INTERNATIONAL BUSINESS ENVIRONMENT
Objectives
- Identify the factors which affect International business activity.
- Assess the impact of Economic, Political, Legal, Social, Cultural,
Technological factors in influencing the extent and location of
international business.
- Discuss the impact of different political and economic systems and
their effect on international business.
- Identify the impact the world political and economic events in the
21st century and their impact on the activities of
international firms.
A. ECONOMICAL
ENVIRONMENT
Economic
environment can be viewed from two different angles:-
a)
Macroeconomic
b)
Microeconomic
a)
Macroeconomic
environment
The
term “Macro” as used in English
language has it origin in the Greek work Makros,
meaning large. Hence, in Macroeconomics,
economic problems are studied from the point of view of the entire economy,
As
an international business executive you have to consider the following factors.
1. Population and income:-
The
most basic information to be considered is about the nature of the population
because the people, of course, constitute the markets, but the population alone
provide little information, since people must have the means in terms of income
to become viable customers. Therefore,
aggregate consuming capacity depends upon total population as well as per
capita income.
2. Economic advancement:-
It
is desirable for international business executive to keep abreast of the
developing countries because they are emerging as potential markets.
Economic
advancement is characterized by such factors as:-
¨
Comparatively small allocation of
labour force to agriculture
¨
Energy available in large amounts
at low cost per unit.
¨
High level of gross national,
product and income
¨
High levels of per capital
consumption
¨
Relatively low rate of population
growth
¨
Complex modern facilities for
transportation, communication and exchange
¨
A substantial amount of capital for
investment
¨
Urbanization based on production as
well as exchange.
¨
Diversified manufacturing that
accounts for an important share of the labour force
¨
Numerous tertiary occupations
¨
Specialization of both physical and
mental labour
¨
Surpluses of both goods and
services and
¨
Highly developed technology.
These
factors can be utilized to examine economic standing of a particular country.
3. Structure of consumption:-
Nations
overall patterns of consumption can be viewed not only on the basis of
potential but also on the basis of structure-taking into considerations on the
volume of consumption among various cultures, nations, and societies.
Generally
consumption in most advanced countries is characterized by higher proportion of
expenditures devoted to capital goods than consumption in poor countries where
substantially more is spent on consumer goods.
The
structural differences with regard to expenditures among nations can be
explained by a theory propounded by a German Statistician Engel.
The
law of consumption (Engel’s law) states that poorer families and societies tend
to spend a greater proportion of their incomes on food than well-to-do people.
4. Economic systems:-
The
economic system of a country is another important economic factor that a
business executive must understand such as:-
-
Capitalist systems - the state
allows the individual ownership of property
-
Communism - The state – owned or
Marxist where all activities related to production and distribution are
controlled by the state.
-
Socialism - Mixed economic systems,
where certain industries are allowed to run freely while others are strictly or
partially controlled. A compromise of the above two systems.
5. Mutual economic dependence:-
Normally country’s economy is profoundly related to the economies of
other nations, particularly those of the advanced countries. So when performing an economic analysis, an
international business executive needs to consider the economic perspectives of
the overall world economy, particularly those of its major trading partners and
the host country.
6.
Other factors to consider include:
-
Aggregate consumption
-
Aggregate employment
-
National income
-
General price level
-
Aggregate supply
-
Demand for and supply of money,
etc.
-
Total saving
-
Total investment
-
Economic development
-
Theory of international trade: -
involving tariffs, protection and free – trade policies.
NB: Not all
of the world’s economies operate at the same level of efficiency, it is
necessary to form a clear idea of the economic situation of a particular host
country in order to develop an appropriate business strategy.
b)
Microeconomic
environment
Microeconomic
environment refers to the environment surrounding a product and/market interest
to a company. An examination of
Microenvironment indicates whether the company can successfully enter the
foreign market.
Essentially
the microeconomic environment concerns competition.
The
following questions should be raised to analyse the competition:-
a)
Who are in the competition now, and
who will they be in the future?
b)
What are the key competitor’s
strategies, objectives and goals?
c)
How important is a specific market
to the competitors, and are they committed enough to continue to invest?
d)
What unique strengths do the
competitors have?
e)
Do they have weaknesses that make
them vulnerable?
f)
What changes are likely in the
competitors’ future strategies?
g)
What are the implications of
competitors’ strategies on the market, the industry and one’s own company?
Assessing Competitors’ Areas of
Strength
Involves:-
1.
Excellent in product design and
performance.
2.
Highly efficient, low-cost
facilities.
3.
Ability to influence legislation.
4.
Efficiency in transportation and
logistics
5.
Massive availability of capital
6.
Low-cost, high-efficiency operating
skill in manufacturing and/or in distribution.
7.
Leadership in product innovation.
8.
Merchandising efficiency – high
turnover of inventories and/or of capital
9.
Efficiency in customer service
10.
Personal relationship with
customers
11.
Effectiveness in sales promotion
12.
Skilful trading in volatile price
movement commodities
13.
Ownership or control of low-cost or
scarce raw materials
14.
Control of intermediate
distribution or processing units
15.
Widespread customer acceptance of a
company brand name (reputation)
16.
Product availability
17.
Customer loyalty
18.
Dominant market share position
19.
Effectiveness of advertising
20.
Quality sales force.
B.
POLITICAL ENVIRONMENT
Political environment of each country is unique. An apparently rich foreign market may not
warrant entry, if the political environment is characterized by instability and
uncertainty. Political stability has been found to be one of the crucial
variables that companies weigh when considering going abroad:-
Unstable
political environment subjects foreign business to risks such as:-
-
Violence
-
Expropriation
-
Restriction of operations and
-
Restrictions on repatriation of
capital and remittances of profits.
If
the risk is high in a particular politically unstable country, it is necessary
to know how to monitor that country’s ongoing political situation.
Governments
around the world do help their domestic industries to strengthen their
competitiveness through various fiscal and monetary measures. Such political support can play a key role in
an industry’s search for business opportunities abroad. Without such assistance an industry may face
a difficult situation.
For example:- European countries rely on
value added taxes to help their industries.
This applies to all levels of manufacturing transactions up to and
including the final sale to the user. However,
if the final sale is for export, the value – added tax is rebated, thus
effectively reducing the price in the international commerce. Japan imposes a commodity tax on selected
lines of products, including automobiles.
In the event of export, the commodity tax is waived.
As an international business man when assessing the political
perspectives of a nation, you should use the following factors:-
1.
The type of government
2.
Stability of government
3.
Quality of host government’s
economic management
4.
Change in government policy
5.
Host country’s attitude toward
foreign investment
6.
Host country’s relationship with
the rest of world
7.
Host country’s relationship with
parent company’s home government
8.
Attitude toward assignment of
foreign personnel
9.
Extent of anti-private -sector
influence or influence of government/state owned industries.
10.
Fairness and honesty of
administrative procedures
11.
Closeness with government and
people.
1. Government stability
In
many developing countries, there are frequent changes of government. Thus it is important for the international
marketers to examine before making agreements whether the current government
will continue to be in office to implement agreements made with it.
The
following variety of symptoms, could point toward the stability of a
government.
a)
Public unrest (demonstrations,
riots, or other demonstrations of social tension)
b)
Government crises (opposition
forces trying to topple the government)
c)
Armed attacks by one group of
people or another, or by groups from neighbouring country.
d)
Guerrilla warfare
e)
Politically motivated
assassinations
f)
Irregular change in top government
leaders.
2.
Government
Economic Management:-
A
country that manages its economic affairs according to sound economic
principles, whether through free economics or socialist policies, with all
things being equal, provides a more favourable environment than a country
governed by political emotions and abrupt practices. The economic environment of a country should
be analysed in the political context with reference to:-
¨
The ability of the government to
sustain its internal and external debts.
¨
The country’s pursuit of stable and
diversified economic growth
¨
The country’s ability to generate
an adequate amount of foreign exchange.
¨
The nature of the various fiscal
and monetary means used to steer the economy.
¨
The quality of the long-term
planning of economic policy and its implementation.
For example:- A country that continues to live on borrowed
funds, either from private sources or International agencies like the IMF and
frequently defaults on payments demonstrates poor economic management.
3.
Change
of Government Policy:-
More
than anything else, MNC’S dislike frequent policy changes by host countries;
which creates uncertainty.
Conclusion
Political Risk Assessment
Political risk assessment (PRA) is useful for three reasons.
1.
To identify the countries with high
political risks so that a firm can protect itself by minimizing its exposure.
2.
To identify countries unnecessarily
discounted as political unsound, and to identify countries where political
conditions have changed for the better.
3.
To provide a framework to identify
countries which are politically risky, but no so risky as to be automatically
ruled out. (Most of the developing
countries fall into this category).
C. LEGAL ENVIRONMENT
Legal
environment alerts marketing managers to the potential perils and pitfalls of
conducting business with organizations of /or in foreign lands. For the marketing manager, “the most important question is always, how
does the law affect my business plans?”
The emphasis is on strategic planning, keeping legal troubles, and
learning how to ask the right questions worldwide to get the best information
for making management decisions.
The
legal environment consists of:-
a)
National laws and regulations
including the law of its country (domestic law) and that of other countries
with which it does business.
b)
Private international law covering
the rights, duties and disputes among persons from different places.
c)
Public international law- including
treaties and commercial customs.
d)
International organizations with
their laws, regulations and guidelines.
National Law:
Any
business activity crossing a national border is subject to the national law of
the home country and that of the foreign or host country. All of the categories of law applying to any
domestic business transactions – such as contract, torts and antitrust or
anti-corruption law will apply to international transaction.
Many
of the national or domestic laws and regulations may not specifically address
issues yet they can have a major impact on a firm’s marketing opportunities
abroad such as:-
-
Minimum wage legislation
-
Safe regulations
Other
legal and regulatory measures, however, are clearly aimed at companies that do
business on international basis. Some of
these regulations may be designed to help firms in their international
marketing efforts. Governments may
attempt to aid and protect the business efforts of domestic companies facing
competition from abroad by setting standards for product content quality.
Political environment/legal environment in most countries tend to provide
general support for the firm headquartered within that country.
A
new government may work to reduce trade barriers or increase trade
opportunities through bilateral and multi-lateral negotiations. Such actions will affect individual firms to
the extent that they improve the global climate for free marketing.
International law
The
body of rules and norms that regulates activities carried outside the legal
boundaries of states/country
 |
|||
 |
|||
Public
International law Private international law
Law
that deals with the rights and
Law applying to private
duties of states and
intergovernmental persons and
organisations between
themselves
non governmental
examples:- organisations
in international
transactions
examples:-
- State territory - Contracts and sales
- State succession - Transportation
- State responsibility to Aliens - Money and banking
- Law of sea - Financing
- International dispute settlement - Security regulations
- Law of war - Intellectual property
- Treaties - Anti-trust /corruption
-
Embargoes/sanctions - Taxation. |
Intergovernmental International
organisation made
Organizations
(IGO) up
of persons
Other than states (may be for profit
or non profit) examples
Permanent
organizations setup - Amnesty international
By
two or more states to -
International committee of
Carry
on activities of common Red Cross.
interest
examples -
World council of churches
- United Nations (U.N.) – W.T.O - International Federation of Airline pilots
(Interpol) – E.U. Association.
-
International Crime Police
Organizations.
The Trading Environment of
International Business:
During the course of this century, numerous laws and institutions
have come into existence to regulate world trade. Such laws and institutions at both the levels
– constitute an important part of the environment in which MNEs conduct their
worldwide business.
Managers
of MNEs must be familiar with these laws not only because they are a means to
seek redress from “unfair” competitive practices, but also because such laws
are often invoked against them.
As
an international business executive you should know a specific sets of laws and
institutions governing and overseeing world trade, and examine how they affect
the MNE’s trading environment such as:-
- Those regulating international trade into and out of a country.
- Those regulating international trade worldwide, and affecting MNE’s
on a multilateral basis such as laws are administered and enforced by the
general agreement of tariffs and trade or GATT or (WTO).
- Those regulating international trade at a regional multi country
level, and enforced by a group of countries such as COMESA, European Union
(EU) and North American Free Trade Agreement (NAFTA).
Since
the end of World War II, although tariff barriers fell worldwide, the scope and
creativity in the application of nontariff barriers increased
substantially. The impressive growth in
World Trade has been accompanied by an equally impressive increase in the
number of commercial disputes between countries.
HOST COUNTRY LAWS:-
Countries enact laws to economies.
Some of the laws are discriminatory against foreign goods and business.
Ø
Laws are sometimes designed to
allow reciprocity with nations on good trading forms of the country. In some instances, extremely favourable laws
may be passed to attract foreign investment.
In general, the legal environment of a country for foreign commerce
depends on that country’s economic objectives and its obligations and position
in relation to worldwide commerce.
In
some situations, however, the laws may have political aims as well. For example a government may decide to
restrict all imports in order to promote a national feeling among the people
and their political supporters. On other
hand, political considerations may require a country to liberalise its laws
pertaining to foreign business.
Laws
that bear on entry into foreign markets take several forms including:
1.
Tariffs
2.
Antidumping laws
3.
Exports/importing licensing
4.
Investment regulations
5.
Legal incentives and restrictive
trading laws
1. Tariffs:-
Is
a tax that a government levies on exports and imports. If the tax is charged on exports it is called
export duty. The tax associated with
imports is referred to as import duty or customs duty.
·
The purpose of export duty is to
discourage selling overseas to maintain adequate supply at home.
·
The import duty is levied for
different reasons:-
(a)
To protect home industry from being
out priced by cheap imports
(b)
To gain source of revenue for the
government
(c)
To prevent the dilution of foreign
exchange balances through consumer goods purchased by a few privileged
people.
However
these reasons are not important in industrialized countries, but in developing
countries, where new industries cannot compete with imports from the western
world and their resources are limited, the import duty serves as an important
measure to promote economic developments.
2. Antidumping Laws:-
Dumping
is a type of pricing strategy for selling products in foreign markets below
cost, or below the price charged to domestic customers. Dumping is practiced to capture a foreign
market and to damage vital foreign national enterprises. Host governments often pass laws against
dumping with a view to protecting local industries. Dumping can be a problem for developed and
developing countries alike.
3. Export/Import Licensing:-
Many
countries have laws that require exporters and importers to obtain licenses before
engaging in trade across national boundaries.
The purpose of export license may be simply to allow for the statistical
tracking of export activities. Licensing
may also help to ensure that certain goods are not exported at all, or at least
to certain countries.
Import
licensing is enforced to control the unnecessary purchase of goods from other
countries. Such restraints save foreign
exchange balances for other important purposes like import of pharmaceuticals,
chemicals, and machinery.India for example, has strict licensing requirements
for the import of cars and other durable consumer goods.
4. Foreign Investment Regulations:-
One
of the primary aims of laws and regulations on foreign investments is to limit
the influence of multinational corporations and to achieve a pattern of foreign
investment that contributes most effectively to the realization of the host
country’s economic objectives. There are
several broad areas of legislation concerned with foreign investment. Such laws curtail:-
a)
Foreign investment decision making
through procedures affecting the selection of foreign investment, control of
takeovers, prohibition or restriction of foreign investment in certain sectors
and elaboration of incentive schemes.
b)
Regulation of ownership, managerial
control, and employment through local participation requirements in ownership
and management, limitation of expatriate employment and local employment
quotas.
c)
Taxation and regulation of
financial transactions through determination of locally taxable income to
inhibit avoidable of double taxation; control of capital and profit
repatriation, incentives for profit reinvestment, regulation of local and
foreign borrowing.
5. Legal Incentives:-
Investment
incentives, enacted to attract foreign investment are an important part of
government policy – in most developing countries. This is because local capital and
entrepreneurship cannot undertake the kind of investment encouraged by the
incentives.
On
the other hand, there are some instances where incentives are restricted to
local enterprises, joint ventures, or enterprises with minority foreign
participation.
Ø
Depending on the basic approach to
investment regulation, incentives may be awarded automatically to all
enterprises meeting the conditions specified in the relevant legislation, or
incentives may be granted for specific performance or
Ø
Contribution to the host country’s
economy, such as export promotion and diversification the development of a
backward area, the transfer of modern technology, the encouragement of applied
research in the host country and so forth.
Other
fiscal incentives obtainable in developing countries include the waiver of
import duties on equipment and materials essential for production exemptions
from property taxes and minor tax concession granted by the provinces or
localities where the enterprise is located.
6. Restrictive Trading laws:-
In
addition to the tax incentive laws, many governments adopt measures that
restrict imports or artificially stimulate exports. Usually such laws are referred to as non
tariff barriers to international trade.
There are several major types of non-tariff barriers.
·
Government
participation in trade:-Subsidies, countervailing duties,
government procurement and state trading.
·
Customs
and entry procedures:-Valuation, classification,
documentation and health and safety regulations.
·
Standards:-Product
standards, packaging, and labelling and marking.
·
Specific limitations:-Quotas,
exchange controls, import restraints, and licensing.
·
Import charges:-Prior import deposits, credit restrictions
for imports, special duties and variable levies.
·
Other measures:-Voluntary export
restraints whereby agreement is made between two trading countries to limit the
exports of a specific product to a particular level.
INTERNATIONAL LAWS
A
variety of International laws regulate business across national borders. International law is an area of study in and
of itself. The agreements between the
General Agreement on Tariffs and Trade (GATT), the International Monetary Fund
(IMF), and the World Bank consists of international laws that influence
business in different ways. The GATT
regulations are particularly relevant, for marketers since they deal with trade
restrictions and barriers that affect market potential.
It
is a comprehensive set of agreements and rules on world trade, administered and
governed by a small secretariat in Geneva, Switzerland. Parties to GATT are governed by voluntary
acceptance of its jurisdiction, and the organization and does not have any
formal enforcement powers. In other
words GATT is nothing more than an “agreement” among signatory countries to
follow a collectively agreed-upon set of rules.
The
workings of GATT are based on five underlying principles, which form the basis
for almost all of its rules.
1. Non discrimination:-
The
principle states that countries should not grant preferential treatment to any
one group of member countries. This is
the basis for the “most favoured nation”, (MFN) rule, which simply means that,
every member country will be treated alike by all GATT members. In other words, MFN does not imply
preferential treatment, rather it implies that every country should be treated
as favourably as every other country.
2. Reciprocity:-
This
means that if one country lowers tariffs against another country, the other
country should do likewise, any concessions that is made will be reciprocated.
Combined with the idea of MFN it is the means by which GATT tries to get all
members to lower their tariffs to each other.
3. Transparency:-
These
principles asses countries that do impose protection to do so through tariffs,
and not nontariff barriers or quantitative restrictions. Even if there are nontariff barriers, GATT
urges their “tariffication” so that they can be made more transparency, and
subsequently reduced through the principle of reciprocity.
4. Dispute Settlement:-
GATT
members are expected to use the dispute settlement mechanisms to GATT. There is however, no enforcement mechanism in
the event that a member country refuses to abide by GATT rules in dispute
settlement.
5. Exception:-
Countries
are granted exceptions to GATT rules under special or emergency circumstances.
These exceptions include special treatment for regional trading
arrangements, for developing countries, for trade in certain industries such as
agriculture and textiles, for dumping, for domestic, firms seriously injured by
imports and for balance-of-payment difficulties.
Despite
some criticisms of the rules and GATT apparent lack of enforcement authority,
these rules have combined to work remarkably well for world trade in the past
few decades, at least in reducing tariff barriers worldwide.
The Uruguay Round
The
Uruguay round was considered ambitious in as much as it sought to address
numerous issues that GATT had previously side stepped since its creation in
1948. These issues were included:-
a)
Trade in services
b)
A consistent set of rules governing
trade in intellectual property rights. (“TRIPS”)
c)
A consistent set of rules to govern
trade – related investment measures (TRIM’S) or direct investments abroad.
d)
Trade in textiles which had
previously been protected (under the auspices of GATT) through the “Multi-fibre
agreement”.
e)
Trade in agricultural products
f)
The creation of a new entity
whereby GATT would be renamed the “World Trade Organization (WTO)” with
improved dispute settlement process, and improved (“FOGS)
The
specific achievements of the Uruguay round agreements which started taking
effect since 1995 are as follows:-
a)
Agreements on services trade were
reached in areas of banking, insurance, and tourism, however, agreement in
areas such as shipping, telecommunications, airlines, and audiovisual products
were postponed.
b)
The new rules tighten antidumping
laws.
c)
The protection of intellectual
property right has been made uniform and substantially strengthened, in the
areas of patents copyrights, trademarks, industrial designs, trade secrets and
integrated circuits.
d)
The TRIMS text establishes GATT
oversight in investment matters and prohibits imposition of local content rules
and trade-balancing rules.
e)
Industrialized countries agreed to
a 10-year phase-out of the multi-fibre agreement, which was originally intended
to protect the textile industries of the US, Japan, and Western European
Countries from low-wage textile exporters, primarily in Asia.
f)
Existing tariffs on both industrial
and agricultural products will be cut by an average of 40%, and most of them 5
years starting 1995; In some industries
(for example, construction equipment, medical equipment, beer, steel,
pharmaceuticals), tariffs are completely eliminated among major trading partners
in the industrialized world, in electronics tariffs cuts range from 50% to 100%
worldwide.
g)
Subsidies are more clearly defined
and categorized.
h)
The agreement establishes
international rules between governments regarding product and technical
standards and matters such as testing, inspection, certification
i)
Most of the existing voluntary
export restraints will be eliminated
j)
a framework for the successor to
GATT, the WTO has been put in place.
D.
CULTURAL
ENVIRONMENT
Doing
business across national boundaries requires interaction with people and their
institutions and organizations nurtured in different cultural
environments. Values that are important
to one group of people may mean little to another.
·
In brief, there exist among nations
striking and significant differences of attitude,
belief, ritual, motivation, perception, morality,
truth, superstition, and an almost endless list of other
cultural characteristics.
·
Cultural differences deeply affect
international business market behaviour.
International business executives therefore need to be as familiar as
possible with cultural traits of any country they want to do business with,
finally knowing that all business decisions are culture-bound.
Culture
has been defined in different ways.
Essentially, it includes all learned behaviour and values that are
transmitted to an individual living within the society through shared
experience.
It
is commonly agreed that a culture must have these three characteristics:-
1. It is learned,
that is acquired by people over time through their membership in group that
transmits culture from generation to generation.
2. It is interrelated –
that is, one part of the culture is deeply connected with another part such as
religion and marriage, business and social status.
3. It is shared,
that is tenets of culture extend to another members of the group.
CULTURAL ELEMENTS:-
Another
way of gaining cultural understanding is to examine the following cultural
elements within a country, material life, social interactions, language,
aesthetics, religion and faith, ethics and morals, role and responsibility and
pride and prejudice.
Material life:- refers to economics, that is
what people do to derive their livelihood.
The tools knowledge, techniques, methods and processes that a culture
utilizes to produce goods and services as well as their distribution and
consumption are all part of material life.
Thus, two essential parts of material life are knowledge and economics.
Material
life reflects standard of living and degree of economic advancement. In a hypothetical country, for example a
large proportion of the population is engaged in agriculture.
Agricultural
operations are mainly performed by manual labour, mechanization of agriculture
is unknown. Modern techniques of farming
such as use of fertilizers, pesticides, and quality seeds are unfamiliar. The medium of exchange is barter system,
markets are local and living is entirely rural.
Such a composite description suggests that the society is
primitive. Opportunities for
multinational business in a primitive environment will be nonexistent.
Social Interactions:- Social interactions establish the role that
people play in a society and their authority/responsibility pattern. These roles and patterns are supported by a
society’s institutional framework, which includes, for example, education and
marriage. Consider the traditional
marriage of Saudi woman. The woman’s
father chooses the husband-to-be.
Language:- Language as part of culture
is considered not only in the literal sense as the spoken word, but also as symbolic
communication of time, space, things, friendship and agreements.Communication
occurs through speech, gestures, expressions and other body movements.
NB: In addition, meanings differ within the same
language used in different places. For
example, English language meaning differ from one English –speaking country to
another. In English the words for “bus”
“gasoline” and “cookies” are “lorry”, “petrol” and “biscuits”.
Aesthetics:- Aesthetics includes the art,
the drama, the music, the folkways and the architecture endemic in a
society. These aspects of the society
convey the concept of beauty and expressions revered in a culture. For example, different colours have different
meanings worldwide. In western
societies, wedding gowns are usually white, but in Asia white symbolizes
sorrow.
The
aesthetic values of a society show in the design, styles, colours, expressions,
symbols, movements, emotions and postures valued and preferred in a particular
culture. These attributes have an impact
on the design and of marketing of different products across national borders.
Religion and Faith:- Religion influences a
culture’s outlook on life, its meaning and concept. And it affects the attitudes toward owning
and using goods and services. Religions
traditions may prohibit the use of certain goods/services altogether. For example Hinduism prescribes
vegetarianism, with special stress on abstinence from beef. Islam on the other hand, forbids the eating
of pork.
Outline of cross-cultural analysis
in foreign markets
1.
Determine
Relevant Motivations in the Culture by answering the following questions:
-
What needs are fulfilled with
this product in the minds of members of the culture?
-
How these needs are presently
fulfilled?
-
Do members of this culture readily
recognize these needs?
2.
Determine
Characteristic Behaviour Patterns:-
-
What pattern of characteristic of
purchasing behaviour?
-
What forms of division of labour
exist within the family structure?
-
How frequently are products of this
type purchased?
-
Do any of these characteristic
behaviours conflict with behaviour expected for this product?
3.
Determine
what Broad cultural values are Relevant to this product:-
-
Are there strong values about work,
morality, religion, family relations, and so on, that relate to this product?
-
Does this product connote
attributes that are in conflict with these cultural values?
-
Can conflicts with values be
avoided by changing the product?
-
Are there positive values in the
culture with which the product might be identified?
4.
Evaluate
Promotion methods Appropriate to the culture:-
-
What role does advertising occupy
in the culture?
-
What themes, words or illustrations
are taboos?
-
What language problem exists in
present markets that cannot be translated into the culture?
-
What types of salesmen are accepted
by members of the culture?
-
Are such salesmen available?
E. THE TECHNOLOGICAL
ENVIRONMENT
The
pace of technological change is becoming increasingly rapid and marketers need
to understand how technological developments might affect them in four related
business areas:-
1.
New technologies can allow new
goods and services to be offered to consumers such as telephone banking, mobile
telecommunications, and new drugs for example.
2.
New technology can allow existing
products to be made more cheaply thereby widening their market through being
able to charge lower prices. In this
way, more efficient aircraft have allowed new markets for air travel to
develop.
3.
Technological developments have
allowed new methods of distributing goods and services (for example, bank
ATM machines allow many banking services to be made available at times and
places which were previously not economically possible.
4.
New opportunities for companies to
communicate with their target customers have emerged, with many financial
services companies using computer databases to target potential customers and
to maintain a dialogue with established customers.
The
Internet opens up new distribution opportunities for many companies.
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