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CHAPTER 6
CONSUMER, INDUCTRIAL, AND GOVERNMENT MARKETS
Chapter Outline
A. Drivers of the Global Consumer
B. The Global Consumer
C. Influences on the Global Consumer
1. Economic Status
2. Technology Level
3. Personal Motives
4. Culture
5. Social Factors
6. Situational Factors
D. Country-of-Origin Effects
E. The Industrial Buyer
F. Influences on the Global Industrial Buyer
1. Culture
2. Stage of Economic Development
3. National Situational Factors
G. The Government Buyer
H. Marketing to Global Consumers
1. Targeting Global Customers
2. Country-of-Origin Challenges
3. Global Customer Relationship Management
4. Selling to Governments
Chapter Objectives
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This chapter begins with a discussion on the drivers of the global consumer. It then helps us
understand the characteristics of the global consumer. Next, it helps us recognize the
influences on the global consumer. It then discusses the country-of-origin effects. Next, it
highlights the characteristics of the industrial buyer. It then outlines the characteristics of the
government buyers. Finally, it concludes with an examination of the managerial
requirements for marketing success with global consumers.
• The instructor could ask the students to discuss how their economic status influences their
buying decision.
• The students could be asked to apply Maslow’s “hierarchy of needs” to themselves and
identify at least two products they have bought to fulfill the individual need level.
• If there are multi ethnic and racial students in the class, the instructor could ask such students
to describe how their culture influences their buying decision. They could be asked to inform
the class whether their culture is conservative or materialistic.
• The instructor could ask the students to identify their reference groups and discuss how these
groups influence their buying decision.
• The instructor could ask the students to discuss the situational factors that influence them
while buying a product.
• The students could be asked to identify the countries that have a positive and the countries
that have a negative influence on their buying decision. Why do the countries have such an
effect on them? Do they consider themselves to be consumer ethnocentric or do they have a
world mindedness?
• If there are students from different countries, the instructor could ask them to identify the
stage of economic development their country is in.
• The students could be asked to design a positioning strategy for a product that they would
like to launch in their home country and in one foreign country of their choice.
Chapter Summary
Exhibit 6.1 displays three levels of factors that shape the world of consumers today. At the
outermost level are supranational factors, which transcend national borders and affect the global
consumer at a macro, international level. Trade institutions and policy refer to global entities such
as the WTO, IMF, and others that influence the evolution of trade and investment at a global
level. In terms of national-level factors (the middle circle in the exhibit), consumers everywhere
are affected by the economic, political, legal, technological, infrastructural, and cultural
conditions that characterize the nations where they live. The inner circle in the exhibit represents
the consumer, whose preferences are determined to a large extent by personality traits, personal
situational factors, and other conditions that exist at the individual level.
The emergence of the global consumer coincides with two important driving trends:
• Globalization
• Advancing information and communications technologies
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Globalization refers to the growing interconnectedness of nations, the organization of life
on a global scale, and the consolidation of world society. It is characterized by a
combination of falling trade barriers and the industrialization and modernization of nations
worldwide. It reflects the spread of free-market capitalism, which both fosters and is
fostered by massive growth in international trade and investment.
The past few decades have seen the emergence of the global consumer. Global consumers
are individuals or organizational buyers that exhibit similar needs and tastes worldwide.
Global market segments are groupings of consumers that exist in multiple countries and
display similar characteristics regarding preferences and consumption of specific product
or service categories. Globalization and global diffusion of media give rise to a desire by
people everywhere to participate in an idealized and relatively universal consumer culture.
Multinational firms seek to capitalize on world culture by developing global products and
positioning their brands in the global consumer culture.
Industrial markets in virtually every economic sector have acquired global characteristics.
The rise of multinational corporations has stimulated widespread competitive pressures on
firms to reduce costs and seek customers wherever they can be found. Increasingly,
companies internationalize their value chains, offering products and services to the world.
Many firms cut costs by minimizing the variety of parts, components, and other inputs used
to produce finished products and services. Using standardized parts results in economies of
scale and the ability to minimize variety in factory inventories.
In the United States, consumerism is practiced with much conviction, and Americans tend
to judge their friends and neighbors based on the products they own. Based on its “winner
takes all” and “growth at all costs” approach, the marketing discipline has on occasion led
individuals and society astray.
In international marketing, certain factors are known to influence the preferences and
buying behavior of consumers. These factors are summarized in Exhibit 6.2.
1. Economic Status
The ability to purchase goods and services is strongly influenced by income level.
Comparisons can be based on the level of each nation’s per-capita gross domestic
product (GDP).
Historically, international marketers targeted the developed markets and their high-
income consumers. Increasingly, firms are also targeting the emerging markets.
Numerous companies are now also targeting the developing markets. For such
markets, firms usually must devise novel business strategies, which usually include
offering low-cost products via innovative marketing communications and distribution
approaches.
Countries in the developed and emerging markets often have numerous highly
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profitable firms. High income at the individual and corporate levels implies a superior
ability to purchase products and services.
Income levels are related to the size of the middle class, the people located in the
middle of each country’s economic hierarchy. The size of the middle class reflects
how wealth is distributed.
2. Technology Level
3. Personal Motives
A motive is an internal force that orients a person’s activities toward satisfying a need
or achieving a goal. Perhaps the most recognized explanation on the formation of
motives is that of the psychologist Abraham Maslow. Maslow’s “hierarchy of needs”
suggests that people are motivated to fulfill basic needs before moving on to other
needs, all of which motivate ultimate behavior.
• Physiological needs describe the needs vital to survival, such as the need for food,
water, and sleep.
• Safety needs refer to people’s need for safety and security. They include the desire
for steady employment, health care, safe neighborhoods, and shelter from the
environment.
• Love and belonging needs are basic to everyone and represent the desire for
friendships, romantic attachments, and families, fulfilling a need for acceptance
and companionship.
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• Esteem needs are sought once the first three needs have been met. Esteem needs
describe the desire for objects and activities that enhance self-esteem, personal
worth, social recognition, and accomplishment.
• Self-actualization needs represent the highest level in hierarchy of needs and refer
to the desire for personal growth and the ability to achieve one’s full potential.
Two points about the hierarchy of needs are especially relevant to international
marketing:
• Need levels vary worldwide as a function of economic status, technology level, and
other factors.
• Worldwide, people do not consistently follow Maslow’s hierarchy of needs.
4. Culture
Culture is the integrated system of learned behavior patterns that distinguish the
members of a given society. It represents basic beliefs, values, and behavioral
tendencies that are learned from family and other important institutions. It strongly
influences consumption in each country. It is characterized by norms, which are
accepted behaviors within a society or group. They may be explicit or implicit and
define the rules of behavior regarding interactions with others.
Norms vary substantially from country to country. Product and service purchases
deemed acceptable in one country may not be accepted in another. Within countries,
norms also differ through time and across social classes and groups. Because they
determine one’s acceptance and popularity within particular groups, norms are
especially important in cultures with a strong collectivist orientation.
Other cultural norms that affect consumers and their purchase behaviors include
conservatism, the tendency to prefer traditions and choices that have stood the test of
time, and materialism, a belief about the importance of possessions in one’s life.
Conservative consumers tend to remain loyal to existing brands and product types.
Thus, markets with numerous conservative consumers can be difficult to enter.
Materialistic consumers are relatively anxious to purchase products that demonstrate
their affluence, including many new and differentiated goods.
5. Social Factors
Family and social groups strongly influence consumer behavior. In many countries,
the family is the center of social life.
In each society, people develop beliefs and attitudes based on the norms of their
reference groups. These include religious groups, professional associations, and trade
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unions.
6. Situational Factors
The institutional environment refers to the public organizations and constraints that
societies create to give structure to human interactions. Institutions include
government and legal systems. Laws, regulations, and other formal institutions
determine the structure and efficiency of marketing systems. Most developing
economies are characterized by weak institutions, which deter many multinational
enterprises (MNEs) from entering such countries. In nations with weak institutional
guidelines, corruption is often a factor that affects the purchase behavior of
organizational buyers. By contrast, extensive rules and regulations may constrain
consumer behavior.
D. Country-of-Origin Effects
Buyer behavior is affected by the national origin of products and services. Country-of-
origin (COO) refers to the nation where a product is produced or branded. Origin is usually
indicated by means of a product label. When consumers are aware of a product’s COO,
they may react positively or negatively. Firms may need to use substantial resources to
convince foreign consumers to buy their goods and services or to change their perceptions.
1. Culture
Cultural influences occur at the level of the nation, the industry, and the firm. Most
companies have a distinctive set of norms, values, and modes of behavior. Marketing
goods to such buyers necessitates skills in dealing with organizational and national
cultural factors. Industrial buyers work closely with their suppliers. In business-to-
business deals, negotiations are common, placing much importance on the quality of
relations between buyers and sellers. In such settings, cultural attitudes and values can
play a major role.
Industrial buyers vary based on their attitude toward risk, which differs cross-
nationally. Uncertainty avoidance refers to the capacity of people in different
countries to tolerate risk. High uncertainty-avoidance countries are risk averse and
favor rules, regulations, and control mechanisms to minimize risk taking. In such
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countries, marketers often must work harder to convince purchasing managers to
accept proposals from new vendors. By contrast, low uncertainty avoidance cultures
are usually more innovative and open to new approaches. In such countries, industrial
buyers are more willing to try new offerings or goods from new market entrants.
Today most countries have advanced beyond Stage 1, and consequently there are vast
opportunities worldwide for various industrial goods. The firm must investigate each
nation’s specific circumstances to determine what types of products and services are
in most demand.
In terms of economic variables, most countries use a currency that is different from
the currency of the selling firm. Fluctuating exchange rates affect the attractiveness of
foreign goods, either making them relatively costly or inexpensive from the industrial
buyer’s perspective. Inflation may cause prices to rise over time. Inflation complicates
the international buying process by distorting exchange rates and the cost of capital
and by producing uncertainty in international transactions. Inflation is especially
burdensome for industrial goods, which are often sold under long-term contracts.
Governments are important targets for sales of goods and services. Governments at both
federal and local levels purchase nearly every kind of good.
Most advanced economies and a few emerging markets are party to the Agreement on
Government Procurement (GPA) of the World Trade Organization. The GPA’s main goal
is to open government procurement to international competition. It also aims to ensure
procurement laws, regulations, and procedures are transparent and do not protect domestic
products or suppliers nor discriminate against foreign products or suppliers. However, in
many industries, developing economies lack a substantial supplier base and, consequently,
are relatively open to receiving bids from foreign vendors.
In many ways the task of the international marketer today is less complex than in the
past. In earlier times, when countries differed sharply in terms of culture, income,
legal systems, and other factors, marketers found themselves devising a wide range of
marketing programs to suit diverse needs and tastes around the world. Today, thanks
to globalization and related trends, market needs worldwide have grown similar in
most industries.
Many firms organize dealings with key global industrial buyers through global
account management (GAM). Companies worldwide have long used national account
management to handle their most important accounts. Recently, globalization has
created the need for coordinating top accounts at multinational firms on a global scale.
2. Country-of-Origin Challenges
In the event the COO image is negative, the firm may attempt to conceal the national
origin or position the offering as made in the targeted country. Perhaps the best
approach to overcoming negative stereotypes is to offer products of such superior
quality that consumers take little notice of the goods’ national origin. All else being
equal, consumers prefer high-quality products. In addition, the firm might undertake
marketing aimed at debunking negative images.
Another strategy for minimizing the impact of a negative COO is to offer the product
at a relatively low price. This approach tends to attract value-conscious consumers,
even if they usually prefer local brands. However, discount pricing works only if the
firm enjoys a cost advantage. In the long run, this approach will work only if the
product is indeed of high quality or has other attributes that justify charging a high
price.
Lastly, the firm might overcome a negative COO by having its product distributed
through a well-respected intermediary in the target market.
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3. Global Customer Relationship Management
4. Selling to Governments
One of the most lucrative market opportunities when selling to foreign governments is
infrastructure development. Nations need basic infrastructure in order to function well
and develop dynamic economies.
Key Terms
Global consumers: These are individuals or organizational buyers who exhibit similar needs and
tastes worldwide.
Norms: These are accepted behaviors within a society or group.
Country-of-origin (COO): It refers to the nation where a product is produced or branded.
Consumer ethnocentrism: It is the tendency to view domestically produced goods as superior to
those produced in other countries.
World mindedness: It refers to a consumer’s interest in, and openness to, acquiring goods from
other countries.
Global market segment: It refers to a group of customers who share common characteristics
across numerous national markets.
Relationship marketing: It refers to a strategy that firms are said to follow when they seek to
build long-term relationships with key customers. This is most typically achieved by emphasizing
activities that ensure consistent customer satisfaction.
Customer relationship management (CRM): It refers to collecting, storing, and analyzing
customer data to develop and maintain two-way relations between the firm and key customers.
Global consumers are individuals or organizational buyers that exhibit similar needs and
tastes worldwide. They are relatively sophisticated, often more demanding, and comfortable
with buying international brands.
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3. Explain the drivers of the contemporary global buyer marketplace.
The emergence of the global consumer coincides with two important driving trends:
• Globalization: It refers to the growing interconnectedness of nations, the organization of
life on a global scale, and the consolidation of world society. Growing integration of
world markets enables individuals, companies, and nations to reach around the world
more deeply and efficiently than ever before. Globalization is characterized by a
combination of falling trade barriers and the industrialization and modernization of
nations worldwide. Today many trade barriers have declined almost to zero, particularly
among the advanced economies and emerging markets. In this way, globalization
reflects the spread of free-market capitalism, which both fosters and is fostered by
massive growth in international trade and investment.
• Advancing information and communications technologies: A century ago, nations were
largely cut off from one another due to trade barriers, geographic distance, and lack of
efficient transportation technologies that could convey goods quickly from one corner
of the world to another. This geographic distance, however, has been dramatically
reduced thanks to developments in transportation, such as fast ships, containerized
shipping, and commercial aircraft. International mass media—primarily television,
movies, and the Internet—have played a major role in the emergence of the global
consumer. People worldwide view much of the same media programming, often
flowing from the United States. In a related trend, more than two-thirds of the movies
shown around the world are produced in Hollywood in the United States. Such media
project a lifestyle and living standard that increasingly transcends national boundaries,
representing a way of life that myriad people wish to embrace.
5. What are country-of-origin effects? Define consumer ethnocentrism and world mindedness.
Buyer behavior is affected by the national origin of products and services. Many consumers
are relatively indifferent to where a product is made. Other consumers favor goods produced
in their home country. Country of origin (COO) refers to the nation where a product is
produced or branded. Origin is usually indicated by means of a product label. When
consumers are aware of a product’s COO, they may react positively or negatively.
Consumer ethnocentrism is the tendency to view domestically produced goods as superior to
those produced in other countries. Some people believe it is inappropriate, and possibly even
immoral, to buy products from other countries.
In contrast to consumer ethnocentrism, world mindedness refers to a consumer’s interest in,
and openness to, acquiring goods from other countries. World mindedness both arises from
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and contributes to the emergence of a global consumer culture.
Industrial buyers are strongly influenced by globalization. Industrial buyers prefer using
standardized inputs whenever possible to minimize costs.
Governments are important targets for sales of goods and services. Governments at both
federal and local levels purchase nearly every kind of good, from aircraft to thumbtacks,
from construction services to training services.
Most governments have a system, often required by international agreements or treaties, for
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is most independent on either side of the body; or, in other words, in
those whose functions are most highly differentiated and whose
innervation is most cortical (from the motor centres in the cerebral
cortex). Those muscular groups, on the other hand, whose action is
usually or necessarily simultaneously bilateral or associated across
the median line—or, in other words, whose innervation is largely
spinal or subcortical—are least paralyzed; while the purely automatic
or reflex muscular apparatuses, those having a strictly spinal or
sympathetic innervation, are not at all affected.
(b) Spinal Hemiplegia.—In this type the face and head are normal,
excepting in some cases the iris; the extremities and trunk are more
or less paralyzed on one side, the loss of power being more evenly
distributed (i.e. less distal) than in hemiplegia of cerebral origin.
Often there is also anæsthesia, and this is always on the other side
of the median line, involving more or less of the whole side. The
coincidence of these symptoms below the head indicates positively
that the lesion is in the spinal cord, involving one of its lateral halves.
Where there is no anæsthesia, care must be taken not to confound
the condition with that in which a cerebral lesion causes paralysis of
one arm and leg (combined brachial and crural monoplegia).
(f) The various internal organs, the viscera, supplied with striped or
unstriped muscular fibres, may be paralyzed.
(g) The muscular coat of the vascular system beyond the heart may
be paralyzed in extensive or limited areas—the so-called vaso-motor
paralysis. This may assume hemiplegic or monoplegic or localized
forms.
(c) Paraplegic spasm is also shown in tonic and clonic forms. Partial
tonic spasm of this distribution, with paresis of the legs, causes the
gait or attitude known as tetanoid or spastic. The four extremities
may be in this state of mixed paresis and contraction, as observed in
some very young children whose cerebral motor area is probably
undeveloped or ill-developed, or which has been damaged shortly
after birth by meningeal hemorrhage.
(e) Inco-ordination more or less of the ataxic form often affects the
muscles of articulation, phonation, and deglutition, giving to the
symptoms dysarthria, dysphonia, and dysphagia. Dysarthria and
dysphagia are probably often caused by lesions of the insula and
subjacent white substance, as well as by those affecting the
oblongata. There are two recent autopsies which would indicate that
there may be a cerebral cortical centre for phonation laryngeal
movements: in the ventral extremity of the right third frontal gyrus—a
part homologous to the speech centre on the left side of the brain. In
some cases, however, dysphonia and aphonia indicate a lesion of
the laryngeal nerves or of the oblongata (nucleus of NN. x. and xi.).
(f) Doubtless the internal muscular organs and the blood-vessels are
frequently the seat of inco-ordinate or quasi-ataxic movements, but
our present knowledge of these conditions amounts to very little.
Diagram illustrating the Arc for Reflex Action. The centripetal and
centrifugal paths, the receptive and terminal organs of the arc, are shown
connected with the spinal centre, which is a portion of central gray matter
containing ganglion cells. The inhibitory cerebral influence is constantly
exerted in health to moderate reflexes.
First, in the eye. In case of atrophy of the optic nerve the pupillary
reflex is lost, the reflex action failing because the receptive surface
and efferent nerve are injured. In certain cases of spinal disease
(posterior spinal sclerosis) the same pupillary immobility is observed
(the Argyll-Robertson pupil); and in this case the lesion either affects
indirect efferent spinal fibres destined for the iris, or it is situated in
the centre for the reflex action—viz. the gray matter of the lobus
opticus. There may be loss of pupillary reflex due to injury of the
direct efferent fibres of the arc (paralysis of the motor oculi, N. iii.).
Lastly, the iris itself may be so diseased as to be incapable of
contracting, though it receive the reflex impulse properly; the lesion
is then in the terminal organ of the arc.
Second, the patellar tendon reflex. In a healthy individual, sitting at
ease with one leg thrown over the other (knee over knee), upon
tapping the ligamentum patellæ of the overhanging or free leg a
contraction of the quadriceps muscle occurs, causing a visible
forward movement of the leg and foot. This is the well-known patellar
reflex or knee-jerk. The arc in this case consists of the ligamentum
patellæ with its included sensory fibres as receptive organs, sensory
(afferent) fibres of the crural nerve, a segment of the lumbar gray
matter of the cord as centre, motor (efferent) fibres of the crural
nerve, supplying the quadriceps extensor femoris, which is the
terminal organ. Theoretically (vide Fig. 1), we can conceive of
numerous abnormal conditions of parts of this arc which would lead
to abolition of the patellar reflex, but in practice the following are the
principal lesions to be thought of: Disease (sclerosis) of the posterior
root-zones of the lumbar enlargement of the cord, as exhibited in the
pre-ataxic stage of tabes; disease of the posterior roots themselves
through meningitis or meningo-myelitis, as in diphtheritic ataxia;
lesion of the nervous centre, as is frequently observed in cases of
infantile poliomyelitis; a lesion of the crural nerve, involving its
efferent or afferent fibres, or both sets of fibres, would produce the
same result, as would also, lastly, a severe myositis or cancerous
infiltration of the quadriceps muscle.
FIG. 2.
Diagram and Table showing the Approximate Relation to the Spinal
Nerves of the Various Sensory and Reflex Functions of the Spinal Cord
(after Gowers).