LEARNING OBJECTIVES

Chapter 3.The culture environmentPresent by group 1.Miguel tamezkimbraleemosmenSumitranilavatanakul

LEARNING OBJECTIVES • To define and demonstrate the effect of culture’s various dimensions on international business • To examine ways in which cultural knowledge can be acquired and individuals and organizations prepared for cross-cultural interaction • To illustrate ways in which cultural risk poses a challenge to the effective conduct of business communications and transactions • To suggest ways in which international businesses act as change agents in the diverse cultural environments in which they operate

International marketing requires constant concern for different cultures and therefore requires adaption. Self- reference criterion- a tendency to rely on one own cultural values, personal experience and knowledge as the primary basis for making decisions. Back ground

The ever increasing level of world trade, opening of markets enhanced purchasing power of customer, and intensifying competition all have allowed and even forced marketers to expend their operation. Oversea success is very much a function of culture adaptability patience, flexibility, and tolerance for other beliefs. Back ground

culture is learned, shared, and transmitted from one generation to the next. culture is defined as an integrated system of learned behavior patterns that are distinguished characteristic of the members of any given society. It including everything that a group thinks, says, does, and makes. Culture defined

High-context culture - is where the social context which what is said strongly affects the meaning of the message. - Examples: Japan and Saudi Arabia • Low-context culture - is where the meaning of message is explicitly expressed by the word and is less affected by the social context. - Example: North American. Key concepts

Contextual background of various countries

1) Language - Verbal - Nonverbal 2) Religion 3) Values and Attitudes 4) Manners/Customs 5) Material Elements • Infrastructure • Convergence Elements of Culture:

6) Aesthetics 7) Education 8) Social Institutions • Learning about other cultures • experiential knowledge • factual knowledge Elements of Culture: (con.)

Verbal - How words are spoken Messages are conveyed by the words used, by the way the word are spoken - Gestures made - Body position assumed - Degree of eye contact • Local language capability’s important role in international marketing - Aids in information gathering and evaluation - Provide access to local society - Important to company communications - Allows for interpretation of contexts Language

Nonverbal language Hidden language of cultures - Time flexibility and sensibility - Social acquaintance and rapport - Personal physical space and personal touching - Non-verbal gestures and signaling Language

FACE

Religion • Religion contains key values and norms that are reflected in adherents’ way of life. • People try to adopt business practices that will satisfy religious tenets without sacrificing modern practices in business.

Christianity- 2.0 billion followers Islam – 1.2 billion followers Hinduism- 860 million followers Buddhism – 360 million followers Confucianism -150 million followers The major world religions

Chapter 6: The Cultural Environment Religion

Values - are shared beliefs or group norms that have been internalized by individuals. Attitudes - are evaluations of alternatives based on these values. Values and Attitudes

Potential problem areas for marketers arise from an insufficient understanding of; - different ways of thinking. - the necessity of saving face. - knowledge and understanding of the host country - the decision-making process and personal relations - the allocation of time for negotiations. Manner and Customs

Never touch the head of Thai or pass an object over it. The head is considered scared in Thailand. Avoid using triangular shapes in Hong Kong, Korean, and Taiwan. It is considered a negative shape. The number 7 is considered bad luck in Kenya, good luck in Czech republic and has a magical connotation in Benin, Africa. The number 10 is bad luck in Korean The number 4 mean death in Japan Red represents witchcraft and death in many African countries. Red is positive color in Denmark Cultural Factors

Japan Do not open a gift in front of Japanese counterpart unless asked, and do not expect the Japanese to open your gift. Avoid ribbons and bows as part of the gift wrapping, Bows as we know them are considered unattractive, and ribbon color can have different meaning. Europe Avoid red rose and white flowers, even numbers, and the number 13. Do not wrap flowers in paper. Do not risk the impression of bribery by spending too much on a gift. It ‘s Not the Gift That Counts, but How Your Present It

Material culture - Results from technology and is directly related to how a society organizes is economic activity. - Material culture is manifested in - Economic infrastructure - Social infrastructure - Financial infrastructure - Marketing infrastructure - Cultural convergence - The degree of industrialization can provide a marketing segmentation variable. Material Elements

What is or is not acceptable as good taste varies widely in cultures. The symbolism of colors, forms, and music carries different meaning in different meaning in different cultures. Aesthetics

Kinship relationships - immediate and extended family • Social stratification • Reference groups - Primary reference groups - family, coworkers - Secondary reference groups - professional associations, trade organizations. Social Institutions

Assessing the educational level of a culture - formal and informal education - literacy rates - enrollment in secondary or higher education - qualitative aspect of emphasizing science • Education affects - employee training - competition for labor - Product characteristics. Education

The key variable of the model is propensity to change, which is a function of three constructs • Culture lifestyle • Individualism • Power distance • Uncertainly avoidance • Masculinity • Distinguish culture difference • Change agent • Communication Culture Analysis

A model of Cross-Culture Behavior

Culture Dimension Score for Twelve Countries (0=low:100=high)

Define the problem or goal in terms of domestic culture traits, habits, or norms. Define the problem or goal in terms of foreign cultural traits, habits, or norms. Make no value judgment. Isolate the self-reference criterion influence in the problem and examine it carefully to see how is complicate the problem Redefine the problem without the self-reference criterion influence and solve for the optimal goal situation. Reducing the influence of one’s own culture values

Internal education program that increase cultural sensitivity - Culture-specific information - Culture-general information - Self-specific information • Specialized training for global managers - Area studies - Environmental briefings - Cultural orientation programs - Cultural assimilator - Sensitivity training The Training Challenge- Global Managers

Embrace local culture Build relationships Employs locals to gain culture knowledge Help employees understand you. Adapt products and processes to local markets. Coordinate by region. Making Culture Work for Marketing Success

Cultural Imperatives Cultural Adiaphorous Cultural Exclusives Business Customs

Figure 2.4 Cross – Cultural Training Methods

Chapter 5Host Country Legal, and Political Environment

Interpretation & Application of regulations  lead to conflict & misleading results. Graph below represents factors that affect country’s investment climate: OVERVIEW 5-33

Policy uncertainty dominates concerns of firm. • However, variations in political & legal environment offer new opportunities to international marketers. • Chapter 5 examines the political-legal environment from a Manager’s point of view. OVERVIEW (Cont.) 5-34

Manager must concentrates on 3 areas during decision-making process: • Political & legal circumstances of home country; • Political & legal circumstances of host country; • Bilateral & multilateral agreements, treaties, & laws governing relations b/w home & host countries. OVERVIEW (Cont.) 5-35

LEGAL AND POLITICAL ENVIRONMENT OF A HOME COUNTRY– INTRODUCTION: • May not be designed specifically to address international marketing; • However, can have a direct effect on a firm’s opportunities aboard. • Some are directly aimed at international market activities to help firms in international efforts. 5-36

LEGAL AND POLITICAL ENVIRONMENT OF A HOME COUNTRY: • Examples of regulations that may not be designed specifically to address international marketing include: • Minimum wage legislation – • affects international competitiveness using production processes that are high labor intensive. • Cost of domestic safety regulations • May impact pricing policies of a firm in international marketing efforts. 5-37

LEGAL AND POLITICAL ENVIRONMENT OF A HOME COUNTRY: • Examples of regulations that may not be designed specifically to address international marketing include: • Environmental Superfund • Requires payment by chemical firm based on production volume, regardless of whether sold domestically or exported. • Firm has disadvantage internationally when exporting products b/c have to compete against foreign firms not required to make such payment and therefore have a cost advantage. 5-38

LEGAL AND POLITICAL ENVIRONMENT OF A HOME COUNTRY: • Examples of regulations that are directly aimed at international market activities to help firms in international efforts include: • Firms concerned w/ lack of safeguards for intellectual property rights in developing country. • Gray market activities • Situation where companies are hurt b/c products enter markets in ways not desired by manufacturer. 5-39

LEGAL AND POLITICAL ENVIRONMENT OF A HOME COUNTRY: • Four areas of governmental activities of major concern to international marketer: • Embargoes or Trade Sanctions • Export Controls • Import Controls • Regulation of International Business Behavior 5-40

Governmental actions that distort the free flow of trade in goods, services, or ideas for decidedly adversarial & political, rather than strictly economic, purposes. Foreign policy tool used by many countries. Range of sanctions imposed can be quite broad. Typically, intent is to bring commercial interchange to complete halt. Key concern w/ sanctions is fact that governments often consider them as being free of cost. However, even though they may not affect budget of governments, sanctions imposed by governments can mean significant loss of business to firms. EMBARGOES/ TRADE SANCTIONS: 5-41

Some of the Sanctions currently maintained by U.S. against China are as follows: • Limits on US foreign assistance • US “No” votes or abstention in international banks • Ban on Overseas Private Investment Corporation programs • Ban on export of defense articles or defense services • Ban on import of munitions or ammunition EMBARGOES/ TRADE SANCTIONS: 5-42

Designed to deny or delay acquisition of strategically important goods by adversaries. Most of systems make controls the exception rather than rule, w/ exports taking place independently from politics. U.S. differs in that exports are considered to be privilege rather than a right, and exporting is seen as extension of foreign policy. Legal basis varies across nations. EXPORT CONTROLS SYSTEMS: 5-43

Legal basis varies across nations. For Example: • Germany – armament exports (defensive exports) are covered in War Weapons List & remainder of exports of goods covered by German Export List. Dual-use items are goods useful for both military & civilian purposes & controlled by Joint List of EU. • U.S. laws control all exports of goods, services, and ideas. • Export of goods occur when transferred from U.S. • Export of services/ideas occur when transferred to foreign national. EXPORT CONTROLS SYSTEMS: 5-44

U.S. export control system is based on • Export Administration Act, administered by Department of Commerce • Arms Export Control Act, administrated by Department of Department of State. • Commerce Dept. focuses on exports in general. • States Dept. covers products designed or modified for military use, even if such products have commercial applicability. • For any export to take place, exporter has to obtain export license. EXPORT CONTROLS SYSTEMS: 5-45

Decision Steps in Export Licensing Process: • Should a Given Product be Exported? • To a Given Country? • To a Given End User? • For a Particular End User? • Determinants for Export Controls: • National Security • Foreign Policy • Short Supply • Nuclear Nonproliferation U.S. EXPORT CONTROLS SYSTEM: 5-46

Restricting the flow of materials can be crucial in avoiding • the proliferation of weapons of mass destruction; • reducing flows of technological knowledge can reduce the sophistication of armaments used by insurgents groups; • financial controls can inhibit funding for terrorist training. • Rise in international awareness of threat of terrorism has led to a renewed importance of global export controls. NEW ENVIRONMENT FOR EXPORT CONTROLS: 5-47

Either all imports or imports of particular products are controlled thru tariff/nontariff mechanisms. Tariffs – place tax on imports and raise prices. Nontariffs barriers, like voluntary restraint agreements – self imposed restrictions & cutbacks aimed at avoiding punitive trade actions from host. Quota systems – reduce volume of imports accepted by a country. IMPORT CONTROLS: 5-48

For international marketer, restrictions may mean most efficient sources of supply are not available because government restrict importations from those sources. • Examples of major problems for import controls include the following: • Downstream change in import composition that results from these controls. • Efficiency confronting the policymaker. IMPORT CONTROLS: 5-49

REGULATION OF INTERNATIONAL BUSINESS BEHAVIOR: • Home countries may implement regulations to ensure that international business of their firms are conducted w/I the legal, moral, and ethical boundaries considered appropriate. • Definition of appropriateness may vary from country to country & govt to govt. 5-50

LEARNING OBJECTIVES