International Marketing

14th Edition
P h i l i p R. C a t e o r a
M a r y C. G i l l y
John L. Graham

Culture,
Management Style,
and
Business Systems
Chapter 5
McGraw-Hill/Irwin
International Marketing 14/e Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
 What Should You Learn?
• The necessity for adapting to cultural differences

5-2
 Global Perspective
Do Blondes Have More Fun in Japan?
• Culture, including all its elements, profoundly
affects management style and overall business
systems
– Max Weber (1930)
• Americans
– Individualists
• Japanese
– Consensus oriented & committed to the group
• Central & Southern Europeans
– Elitists and rank conscious

5-3
 Global Perspective
Do Blondes Have More Fun in Japan?
• Knowledge of the management style existing in
a country and a willingness to accommodate the
differences are important to success in an
international market
– Business culture
– Management values
– Business methods
– Behaviors

5-4
 Required Adaptation
• Adaptation is a key concept in international
marketing
• Ten basic criteria for adaptation
1) open tolerance
2) flexibility
3) humility
4) justice/fairness
5) ability to adjust to varying tempos
6) curiosity/interest
7) knowledge of the country
8) liking for others
9) ability to command respect
10) ability to integrate oneself into the environment

5-5
 Degree of Adaptation
• Essential to effective adaptation
– Awareness of one’s own culture and the
– Recognition that differences in others can cause anxiety,
frustration, and misunderstanding of the host’s intentions
• The self-reference criterion (SRC) is especially
operative in business customs
• The key to adaptation is to remain “deshi” but to
develop an understanding of and willingness to
accommodate the differences that exist

5-6
 Marketing Orientation
• A company’s marketing orientation has been
positively related to profits (U.S.)
• Other countries have more traditional approach
– Production orientation (consumers will prefer products that are
widely available)
– Product orientation (consumers will favor products that offer the
most quality performance, or innovative features)
– Selling orientation (consumers and businesses alike will not buy
enough without prodding)
• Encouraging a marketing orientation across
global business units can be difficult

5-7
 International Marketing
14th Edition
P h i l i p R. C a t e o r a
M a r y C. G i l l y
John L. Graham

The Political
Environment:
a Critical Concern
Chapter 6

McGraw-Hill/Irwin
International Marketing 14/e Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
 What Should You Learn?
• What the sovereignty of nations means and how it can
affect the stability of government policies
• How different governmental type, political parties, nationalism,
targeted fear/animosity, and trade disputes can affect the
environment for marketing in foreign countries
• The political risks of global business and the factors that affect
stability
• The importance of the political system to international marketing
and its effect on foreign investments
• The impact of political and social activists, violence, and
terrorism on international business
• How to assess and reduce the effect of political vulnerability
• How and why governments encourage foreign investment

6-9
 Global Perspective
• A crucial reality of international business
– Both host and home governments are integral partners
• A government controls and restricts a company’s
activities
– By encouraging and offering support
– By discouraging and banning or restricting its activities
• International law recognizes the sovereign right of
a nation
– To grant or withhold permission to do business within its political
boundaries
– To control where its citizens conduct business

6-10
 The Sovereignty of Nations
• A sovereign state
– Independent
– Free from all external control
• Sovereignty
– Powers exercised by a state in relation to other countries
– Supreme powers exercised over its own members

6-11
 The Sovereignty of Nations
• Nations can and do abridge specific aspects of
their sovereign rights in order to coexist with
other nations
– NAFTA – North America Free Trade Agreement
– NATO – North Atlantic Treaty Organization
– WTO – World Trade Organization
• The United States involvement in international
political affiliations is surprisingly low
• The WTO is considered by some as the biggest
threat so far to national sovereignty

6-12
Stability of Government Policies
• Issues that can affect the stability of a government
– Radical shifts in government philosophy when an opposing political party
ascends to power
– Pressure from nationalist and self-interest groups
– Weakened economic conditions
– Bias against foreign investment
– Conflicts between governments
• Five main political causes of international market
instability
– Some forms of government seem to be inherently unstable
– Changes in political parties during elections can have major effects on
trade conditions
– Nationalism
– Animosity targeted toward specific countries
– Trade disputes themselves

6-13
 Political Parties
• In countries where two strong political parties
typically succeed one another, it is important to know
the direction each party is likely to take
– Great Britain
► The Labour Party vs. the Conservative Party

• Unpredictable and drastic shifts in government

policies deter investments, whatever the cause
of the shift
• A current assessment of a country’s political
philosophy and attitudes is important in gauging their
stability and attractiveness in terms of market
potential
6-14
 Nationalism
• An intense feeling of national pride and unity
– An awakening of a nation’s people to pride in their country
• National interest and security are more important
than international relations
• Countries use nationalism to protect themselves
against intrusions
– Threats from outside forces
– Declines in the domestic economy

• Nationalism comes and goes

– As conditions and attitudes change
– Foreign companies welcomed today may be harassed tomorrow
and vice versa

6-15
Targeted Fear and/or Animosity
• Marketers should not confuse nationalism with
a widespread fear or animosity directed at a
particular country
– Toyota in the U.S. (1980s)
– Animosity toward the United States in France
– The unhappiness of citizens and politicians in many other countries
concerning the war in Iraq
• No nation-state, however secure, will tolerate
penetration by a foreign company into its market
and economy
– If it perceives a social, cultural, economic, or political threat to its well-
being
• Trade disputes

6-16
Political Risks of Global Business
• Confiscation – the seizing of a company’s assets
without payment
• Expropriation – where the government seizes an
investment but makes some reimbursement for the
assets
• Domestication – when host countries gradually
cause the transfer of foreign investments to national
control and ownership through a series of
government decrees
– Mandating local ownership
– Greater national involvement in a company’s management

6-17
 Economic Risks
• Exchange controls
– Stem from shortages of foreign exchange held by a country
• Local-content laws
– Countries often require a portion of any product sold within the
country to have local content
• Import restrictions
– Selective restrictions on the import of raw materials to force
foreign industry to purchase more supplies within the host
country and thereby create markets for local industry

6-18
 Economic Risks
• Tax controls
– A political risk when used as a means of controlling foreign
investments
• Price controls
– Essential products that command considerable public interest
► Pharmaceuticals
► Food
► Gasoline

• Labor problems
– Labor unions have strong government support that they use
effectively in obtaining special concessions from business

6-19
 Political Sanctions
• One or a group of nations may boycott
another nation
– Stopping all trade between the countries
– Issuing sanctions against trade of specific products
► U.S. boycotts of trade with Cuba/Iran

• History indicates that sanctions are often

unsuccessful in reaching desired goals
– Particularly when ignored by other major nations’
traders

6-20
Qatar Airways – “No Borders, Only
Horizons”
• https://www.youtube.com/watch?v=0mA7v_qFAeI
• The campaign, launched across the airline’s social
media channels, was listed as the top viral video after
gaining more than 54 million views.
• The commercial was viewed more than 50 million
times on the airline’s Facebook page, with nearly
800,000 views on Twitter, more than three million
views on Instagram and more than one million views
on Youtube.
• The blockade on the State of Qatar initiated on 5 June

6-21
 Political and Social Activists
• Not usually government sanctioned
• Can interrupt the normal flow of trade
• Range from those who seek to bring about
peaceful change to those who resort to violence
and terrorism to effect change
– Worldwide boycott of Nestle products
• The Internet has become an effective tool of
PSAs to spread the word
– Protest rallies against the U.S. – Iraq War

6-22
Nongovernmental Organizations
• Nongovernmental organizations (NGOs) are
increasingly affecting policy decisions made by
governments
– Protests
– Lobbying
– Collaborations with governmental organizations
• Many also are involved in mitigating much of the human
misery plaguing parts of the planet
– Red Cross
– Red Crescent
– Amnesty International
– Oxfam
– UNICEF
– Care
– Habitat for Humanity

6-23
 Violence and Terrorism
• The State Department reported 3,200 terrorist
incidents worldwide in 2004
• Goals of terrorism against multinationals
– To embarrass a government and its relationship with firms
– To generate funds by kidnapping executives
– To use as pawns in political or social disputes
– To inflict terror within a country as did September 11
• In the past 30 years, 80% of terrorist attacks
against the U.S. have been aimed at American
businesses

6-24
Cyberterrorism and Cybercrime
• The internet is a vehicle for terrorist and criminal
attacks to inflict damage on a company with little
chance of being caught
– By foreign and domestic antagonists
• It is hard to determine if a cyber attack has been
launched
– By a rogue state
– A terrorist
– A hacker as a prank

6-25
Cyberterrorism and Cybercrime
• Each wave of viruses
– Gets more damaging
– Spreads so rapidly that considerable harm is done before it can be
stopped
• Tools for cyberterrorism
– Can be developed to do considerable damage
► To a company,
► An entire industry
► A country’s infrastructure

• Mounting concern over the rash of attacks

– Business leaders and government officials addressed a Group
of Eight conference

6-26
 Politically Sensitive
Products and Issues
• Politically sensitive products
– Perceived to have an effect on the environment, exchange rates,
national and economic security, and the welfare of people
– Are publicly visible or subject to public debate
• Health is often the subject of public debate, and
products that affect or are affected by health
issues can be sensitive to political concern
• The European Union has banned hormone-
treated beef for more than a decade

6-27