SE21 Chapter 3 International Environment

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Sales, exports and internationalmarketing (SE21)

Chapter 3

The international environment


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ntroduction to (changing and foreign) environment

The foreign environment includes:

economic forces,political/legal forces,socio-cultural forces, andcompetition.

Great turbulence internationally:disintegration of the Soviet Union,experiments with market economies,the EU moving increasingly toward a single internal market,the expansion of international trade,

the opening of investment opportunities by China,and economic/political crises in some countries.

Terrorism has expanded to a world-wide phenomenon,affecting individual lives and businesses.Security as business strongly develops (in answer).


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Economic Forces

Demand for products, affected by:

population size

size and distribution of income and wealth.


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Market development

The extent of economic development of a country

is classified in various ways, like:developed, developing and newly industrialized.(Other schemes of classification may also be used.)

Big emerging markets (BMEs) give major marketing

opportunities.

Table 3.1 (The world by income): countries are grouped bythe World Bank. General classifications are of only limitedusefulness to the international marketer.

A company may develop its own system ofclassification for its own use - as GE did (Exhibit 3.1.).


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Gini coefficienthttp://william-king.www.drexel.edu/top/prin/txt/factors/dist4.html

Most developed European nations have Gini coefficients between0.24 and 0.36.

United States Gini coefficient is above 0.4, indicating greaterinequality.

Using the Gini can help quantify differences in welfare andcompensation policies and philosophies.

Gini coefficient can be misleading when used to make politicalcomparisons between large and small countries.

The Gini coefficient for the entire world has been estimatedby various parties to be between 0.56 and 0.66. (2006-2007)
http://william-king.www.drexel.edu/top/prin/txt/factors/dist4.htmlhttp://william-king.www.drexel.edu/top/prin/txt/factors/dist4.html


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Some areas of change.

Asia and Latin America are areas of major change and growth.

Table 3.2 gives selected indicators for Asian areas.

Exhibit 3.2 indicates East Asias expected future growth industries.

China attracting additional producers and marketers of consumer goods,as economy has been growing rapidly.

Figure 3.1 indicates high-growth areas in China.

Market opening in some Latin American countries, leading torapid growth and attracting increasing investment by Asian countries.

Russias middle class becoming more important.


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Socio-cultural environment

Socio-cultural environment influences customers, managers,and marketing intermediaries.

Foreign consumers differ from domestic consumersin all aspects of buyer behaviour:the what, why, who, how, when and where.

There are differences between areas (as in the EU)and between groups.

Exhibit 3.3 provides some guidelines for managing cultural differences.


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Culture and communication

Communication is both by language and behaviour(non-verbal communication).

Knowing what people mean by their behaviours,and how they view time, space, things, friendships, and agreementsis essential for the international marketer.

Anthropologist Edward T. Halls theory of high- and low-context culturehelps us better understand the powerful effect culture has oncommunication. A key factor in his theory is context.This relates to the framework, background, and surrounding

circumstances in which communication or an event takes place.

In high context cultures (like Japan), the situation, relationships,and unspoken understandings may carry more meaning and importance

than the words themselves.(see also next slides for more info about high & low context cultures)

In low context cultures (like many European nations and the U.S),the meaning of the message can usually be wholly or partially isolatedfrom the context in which the message occurs.


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Low-context cultures (including North Americaand much of Western Europe) are logical, linear,

individualistic, and action-oriented.People from low-context cultures value logic, facts,and directness.Solving a problem means lining up the facts and evaluating one afteranother.Decisions are based on fact rather than intuition.

Discussions end with actions.And communicators are expected to be straightforward, concise, andefficient in telling what action is expected.To be absolutely clear, they strive to use precise words and intend themto be taken literally.Explicit contracts conclude negotiations.

This is very different from communicators in high-context cultures whodepend less on language precision and legal documents.High-context business people may even distrust contracts and beoffended by the lack of trust they suggest.


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Self-reference criterion (SRC)

Most people initially define problems in terms of their own culture.The SRC effect, or likely cultural bias, occurs when an individualis only able to define problems in terms of his/her own culture.

Lee (1966) coined the term self-reference criterion as a useful concept to avoidcultural bias. He suggested that problems should be defined first in terms ofcultural traits, habits, or norms of the home society. They should be redefinedwithout value judgments, in terms of the foreign cultural traits, habits, andnorms. He indicated that the difference between these two specifications is an

indication; the likely cultural bias, or SRC effect, which can be then isolatedand carefully examined to see how it influences the concept or the problem.

The value of this approach lies in forcing the manager, posing the problem tomake specific his or her assumptions about the cultural elements affecting theproblem, and to question whether or not they hold for another culture.The international marketer should learn how to define problems in terms of

the local culture as well as his/her own culture.The comparison can then indicate possible areas for mutually agreeablesolutions.

Culture affects all international and export marketing activity.Exhibit 3.5 indicates some of the many ways in which this is evident.


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Political & legal environment & economic integration

See the separate Chapter 3 notes-file for some helpful comments

Also look at: http://www.geert-hofstede.comFor explanation and comparisons of Hofstedes Cultural Dimensions.
http://www.geert-hofstede.com/http://www.geert-hofstede.com/


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SE21 Chapter 3 International Environment