International Marketing

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International Marketing

• Tim Beal
• Lecture 7
• 23 April 2002

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Today

• Housekeeping
• Issues in IM
• Ethics Bribery, Corruption and Customers
• China

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Housekeeping

• Anzac Day
• This Thursday no tutorials
• Wine SWOT marks

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Issues in IM

• Many fascinating issues in IM
• Intellectual Property Rights
• software, CD piracy, parallel importing
• Non-tariff barriers
• phytosanitary regulations
• Legal battles
• spreadable butter, trade access, dumping

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Some other issues

• Social trends
• move away from red meats
• Demographic trends
• ageing society destroying old markets, creating
  new
• decline in university age population
• Internet
• impact on may aspects of marketing
• Many others..but not enough time

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Ethics

• Growing interest in ethics
• universities and business schools introducing
  courses
• topical - Enron
• ongoing and big issue
• eg Soeharto family in Indonesia amassed US20-40
  billion
• much in kickbacks from foreign companies
• Some investing in NZ
• Korean President Kim Dae-jungs sons and
  associates

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Ethicsgtgtcustomer action

• Ethics
• Bribery and corruption
• Ethical judgments by customers
• Political and environmental concerns

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Bribery and Corruption

• moral dilemmas
• Takes 2 briber and bribed
• but many poor officials need dash to supplement
  wages
• is tax avoidance immoral?
• corruption widespread but varies
• Singapore seen as uncorrupt
• Officials are well paid

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Transparency International

• Transparency International
• German-based NGO
• Annual Corruption Perceptions Index
• tables in Reader
• 2001Corruption Perceptions Index
• 1999 Bribe Payers Index

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Bribery and IM

• Cateora gives overview
• Extortion - using position to get private
  advantage
• Bribery - using money to get unlawful advantage
• Reminds us of continuum between legitimate and
  illegitimate

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Continuum

• When does hospitality or a gift become a bribe?
• normal way of doing business in many countries
• Agents and lobbyists
• Washington lobbyists are big business
• Should NZ lamb exporters hire a lobbyist?

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Government initiatives

• Americans complained their laws forbade foreign
  bribery
• Gave advantage to competitors
• Especially French - bribery tax deductible
• gtgtOECD convention

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OECD Convention

• Combating bribery of foreign public officials in
  international business transactions
• entered into force 19 February 1999
• NZ ratified last year
• Mixed reception from business
• Most businesspeople from low corruption
  countries welcome it

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coursepage

• OECD Anti-Corruption Unit

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the convention

• The Convention makes it a crime to offer, promise
  or give a bribe to a foreign public official in
  order to obtain or retain international business
  deals.
• ends according tax deductibility for bribe
  payments made to foreign officials.
• The Convention commits 34 signatory countries,
  including all the worlds biggest economies, to
  adopt common rules to punish companies and
  individuals who engage in bribery transactions

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Briberygtgtgtethical judgements by customers

• Customers make ethical judgements on various
  grounds
• National Politics
• Company treatment of employees
• Environment

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Politics

• Esp political action of governments
• Analogous to country image
• Eg
• Country image Chinese products are poorly made
• Politics China has a poor human rights record
• Whether right or wrong is not the issue

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What is the issue?

• Perceptions and opinions
• Can be changed by events, advertising/promotion/pu
  blic relations
• Strength of opinion varies
• Other factors price, quality and availability of
  product
• So customer may disapprove of country but still
  buy products
• Examples?

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Examples?

• Japan
• South Africa
• Israel
• United States

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Not merely countries

• Companies which are seen to have poor ethical
  record may be spurned
• Eg
• Nike
• McDonalds
• Other side of coin Cause-related Marketing
• Gifts to charities, etc.

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Environmental concerns

• More likely to affect companies than countries
• Except for clean, green image
• Matter of self interest rather than ethics
• Environmental concerns may be
• Self-interest
• Eg organic foods
• Altruistic
• We need to protect the Earth..and other species

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Body Shop

• The Body Shop

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Growing importance

• As many products become indistinguishable from
  each other ethical considerations grow in
  importance
• Customers around well becoming more conscious of
  such issues
• Ethics can be an important way of differentiating
  products

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Reader

• Cateora overview
• Extract from OECD Convention
• examples from the press
• bribery an interesting and difficult challenge in
  international marketing

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Country studies

• Look at some of our main markets
• Give a feel for IM potential and problems
• Use videos, visitors
• More material in Reader, coursepage

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China

• last week - Taiwan
• China and Taiwan share Chinese culture
• But there are cultural differences between two
• cultural differences between various parts of
  China

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Start with politics and history

• Parts of the Chinese economies
• Greater China
• Chinese economic area

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Greater China

• China
• Peoples Republic of China (PRC), Mainland
• Taiwan
• Formosa
• Hong Kong
• since 1/7/97 Hong Kong Special Administrative
  Region

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Other parts

• Macau
• Portuguese colony reverted 1999
• Overseas Chinese
• Especially Southeast Asia
• Singapore - majority
• Elsewhere usually small minority
• Control much of commerce

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China and colonialism

• mid 19C-mid 20 Century -unequal treaties
• China saw itself under attack from all sides
• British, Russians, FrenchJapanese

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Pacific War and aftermath

• 1945 Japan defeated
• Hong Kong returned to Britain
• Taiwan returned to China
• 1949 Communists win civil war

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1949gtgt

• Taiwan
• de facto independence
• rapid, export-led economic growth
• Hong Kong
• rapid, export-led economic growth

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Taiwan-PRC relations

• up and down
• strong and growing economic ties
• PRC will not tolerate independence
• but accepts de facto independence

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Sensitivities

• Most countries and companies want to do business
  with both
• Thats possible but marketers need to be aware of
  issues and act sensitively
• Eg avoid use of (national) flags when what you
  mean is Chinese customers

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China as market

• Facts and figures
• economic policies
• market characteristics

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China facts and figures

• Area
• Population
• Wealth
• Geographical distribution
• population
• industry
• wealth
• Literacy and languages

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Physical geography

• China 4th largest country in world
• Lot of terrain inhospitable mountain, desert
• extensive coastline - fishing and mineral rights
• Major rivers - Yangtze, Yellow, Pearl
• access to interior irrigation, power (3 Gorges)

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Population

• Ethnicity
• Han 92
• Zhuang, Uygur, Hui, Yi, Tibetan, Miao, Manchu,
  Mongol, Buyi, Korean, and other nationalities 8
• largest in world
• 1.2 billion
• India catching up-984 million

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one child family policy

• Applies mainly to Han, not minorities
• fertility rate now 1.8 child/woman
• cf India 3.24 children born/woman
• NZ 1.91 children born/woman
• Result?
• Age distribution gtgtdeveloped country
• ageing society

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Age distribution
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Consequences

• preference for boy children leading to gender
  imbalance
• Xiao Huangdi (little emperor) - pampered only
  children
• marketing implications?
• Greater willingness and capacity to invest in
  education?
• What other products are affected by demographic
  changes?

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Wealth- pcGDP

• conventional calculation - US300-370
• PPP - I770-1044
• Moreover, disposable income high in relation to
  pc GDP
• rents, etc. low
• Unequal distribution of income
• Undeclared income

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Wealth - gross GDP

• How big is Chinese economy?
• Estimates vary with assumptions
• exchange rate
• PPP calculations
• CIA data for 2000

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Geographical distribution

• Northeast (Manchuria)
• Coastal provinces
• Interior

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Literacy and languages

• why are these important for IM?
• Literacy
• China 82
• India 52
• NZ 99

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Language

• Chinese and minority languages
• Tibetan, Uygur, Korean, etc
• Chinese not a phonetic script
• cf English, French, Arabic, Hindi
• Written language constant
• Spoken languages diverge

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Inter-language conversion

• Foreign words into Chinese
• Transliteration
• KeKouKeLa, Timu Bir, WeiLingDun
• Need to pick characters with
• appropriate sound
• appropriate meaning

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Romanisation

• Any language can be represented by Roman letters
• Maori
• Problems with romanisation
• Fit is not exact because sounds used vary
• Chinese, Japanese do not distinguish L and R
• Chinese uses tones
• many words with same pronunction, different
  tones..different meaning

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Different forms of romanisation

• China - pinyin
• Zhongguo
• Taiwan (and elsewhere, older books) - Wade-Giles
• Chung-kuo

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Economic Growth

• late 70s - Opening to the outside world
• great growth in trade, investment
• Fastest growing economy in world
• now 7-8
• Eg cars 15 growth
• Largest market in world mobiles, TVs, bicycles,
  wool..
• Fast growth in tourism

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Relationships

• Guanxi
• relationships, connections
• Common in other cultures
• Relationship building very important
• Need to show commitment
• partners and market

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Challenging market

• Chinese market changing, chaotic, undisciplined
• Requires serious preparation and local knowledge
• Will be biggest in world in 21c
• cant be ignored

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Today

• Ethics briberycustomer action
• China

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Next week

• Market and environmental research and analysis
• Korea
• video