Friday, December 14, 2012

Culture and International Business

Geert Hofstede came up with six dimensions of international marketing that are important to consider.


1. Power Distance
This concept represents the "distance" between equalities of workers and the head of business. 
Some cultures practice low power distance which means less formal relationships, more democratic and friendly environment between the leaders and the employees. 
High power distance cultures give importance to the hierarchical positions which causes unequal distribution of power and more autocratic environment.

2. Uncertainty Avoidance
This aspect relates to the near future and the changes. people who work in high uncertainty environment tend to be more stressed, emotional and have hard time adapting to changes. This is a result of many strict rules and being tight up. People with  low uncertainty environment have as few rules as possible which leads to more friendly, less stressful and easily adaptable environment.

3. Individualism versus Collectivism
Individualism represents people who have larger number of loose relationships but in fact it is a everyone-for-himself way of achieving goals. Collectivism requires tight relationships and teamwork with benefit for all.

4. Masculinity versus Femininity
This aspects focuses on the quality of life vs quantity of life loved. Masculine features consists of more competitive, assertive and materialist behavior while femininity is represented by feelings, reason and maintenance of good relationships.

5. Long Term versus Short Term Orientation
Long term focuses on the future of the company, giving importance to persistence and  savings. Short term orientation focuses on the present and past and highlights traditions, tries to reach favorable return and therefore fulfills social obligations.

6. Indulgence versus Restraint
This concepts relates to the natural human drive to enjoy life. Indulgence represents fulfilling obligations while enjoying life whereas resistant approach represents repression of this optimistic drive to fulfill higher expectations.



Japan
Japan is known as the most masculine country in the world since people fiercely compete for sucess. This is related to the long history of samurai.
At the same time, it has moderately high power distance that is believed to be right by the Japanese, deriving from its long history and traditions. Yet the member of the same company is almost thought as of a member of the family.
Individualism is seen in Japan, however, people are concentrated in smaller groups to which members they are very loyal. 
High score of uncertainty can be seen in the many protocols and rules that are always used to avoid making mistakes and changes.
The Japanese have long term orientation that sprouts from their attitude towards the work: persistence, sense of shame and loyalty to their group. They therefore focus more on the bigger picture with outcomes that are more worth it.




 Australia
Low power distance in Australia is seen when the managers and other leaders rely on individual employees. At the same ime communication is informative and direct, yet friendly.
High individualism is represented by people who are expected to look after themselves and very close families. The promotions are given based on what one can do and his abilities alone.
This masculine society believes into "the winner takes it all" attitude, whether in school or at work.
People are relatively accepting to the new ideas yet do not show emotion much, which shows the border on the uncertainty avoidance scale. 
In Australia people look for quick results, give importance to the traditions and therefore focus on short term orientation.
  




Slovakia
In Slovakia, people whow their pover, not necessary in a negative way but they draw a clear line between the various ranks which shows high power distance.
This is an individualistic society yet very close to the middle which shows that people work for themselves yet work hard on not being rude and still somwehat work in groups.
High masculinity score shows thatt people strive for winning and success. 
Uncertainty is close to the middle, where people try hard to avoid uncertainty.
Importance is giving to analytical thinking and focuses on present which shows short term orientation.





Sources:
- http://geert-hofstede.com/dimensions.html
- http://en.wikipedia.org/wiki/Hofstede%27s_cultural_dimensions_theory
- http://geert-hofstede.com/slovakia.html

Saturday, December 8, 2012

International Marketing

Why has international marketing grown so much in recent decades? 

Global marketing reaches customers, markets and advertising beyond the borders of domestic region. The more a culture spreads, the more its products do. Since traveling is a lot easier as it used to be, people from different cultures visit different countries. Better communication, transportation and freer international markets are signs of globalization. These aspects lacked in the past and while it used to be risky, international marketing is in many cases a necessity for businesses.




 What are some of the factors that has allowed this to happen more easily now than in the past?

Improved communications, transportation and businesses that are too big for their own market.



Identify five reasons why companies may decide to sell their product or service in foreign markets.
Home markets may be too saturated, meaning that the product is already maximized in given market and there is no more space to sell it anymore.
Foreign markets also offer potential profits while it still emerges, this result in rapid sales at low costs.
Spreading risks to different places.
Poor trading conditions may contribute to market globalization.




What considerations must a company have in these areas when undertaking international marketing?
Ø     Political differences
Changes in the government or political instabilities, like riots or terrorist activity, increase the risk of business failure. For example civirl wars in Nepal, Sri Lanka and Sudan dramatically decreased businesses.
 
Ø     Economic differences
One must take in account the GDP as well as the rates of taxes, age structure of population and interest rates. The GDP vary from country to place to place, like Luxembourg that has GDP of $78 559 and Burundi that stands on $160.
 
Ø     Social differences
Products to be sold are also effected by cultures that also include the importance of marriage and the role of women in the society. For example, IKEA's advertisements that had a happy women in nicely designed kitched in a European country, lacked the woman in the picture in an Arabic country.
 
Ø     Legal differences
Legal differences have huge impact of foreign businesses and affect them in many key ways. For example: product safety and labeling are much stricter in European Union than in America, children under the age of 12 cannot be directly advertised to, guns are legally sold in the USA but are illegal in other countries.
           
Ø     Cultural differences
Unrecognized cultural differences may have crucial impact. While laws are written down, traditions and culture are hard to measure. If a business doesn't recognise , for example, the roles of women in the society, uses an unfortunate word in its translation or uses different colors (ex. in far East, white is a mourning color), the business will fail.  

Ø     Differences in business practices
Setting up a business, the formalities and paperwork that come with it take different amount of time in different parts of the world. For example, this process may take few days in the UK but may take up to a year in Sierra Leone.
 

Source: Business and Managemrnt for the IB Diploma by Peter Stimpson and Alex Smith
              http://www.helium.com/items/1010632-political-risks-in-international-trade

Monday, December 3, 2012

Distribution Arrangements

Distribution is an important part of business's success, since the product must also be present when it needs to be sold. The types of distribution are intensive, selective, exclusive, integrated.

Intensive Distribution

Advantages
This type of distribution takes advantage of the intensity of the product distribution. Businesses are trying to get as many retailers and shelf space as possible. The advantage is that wherever people go, they will see the product and therefore to be reminded to buy it.

Products that are most likely effected
This distribution concerns mainly everyday products that have to be routinely replaced. For example, soap is made in a factory but a common brand can be found in any grocery, retailer store like Walmart, gas stations or drug store. Among items that use intensive distribution belong chewing gums, cigarets, soaps, shampoos, deodorants and soft drinks.

Issues that must be considered
Retailers may give little shelfspace to the product, don't advertise it or make price too high.

Things to be considered about choosing a channel partner






Selective Distribution

Advantages 
Selective distribution means that a product is sold only to some retailers covering specific geographical area. Fewer intermediaries means less money spent for retailers.
 
Products that are most likely effected
Few retailers carry specific product, these are usually of specific brand or designer products.
 
Issues that must be considered
Since only few retailers in the same geographical area are selling this product, manufacturer must consider money issue such as having higher prices and how to make people come to the store where his product is sold.

Things to be considered about choosing a channel partner






Exclusive Distribution

Advantages
In exclusive distribution manufacturer and one specific retailer make an agreement about selling the product. This retailer covers specific area and since this product is most cases special (and expensive) customer service is extra good.
 
Products that are most likely effected
As mentioned before, expensive products usually use this type of distribution. New technologies are very common to distribute its products in this way, for example Apple has agreement with AT&T to sell iPhones.

Issues that must be considered
Since only one retailer sells the product, the manufacturer has to get his money back. Also, the product is expensive and its manufacturing costs tend to be more expensive too. The final price of the product must be high enough to cover these costs yet appealing enough to the people.


Things to be considered about choosing a channel partner







Integrated Distribution
Advantages


Products that are most likely effected

Issues that must be considered

Things to be considered about choosing a channel partner