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IMR 300 – Lecture 5
Political environment
Legal environment
The Political Environment
The Political Environment
The sovereignty of nations
Stability of government policies In Italy: more than 50 different governments since
World War II – business goes as usual In India: hostile to foreign investments
Forms of government
Ancient Greeks Rule by one Rule by few Rule my many
Today Monarchy (Dictatorship) Aristocracy (Oligarchy) Democracy
The Political Environment
Political parties Nationalism Targeted fear/ animosity Trade disputes
Political risk of global business
Confiscation: the seizing of a company’s payment without payment /1950s and 1960s/
Expropriation: the government seizes the investment but some reimbursement for the asset
Domestication: the transfer of foreign investments to national control
Economic risks
Exchange controls Local content laws /Thailand: 50% milk from
local farmers/ Import restrictions Tax controls Price controls Labor problems /layoff is forbidden, profits
may have to shared/
Assessing political vulnerability
Politically sensitive products and issues
Effect on environment Exchange rates National and economic security Welfare of people
Failed States Index 2010
Least risky countries, Score out of 100
Source: Euro-money Country risk March 2008
Rank Previous Country Overall score
1 1 Luxembourg 99.88
2 2 Norway 97.47
3 3 Switzerland 96.21
4 4 Denmark 93.39
5 5 Sweden 92.96
6 6 Ireland 92.36
7 10 Austria 92.25
8 9 Finland 91.95
9 8 Netherlands 91.95
10 7United States
91.27
Kidnappings by country
Rank
Countries Amount
# 1 United Kingdom:
3,261 kidnappings
# 2 South Africa3,071 kidnappings
# 3 Canada2,933 kidnappings
# 4 Belgium 994 kidnappings
# 5 Tunisia 555 kidnappings
# 6 Peru 491 kidnappings
# 7 Portugal 432 kidnappings
# 8 Romania 383 kidnappings
# 9 Kuwait 281 kidnappings
# 10 New Zealand 257 kidnappings
http://www.nationmaster.com
Assault victims by country
Rank
Countries Amount
# 1 Saint Kitts and Nevis 3%
# 2 United Kingdom 2.8%
= 3 Australia 2.4%
= 3 New Zealand 2.4%
# 5 Canada 2.3%
# 6 Finland 2.1%
= 7 Denmark 1.4%
= 7 France 1.4%
= 9 Belgium 1.2%
= 9 United States 1.2%
http://www.nationmaster.com
MNC are generally positive when
Improves the balance of payment Uses locally produced resources Transfers capital, technology and skills Creates jobs Makes tax contributions
Strategies to minimize political risks
Joint ventures Expanding the investment base Licensing Planned domestications Political bargaining Political payoffs
The international legal environment
Bases for legal systems
Common law Code law Islamic law Socialist law
Common law
the system in effect in the U.S., is based on a legal tradition of precedent.
Each case that raises new issues is considered on its own merits, and then becomes a precedent for future decisions on that same issue.
Code law
which is common in Europe, cannot come up with innovative solutions
when new issues such as patentability of biotechnology come up.
Islamic law
based on the teachings of the Koran, which puts forward mandates such as a
prohibition of usury, or excessive interest rates.
Attorneys may be consulted about what might please God rather than what is an explicit requirements of the government.
Socialist law
based on the premise that “the government is always right”
and typically has not developed a sophisticated framework of contracts (you do what the governments tells you to do) or intellectual property protection (royalties are unwarranted since the government ultimately owns everything).
International dispute resolution
Conciliation Arbitration Litigation
Protection of intellectual property
A special problem Counterfeiting and piracy
Bayer AG - Aspirin
German chemical company In Russia:
Russia’s Patent office registered its trademark to the word aspirin
Popular use First manufacturer
In USA Generic name: acetylsalicylic acid Sterling Winthrop owned Bayer trademark US confiscated domestic assets of Bayer AG after WWI Bought from Kodak in 1994
Software piracy rate by country Rank Countries Amount
# 1 Armenia 93%
= 2 Moldova 92%
= 2 Azerbaijan 92%
= 2 Bangladesh 92%
# 5 Zimbabwe 91%
# 6 Sri Lanka 90%
# 7 Yemen 89%
# 8 Libya 88%
# 9 Venezuela 87%
= 10 Iraq 85% http://www.nationmaster.com
International conventions
The Paris Convention for the Protection of Industrial Property
The Inter- American Convention The Madrid Arrangement
Commercial law
Marketing laws: marketing activities in production, promotion, labeling, pricing, channels of distribution
Green marketing legislation Antitrust
Marketing laws:
US: prohibits human organ selling and buying Philippines: allows this transaction Greece, Norway, Denmark, Austria,
Netherlands: restrict advertising directed at children
Alcohol law
US: the standard is that alcohol advertisements can only
be placed in media where 70% of the audience is over the legal drinking age.
should not be designed to appeal to people under the age of 21, for example, using cartoon characters as spokespeople is discouraged
Currently the tobacco industry is forbidden to advertise on TV.
Alcohol law
Malaysia is not shown before 10:00 pm and during Malay-
language programs. non-Malay newspapers and magazines are allowed
to continue alcohol advertising. Supermarkets and hypermarkets are also criticized
for advertising alcohol products on trolley, which is a disappointment for Muslims, which is an official religion of the country.
sponsorships of concerts and entertainment events.
Alcohol law
Singapore not allowed to be shown during programs
intended for children and young persons and during Malay-language programs.
Hong Kong alcohol advertising is not allowed to be
shown during Family Viewing Hour programs.
Alcohol law
Swedish law generally forbidden. permitted for beverages identified as "class
1" or "light beer" Since 2005, newspapers have allowed
advertisements for wine, and later for spirits, based on the provisions of an EU directive
Green marketing legislation
Environmentally friendly products, and on product packaging and its effect on solid waste management
Germany: regulate management and recycling of packaging waste
International marketing research
MARKET SCREENING
MARKET RESEARCH
a systematic, objective collection and analysis of data about a particular target market, competition, and/or environment
The purpose of any market research project is to achieve an increased understanding of the subject matter.
MARKET RESEARCH
With markets throughout the world becoming increasingly more competitive, market research is now on the agenda of many organizations
MARKET RESEARCH
Market Researchers can utilize many types of research techniques and methodologies to capture the data that they require.
Role of marketing research
To provide management with relevant, accurate, reliable, valid, and current information.
Research process
1. Define the research problem and establish research objectives
2. Determine the sources of information to fulfill the research objectives
3. Consider the costs and benefits of the research effort
4. Gather the relevant data from secondary and primary sources or both
5. Analyze, interpret and summarize results6. Effectively communicate the results to decision
makers
The role of marketing research "DECIDE" model
D - Define the marketing problem E - Enumerate the controllable and
uncontrollable decision factors C - Collect relevant information I - Identify the best alternative D - Develop and implement a marketing plan E - Evaluate the decision and the decision
process
Classification of marketing research
Organizations engage in marketing research for two reasons:
1. to identify and
2. to solve marketing problems.
Types of marketing research
Advertising Research Commercial eye tracking research Cool-hunting Demand estimation Distribution channel audits Internet strategic intelligence Mystery shopping
International Marketing Research (IMR)
market research conducted either simultaneously or sequentially to facilitate marketing decisions in more than one country
The process of international marketing research
though involves the same disciplines as domestic research, has some differences
The national differences between countries arising out of political, legal, economic, social and cultural differences and,
The comparability of research results due to these differences.
National Differences: Cultural Differences
Product A soft drink was introduced into Arab
countries with an attractive label that had six-pointed stars on it.
The Arabs interpreted this as pro-Israeli and refused to buy it.
National Differences: Cultural Differences
Price The Americans lost a lot of profit by jumping
the gun and believing that Japanese respond just like the Americans do
Racial Differences
For example, the types of hair care and cosmetic products needed in U.S would differ from those needed in South East Asia.
Top 9 of the market research sector 2009 (million USD)
Company SalesGrowth
%
1 Nielsen Company 5,056.0 2.6
2WPP Group - Kantar Group, TNS, Millward Brown,
BMRB, IMRB International and Ziment Group4,692 2.5
3 IMS Health Inc 1,958.6 8.9
4 GfK AG 1,397.3 5.4
5 Ipsos 1,077.0 6.5
6 Synovate 739.6 9.5
7 IRI 665.0 6.6
8 Westat 425.8 0.8
9 Arbitron 400.0 5.9
The Nielsen Company
Global marketing and advertising research company headquartered in New York, NY.
Nielsen is active in over 100 countries, and employs some 36,000 people worldwide.
Total revenues amounted to $4.8 billion in 2009.
Specialists vs. Generalists
Specialist approach: considering the uncontrollable factors particular to a market
Generalists: consider the world markets as a
whole
Specialists vs. Generalists
Centralized vs. Decentralized Research
Centralized research: from the headquarters. hierarchy authority Dispute delay inefficiency.
Centralized vs. Decentralized Research
Decentralized research: company office in each country conduct the research based on the guidelines from the headquarters.
translate the information gathered correctly into the language at the headquarters.
Centralized Research: Parker Pen
Decentralized marketing: ad agencies in more than 40 countries.
A new team: centralized in the company’s headquarters to standardize the promotion, packaging, pricing,
promotional materials, and advertising. the difference in the cultures were less important
than the similarities.
Centralized Research: Parker Pen
The same ad was used in all countries, the ads tried to say something to everyone
but ended up saying nothing to anyone.
Research Across Countries
Single-country Research: Multi-country Research:
Independent Multi-country Research: the most common form
Sequential Multi-country Research: attractive as the lessons can be learned in the first one or two markets
Simultaneous Multi-country Research: It is a test for the researcher capabilities and also creates in its most acute form, the question of comparability.
IMR: SURVEY
useful for getting a great deal of specific information.
vulnerable to bias
open-ended questions (e.g., “In which city and state were you born? ____________”)
closed-ended, (e.g., “Male”)
IMR: SURVEY
Mail survey: relatively inexpensive, but response rates are typically quite low—typically from 5-20%.
Phone-survey: get somewhat higher response rates, but not many questions can be asked
Mall intercepts: are a convenient way to reach consumers, but respondents may be reluctant to discuss anything sensitive face-to-face with an interviewer. very popular in the United States and Canada
IMR: FOCUS GROUP
launch a new product or modify an existing one.
involves having some 8-12 people come together in a room to discuss their consumption preferences and experiences.
very good for getting breadth
IMR: FOCUS GROUP
Small sample sizes. Cannot give us in-depth information. Inherently social. Reluctant to speak about embarrassing
issues (e.g., weight control, birth control).
IMR: FOCUS GROUP Women in the Middle East do not have as much
freedom as women in the Western world. In some Asian countries, the moderator must take
special interest in introductions if the discussion is to be truly open and candid.
The French have been proven to resist innovations of any kind.
The Japanese hesitate to criticize new product ideas.
There is a very strong group mentality in Asian culture while most Americans tend to be individualistic
IMR: FOCUS GROUP
Timeframe: A good estimate would be to calculate the time required for the research in the United States and double it for Europe. It would be longer for Asia.
Structure: In most of other countries, focus group panels consist of four to six people, versus eight to ten in the United States. The focus group interviews themselves last for almost four hours.
IMR: FOCUS GROUP
Approach: Foreign moderators are not as structured and as authoritative as U.S moderators.
This can result in long periods of silence and digression. This is because foreign moderators feel it necessary to allow the group to settle down and establish trust to build up the necessary comfort.
IMR: PERSONAL INTERVIEW
really into depth (when the respondent says something interesting, we can ask him or her to elaborate),
but this method of research is costly and can be extremely vulnerable to interviewer bias.
IMR: PERSONAL INTERVIEW Tend to be the dominant mode of data collection outside
the United States and Canada Lower wage costs imply that personal procedures are
cheaper than in the United States. In Latin countries, and particularly in the Middle East,
interviewers are regarded with considerable suspicion. In Latin countries, where tax evasion is more prevalent,
interviewers are often suspected of being tax inspectors. In the Middle East, where interviewers are invariably
male, interviews with housewives often have to be conducted in the evenings when husbands are at home.
IMR: OBSERVATION OF CONSUMERS
a powerful tool.
Equivalence Issues in Primary Data Collection
Construct equivalence
the function of the product or service that is being researched and not the method used in collecting the information
Bicycle: USA – recreational, China - transportation
Measurement equivalence
relates to establishing equivalence in terms of procedures used to measure concepts or attitudes.
Calibration Equivalence – Equivalence has to be established with regard to the calibration system used in measurement monetary units, measures of weight, distance and volume and perceptual cues like color, shape or form.
Measurement equivalence
Translation Equivalence – The research instrument has to be translated such that respondents in all countries involved in the study understand it.
Metric Equivalence –the scoring or scalar equivalence of the measure used. The researcher has to ensure equivalence of the scaling or scoring procedure used to establish the measure.
Sampling equivalence
Japanese tend to take a neutral point, so it is wise to avoid a scale with a neutral point in order to obtain useful information.
Latin Americans and Italians tend to exaggerate their response
Americans do not typically go into details with open-ended question.
Factors such as this should be kept in mind while designing the scales for measurement
