Introduction

International Marketing environment refers to the controllable and uncontrollable forces that influence upon the marketing decision making of a firm globally. International Marketing environment is comprised of those components which shape policies, programmes and strategies of an international marketer. An international firm must resort to systematic study of international marketing environment to collect the inputs of marketing decision making.

To serve the international markets effectively, a firm is in need of understanding international marketing environment properly. The needs, preferences and expectations of buyers in different overseas markets are not necessarily similar. The environmental differences influence the international marketing decisions of a firm.

Such strategic decisions as whether a company should enter a given foreign market or not, what market entry strategy should it employ, what strategy it should adopt in respect of product, promotion, pricing and distribution, etc. are based on two sets of factors, viz., the company related factors and the foreign market related factors. The decision as to whether to go international or not is based, in addition to the above two, on yet another set of factors, viz., the domestic marketing environment.

The company related factors refer to such factors as the company objectives, resources, and international orientation. The domestic marketing environment consist of factors like growth prospects including the competition, government policies etc. The foreign market related factors which are relevant to the international business strategy formulation or which affect the international business are often described as the international business environment.

What makes a business strategy which is successful in one market a failure in another market is often the differences in the business environment.nte In other words, the differences in the business environment may call for changes in the business strategies, i.e., there should be adaptation of the business strategy to suit the environment of the market. In short, it is the differences in the marketing environment which may make the international business strategy different from the domestic one.

1. Social/Cultural Environment

The social/cultural environment consists of the influence of religious, family, educational, and social systems in the marketing system. Marketers who intend to market their products overseas may be very sensitive to foreign cultures. While the differences between home country and those of foreign nations may seem small, marketers who ignore these differences risk failure in implementing marketing programmes. Failure to consider cultural differences is one of the primary reasons for marketing failures overseas.

This task is not as easy as it sounds as various features of a culture can create an illusion of similarity. Even a common language does not guarantee similarity of interpretation. For example, in the US customers purchase “cans” of various grocery products, but the Britishers purchase “tins”. A number of cultural differences can cause marketers problems in attempting to market their products overseas.

• Language

• Colour

• Customs and taboos

• Values

• Aesthetics

• Time

• Business norms

• Religion, and

• Social structures.

Each is discussed in the following sections:

a. Language

The importance of language differences cannot be overemphasised, as there are almost 3,000 languages in the world. Language differences cause many problems for marketers in designing advertising campaigns and product labels. Language problems become even more serious once the people of a country speak several languages. For example, in Canada, labels must be in both English and French. In India, there are over 200 different dialects, and a similar situation exists in China.

Chevrolet created a car called the Chevy Nova. This car was very popular in the United States, but when they tried to sell them in Spanish speaking countries, they seemed to have problems because NO VA means ‘no go’ so they thought the car would not move. If companies are going to sell their products internationally, they need to think about what their name means in the countries where they want to sell them.

b. Colours

Colours also have different meanings in different cultures. For example, in Egypt, the country’s national colour of green is considered unacceptable for packaging, because religious leaders once wore it. In Japan, black and white are colours of mourning and should not be used on a product’s package. Similarly, purple is unacceptable in Hispanic nations because it is associated with death.

The U.S is the only currency that uses the same color green for all of its money. Other countries use different colors for different values of currency but the U.S uses the same color for all denominations.

c. Customs and taboos

All cultures have their own unique set of customs and taboos. It is important for marketers to learn about these customs and taboos so that they will know what is acceptable and what is not for their marketing programs.

Consider how the following examples could be used in development of international marketing programs:

• In Russia, it is acceptable for men to greet each other with a kiss, but this custom is not acceptable in the US.

• Germans prefer their salad dressing in a tube, while Americans prefer it in a bottle.

• In France, wine is served with most meals, but in America, milk, tea, water, and soft drinks are popular.

McDonalds’s Corporation has opened 20 restaurants in India. Since 80 per cent of Indians are Hindu, McDonald’s will use a nonbeef meat substitute for its traditional hamburger. The likely beef substitute will be lamb, a very popular meat in India. In anticipation of its restaurant openings, McDonald’s conducted extensive market research, site selection studies, and developed a relationship with India’s largest chicken supplier. McDonald’s has opted to market its product in India, largely because India’s population of more than 900 million represents one sixth of the world’s population.

illustrations of potential areas of misunderstanding due to differences in cultural norms

In Ireland, the evening meal is called tea, not dinner. In Asia, when a person bows to you, bow your head forward equal or lower than theirs. A nod means “no” in Bulgaria and shaking the head side-to-side means “yes”. The number 7 is considered bad luck in Kenya, good luck in the Czech Republic, and has magical connotations in Benin.

Pepsodent toothpaste was unsuccessful in Southeast Asia because it promised white teeth to a culture where black or yellow teeth are symbols of prestige. In Quebec, a canned fish manufacturer tried to promote a product by showing a woman dressed in shorts, golfing with her husband, and planning to serve canned fish for dinner. These activities violated cultural norms. Maxwell House advertised itself as the “great American coffee” in Germany. It found out that Germans have little respect for American coffee.

General Motors’ “Body by Fisher” slogan became “Corpse by Fisher” when translated into Japanese. In German, “Let Hertz Put You in the Driver’s Seat” means “Let Hertz Make You a Chauffeur”. In Cantonese, the Philip Morris name sounded the same as a phrase meaning no luck. In Hong Kong, Korea, and Taiwan, triangular shapes have a negative connotation.

In Thailand, it is considered unacceptable to touch a person’s head, or pass something over it. Red is a positive color in Denmark, but represents witchcraft and death in many African countries. Americans usually smile as they shake hands. Some Germans consider smiles overly familiar from new business acquaintances. Americans should not say “Wie gehts?” (“How goes it?”) It is also too informal for first meetings.

If you offer a compliment to a Chinese-speaking person, he or she will decline it, because disagreeing is the polite way to accept praise. Do not say “Merci” (“Thanks”) to a French person’s compliment. You might be misinterpreted as making fun. Italians wave goodbye as Americans beckon someone–with palm up and fingers moving back and forth; but in Asia, waving with the palm down is not interpreted as goodbye, but rather, “come here”.

Offering gifts when you visit a home is expected in Japan, but in the Soviet Union it may be considered a bribe. In Brazil and Portugal, business people like to entertain foreigners in their homes. When it is time to go, the host may feel constrained to insist that the foreigner stay. Foreigners should politely take their leave.

d. Values

An individual’s values arise from his/her moral or religious beliefs and are learned through experiences. For example, in America people place a very high value on material well-being, and are much more likely to purchase status symbols than people in India.

Similarly, in India, the Hindu religion forbids the consumption of beef, and fast-food restaurants such as McDonald’s and Burger King would encounter tremendous difficulties without product modification. Americans spend large amounts of money on soap, deodorant, and mouthwash because of the value placed on personal cleanliness. In Italy, salespeople call on women only if their husbands are at home.

I visited Germany in High School for a German exchange program and not only learned the language better but got first-hand insight into German etiquette. One of the most important things I learned was how important punctuality is, it means you are organized and good at time management which is very important in their culture. The interesting thing is being too early is just as detrimental as being late. Knowing little tips like this can help companies from having business deals fall through.

e. Aesthetics

The term aesthetics is used to refer to the concepts of beauty and good taste. The phrase, “Beauty is in the eye of the beholder” is a very appropriate description for the differences in aesthetics that exist between cultures. For example, Americans believe that suntans are attractive, youthful, and healthy. However, the Japanese do not.

A few years ago, Cheez-it decided to edit the design on their boxes. The changes were minimal, such as a change of font and subtle changes to the layout. This exemplifies the idea of “aesthetics”, as Cheez-it did the minor changes to the design so they looked better to the common consumer. Lisa Einet, the design director at Kellog, stated that the change of design was to modernize the snack and more strongly appeal to its current consumer. She believed the font simply looked more appealing to the consumer they were aiming to attract.

f. Time

Americans seem to be fanatical about time when compared to other cultures. Punctuality and deadlines are routine business practices in the US. However, salespeople who set definite appointments for sales calls in the Middle East and Latin America will have a lot of time on their hands, as business people from both of these cultures are far less bound by time constraints. To many of these cultures, setting a deadline such as “I have to know next week” is considered pushy and rude.

g. Business Norms

The norms of conducting business also vary from one country to the next. Here are several examples of foreign business behavior that differ from US business behavior:

• In France, wholesalers do not like to promote products. They are mainly interested in supplying retailers with the products they need.

• In Russia, plans of any kind must be approved by a seemingly endless string of committees. As a result, business negotiations may take years.

• South Americans like to talk business “nose to nose”. This desire for close physical proximity causes American businesspeople to back away from the constantly forward-moving South Americans.

• In Japan, business people have mastered the tactic of silence in negotiations. Americans are not prepared for this, and they panic because they think something has gone wrong. The result is that Americans become impatient, push for closure, and often make business concessions they later regret. These norms are reflected in the difficulty of introducing the Web into Europe.

h. Religious Beliefs

A person’s religious beliefs can affect shopping patterns and products purchased in addition to his/her values. In the United States and other Christian nations, Christmas time is a major sales period. But for other religions, religious holidays do not serve as popular times for purchasing products. Women do not participate in household buying decisions in countries in which religion serves as opposition to women’s rights movements.

Every culture has a social structure, but some seem less widely defined than others. That is, it is more difficult to move upward in a social structure that is rigid. For example, in the US, the two-wage earner family has led to the development of a more affluent set of consumers. But in other cultures, it is considered unacceptable for women to work outside the home.

2. Political Environment

The political environment abroad is quite different from that of India. Most nations desire to become self-reliant and to raise their status in the eyes of the rest of the world. This is the essence of nationalism. The nationalistic spirit that exists in many nations has led them to engage in practices that have been very damaging to other countries’ marketing organisations.

For example, foreign governments can intervene in marketing programs in the following ways:

• contracts for the supply and delivery of goods and services

• the registration and enforcement of trademarks, brand names, and labeling

• patents

• marketing communications

• pricing

• product safety, acceptability, and environmental issues

a.Political Stability

Business activity tends to grow and thrive when a nation is politically stable. When a nation is politically unstable, multinational firms can still conduct business profitably. Their strategies will be affected however. Most firms probably prefer to engage in the export business rather than invest considerable sums of money in investments in foreign subsidiaries. Inventories will be low and currency will be converted rapidly. The result is that consumers in the foreign nation pay high prices, get less satisfactory products, and have fewer jobs.

b. Monetary Circumstances

The exchange rate of a particular nation’s currency represents the value of that currency in relation to that of another country. Governments set some exchange rates independently of the forces of supply and demand. The forces of supply and demand set others. If a country’s exchange rate is low compared to other countries, that country’s consumers must pay higher prices on imported goods. While the concept of exchange rates appears relatively simple, these rates fluctuate widely and often, thus creating high risks for exporters and importers.

c. Trading Blocs and Agreements

A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organisation, where regional barriers to trade, (tariffs and non-tariff barriers) are reduced or eliminated among the participating states. Regional trading blocs represent a group of nations that join together and formally agree to reduce trade barriers among themselves.

Trace blocs can be stand-alone agreements between several states such as the North American Free Trade Agreement (NAFTA) or part of a regional organisation such as the European Union (EU). Depending on the level of economic integration, trade blocs can fall into different categories, such as, preferential trading areas, free trade areas, customs unions, common markets and economic and monetary unions.

Trade agreements regulate international trade between two or more nations. An agreement may cover all imports and exports, certain categories of goods, or a single category. The most important general trade agreement is called, simply enough, the General Agreement on Tariffs and Trade (GATT).

India views Regional Trading Arrangements (RTA’s) as ‘building blocks’ towards the overall objective of trade liberalisation. Hence, it is participating in a number of RTAs which include Free Trade Agreements (FTAs); Preferential Trade Agreements (PTAs); Comprehensive Economic Cooperation Agreements (CECAs); etc. These agreements are entered into either bilaterally or in a regional grouping. The United States is currently engaged in some 320 trade agreements with various nations; However, several general trade agreements have shaped trade policy on broad levels.

d. Tariff and Non-Tariff Barriers

Most nations encourage free trade by inviting firms to invest and to conduct business there, while encouraging domestic firms to engage in overseas business. These nations do not usually try to strictly regulate imports or discriminate against foreign-based firms. There are, however, some governments that openly oppose free trade. For example, many Communist nations desire self-sufficiency. Therefore, they restrict trade with non-Communist nations. But these restrictions vary with East-West relations.

The most common form of restriction of trade is the tariff, a tax placed on imported goods. Protective tariffs are established in order to protect domestic manufacturers against competitors by raising the prices of imported goods. The other form of restriction is non-tariff. Countries impose non-tariff barriers to restrict the import of goods indirectly from certain countries. Non-tariff barriers include quota system, restriction on foreign exchange, state trading, etc.

e. Expropriation

All multinational firms face the risk of expropriation. That is, the foreign government takes ownership of plants, sometimes without compensating the owners. However, in many expropriations there has been payment, and it is often equitable. Many of these facilities end up as private rather than government organisations. Because of the risk of expropriation, multinational firms are at the mercy of foreign governments, which are sometimes unstable, and which can change the laws they enforce at any point in time to meet their needs.

3. Legal Environment

Businesses are affected by legal environments of countries in many ways. Legal environments are not just based on different laws and regulations concerning businesses, these are also defined by the factors like rule of law, access to legal systems by foreigners, litigations systems etc. Variations in legal environments, rule of law, laws, and legal systems affect foreign business firms in a number or areas.

Key areas of business that are affected by legal environments are listed below:

• Laws concerning employment and labour affect managing of workforce in international markets.

• Different laws in foreign countries regulate financing of operations by foreigners. In some countries foreign firms are restricted access to local deposits/funds.

• Various countries around the world have different laws concerning marketing of products, especially food products, pharmaceuticals, hazardous materials and strategic products to a nation.

• Countries also control and regulate developing and utilising of technologies through various laws and regulations.

• Many countries also have different laws and regulations that affect ownership of businesses by foreigners.

• Countries also regulate /restrict remittances to foreign countries and repatriation of profits.

• Some countries regulate closing of operations and in some countries businesses are not allowed to close shop especially when they have sold products that have guarantees and warranties from the foreign firms.

• Various countries around the world have implemented different trade and investment regulations.

• Countries also have their own taxation requirements, systems and laws.

• Countries also differ on the accounting reporting requirements from various categories of firms.

• Countries around the world have also actively implemented environmental regulations that affect businesses.

4. Technological Environment

Technological know-how impacts all spheres of an international marketer’s operations including production, information system, marketing etc. The international marketers must understand technological development and its impact on its total operations. The marketing intelligence system may help the international firm to know technological orientations of other enterprises and to update its own technologies to remain competitive. Research and Development (R&D) has a vital role to play in increasing technological ability of a firm.

New technologies create new markets and opportunities. However, every new technology replaces an old technology. Xerography hurt carbon-paper industry, computer hurt typewriter industry, and examples are so on. Any international marketer, when ignored or forgot new technologies, their business has declined. Thus, the marketer should watch the technological environment closely. Companies that do not keep up with technological changes, soon find their products outdated.

The United States leads the world in research and development spending. Scientists today are researching a wide range of promising new products and services ranging from solar energy, electric car, and cancer cures. All these researches give a marketer an opportunity to set his products as per the current desired standard. The challenge in each case is not only technical but also commercial that means manufacture a product that can be afforded by mass crowd.

The level of technological development of a nation affects the attractiveness of doing business there, as well as the type of operations that are possible. Marketers in developed nations cannot take many technological advances for granted. They may not be available in lesser developed nations.

Consider some of the following technologically related problems that firms may encounter in doing business overseas:

• Foreign workers must be trained to operate unfamiliar equipment.

• Poor transportation systems increase production and physical distribution costs.

• Maintenance standards vary from one nation to the next.

• Poor communication facilities hinder advertising through the mass media.

• Lack of data processing facilities makes the tasks of planning, implementing, and controlling marketing strategy more difficult.

5. Economic Environment

The international marketer tries to understand economic environmental variables of the global markets for identifying the right marketing opportunities for the enterprise.

The economic environment is comprised of the following economic variables:

• National Income

• Gross Domestic Product (GDP)

• Industrial Structure

• Currency floating (Open/fixed) issue

• Demand patterns

• Balance of Payment (BOP) status

• Economy base (Import/Export)

• Rate of Economic Growth

• Occupational Pattern

• State of Inflation

• Consumer Mobility.

The economic situation varies from country to country. There are variations in the levels of income and living standards, interpersonal distribution of income, economic organisation, and occupational structure and so on. These factors affect market conditions. The level of development in a country and the nature of its economy will indicate the type of products that may be marketed in it and the marketing strategy that may be employed in it.

In high income countries there is a good market for a large variety of consumer goods. But in low-income countries where a large segment does not have sufficient income even for their basic necessities, the situation is quite different. A nation’s economic situation represents its current and potential capacity to produce goods and services. The key to understanding market opportunities lies in the evaluation of the stage of a nation’s economic growth.

A way of classifying the economic growth of countries is to divide them into three groups:

(a) Industrialised,

(b) Developing, and

(c) Less-developed nations.

The industrialised nations are generally considered to be the United States, Japan, Canada, Russia, Australia, and most of Western Europe. The economies of these nations are characterised by private enterprise and a consumer orientation. They have high literacy, modern technology, and higher per capita incomes. Developing nations are those that are making the transition from economies based on agricultural and raw materials production to industrial economies.

Many Latin American nations fit into this category and they exhibit rising levels of education, technology, and per capita incomes. Finally, there are many less developed nations in today’s world. These nations have low standards of living, literacy rates are low, and technology is very limited.

Usually, the most significant marketing opportunities exist among the industrialised nations, as they have high levels of income, one of the necessary ingredients for the formation of markets. However, most industrialised nations also have stable population bases, and market saturation for many products already existing. The developing nations, on the other hand, have growing population bases, and although they currently import limited goods and services, the long-run potential for growth in these nations exists.

Dependent societies seek products that satisfy basic needs-food, clothing, housing, medical care, and education. Marketers in such nations must be educators, emphasising information in their market programmes. As the degree of economic development increases, so does the sophistication of the marketing effort focused on the countries.

6. Competitive Environment

To plan effectively international marketing strategies, the international marketer should be well-informed about the competitive situation in the international markets.

By competitive environment we mean the following variables:

• Nature of competition

• Players in the competition

• Strategical weapons used by the participants

• Competition regulations

Entering an international market is similar to doing so in a domestic market, in that a firm seeks to gain a differential advantage by investing resources in that market. Often local firms will adopt imitation strategies, sometimes successfully. When they are successful, their own nation’s economy receives a good boost. When they are not successful, the multinational firm often buys them out.

Japanese marketers have developed an approach to managing product costs that has given them a competitive advantage over US competitors. A typical American company will design a new product, and then calculate the cost. If the estimated cost is too high, the product will be taken back to the drawing board.

In Japan, a company typically starts with a target cost based on the price that it estimates the market is most willing to accept. Product designers and engineers are then directed to meet the cost target. This approach also encourages managers to worry less about product costs and more about the role it should play in gaining market share. Briefly, at Japanese companies like NEC, Nissan, Sharp, and Toyota, a team charged with bringing a product idea to market estimates the price at which the product is most likely to appeal to the market.

From this first important judgment all else follow. After deducting the required profit margin from the selling price, planners develop estimates of each element that make up the product’s cost- engineering, manufacturing sales, and marketing. US firms tend to build products, figure how much it costs to build the product, and then ask whether the product can be sold at a profitable price. US companies tend not to assess what the market will be willing to pay.

Following are the ways an international marketer can handle competition:

• Proper knowledge about the competitors

• Knowledge of competitors’ objectives

• Knowledge of competitors’ strategies

• Knowledge of competitors’ reaction patterns

• Knowledge of competitors’ strengths and weakness.