to music. Over 13 million YouTube views later, United offered the
band substantial sums to remove the video - the band politely declined and the
damage to the brand continues. The purpose is to illustrate the power provided to
consumers around the world by social media.

2. When discussing ethics, students should be encouraged to discuss the benefits to

companies, consumers and society from initiatives such as Fairtrade (see, for
example, www.fairtrade.com.au). The purpose is to highlight that ‘ethical’
behaviour is not just the avoidance of the ‘unethical’ and that pursuing initiatives
such as Fairtrade can also generate commercial benefits in terms of differentiation,
market position etc.

Assignments

1. DodgyAs offers to sell your company 1 million Chewy Choc Toddler Toys for only
$100,000. Due to questions about health and safety and what are viewed by
DodgyAs as ultra-cautious and business unfriendly standards, Chewy Choc Toddler
Toys are not being sold in New Zealand and Australia. DodgyAs advises, however,
that there is extremely high demand in Africa and the toys could easily be sold for
at least $3 each. How do you respond? Explain your answer using the relativist,
utilitarian and universalist perspectives.

Students are being asked to consider that, while it may be legal to sell this product
in Africa, it may not be ethical as there are questions about safety. Student
answers will vary but they should make an attempt to deal with the relativist
(looking at ethics in the host country), utilitarian (greatest good for greatest
number) and universalist (universal set of ethical behaviours regardless of country)
views which would likely lead them to different answers.

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2. Explain, with examples, how environmentalism presents both a threat and an
opportunity for international marketers.

Environmentalism and environmentally conscious consumers can present a threat

to international marketing operations. International marketers need to be aware of
any potential for environmental issues that might arise from either their operations
or sales of their products in offshore markets – from excessive packaging to
environmental disasters. They must recognise that regardless of the activities of
agents or in-country partners, they will be the ones held accountable, receiving the
adverse publicity that will injure their reputation not just in the affected country but
any country where their products are sold (including their home country).

Environmentally conscious consumers, however, also present opportunities for

creating new products (e.g. solar powered appliances) and services (e.g.
ecotourism) or modifying existing products. Research has shown that these
consumers are willing to pay more for ‘green products’ and spend more time
locating them (online opportunities). See Figure 6.1.

Additional Questions

1. Ethics can be viewed as being culturally-based assumptions of what is

right and what is wrong. Discuss the three differing views of correct
ethical behaviour and identify and discuss why ethical behaviours differ
from country to country.

Views of correct ethical behaviour differ according to whether the person holds a:
• relativist perspective – what is ethical is determined by the host country
• utilitarian perspective – what is ethical is that which delivers the greatest
benefit to the greatest number of people
• universalist perspective – there is a universal set of acceptable ethical
behaviours that should be applied to business wherever it occurs.

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The challenge for the international marketer when dealing with ethical issues stems
from the fact that ethical behaviours differ on a country-by-country basis. Reasons
for this include:
• popular attachments to governments
• popular customs
• level of economic development
• relative size of the public sector
• low income for public servants
• obscure political and legal environments
• high level of government control and state ownership.

2. Terrorism and violent activities around the world have made the global
marketplace seem unsafe. How concerned should companies with
international operations be about such activities? Should they consider
abandoning some of their global markets? How should companies weigh
their concerns about terrorism against the need to help the economies of
developing countries?

This is a good debate/discussion question. Overall, companies must weigh up the

risks in each particular country. Terrorism and the threat of terrorism can
dramatically change business environments – both in the short and the long term.
Some companies decide to abandon markets where there is political instability
while other companies review market entry options. Students should be aware,
however, that terrorism and the threat of hostile acts directed at foreign operations
existed long before 9/11.

3. Discuss consumerism and why international marketers need to be aware

of consumer activities offshore and online.

Consumerism is an organised movement of citizens to improve the rights of buyers

in relation to sellers (often supported by governments – see, for example, the ACCC
at www.accc.gov.au). The degree of consumerism in any given offshore market
should be factored into market assessments as consumer watchdog groups are
often powerful players in the marketplace exerting influence over perceptions of
brands and business activities. Consumerism is also increasing with the use of the
internet. Using social media, consumers can create and coordinate campaigns
against companies perceived to be acting inappropriately.

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