The Internationalization of Business:
Pakistani exporters should understand that worldwide current interest in
international and export marketing can be explained due to the changing
competitive structures coupled with shifts in demand characteristics in markets
throughout the world. With the increasing globalization of markets, companies
find they that must interact with foreign customers, competitors and suppliers in
order to get the best possible price. Thus Pakistani companies have to seriously
look at the options of international marketing in order to stay in business and to
expand they must look beyond Pakistan’s border.
Pakistani companies that have never ventured abroad until recently are now
seriously seeking foreign markets. Companies with existing foreign operations
realize they must be more competitive to succeed against their foreign
competitors. They have found it is absolutely necessary to spend more money
and time improving their marketing positions abroad because competition for
these growing markets is intensifying and will further intensify in coming years.
Unfortunately Pakistani companies seriously lack in international marketing
activities. For the firm venturing into international marketing for the first time
and for those already experienced, the requirement is generally the same: a
thorough and complete commitment to foreign markets and new ways of
operating.
What is International Marketing?
International Marketing is the performance of business activities designed to
plan, price, promote, and direct the flow of a company’s goods and services to
consumers or users in more than one nation for a profit.
As usual the business’s goal stays the same which is to make a profit by
promoting, pricing and distributing products for which there is an international
and global market.
What makes marketing interesting is the challenge of molding the controllable
elements of marketing decisions (product, price, promotion, distribution) within
the framework of the uncontrollable elements of the marketplace (competition,
politics, law, consumer behavior, level of technology and so forth) in such a way
that marketing objectives are achieved.
What are International Marketing Tasks?
Pakistani exporters must understand that international marketer’s task is more
complicated than that of the domestic marketer because the international
marketer must deal with at least two levels of uncontrollable uncertainty instead
of one. Uncertainty is created by the uncontrollable elements of all business
environments, but each foreign country in which a company operates adds its
own unique set of uncontrollable factors.
Marketing Decision Factors
The successful manager constructs a marketing program designed for optimal
adjustment to the uncertainty of the business climate. Assuming the necessary
overall corporate resources, the marketing manager blends price, product,
promotion and channels or distribution activities to capitalize on anticipated
demand. The controllable elements can be altered in the long run and usually, in
the short run to adjust to changing marketing conditions, consumer tastes or
corporate objectives.
Uncontrollable elements include political/legal forces, economic forces,
competitive structure, competitive forces and climate.
What are the “Aspects of the Domestic Environment”?
A political decision involving domestic foreign policy can have a direct effect on
a firm’s international marketing success.
The domestic economic climate is another important home-based uncontrollable
variable with far-reaching effects on a company’s competitive position in foreign
market. The capacity to invest in plants and facilities, either in domestic or
foreign markets, is to a large extent a function of domestic vitality. Currency
value is another influence the home country has on the marketer’s task.
Pakistani exporters should understand that competition within Pakistan can also
have a profound effect on the international marketer’s task. Competition within
its home country affects a company’s domestic as well as international plans.
What are the “Aspects of Foreign Environment”?
A local business operating in Pakistan undoubtedly feels comfortable in
forecasting the business climate and adjusting business decisions to these
elements. The process of evaluating the uncontrollable elements in an
international marketing program, however, often involves substantial doses of
cultural, political, and economic shocks for which our exporters should be fully
equipped to handle and tackle.
The dynamic upheavals in some countries further illustrate the problems of
dramatic change in cultural, political and economic climates over relatively short
period of time.
How to Adapt for Foreign Countries?
To adjust and adapt a marketing program to foreign markets, Pakistani exporters
must be able to interpret effectively the influence and impact of each of the
uncontrollable environmental elements on the marketing plan for each foreign
market in which they hope to do business.
The task of cultural adjustment, however, is the most challenging and important
one confronting our exporters; they must adjust their marketing efforts to
cultures to which they are not attuned.
The key to successful international and export marketing is adaptation to the
environmental differences from one market to another.
Our exporters must be aware that there are cultural differences or recognize the
importance of those differences in foreign markets as compared to Pakistan.
An awareness of the need to be sensitive to differences and to ask questions
when doing business in another culture can help one avoid many of the mistakes
possible in international marketing.
What is Global Awareness?
Pakistani exporters must be globally aware is to have:
 Objectivity
 Tolerance of cultural differences
 Knowledge of cultures, history, world market potential and global
economic, social and political trends
To be globally aware is to be objective. Objectivity is important in assessing
opportunities, evaluating potential and responding to problems.
To be globally aware is to have tolerance for cultural differences. Tolerance is
understanding cultural differences and accepting and working with others
whose behaviors may be different than of those in Pakistan. The tolerant person
understands the differences that may exist between cultures and uses that
knowledge to relate effectively.
A successful exporter is a globally aware person and knowledgeable about
cultures and history. Knowledge of cultures is important in understanding
behavior in the marketplace or in the boardroom. Knowledge of history is
important because the way people act is influenced by their history. Why
Americans are impulsive in decision making? It can be easily found in their
history, which was their fight for survival.
Global awareness also involves knowledge of world market potentials and global
economic, social and political trends. Global awareness can and should be built
in organizations using several approaches. The obvious strategy is to select
individual managers specifically for their demonstrated global awareness. It can
also be obtained through personal relationships with other countries.
What are the “Stages of International Marketing Involvement”?
Once a company has decided to go international, it has to decide the degree of
marketing involvement and commitment it is prepared to make. These decisions
should reflect considerable study and analysis of market potential and company
capabilities.
The stages of international marketing are presented below in linear order:
Stage 1: No Foreign Direct Marketing
A company in this stage does not actively cultivate customers outside national
boundaries; however, this company’s product may reach foreign markets. Sales
may be made to trading companies as well as to foreign customers who come
directly to the firm.
Stage 2: Infrequent Foreign Marketing
Temporary surpluses caused by variations in production levels or demand may
result in infrequent marketing overseas. In this stage, there is little or no change
in company organization or product lines.
Stage 3: Regular Foreign Marketing
At this level, the firm has permanent productive capacity devoted to the
production of goods to be marketed in foreign markets. A firm may employ
foreign or domestic overseas middlemen or it may have its own sales force or
sales subsidiaries in important foreign markets. The primary focus of operations
and production is to service domestic market needs.
Stage 4: International Marketing
Companies in this stage are fully committed and involved in international
marketing activities. Such companies seek markets all over the world and sell
products that are a result of planned production for markets in various countries.
This generally entails not only the marketing but also the production of goods
outside the home market. At this point a company becomes an international or
multinational marketing firm.
Stage 5: Global Marketing
At this stage, companies treat the world, including their home market, as one
market. Market segmentation decisions are no longer focused on national
borders. Instead, market segments are defined by income levels, usage patterns,
or other factors that often span countries and regions. Global companies and
global marketing are terms frequently used to describe the scope of operations
and marketing management orientation of companies in this stage.
The Three Strategic Orientations for International Market:
Below are three distinctive approaches that seem to dominate strategic thinking
in firms involved in international markets:
1) Domestic Market Extension Orientation
The domestic company seeking sales extension of its domestic products
into foreign markets illustrates this orientation to international marketing.
It views its international operations as secondary to and an extension of its
domestic operations; the primary motive is to market excess domestic
production. Domestic business is its priority, and foreign sales are seen as
profitable extension of domestic operations.
2) Multi-domestic Market Orientation
Once a company recognizes the importance of differences in overseas
market and the importance of offshore business to the organization, its
orientation toward international business may shift to a multi-domestic
market strategy. A company guided by this concept has a strong sense
that country markets are vastly different and that market success requires
an almost independent program for each country. Firms with this
orientation market on a country-by-country basis, with separate
marketing strategies for each country.
3) Global Marketing Orientation
A company guided by the global marketing orientation or philosophy is
generally referred to as a global company; its marketing activity is global,
and its market coverage is the world. A company employing a global
marketing strategy strives for efficiencies of scale by developing a
standardized marketing mix applicable across national boundaries.
How International Marketing has changed from the 20th to the 21st Century?
The first half of the 20th century was marred by a major worldwide economic
depression that occurred between two world wars and that all but destroyed
most of the industrialized world. The latter half of the century, although free of a
world war, was marred by struggles between countries espousing the socialist
Marxist approach and those following a democratic capitalist approach to
economic development.
The First Decade of the 21st Century and Beyond
Companies are looking for ways to become more efficient, improve productivity,
and expand their global reach while maintaining an ability to respond quickly to
delivering a product that the market demands. We in Pakistan seriously lack in
all important criteria whether it has to do with efficiency, increased productivity,
and the ability to reach globally and to respond quickly to market demands.
Global companies are not the only ones aggressively seeking new market
opportunities. Smaller companies are using novel approaches to marketing and
seeking ways to apply their technological expertise to exporting goods and
services not previously sold abroad. Our exporters must hire professional
international marketing experts, which unfortunately are very rare in Pakistan
since international marketing is usually done by the owners of the export
companies with very limited knowledge of International Marketing.
What is a Balance of Payments?
When countries trade, financial transactions amongst businesses and/or
consumers of different nations occur. The system of accounts that records a
nation’s international financial transactions is called its balance of payments. A
nation’s balance of payment statement records all financial transactions between
its residents and those of the rest of the world during a given period of timeusually one year.
A nation’s balance of payments represents an overall view of its international
economic position and is an important economic measure used by treasuries,
central banks, and other government agencies whose responsibility is to
maintain external and internal economic stability.
A balance of payments statement includes three accounts:
Current Account: a record of all merchandise exports, imports, and services plus
unilateral transfer of funds.
Capital Account: a record of direct investment, portfolio investment, and shortterm capital movements to and from countries.
Official Reserves Account: a record of imports and exports of gold, increases or
decreases in foreign exchange, and increases or decreases in liabilities to foreign
central banks.
Of the three, the current account is of primary interest to international business.
It is important because it includes all international merchandise trade and service
accounts, that is, accounts for the value of all merchandise and services imported
and exported and all receipts and payments from investments.
What is Balance of Trade?
The relationship between merchandise imports and exports is referred to as the
balance of merchandise trade, or trade balance. If a country exports more goods
than it imports, it has a favorable balance of trade; if it imports more goods than
it exports, it has an unfavorable balance of trade.
What is Protectionism in International Business?
International business must face the reality that even in world of post WTO but
still there are ways to protect a country’s markets from intrusion by foreign
companies.
Trade Barriers
To encourage development of domestic industry and protect existing industry,
governments may establish such barriers to trade as tariffs, quotas, boycotts,
monetary barriers, non-tariff barriers and market barriers.
Tariffs- a tariff, simply defined, is a tax imposed by a government on goods
entering at its borders. Tariffs may be used as revenue-generating taxes or to
discourage the importation of goods or for both reasons. Tariffs are arbitrary,
discriminatory and require constant administration and supervision.
Quotas- a quota is a specific unit or dollar limit applied to a particular type of
good. Quotas put an absolute restriction on the quantity of a specific item that
can be imported.
Voluntary Export Restraints (VERs) - common in textiles, clothing, steel,
agriculture and automobiles, the VER is an agreement between the importing
country and the exporting country for a restriction on the volume of exports. A
VER is called “voluntary” because the exporting country sets the limits; however,
it is generally imposed under the threat of stiffer quotas and tariffs being set by
the importing country if a VER is not established.
Boycotts- a government boycott is an absolute prohibition on the purchase and
importation of certain goods from other countries. A public boycott can be either
formal or informal and may be government sponsored or sponsored by an
industry.
For example: Cuba, Iran and Burma had or still have sanctions imposed by
United States.
Monetary Barriers- a government can effectively regulate its international trade
position by various forms of exchange-control restrictions. A government may
enact such restrictions to preserve its balance of payments position or specifically
for the advantage or encouragement of particular industries. There are three
barriers to consider; blocked currency, differential exchange rates and
government approval requirements securing foreign exchange.
Standards- Non-tariff barriers of this category include standards to protect health,
safety and product quality. The standards are sometimes used in an unduly
stringent or discriminating way to restrict trade, but the sheer volume of
regulations in this category is a problem itself. Different standards are one of the
major disagreements between the United States and Japan. The United States and
other countries require some products (automobiles in particular) to contain a
percentage of local content to gain admission to their markets.
Antidumping Penalties- antidumping laws were designed to prevent foreign
producers from using predatory pricing, a practice whereby a producer
intentionally sells its products for less than the cost of production in order to
undermine the competition and take control of the market.
Easing Trade Restrictions
Lowering the trade deficit has been a priority of the U.S. government for a
number of years. Of the many proposals brought forward, most deal with
fairness of trade with some of our trading partners instead of reducing imports
or adjusting other trade policies. Many believe that too many countries are
allowed to trade freely in the United States without granting equal access to U.S.
products in their countries.
The Omnibus Trade and Competitiveness Act of 1988 addressed the trade
fairness issue and focused on ways to improve U.S. competitiveness. The trade
act was designed to deal with trade deficits, protectionism and the overall
fairness of trading partners. Some see the act as a protectionist measure, but the
government sees it as a means of providing stronger tools to open foreign
markets and to help U.S. exporters to be more competitive. The bill covers three
areas considered critical in improving U.S. trade: market access, export
expansion and import relief.
As the global marketplace evolves, trading countries have focused attention on
ways of eliminating tariffs, quotas, and other barriers to trade. Three ongoing
activities to support the growth of international trade are GATT, the
International Monetary Fund (IMF) and the World Bank Group.
The GATT treaty and subsequent meetings have produced agreements
significantly reducing tariffs on a wide range of goods. Periodically, member
nations meet to reevaluate trade barriers and establish international codes
designed to foster trade among members. In general, the agreement covers these
basic elements:
1) Trade shall be conducted on nondiscriminatory basis
2) Protection shall be afforded domestic industries through custom tariffs, not
through such commercial measures as import quotas
3) Consultation shall be the primary method used to solve global trade
problems.
World Trade Organization
The creation of World Trade Organization was the result of the Uruguay Round.
It was the creation of a new institution as a successor to the GATT. The WTO is
an institution, not an agreement as was GATT. It sets many rules governing trade
between its 132 members, provides a panel of experts to hear and rule on trade
disputes between members and issues binding decisions.
All member countries have equal representation in the WTO’s ministerial
conference, which meets at least every two years to vote for a director general.
Antidumping duties are becoming another favorite way for nations to impose
duties, under the justification that a foreign company is selling at unfair prices.
Most nations having dumping laws that ostensibly are designed to keep foreign
companies from dumping product that is, selling below cost in order to unfairly
gain a share of market and lessen competition. This law has always been difficult
to interpret because “selling below cost” is difficult to measure; most countries
have defined it whatever way necessary to serve their purpose. When companies
are found to be dumping, the recipient country places an extra tax on the product
to offset the advantage of the lower price. If the foreign government has
subsidized the company that is found guilty of dumping, an additional
countervailing duty is collected to offset the subsidy.
Despite the clever tactics used by some countries to skirt its provisions, the WTO
is considered to have a positive effect on international trade.
What is “The International Monetary Fund (IMF)”?
Inadequate monetary reserves and unstable currencies are particularly vexing
problems in global trade. To overcome these particular market barriers, the
International Monetary Fund was formed. There are 181 countries as members.
The objective of IMF is the stabilization of foreign exchange rates and the
establishment of freely convertible currencies to facilitate the expansion and
balanced growth of international trade. The IMF also lends money to members
having trouble meeting financial obligations to other members.
To cope with the universally floating exchange rates, the IMF developed special
drawing rights (SDRs). Because both gold and the U.S. dollar have lost their
utility as the basic medium of financial exchange, most monetary statistics relate
to SDRs rather than dollars. The SDR is in effect “paper gold” and represents an
average base of value derived from the value of a group of major currencies.
Although the IMF has some severe critics, most agree that it has performed a
valuable service and at least partially achieved many of its objectives.
What is “The World Bank Group”?
The World Bank Group is a separate institution that has its goal the reduction of
poverty and the improvement of living standards by promoting sustainable
growth and investment in people. It provides loans, technical assistance and
policy guidance to developing-country members to achieve its objectives.
The World Bank Group provides the following services:
1) lending money to the governments of developing countries to finance
developmental projects in education, health and infrastructure
2) providing assistance to governments for developmental projects to the
poorest developing countries
3) lending directly to the private sector to help strengthen the private sector
in developing countries
4) providing investors with investment guarantees against “noncommercial
risk”
5) Promoting increased flows of international investment by providing
facilities for the conciliation and arbitration of disputes between
governments and foreign investors.
Since their inception, these institutions have played a pivotal role in the
economic development of countries throughout the world and thus contributed
to the expansion of international trade since World War II.
How Geography and Global Markets affect Exports?
Geography, the study of the earth’s surface, climate, continents, countries,
people, industries and resources, is an element of the uncontrollable
environment that confronts every marketer but which receives scant attention.
The study of geography is important in the evaluation of markets and their
environment.
Climate and Topography
As elements of geography, the climate and physical terrain of a country are
important environmental considerations when appraising a market. The effect of
these geographical features on marketing ranges from the obvious influences on
product adaptation to more profound influences on the development of
marketing systems.
Within even a single national market, climate can be sufficiently diverse to
require major adjustments. Different seasons between the northern and southern
hemispheres can affect global strategies.
While physical barriers can be an impediment to economic growth and trade, in
some cases, physical barriers are preserved as protection from potential enemies;
in other cases, governments have been reluctant to eliminate barriers, preferring
to preserve economic isolation. Such attitudes are yielding to the desire many
countries have to participate in the economic opportunities and challenges of the
global marketplace.
Geographic hurdles have a direct effect on a country’s economy, markets, and
the related activities of communication and distribution. Furthermore, there are
indirect effects on its society and culture that are ultimately reflected in market
behavior.
Geography, Nature, and Economic Growth
Climate and topography coupled with civil wars, poor environmental policies
and natural disasters push these countries further into economic stagnation.
As countries prosper, natural barriers are overcome. Tunnels are dug and
bridges and dams are built in an effort to control or to adapt to climate,
topography and the recurring extremes of nature. Humankind has been
reasonably successful in overcoming or minimizing the effects of geographical
barriers and natural disasters, but as they do so they must contend with
problems of their own making. The construction of dams is a good example of
how an attempt to harness nature for good has a negative side as well.
As the global rush toward industrialization and economic growth accelerates,
environmental issues become more apparent. Disruption of ecosystems,
relocation of people, inadequate hazardous waste management and industrial
pollution are problems that must be addressed by the industrialized world and
those seeking economic development.
Social Responsibility and Environmental Management
Nations, companies and people reached a consensus during the close of the last
decade: environmental protection is not an optional extra- it is an essential part
of the complex process of doing business.
Companies looking to build manufacturing plants in countries with more liberal
pollution regulations than they have at home are finding the regulations
everywhere have become stricter. Many Asian governments are drafting new
regulations and enforcing existing ones. A strong motivator for Asia and the rest
of the world is the realization that pollution is on the verge of getting completely
out of control.
Governments, organizations and businesses are becoming increasingly
concerned with the social responsibility and ethical issues surrounding the
problem of maintaining economic growth while protecting the environment for
future generations. The issue that concerns all is whether economic development
and protection for the environment can coexist. Sustainable development, a joint
approach among those (governments, businesses, environmentalists and others)
who seek economic growth with “wise resource management, equitable
distribution of benefits and reduction of negative efforts on people and the
environment from the process of economic growth,” is the concept that guides
many governments and multinational companies today. More and more
companies are embracing the idea of sustainable development as a “win-win”
opportunity. Responsibility for protecting the environment does not rest solely
with governments, businesses or activist groups; however, each citizen has a
social and moral responsibility to include environmental protection among his or
her highest goals.
Resources
The availability of minerals and the ability to generate energy are the
foundations of modern technology. The locations of the earth’s resources, as well
as the available sources of energy are geographic accidents.
Many countries that were self-sufficient during much of their early economic
growth have become net importers of petroleum during the past several decades
and continue to become increasingly dependent on foreign sources.
The location, quality and availability of resources will affect the pattern of world
economic development and trade well into the 21st century. As the global
demand for resources intensifies and prices rise, resources will continue to
increase in importance among the uncontrollable elements of the international
marketer’s decisions.
What are “World Population Trends”?
Current population, rural/urban population shifts, rates of growth, age levels
and population control help determine today’s demand for various categories of
goods. Although not the only detriment, the existence of sheer numbers of
people is significant in appraising potential consumer markets.
Faced with the ominous consequences of the population explosion, it would
seem logical for countries to take appropriate steps to reduce growth to
manageable rates, but procreation is one of the most culturally sensitive
uncontrollable. Economics, self-esteem, religion, politics and education all play a
critical role in attitudes about family size.
The prerequisites to population control are adequate incomes, higher literacy
levels and education for women, universal access to health care, family planning,
improved nutrition and a change in basic cultural beliefs regarding the
importance of large families.
Population control is often a political issue as well. Overpopulation and the
resulting problems have been labeled by some as an imperialist myth to support
a devious plot by rich countries to keep Third World population down and
maintain the developed world’s dominance of the globe. Instead of seeking ways
to reduce population growth, some politicians encourage growth as the most
vital asset of poor countries.
Family planning and all that it entails is by far the most universal means
governments use to control explosive birthrates, but many believe that a decline
in the fertility rate is a function of economic prosperity and will come only with
economic development.
While the developing world faces a rapidly growing population, the
industrialized world’s population is in decline and rapidly aging. There are more
people aging today than ever before.
What are the “World Trade Routes”?
Trade routes bind the world together, minimizing distance, natural barriers, lack
of resources, and the fundamental differences between people and economies.
Trade routes represent the attempts of countries to overcome economic and
social imbalances created in part by the influence of geography.
What are the “Communication Links”?
An underpinning of all commerce is effective communication- knowledge of
where goods and services exist and where they are needed and the ability to
communicate instantaneously across vast differences. Facilitating the expansion
of trade has been due to the continuous improvements in electronic
communication. First came the telegraph, then the telephone, television,
satellites, the computer and the internet. As the internet permeates the fabric of
the world’s cultures, the biggest changes are yet to come.
Historical Perspective in Cultural Business
History helps define a nation’s “mission”, how it perceives its neighbors, how it
sees its place in the world, and how it sees itself. Insights into the history of a
country are particularly effective for understanding attitudes about the role of
government and business; the relations between managers and the managed, the
sources of management authority and attitudes toward foreign multinational
corporations.
Is History Subjective?
History is important in understanding why a country behaves as it does.
Historical events always are viewed from one’s own biases and thus what is
recorded by one historian may not be what another records, especially if the
historians are from different cultures. Historians traditionally try to be objective,
but few can help filtering events through their own cultural biases. Our
perspective influences not only our view of history, but also subtly influences
how we view other matters.
Manifest Destiny and Monroe Doctrine were accepted as the basis for U.S.
foreign policy during much of the 19th and 20th centuries. Manifest Destiny, in its
broadest interpretation, meant that Americans were a chosen people ordained by
God to create a model society. More specifically, it referred to the desires of
American expansionists in the 1840s to extend the U.S. boundaries from the
Atlantic to the Pacific.
The Monroe Doctrine, a cornerstone of U.S. foreign policy, was enunciated by
President James Monroe in a public statement proclaiming three basic dicta: no
further European colonization in the New World, abstention of the United States
from European political affairs and nonintervention of European governments in
the governments of the Western Hemisphere.
Theodore Roosevelt applied the Monroe Doctrine with an extension that became
known as the Roosevelt Corollary. The corollary stated that not only would the
United States prohibit non-American intervention in Latin American affairs but it
would also police the area and guarantee that Latin American nations met their
international obligations.
Geography and history are two of the environments of foreign marketing that
should be understood and that must be included in foreign marketing plans to a
degree commensurate with their influence on marketing effort.
Culture deals with a group’s design for living. It is pertinent to the study of
marketing, especially international marketing. When designing a product, the
style, uses and other related marketing activities must be made culturally
acceptable if they are to be operative and meaningful.
Culture is the human-made part of human environment- the sum total of
knowledge, beliefs, art, morals, laws, customs and any other capabilities and
habits acquired by humans as members of society.
Markets constantly change; they are not static but evolve, expand and contract in
response to marketing effort, economic conditions and other cultural influences.
Markets are the result of the three-way interaction of a marketer’s efforts,
economic conditions and all other elements of the culture. Marketers are
constantly adjusting their efforts to cultural demands of the market, but they also
are acting as agents of change whenever the product or idea being marketed is
innovative.
Is Culture of the respective country important?
Definition and Scope of Culture:
It is imperative for foreign marketers to learn to appreciate the intricacies of
cultures different from their own if they are to be effective in foreign market. A
place to begin is to make a careful study of the elements of culture.
Elements of Culture:
Culture includes every part of life. The scope of the term culture to the
anthropologist is illustrated by the elements included within the meaning of the
term:
1) Material Culture
a) Technology
b) Economics
2) Social Institutions
a) Family
b) Education
c) Political Structure
d) The Media
3) Humans and the Universe
a) Belief Systems
4) Aesthetics
a) Graphic and Plastic Arts
b) Folklore
c) Music, Drama and Dance
5) Language
1. Material Culture: Material culture is divided into two parts: technology and
economics. Technology includes the techniques is the creation of material goods; it
is the technical know-how possessed by the people of a society. Economics is the
manner in which people employ their capabilities and the resulting benefits.
Included in the subject of economics are the production of goods and services,
their distribution, consumption and means of exchange; and the income derived
from the creation of utilities.
Material culture affects the level of demand, the quality and the types of
products demanded, and their functional features, as well as the means of
production of these goods and there distribution.
2. Social Institutions: Social institutions including family, education, political
structures, and the media affect the ways in which people relate to one another,
organize their activities to live in harmony with one another, teach acceptable
behavior to succeeding generations, and govern themselves. The positions of
men and women in society, the family, social classes, group behavior etc are
interpreted differently within every culture.
Education is one of the most important social institutions and it affects all aspects
of the culture, from economic development to consumer behavior. The four
social institutions that most strongly influence values and behaviors are schools,
churches, families and most recently, the media.
3. Humans and the Universe: Within this category are religion, superstition and
their related power structures. The impact of religion on the value systems of a
society and the effect of value systems on marketing must not be
underestimated. Religion affects people’s habits, their outlook on life, the
products they buy, the way they buy them and even the newspapers they read.
Religion is one of the most sensitive elements of a culture. When a marketer has
little or no understanding of a religion, it is easy to offend, albeit unintentionally.
Superstition plays a much larger role in a society’s belief system in some parts of
the world especially in Asia than it does in the United States.
4. Aesthetics: Aesthetics are of particular interest to the marketer because of their
role in interpreting the symbolic meanings of various methods of artistic
expressions, color, and standards of beauty in each culture. Customers
everywhere respond to images, myths, and metaphors that help them define
their personal and national identities and relationships within a context of
culture and product benefits.
Product styling must be aesthetically pleasing to be successful, as must
advertisements and package designs.
5. Language: The importance of understanding language of a country cannot be
over-estimated. The successful marketer must achieve expert communication,
which requires a thorough understanding of the language as well as the ability to
speak. Language may be one of the most difficult cultural elements to master,
but it is the most important to study in an effort to acquire some degree of
empathy.
Each cultural element must be evaluated in light of how it might affect a
proposed marketing program. Gaining specific cultural knowledge is a
beginning.
What is Cultural Knowledge in International Marketing?
There are two kinds of knowledge about cultures. One is factual knowledge; it is
usually obvious and must be learned. The other is interpretive knowledge- the
ability to understand and to appreciate fully the nuances of different cultural
traits and patterns.
Cultural Sensitivity and Tolerance
Successful foreign marketing begins with cultural sensitivity-being attuned to the
nuances of culture so that a new culture can be viewed objectively, evaluated,
and appreciated. Cultural sensitivity must be carefully cultivated. Perhaps the
most important step is the recognition that cultures are not right or wrong, better
or worse; they are simply different.
Marketers must understand how their own cultures influence their assumptions
about another culture. The more exotic the situation, the more sensitive, tolerant,
and flexible one need to be. Being culturally sensitive will reduce conflict and
improve communications, and thereby increase success in collaborative
relationships.
Cultural Values
Underlying the cultural diversity that exists among countries are fundamental
differences in cultural values. The four dimensions are as follows:
Individualism/Collective Index: refers to the preference for behavior that
promotes self interest. Cultures that score high in IDA reflect an “I” mentality
and tend to reward and accept individual initiative, whereas those low in
individualism reflect a “we” mentality and generally subjugate the individual to
the group. Collectivism, as it’s opposite, pertains to societies in which people
from birth onward are integrated into strong, cohesive groups, which throughout
people’s lifetimes continue to protect them in exchange for unquestioning
loyalty.
Power Distance Index: measures the tolerance of social inequality, that is, power
inequality between superiors and subordinates within a social system. Cultures
with high PDI scores tend to be hierarchical while cultures with low PDI scores
tend to value equality and cite knowledge and respect as sources of power. A
low score reflects more egalitarian views.
Uncertainty Avoidance Index: measures the tolerance of uncertainty and
ambiguity among members of a society. Cultures with high UAI scores are
highly intolerant of ambiguity and as a result tend to be distrustful of new ideas
or behaviors. Cultures scoring low are associated with a low level of anxiety and
stress, a tolerance of deviance and dissent, and a willingness to take risks.
Linguistic Distance
Language is a crucial aspect of culture. Recent studies indicate that a new
concept, linguistic distance, may prove useful to marketing researchers in the
future. Over the years linguistic researchers have determined that languages
around the world conform to family trees based on the similarity of their forms
and development.
Besides knowledge of cultural values and linguistic distance, a marketer also
should have appreciation of how cultures change and accept or reject new ideas.
Cultural Change
Culture is dynamic to nature; it is a living process. The dynamic character of
culture is significant in assessing new markets even though changes face
resistance. Societies have found answers by looking to other cultures from which
they can borrow ideas.
Cultural Borrowing
Culture borrowing is a responsible effort to learn from others’ cultural ways in
the quest for better solutions to a society’s particular problems. Thus, cultures
unique in their own right are the result, in part, of imitating a diversity of others.
Culture is learned; societies pass on to succeeding generations solutions to
problems, constantly building on and expanding the culture so that a wide range
of behavior is possible.
The scope of culture is broad. It covers every aspect of behavior within a society.
The task of foreign marketers is to adjust marketing strategies and plans to the
needs of the culture in which they plan to operate.
Cultures are dynamic and change occurs when resistance slowly yields to
acceptance as the basis for resistance becomes unimportant or forgotten.
Historically, most cultural borrowing and the resulting change has occurred
without a deliberate plan, but increasingly changes are occurring in societies as a
result of purposeful attempts by some acceptable institution to bring about
change, that is, planned change.
Planned and Unplanned Cultural Change
The first step in bringing about planned change in a society is to determine
which cultural factors conflict with an innovation, thus creating resistance to its
acceptance. The next step is an effort to change those factors from obstacles to
acceptance into stimulants for change.
Marketers have two options when introducing an innovation to a culture: They
can wait, or they can change. Not all marketing efforts require change in order to
be accepted. In fact, much successful and highly competitive marketing is
accomplished by a strategy of cultural congruence. This involves marketing
products similar to ones already on the market in a manner as congruent as
possible with existing cultural norms, thereby minimizing resistance.
Marketing strategy is judged culturally in terms of acceptance, resistance, or
rejection. How marketing efforts interact with a culture determines the degree of
success and failure, but even failures leave their imprint on a culture.
Required Adaptation
Adaptation is a key concept in international marketing and willingness to adapt
is a crucial attitude. As a guide to adaptation, there are ten basic criteria that all
who wish to deal with individuals, firms, or authorities in foreign countries
should be able to meet: (1) open tolerance (2) flexibility (3) humility (4)
justice/fairness (5) ability to adjust to varying tempos (6) curiosity/interest (7)
knowledge of the country (8) liking for others (9) ability to command respect and
(10) ability to integrate oneself into the environment.
Degree of Adaptation
Essential to effective adaptation is awareness of one’s own culture and the
recognition that differences in others can cause anxiety, frustration and
misunderstanding of the host’s intentions.
When different cultures meet, open tolerance and a willingness to accommodate
each other’s differences are necessary. Once a marketer is aware of the possibility
of cultural differences and the probable consequences of failure to adapt or
accommodate, the seemingly endless variety of customs must be assessed.
Business Customs
Cultural Imperatives: Cultural imperatives are the business customs and
expectations that must be met and conformed to or avoided if relationships are to
be successful. Establishing friendship is an imperative in many cultures. If
friendship is not established, the marketer risks not earning trust and acceptance,
the basic cultural prerequisites for developing and retaining effective business
relationships.
Cultural adjoins (or cultural options) relate to areas of behavior or to customs
that cultural aliens may wish to conform to or participate in but that are not
requires; in other words, it is not particularly important but it is permissible to
follow the custom in question. In some cultures one can accept or tactfully and
politely reject an offer of a beverage, while in other cases the offer of a beverage
is a ritual and not to accept it is to insult. Cultural adjoins are the most visibly
different customs and thus more obvious.
Cultural Exclusives: Cultural exclusives are those customs or behavior patterns
reserved exclusively for the locals and from which the foreigner is excluded.
There are few cultural traits reserved exclusively for locals, but a foreigner must
carefully refrain from participating in those that are reserved.
Pakistani exporters need to be perceptive enough to know when they are dealing
with an imperative or an exclusive and have the adaptability to respond to each.
Methods of Doing Business
Because of the diverse structures, management attitudes and behaviors
encountered in international business, there is considerable latitude in the ways
business is conducted.
What are Sources and Level of Authority in International Marketing?
Although the international businessperson is confronted with a variety of
authority patterns, most are a variation of three typical patterns:
Top-level Management Decisions: top-level management decision making is
generally found in those situations where family or close ownership gives
absolute control to owners and where businesses are small enough to make such
centralized decision making problems.
Decentralized Decisions: decentralized decision making allows executives at
different levels of management to exercise authority over their own functions.
Committee Decisions: committee decision making is by group or consensus.
Committees may operate on a centralized or decentralized basis, but the concept
of committee management implies something quite different from the
individualized functioning of the top-management and decentralized decision
making just discussed.
The demand of these three types of authority systems on a marketer’s ingenuity
and adaptability are evident.
Management Objectives and Aspirations
In dealing with foreign business, a marketer must be particularly aware of the
varying objectives and aspirations of management.
Personal Goals: Individual goals are highly personal in any country, so it is hard
to generalize to the extent of saying that managers in any one country always
have a specific orientation.
Security and Mobility: Personal security and job mobility relate directly to basic
human motivation and therefore have widespread economic and social
implications. The word security is somewhat ambiguous and this very ambiguity
provides some clues to managerial variation.
Personal Life: For many individuals, a good personal life takes priority over profit,
security, or any other goal. It has been discovered that the culture of some
countries stressed the virtue of a good personal life as being far more important
than profit or achievement.
Social Acceptance: In some countries, acceptance by neighbors and fellow workers
appears to be a predominant goal within business. The Asian outlook is reflected
in the group decision making so important in Japan and the Japanese place high
importance on fitting in with their group.
Power: Although there is some power seeking by business managers throughout
the world, power seems to be a more important motivating force in South
American countries. In these countries, many business leaders are not only profit
oriented but also use their business positions to become social and political
leaders.
How Communication Emphasis play its part in International Marketing?
Even though language is the basic communication tool of marketers trading in
foreign lands, managers, particularly from the United States, fail to develop even
a basic understanding of a foreign language, much less master the linguistic
nuances that reveal unspoken attitudes and information. Where as a marketer
from Asia & Africa will try to master in English language. But this trend is
changing and today a lot of American marketers are learning Mandarin
(Chinese) and Hindi languages in order to communicate with their counter parts
in respective countries.
The translation and interpretation of clearly worded statements and common
usage is difficult enough, but when slang is added the task is almost impossible.
Linguistic communication, no matter how imprecise, is explicit, but much
business communication depends on implicit messages that are not verbalized.
What is P-Time versus M-Time?
M-time, or monochronic time, typifies most North Americans, Swiss, Germans,
and Scandinavians. These western cultures tend to concentrate on one thing at a
time. They divide time into small units and are concerned with promptness. Mtime is used in a linear way and it is experienced as being almost tangible in that
one saves time, wastes time, bides time, spends time, and loses time. Most lowcontext cultures operate on M-time.
P-time or polychronic time is more dominant is high-context cultures, where the
completion of a human transaction is emphasized more than holding to
schedules. P-time is characterized by the simultaneous occurrence of many
things and by “a great involvement with people.” P-time allows for relationships
to build and context to be absorbed as parts of high-context cultures.
Most cultures offer a mix of P-time and M-time behavior, but have a tendency to
be either more P-time or M-time in regard to the role time plays. The differences
between P-time and M-time are reflected in a variety of ways throughout a
culture. But we in Pakistan definitely fall in P-time category.
Negotiations Emphasis
The basic elements of business negotiations are the same in any country: They
relate to the product, its price and terms, services associated with the product,
and finally friendship between vendors and customers. But it is important to
remember that the negotiating process is complicated, and the risk of
misunderstanding increases when negotiating with someone from another
culture.
Gender Bias in International Business
The gender bias against women managers that exists in some countries, coupled
with myths harbored by male managers, creates hesitancy among certain
Western countries to offer women international assignments.
It would be inaccurate to suggest that there is no difference in how male and
female managers are perceived in different cultures. However, this does not
mean that women are not successful in foreign postings. A key to success for
either men or women often hinges on the strength of a firm’s backing. Slowly but
surely this “Gender Bias” is crumbling around the world and even in Pakistan
and now you see successful business women like Musharraf Hai and others
who are internationally recognized and appreciated.
What are Business Ethics Internationally?
The moral question of what is right or appropriate poses many dilemmas for our
exporters. Even within a country, ethical standards are frequently not defined or
always clear. Ethical standards are different in different provinces of Pakistan.
The problem of business ethics is definitely more complex in the international
marketplace because value judgments differ widely among culturally diverse
groups.
Bribery
Although bribery is a legal issue, it is also important to see bribery in a cultural
context in order to understand different attitudes toward it. Culturally, attitudes
are significantly different among different peoples. Some cultures seem to be
more open about taking bribes, while others, like the United States, are publicly
contemptuous of such practices but are far from virtuous. Unfortunately in
Pakistan bribery is less of a legal issue and more of a moral issue. Where billions
of Rupees goes into this practice, which unfortunately has been more or less
becomes an accepted form in Pakistan.
A first step in understanding the culture of bribery is to appreciate the limitless
variations that are often grouped under the word bribery.
Bribery: Voluntarily offered payment by someone seeking unlawful advantage.
Extortion: Payments are extracted under duress by someone in authority from a
person seeking only what they are lawfully entitled to.
Subornation: Involves giving large sums of money- frequently not properly
accounted for- designed to entice an official to commit an illegal act on behalf of
the one offering the bribe.
Lubrication: Involves a relatively small sum of cash, a gift, or a service given to a
low-ranking official in a country where such offerings are not prohibited by law.
What are Ethical and Socially Responsible Decisions in International
Marketing?
Believing in an ethically and socially responsible way should be the hallmark of
every business person’s behavior, domestic or international.
In normal business operations there are five broad areas where difficulties arise
in making decisions, establishing policies and engaging in business operations:
1)
2)
3)
4)
5)
employment practices and policies
consumer protection
environmental protection
political payments and involvement in political affairs of the country
basic human rights and fundamental freedoms
In many countries, the law may help define the borders of minimum ethical or
social responsibility, but the law is only the floor above which one’s social and
moral personality is tested. Child labor and bondage labor issues all come in this
category.
Prepared by Riaz Khan, Executive Director Marketing, Trade Development
Authority of Pakistan