SCHOOL OF BUSINESS

MASTERS PROGRAMME
MKT 506- INTERNATIONAL MARKETING

INTERNATIONAL ENVIRONMENT
• Marketing environment refers to all those
internal (firm related) and external (market
related) forces which are relevant to
marketing strategy formulation.
 BUSINESS ENVIRONMENT

Internal Environment External Environment

• Promoters’/shareholders’
values
• Mission/objectives
• Management Micro Macro (General/
structure/nature (Task/Operating) Remote)
• Internal power Environment Environment
relationship • Customers • Economic factors
• Co. image/brand equity • Suppliers • Social/cultural factors
• Physical assets/facilities • Competitors • Demographic factors
• R&D and technological • Political/govt. factors
• Publics • Technological factors
capabilities • Financiers
• Human resources • Global factors
• Marketing
• Marketing capabilities
intermediaries
 Implications of Business Environments
• Different marketing environmental factors
make markets different
• Such strategic decisions;
-Whether firm should enter a given foreign
market or not
-What market entry strategy to employ
-What strategy to adopt in respect of product,
promotion, pricing & distribution, etc. are
based on internal & external environments
-Causes differences in international marketing
strategy & domestic strategy
 Concern 1:
-Is business environment is same or
different??? And NOT, Is market domestic
of foreign???
-Differences in business environment make
business strategy which is successful in
one market a failure in another market
-Differences in business environment may
call for changes in business strategies
-Adapt business strategy to suit
environment of market
 Concern 2:
-Differences in level & nature of
industrialization & economic development
between different states & different regions
within states & preferences, beliefs &
customs etc. of different cultures may vary
significantly,
-Dissimilar weather & climatic conditions,
topographical factors etc. could are also
decisive factor
Note: Business environment is very important
determinant of business strategy
Environment of International Business

Internal -Domestic
Environment -Environment

INTERNATIONAL
BUSINESS

Foreign Global
Environment Environment
Environment of International Business
-Internal environment: Firm-related factors
(mission & vision, attitude, capabilities &
commitment of top management; entire
people in the firm, organizational structure;
decision-taking; implementing factors,
financial & other resources & capabilities)
-IB demands strict adherence to production &
delivery schedules, commitment to quality,
quick & effective response to customer
requirements, cost competitiveness,
innovativeness
-Foreign environment: environment of relevant
foreign market
-Nature business environment components of may
differ between different markets.
-Business environment may vary widely within
foreign country (policies & regulations applicable to
foreign trade & investment & several other policies
& laws governing business (Sociocultural,
demographic, economic & natural factors vary
greatly within & between countries)
-Difference in external environment even
necessitate, in some cases, modification of the
internal environment
 Global Environment

-Global factors relevant to business, e.g.,

i. WTO principles and agreements;
ii. Other international conventions;
treaties; agreements; Declarations;
protocols, etc.;
-Economic and business conditions;
impacts of major developments like war,
substantial
• fluctuations in oil prices; sentiments in
other countries etc.
• There are certain developments which
have global impact, e.g.,
-Substantial fluctuations in crude oil price,
-Global economic meltdown (for example,
the global economic crisis that erupted in
the second half of 2008 resulting in a fall in
global trade in 2009, among other
things)/boom,
-War or major political developments, etc.
 Economic Environment
• Much to do with scope of business,
business prospects & business strategy
• Relevant factors include;
Nature & level of economic development,
economic resources, size of economy,
economic system & economic policies,
economic conditions, trends in GNP growth
rate & per capita income, nature of & trends
in foreign trade, domestic supply & demand
conditions
 World nations broad classification:
• Developing countries (or less developed
countries — LDCs) and developed
countries (or more developed countries
— MDCs)
• Nearly three-fourths of total number of
world nations are developing countries,
(inhabited by about 85% of world
population)
• Developing countries fall into 2
categories; low income countries &
middle income countries
 Developed Countries
• High income countries (Most are industrial
economies, but some, like Kuwait & Saudi
Arabia, are oil exporters)
• Low income economies (United Nations has
identified a special category; Least
developed countries- most may suffer from
one/more such constraints: very low GNI per
capita, landlocked, desertification &
exposure to natural disasters
• Middle income economies: 2two categories-
lower middle & upper middle incomes
Developing Countries: Good Prospects
for Future Business
• Reasons?
(i) A steady increase in population,
(ii) Increase in income,
(iii) Growing democratization and
individual freedom.
 Social-cultural Environment
• Deals religious aspects; language; customs,
traditions & beliefs; tastes & preferences;
social strata; social institutions; buying &
consumption habits etc.
• One main reasons for failure of companies
in foreign markets is inability to understand
or ignoring cultural environment in
formulating business strategies
• Products strategies to be modified to suit
tastes & preferences/other characteristics
of target consumers in foreign countries.
 Social-cultural Environment
• For business to succeed, strategy must be
appropriate to sociocultural environment
• Marketing mix must be designed to suit the
environmental characteristics of market
• Examples;
-In Thailand, Helene Curtis switched to black
shampoo because Thai women felt that it
made their hair look glossier
- Nestle, today brews large number of
varieties of instant coffee to satisfy different
national tastes
 Social-cultural Environment
• Differences in language may pose serious
problems, to necessitate change in brand
name, e.g., Chevrolet’s brand name Nova in
Spanish means “it doesn’t go”; in Japanese,
General Motors’ “Body by Fisher” translates
as “corpse by Fisher”; In Japanese, 3M’s
slogan “sticks like crazy” translates as “sticks
foolishly”; In some languages, Pepsi Cola’s
slogan “come alive” translates as “come out
of the grave”; Cue seems a good brand
name for toothpaste but in French language
cue is crude slang expression for derrieres.
 Social-cultural Environment
• Values & beliefs to do with colour vary
significantly among cultures; Blue is
regarded feminine & warm in Holland, it is
regarded as masculine & cold in Sweden;
Green is a favourite colour in Muslim world,
in Malaysia, it is associated with illness;
White indicates death & mourning in China
& Korea; but in some countries, it expresses
happiness & is colour of bridal dress; Red is
a popular colour in communist countries;
many African countries have a national
distaste for red colour.
 Social-cultural Environment
• Some demographic factors, e.g. age &
sex composition of population, family
size, habitat, religion, etc. influence
business
• Under social environment, we must
also consider social environment of
business (.g., social responsibility &
alertness or vigilance of consumers &
of society)
 Demographic Environment
• E.g., population size, population growth
rates, age composition, family size, nature
of family, income levels etc. have significant
implications for business
 CLASS DISCUSSION

• Pick a variable and discuss

how each may affect a
business organization of
your choice
 Political & Government Environment

• Characteristics & policies of political parties,

nature of constitution & government system
& government environment encompasses
economic & business policies & regulations
are needed in market selection & business
strategy formulation
• Factors vary between different nations
• Government system in different countries,
are making rapid economic progress &
liberal policies towards foreign capital &
technology
• Some countries have lots of restrictions on
imports and foreign business, e.g.?
Liberalization policy in most world regions
• Lots of countries embracing liberalization
• Effect?
Privatization
• Many state owned enterprises (SOEs) have
been privatized
• Effect?
 Technological Environment
• Type of technology in use, level of
technological developments, speed with
which new technologies are adopted &
diffused, type of technologies that are
appropriate, technology policy etc. are
important to business
• Affects;
-International product life
-Production locations &
-Trade flows shift at different stages of the
product life cycle
 Advances in technology
• May cause relocation of production, e.g.,
many companies countries developed in
shifted TV production to developing countries
to utilize cheap labour
• Technological developments led to reduction
labour content of TV production; Result: firms
relocated their production back to developed
countries
• Some countries have embraced labour
intensive technology; Result- mechanization &
automation may be opposed, result, adverse
effect business.
 Advances in technology
-Attitude towards foreign technology, high
costs of installation & distorted
developments
-Country policy on digitization?
• Fibre cable optic vs digitization
• Companies in advanced countries have
considered developing countries as a
market for obsolete technology;
Developing countries import second hand
plant & machinery
 TRADE BARRIERS: Main objectives of
trade barriers:
-Protect domestic industries from foreign
competition,
-Promote local research & development,
-Conserve foreign exchange resources of
country,
-Improve on balance of payments position
-Curb conspicuous consumption,
-Mobilize revenue for government
-Discriminate against certain countries
 Two types of Trade Barriers
-Tariff barriers: developing countries to
prevent foreign exchange outflows or result
from their chosen strategy of economic
development
and
-Non-tariff barriers: developed economies to
protect domestic industries which have lost
international competitiveness and/or which
are politically sensitive for governments of
these countries
 NTBs
• Quotas- Quantitative restrictions taking
form of quotas is very important traditional
means of restricting imports and exports
-Import Quotas: quota on the export of a
product from a country may be imposed if
government feels that exports in excess of
will affect interests of domestic consumers
-Export Quotas: To restrict imports’ quantity
-Quantitative restriction protects interests of
domestic producers or to conserve foreign
exchange resources
 Import Quotas
(i) Tariff Quota: Features of tariff & of
quota
-Under a tariff quota, imports of
commodity up to specified volume are
allowed duty free or at a special low rate;
Imports in excess to limit are subject to
duty or higher rate of duty
(ii) Unilateral Quota: In a unilateral quota,
a country unilaterally fixes a ceiling on
quantity of import of particular commodity
 Import Quotas

(iii) Bilateral Quota: Results from

negotiations between importing country &
particular supplier country, or between
importing country & export groups within
supplier country
(iv) Mixing Quota: Producers are obliged to
utilize domestic raw materials up to a
certain proportion in production of
finished product