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155 Cards in this Set
- Front
- Back
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Ch. 4
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The Political, Legal, and Regulatory Environments
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What is sovereignty?
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Supreme and independent political authority.
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What is Political Risk?
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It is the danger that political and military upheaval will change the nation's economic rules and regulations overnight. (affecting a company's ability to operate effectively and profitability)
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When perceived political risk is high, a country will...?
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have a difficult time attracting foreign direct investment.
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What 3 groups publish up-to-date political risk reports on individual country markets?
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1. The Economist Intelligent Unit (EIU)
2. The Geneva-based Business Environment Risk Intelligence (BERI) (focuses on societal and system attributes) 3. The PRS Group (focuses more directly on government actions and economic functions) |
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What can companies do to offset potential risks arising from the political environment?
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Companies can purchase insurance.
Example: The Overseas Private Investment Corporation (OPIC) |
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What are some ways political risk can change rapidly in a nation?
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As governments change and new regimes come to power, political risk can change rapidly (i.e. expropriation, currency exchange, and more).
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The rise of ______ is a new type of political risk?
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International terrorism
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Can political risk be temporary?
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Yes.
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Tension between _______ and ______ is a cause of political risk.
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aspirations and reality
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Where does political risk primarily occur?
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Lower and lower-middle income countries.
Example: Indonesia and economic crisis |
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When political risk occurs in high income countries, it is generally due to...?
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some form of long standing conflict
Example: Northern Ireland |
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What are some examples of political risk? (9 examples)
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1. War
2. Social unrest 3. Politically motivated violence 4. Transparency 5. Social conditions (population density and wealth distribution) 6. Corruption, nepotism 7. Crime 8. Labor costs 9. Tax discrimination |
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What is nepotism?
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Giving jobs to unqualified family members.
Example: Dictators appointing their cousins and brothers to positions |
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What is cronyism?
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Same as nepotism except friends instead of family.
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Countries with high income = ?
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Low political risk
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What does VAT stand for?
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Value-added tax
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High taxation can lead to...?
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black market growth and cross-border shopping.
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High excise and VAT taxes can encourage...?
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legal cross-border shopping as consumers go abroad in search of good values.
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In regards to Corporate Taxation, companies attempt to...?
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limit their tax liability by shifting location of income.
Example: In one approach, called "earnings stripping", foreign companies reduce earnings by making loans to U.S. affiliates rather than using direct investment to finance U.S. activities. The U.S. subsidiary can deduct the interest it pays on such loans and thereby reduce its tax burden. |
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Give an example of how corporate taxation ties into political risk.
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The high level of political risk currently evident in Russia can be attributed in part to excessively high taxes on business operations.
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The ultimate threat a government can pose toward a company is...?
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seizing its assets.
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What is expropriation?
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It refers to governmental action to dispossess a foreign company or investor. Compensation should be provided in a "prompt, effective, and adequate manner". Compensation is generally provided, although not in the "prompt, effective, and adequate manner" provided for be international standards.
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What is confiscation?
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It is when expropriation occurs but no compensation is provided.
International law is generally interpreted as prohibiting any act by a government to take foreign property without compensation. |
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What is nationalization?
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It is generally broader in scope than expropriation; it occurs when the government takes control of some or all of the enterprises in an entire industry. International law recognizes nationalization as a legitimate exercise of government power, as long as the act satisfies a "public purpose" and is accompanied by "adequate payment" (i.e. compensation that reflects fair market value of the property).
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What is creeping expropriation? What may it include?
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Short of outright expropriation or nationalization, the phrase creeping expropriation has been applied to limitations on economic activities of foreign firms in particular countries.
Basically: It limits economic activities of foreign firms. It may include: -Limits on repatriation of profits, dividends, or royalties -Technical assistance fees -Increased local content laws -Quotas for hiring local nationals -Price controls -Discriminatory tariff and nontariff barriers -Discriminatory laws on patents and trademarks |
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What is International Law?
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It may be defined as the rules and principles that nation-states consider binding upon themselves. International law pertains to property, trade, immigration, and other areas that have traditionally been under jurisdiction of individual nations. International law applies only to the extent that countries are willing to assume all rights and obligations in these areas.
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What is Public International Law? Where are these cases settled?
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Disputes arising between nations are issues of PUBLIC international law. These disputes may be taken before the World Court, also known as the International Court of Justice (ICJ), which is located in The Hague.
This is the judicial arm of the United Nations. |
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What happens if a nation has allowed a case against it to be brought before the ICJ and then refuses to accept a judgement against it?
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The plaintiff nation can seek recourse through the United Nations Security Council, which can use its full range of powers to enforce the judgement.
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What is Private International Law?
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Private international law is the body of law that applies to disputes arising from commercial transactions between companies of different nations.
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The story of law in the Western world can be traced to two sources: ...?
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Civil Law:
1. Rome, from which the continental European civil law originated. The Napoleonic Code of 1804 drew on the Roman legal system and is the basis for continental European law today. Code law is also known as Civil Law Common Law: 2. English common law, from which the U.S. legal system originated. U.S. law is rooted in English common law. |
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Explain Common Law versus Civil Law.
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Common Law:
-In a common law country, many disputes are decided by reliance on the authority of past judicial decisions (cases). A common-law legal system is based on the concept of precedent, sometimes called stare decisis. -Companies are legally incorporated by state authority. -Code law is used in few areas; The U.S. Uniform Commercial Code (UCC). Civil Law: -A civil-law country is one in which the legal system reflects the structural concepts and principles of the Roman Empire. -Companies are formed by contract between two or more parties who are fully liable for the actions of the company. |
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What is the UCC?
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The U.S. Uniform Commercial Code (UCC).
It is fully adopted by 49 U.S. states, codifies a body of specifically designed rules covering commercial conduct. |
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What directly affects the form a legal business entity will take?
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The host country's legal system (that is common or civil law).
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Which is the only U.S. state to not fully adopt the UCC? Explain.
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Louisiana; they have adopted parts of the UCC, but its laws are still heavily influenced by the French civil code.
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Are Asian countries under common or civil law?
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Asian countries are split:
Common-law jurisdictions: -India -Pakistan -Malaysia -Singapore -Hong Kong Civil-law jurisdictions: -Japan -Korea -Thailand -Indochina -Taiwan -Indonesia -China |
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Today, the majority of countries have legal systems based on _____-law traditions.
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civil
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What is the legal system in many Middle Eastern countries?
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Islamic Law
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What is Islamic Law?
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The legal system in many Middle Eastern countries is identified with the laws of Islam, which are associated with "the one and only one god, the Almighty".
Islamic Law is based on the "Sharia". |
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What is the Sharia?
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In Islamic Law, the "Sharia" is a comprehensive code governing Muslim conduct in all areas of life, including business.
The code is derived from 2 sources: 1. The Koran, the Holy Book written in Arabic that is a record of the revelations made to the Prophet Mohammed by Allah. 2. The Hadith, which is based on the life, sayings, and practices of Muhammad. In particular, the Hadith spells out the products and practices that are "haram" (forbidden). |
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What is the best thing to do in order to avoid legal issues?
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Get expert legal help
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In regards to avoiding legal issues, the astute, proactive marketer can do a great deal to prevent conflicts from arising in the first place, especially concerning issues such as...? (3 main issues from slides and then the 4 other issues listed only in the book)
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3 main issues pointed out in slides:
1. Jurisdiction 2. Protect intellectual property (patents, trademarks, and copyrights) 3. Avoid Bribery 4 other issues listed only in the book, not slides: 1. Establishment 2. Antitrust 3. Licensing and trade secrets 4. Advertising and other promotional tools |
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What is Jurisdiction?
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It refers to a court's authority to rule on particular types of issues arising outside of a nation's borders or to exercise power over individuals or entities from different countries.
Company personnel working abroad should understand the extent to which they are subject to the jurisdiction of host-country courts. Courts have jurisdiction if it can be demonstrated that the company is doing business in the state the court sits. |
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Explain intellectual property on a global scale. What are the 3 main types of intellectual property?
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Intellectual property must be registered in each country where business is conducted, because patents and trademarks that are protected in one country are not necessarily protected in another country.
3 main types of intellectual property: 1. Patents 2. Trademarks 3. Copyrights |
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What is a patent?
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It is a formal legal document that gives an inventor the exclusive right to make, use, and sell an invention for a specified period of time.
Typically, the invention represents an "inventive leap" that is "novel" or "nonobvious". |
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What is a trademark?
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It is defined as a distinctive mark, motto, device, or emblem that a manufacturer affixes to a particular product or package to distinguish it from goods produced by other manufacturers.
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What is a copyright?
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A copyright establishes ownership of a written, recorded, performed, or filmed creative work.
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What are the 3 main forms of infringement of intellectual property?
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1. Counterfeiting
2. Associative counterfeiting (aka imitation) 3. Piracy |
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What is counterfeiting?
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It is the unauthorized copying and production of a product.
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What is associative counterfeiting, or imitation?
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An associative counterfeit, or imitation, uses a product name that differs slightly from a well-known brand but is close enough that consumers will associate it with the genuine product.
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What is piracy?
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A third type of counterfeiting is piracy, which is the unauthorized publication or reproduction of copy righted work.
Counterfeiting and piracy are particularly important in industries such as motion pictures, recorded music, computer software, and textbook publishing. |
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Explain the counterfeiting example involving Kleenex. How does grammar have to do with brand names vs products.
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Not all boxes of tissues are Kleenex tissues. If it hasn't got the Kleenex brand on the box then it is not a Kleenex tissue. While we're on the subject, Kleenex is a brand name, so its an adjective, not a noun. It is also always spelled with a capital "K" followed by the registered trademark symbol and the word "tissue".
Brand names = Adjectives (i.e. Kleenex) Products = Nouns (i.e. Tissue) |
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In the United States, who are patents, trademarks, and copyrights registered with?
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The Federal Patent Office
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In the United States, how long does the patent holder retain its patent rights?
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The patent holder retains all rights for the life of the patent even if the product is not produced or sold.
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How does a company register a patent in Europe?
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A company has the option of filing for a patent on a country-by-country basis or applying to the European Patent Office in Munich for patent registration in a specific number of countries.
A third option will soon be available: The Community Patent Convention will make it possible for an inventor to file for a patent that is effective in the 27 signatory nations. Currently patent procedures in Europe are quite expensive. |
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What is the WIPO?
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The United States recently joined the World Intellectual Property Organization (WIPO). The system allows trademark owners to seek protection in as many as 74 countries with a single application and fee.
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Which company has received the most U.S. patents each year since 1993.
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IBM
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How many patents have the U.S. Patent and Trademark Office awarded?
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Over 7,000,000
It awarded it's 7 millionth patent to DuPont in 2009. |
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International concern about intellectual property issues in the 19th century resulted in what 2 important agreements?
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1. The International Convention for the Protection of Industrial Property
2. The International Union for the Protection of Literary and Artistic Property |
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Antitrust laws in the U.S. and other countries are designed to...?
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combat restrictive business practices and to encourage competition.
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What is licensing?
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It is a contractual agreement in which a licensor allows a license to use patents, trademarks, trade secrets, technology, or other intangible assets in return for royalty payments or other forms of compensation.
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What is bribery?
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Bribery is the corrupt business practice of demanding or offering some type of consideration - typically cash payment - when negotiating a cross-border deal.
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What is the FCPA?
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In the United States, the Foreign Corrupt Practices Act (FCPA) is a legacy of the Watergate scandal during Richard Nixon's presidency.
Administered by the Department of Justice and the Securities and Exchange Commission, the act was concerned with disclosure and prohibition. The disclosure part of the act requires publicly held companies to institute internal accounting controls that would record all transactions. The prohibition part made it a crime for U.S. corporations to bribe an official of a foreign government or political party to obtain or retain business. Payments to third parties were also prohibited when the company had reason to believe that part or all of the money would be channeled to foreign officials. |
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What is the Omnibus Trade and Competitiveness Act?
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The U.S. business community felt the FCPA was too vague and started lobbying immediately for changes to the act. In 1988, President Reagan signed amendments to the statutes into law under the Omnibus Trade and Competitiveness Act.
Among the changes were exclusions for "grease" payments (made them allowed) to low-level officials to cut red tape and expedite "routine governmental actions" such as clearing shipments through customs, securing permits, or getting airport passport clearance to leave a country. This |
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What are the 5 countries with the least corruption and what are the 5 countries with the most corruption?
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Least = Denmark / Finland / New Zealand / Singapore / Sweden
Most = Myanmar / Somalia / Afghanistan / Iraq / Uzbekistan |
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Chapter 6
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Global Information Systems & Market Research
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What is the phrase IT?
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Information Technology (IT) refers to an organization's processes for creating storing, exchanging, using, and managing information.
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What is a MIS?
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A Management Information System (MIS) provides managers and other decision makers with a continuous flow of information about company operations.
MIS is a broad term that can be used (and in this case, is used) in reference to a system of hardware and software that a company uses to manage information. An MIS should provide a means for gathering, analyzing, classifying, storing, retrieving, and reporting relevant data. The MIS should also cover important aspects of a company's external environment, including customers and competitors. Global competition intensifies the need for effective MIS and business intelligence that are accessible throughout the company. |
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One component of a firm's MIS is a _____ _____ (BI) _____ that helps...?
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business intelligence (BI) network that helps managers make decisions.
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What is an Intranet?
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Unlike the public internet, an intranet is a PRIVATE NETWORK that allows authorized company personnel or outsiders to share information electronically in a secure fashion without generating mountains of paper.
Intranets allow a company's information system to serve as a 24-hour nerve center, enabling Amazon.com, Dell, and other companies to operate as real time enterprises (RTE). |
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What is an RTE?
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Real time enterprises (RTE)
The RTE model is expected to grow in popularity as wireless internet access becomes more widely available. |
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What is an EDI?
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An Electronic Data Interchange (EDI) system allows a company's business units to submit orders, issue invoices, and conduct business electronically with other company units as well as outside units.
One of the key features of EDI is that its transaction formats are universal. This enables computer systems at different companies to speak the same language. Wal-Mart is legendary for its sophisticated EDI system. EDI links with vendors enable retailers to improve inventory management and restock hot-selling products in a timely, cost-effective manner. |
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What are the 4 main tools of MIS?
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1. Intranet
2. Electronic Data Interchange (EDI) 3. Efficient Consumer response System (ECR) 4. Customer Relationship Management (CRM) |
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What is ECR?
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In addition to EDI, retailers are increasingly using a technique known as efficient consumer response (ECR) in an effort to work more closely with vendors on stock replenishment.
ECR can be defined as a joint initiative by members of a supply chain to work toward improving and optimizing aspects of the supply chain to benefit customers. It is an effort for retailers and vendors to work closely on stock replenishment. ECR systems utilize electronic point of sale (EPOS) data gathered by checkout scanners to help retailers identify product sales patterns and how consumer preferences vary with geography. Although currently most popular in the U.S., the ECR movement is gaining traction in Europe. Supply chain innovations such as radio frequency identification tags (RFID) are likely to provide increased momentum for ECR. |
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What are EPOS and RFID?
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EPOS = Electronic point of sale (EPOS) data
RFID = Radio frequency identification tags (RFID) |
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EPOS, ECR, and other IT tools are also helping businesses improve...?
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their ability to target consumers and increase loyalty. The trend among retailers is to develop customer-focused strategies that will personalize and differentiate the business.
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What is CRM?
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A new business tool that helps companies collect, store, and analyze customer data is called customer relationship management (CRM).
CRM is a philosophy that values two-way communication between the company and the customer. CRM is a new business model. Every point of contact with a consumer is an opportunity to collect data. If implemented correctly, CRM can make employees more productive and enhance corporate profitability; it also benefits customers by providing value-added products and services. Industry experts recommend implementing global CRM programs in phases. The first could focus on a specific task such as sale force automation (SFA); this term refers to a software system that automates routine aspects of sales and marketing functions such as lead assignment, contact follow-up, and opportunity reporting. An SFA system can also analyze the cost of sales and the effectiveness of marketing campaigns. Databases called data warehouses are frequently an integral part of a company's CRM system. |
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What are data warehouses?
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Databases called data warehouses are frequently an integral part of a company's CRM system.
Data warehouses help fine-tune product assortments for multiple locations. Date warehouses enhance the ability of management to respond to changing business conditions. |
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However, EDI, ECR, EPOS, SFA, CRM, and other aspects of IT do not simply represent marketing issues; they...?
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are organizational imperatives.
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What is SFA?
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Industry experts recommend implementing global CRM programs in phases. The first could focus on a specific task such as sale force automation (SFA); this term refers to a software system that automates routine aspects of sales and marketing functions such as lead assignment, contact follow-up, and opportunity reporting. An SFA system can also analyze the cost of sales and the effectiveness of marketing campaigns.
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Although environmental scanning is a vital source of information, research has shown that headquarters executives of global companies obtain as much as two-thirds of the information they need from...?
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personal sources.
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What are personal sources?
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Company executives based abroad who have contact with distributors, consumers, suppliers, and government officials.
A striking feature of the global corporation - and a major source of competitive strength - is the role that executives abroad play in acquiring and disseminating information about the world environment. Headquarters executives generally acknowledge that company executives overseas are the people who know best what is going on in their areas. Personal sources can also be friends, acquaintances, professional colleagues, consultants, and prospective employees. Direct sensory perception provides a vital background for the information that comes from human and documentary sources. |
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What is direct sensory perception?
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Direct sensory perception provides a vital background for the information that comes from human and documentary sources.
Direct sensory perception gets all the senses involved and then using the senses to find out first hand what is going on in a particular country. Direct perception can also be important when a global player dominates a company's domestic market. |
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What is Market Research?
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It is the project-specific, systematic gathering of data.
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What is Global Marketing Research? What is the challenge of global marketing research?
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It is the project-specific, systematic gathering of data in the search scanning mode on a global basis.
It is market research that is carried out on a global scale. The challenge of global market research is to recognize and respond to the important national differences that influence the way information can be obtained. Marketing research can be conducted in 2 different ways. One is to design and implement a study with in-house staff. The other is to use an outside firm specializing in market research. In global marketing, a combination of in-house and outside research efforts is often advisable. |
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What are the 8 steps in the international marketing research process?
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1. Identify the information requirement
2. Define the problem 3. choose a unit of analysis 4. Examine data availability 5. Assess value of research 6. Design the research 7. Analyze the data 8. Present the findings |
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Explain Step 1: Identifying the information requirement
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Main question: What information do I need?
Existing markets: Customer needs already being served by one or more companies; information may be readily available. Potential Markets: -Latent market: An undiscovered market; demand would be there if a product was there -Incipient market: Market will emerge as macro environmental trends continue. *Market Orientation *Strategic Orientation *Problem Orientation |
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Explain Step 2: Problem definition and overcoming SRC
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Self-Reference Criterion (SRC) is when a person's home-country values and beliefs influence the assessment of a foreign culture or country.
The SRC tendency underscores the importance of understanding the cultural environments of global markets. Ex: Barbie not having the same appeal in Japan and the French find Disneyland's personal appearance code to insult French culture, individualism, and privacy. Marketers must be aware of the impact SRC and other cross-cultural assumptions can have. Such awareness can have several positive effects: -Enhances management's willingness to conduct market research. -Ensures that research design has minimal home-country bias. -Increases management's receptiveness to findings. |
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Explain Step 3: Choose a unit of analysis
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This step involves the need to identify in what part(s) of the world the company should be doing business and finding out as much as possible about the business environment in the area(s) identified.
Will the market be: -Global -A region -A country -A province -A state -A city Countrywide data are not required for all market-entry decisions. Rather, a specific city, state, or province may be the relevant unit of analysis. For example: A company that is considering entering China may focus initially on Shanghai. |
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Explain Step 4: Examine data availability
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What type of data should be gathered?
1. Primary data (gathered through original research pertaining to the particular problem in step 1. 2. Secondary data One type of source is Secondary sources: Data that comes from secondary sources is referred to as secondary data (i.e. data available in company files, the library, industry or trade journals, or online databases). Types of secondary sources: -Trade journals -Government sources like National Trade Data Base (NTDB), Bureau of Economic Analysis (BEA), Eurostat (used in the EU), Foreign Commericial Service, Virtual Trade Commissioner (used in Canada). -Commercial sources like The Economist and Financial Times, Marketresearch website -Syndicated studies published by private research companies (i.e. Marketresearch website). If secondary research can be used, the researcher can go directly to the data analysis step (step #7). |
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If secondary data can be used, what happens regarding the marketing research process?
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If secondary research can be used, the researcher can go directly from the examine data availability step (step #4) to the data analysis step (step #7).
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Explain Step 5: Assess Value of Research
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When data are not available through published statistics or studies, managements may wish to conduct further study of the country market, region, or global segment. However, collecting information costs money. Thus, the plan should also spell out what this information is worth to the company in dollars compared with what it would cost to collect.
The 3 main questions to consider from the slides: 1. What the information is worth vs what it will cost to collect? 2. What will it cost if the data are not collected? 3. What will the company gain with this information? The small markets around the world pose a special problem for the researcher. The relatively low profit potential in smaller markets justifies only modest expenditures for market research. Therefore, the global researcher must devise techniques and methods that keep expenditures in line with the market's profit potential. |
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Explain Step 6A: Research design: data collection
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This data collection step uses primary data since it is skipped over if their is proficient secondary data.
What are the 4 guidelines regarding data gathering? 1. Use multiple indicators rather than a single measure. This approach will decrease the level of uncertainty for decision makers. As the saying goes, "There are three sides to every story: your side, my side, and the truth". A land surveyor can pinpoint the location of a third object given the known location of the two objects. This technique, known as triangulation, is equally useful in global market research. 2. Individual companies should develop customized indicators specific to the industry, product market, or business model. Such indicators should leverage a company's previous experience in global markets. For example, in some developing markets, Mary Kay Cosmetics uses the average wage of a female secretary as a basis for estimating income potential for its beauty consultants. 3. Always conduct comparative assessments in multiple markets. Do not assess a particular market in isolation. Comparative assessment enables management to develop a "portfolio" approach in which alternative priorities and scenarios can be developed. For example, to better understand Czech consumers in general, a company might also conduct research in nearby Poland and Hungary. By contrast, if a brewing company wished to learn more about beer consumption patterns in the Czech Republic, it might also conduct research in Ireland and Germany, where per capita beer consumption is high. 4. Observations of purchasing patterns and other behavior should be weighted more heavily (are more important) than reports or opinions regarding purchase intention or price sensitivity. Particularly in developing markets, it is difficult to accurately survey consumer perceptions. |
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What is an existing market?
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Existing markets are those in which customer needs are already being served by one or more companies.
In many countries, data about the size of existing markets (in terms of dollar volume and unit sales) are readily available. |
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What are the 2 types of potential markets?
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2 Types of Potential Markets:
1. Latent market 2. Incipient market |
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What is a latent market?
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A latent market is in essence, an undiscovered segment. It is a market in which demand would materialize IF an appropriate product were made available.
In a latent market, demand is zero before the product is introduced. With latent markets, initial success is not based on a company's competitiveness. Rather, it depends on the prime mover advantage (a company's ability to uncover the opportunity and launch a marketing program that taps the latent demand). |
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What is an incipient market?
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An incipient market is a market that will emerge if a particular economic, demographic, political, or sociocultural trend continues.
A company is not likely to succeed if it offers a product in an incipient market before the trends have taken root. After the trends have taken root, an incipient market will become latent and, later, existing. The concept of incipient markets can also be illustrated by the impact of rising income on demand for automobiles and other expensive consumer durables. As per capita income rises in a country, the demand for automobiles will also rise. Therefore if a company can predict a country's future rate of income growth, it can also predict the growth rate of its automobile market. |
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Step 6B: Research design: research methodologies
What are the 5 main research methodologies used as primary data collection methods? |
1. Survey Research
2. Interviews 3. Consumer Panels 4. Observation 5. Focus Groups |
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What is Survey Research?
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Survey research utilizes questionnaires designed to elicit quantitative data ("How much would you buy?"), qualitative responses ("Why would you buy?"), or both. Survey research is often conducted by means of a questionnaire distributed through the mail, by telephone, or in person.
Culture shapes attitudes and values in a way that directly affects people's willingness to respond to interviewer questions. SRC is especially important in survey research: SRC bias can originate from the cultural backgrounds of those designing the questionnaire. For example, a survey designed and administrated in the U.S. may be inappropriate in non-Western cultures, even if it is carefully translated. This is especially true if the person designing the questionnaire is not familiar with the SRC. A technique known as "back translation" can help increase comprehension and validity; the technique requires that, after a questionnaire or survey instrument is translated into a particular target language, it is translated once again into the original language by a different translator. For even greater accuracy, "parallel translations" (two versions by different translators) can be used as input to the back translation. The same techniques can ensure that advertising copy is accurately translated into different languages. |
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What are Interviews?
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Personal interviews allow researchers to ask "why?" and then explore answers with the respondent on a face-to-face basis.
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What are Consumer Panels?
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A consumer panel is a sample of respondents whose behavior is tracked over time. For example, a number of companies conduct television audience measurement (TAM) by studying the viewing habits of household panels. Broadcasters use audience share data to set advertising rate; advertisers such as Coca-Cola use the data to choose programs during which to advertise.
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What is Observation?
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When observation is used as a data collection method, one or more trained observers (or a mechanical device such as a video camera) watch and record the behavior of actual or prospective buyers. The research results are used to guide marketing managers in their decision making.
For example, after Volkswagen's U.S. sales began to slump, the company launched "Moonraker", an 18-month effort designed to help its engineers, marketers, and design specialists better understand American consumers. A marketer of breakfast cereals might send researchers to preselected households at 6am to watch families go about their morning routines. |
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What are Focus Groups?
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In a focus group research, a trained moderator facilitates discussion of a product concept, a brand's image and personality, an advertisement, a social trend, or other topic with a group of 6 to 10 people.
A typical focus group meets at a facility equipped with recording equipment and a one-way mirror behind which representatives of the client company observe the proceedings. The moderator can utilize a number of approaches to elicit reactions and responses, including projective techniques, visualization, and role plays. When using a "projective technique", the researcher presents open-ended or ambiguous stimuli to a subject. Presumably, when verbalizing a response the subject will "project" - that is, reveal - his or her unconscious attitudes and biases. By analyzing the responses, researchers are better able to understand how consumers perceive a particular product, brand, or company. Example: In a focus group convened to ***** car-buying preferences among twenty-somethings, the researcher might ask participants to describe a party where various automotive brands are present. What is Nissan eating, wearing, and drinking? What kind of shoes does Honda have on? Who is loud? Who is shy? Who gets the girl (or guy)? Focus group research yields qualitative data that does not lend itself to statistical projection. Such data suggests rather than confirms hypotheses; also, qualitative data tends to be directional rather than conclusive. Such data is extremely valuable in the exploratory phase of a project and is typically used in conjunction with data gathered via observation and other methods. Such data is extremely valuable in the exploratory phase of a project and is typically used in conjunction with data gathered via observation and other methods. |
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What is Scale Development?
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Market research requires assigning some type of measure, rankings, or interval to a response.
Take a simple example of measure, a "nominal scale" is used to establish the identity of a survey element. For example, male respondents could be labeled "1" and females "2". Scaling can also entail placing each response in some kind of continuum; a common example is the Likert scale that asks respondents to indicate whether they "strongly agree" with a statement, "strongly disagree", or whether their attitude falls somewhere in the middle. In a multicountry research project it is important to have a "scalar equivalence", which means that two respondents in different countries with the same value for a given variable receive equivalent scores on the same survey. Even with standard data-gathering techniques, the application of a particular technique may differ from country to country. For example of a 1-10 scale, while the typical American scale would equate to 10 being the "most/best" and 1 with "least/worst", Germans prefer scales in which 1 is the "most/best". Also, while American survey items pertaining to spending provide a range of figures, Germans prefer the opportunity to provide an exact answer. |
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What is Sampling? What are the 2 best known types of samples?
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When collecting data, researchers generally cannot administer a survey to every possible person in a designated group. A sample is a selected subset of a population that is representative of the entire population.
The two best known types of samples are probability samples and nonprobability samples. |
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What is a probability sample?
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A probability sample is generated by following statistical rules that ensure that each member of the population under study has an equal chance (or probability) of being included in the sample. The results of a probability sample can be projected to the entire population with statistical reliability reflecting sampling error, degree of confidence, and standard deviation.
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What is a nonprobability sample?
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The results of a nonprobability sample cannot be projected with statistical reliability.
One form of nonprobability sampling is a "convenience sample". As the name implies, researchers select people who are easiest to reach. For example, in one study that compared consumer shopping attitudes in the U.S., Jordan, Singapore, and Turkey, data from the latter three countries were gathered from convenience samples recruited by an acquaintance of the researcher. Although data gather in this way are not subject to statistical inference, they may be adequate to address the problem defined in step 1. To obtain a "quota sample" the researcher divides the researcher divides the population under study into categories; a sample is then taken from each category. The term quota refers to the need to make sure than enough people are chosen in each category to reflect the overall makeup of the population. For example, assume a country's population is dividend into six categories based on monthly income. If it is assumed that income is the characteristic that adequately differentiates the population for study purposes, then a quota sample would include respondents from different income levels in the same proportion as they occurred in the population. |
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Explain Step 7: Anayzing data
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The data collected up to this point must be subjected to some form of anaysis if it is to be useful to decision makers.
The steps in anayzing the data: 1. Clean the data 2. Tabulate the data using statistical techniques (ANOVA, regression, factor anaysis, cluster anaysis) 3. Perceptual mapping, conjoint anaysis |
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What is "cleaning" the data?
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First the data must be prepared (the term "cleaned" is used) before further anaysis is possible. It must be logged and stored in a central location or database (can be difficult when research is prepared around the world). Some amount of editing may be required (i.e. some responses may be missing or difficult to interpret). Next, questionnaires must be coded. Simply put, coding involves identifying the respondents and the variables. Finally, some data adjustment may be required.
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What is "tabulation", as in tabulate the data?
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Data anaysis continues after "cleaning" the data with "tabulation"; that is, the arrangement of data in tabular form. Researchers might want to find, mean, median, mode, standard deviation, range, and the shape of the distribution (i.e. normal curve). For normally scaled variables such as "male" and female", a simple cross-tabulation my be performed. A company could use cross-tabulation to separately examine the response to see if the male and female responses differed significantly.
What are 4 main types of statistical techniques? 1. Anaysis of Variance (ANOVA) 2. Regression anaysis 3. Factor anaysis 4. Cluster anaysis #1 and #2 are considered "advanced data anaysis". #3 and #4 are considered "interdependence techniques". |
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What are interdependence techniques?
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If the researcher is interested in the interaction between variables, interdependence techniques such as factor anaysis, cluster anaysis, and multidimensional scaling (MDS) can be used.
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What is Factor Anaysis?
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Factor anaysis can be used to transform large amounts of date into manageable units;specialized computer programs perform data reduction by "distilling out" a few meaningful factors that underline attitudes and perceptions from a multitude of survey responses.
Factor anaysis is useful in psychographic segmentation studies; it can also be used to create perceptual maps. In this form of anaysis, variables are not classified as dependent or independent. Subjects are asked to rate specific product benefits on five-point scales. Factor anaysis will generate "factor loadings" that enable the researcher to determine two or three factors that underline the benefits. The computer will also output "factor scores" for each respondent. When all respondents factors scores are averaged, the position of a company's product on a perceptual map can be determined. |
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What is Cluster Anaysis?
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Allows the researcher to group variable into clusters that maximize within-group similarities and between-group differences.
Factor anaysis is useful in psychographic segmentation studies. In this form of anaysis, variables are not classified as dependent or independent. Cluster anaysis is well suited to global market research because similarities and differences can be established between local, national, and regional markets of the world. Cluster anaysis can also be used to perform benefit segmentation and identify new product opportunities. |
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What are dependence techniques?
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They asess the interdependence of two or more dependent variables with one or more independent variables. Conjoint analysis is an example of a dependence technique that is useful in both single market and global market research.
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What is Conjoint anaysis?
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It is a tool that researchers can use to gain insights into the combination of features that will be most attractive to consumers; it is assumed that features affect both perception and preferences.
It determines the values or "utilities" of various levels of product features and plots them graphically. Sometimes advisable to use a pair-wise approach that allows them to consider two attributes at a time because the number of combinations can be overwhelming and lead to fatigue sometimes. |
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Explain Step 8: Presenting the findings
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The report based on the market research must be useful to managers as input to the decision-making process.
The report must clearly address the problem identified in step 1. Include a memo or executive summary of the key findings along with main report. |
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Chapter 7
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Segmentation, Targeting, and Positioning
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What is the S-T-P Framework?
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The typical way of approaching global marketing strategy is similar to the so-called S-T-P framework:
1. Segmentation 2. Targeting 3. Positioning The efforts by global companies to reach low-income consumers in emerging markets highlight the importance of skillful global market segmentation and targeting. Segmentation and targeting are 2 different but closely related go-to-market activities. Together they serve as the link between market need and wants and tactical decisions made by managers to develop marketing programs and value propositions that meet the specific needs of one or more segments. |
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What is market segmentation?
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Market segmentation represents an effort to identify and categorize groups of customers and countries according the common characteristics (an effort to split up the total markets into segments of more homogeneous subgroups).
Global markets can be segmented according to buyer categories (consumer, enterprise, government), age, gender, income, etc. |
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What is targeting?
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Targeting is the practice of evaluating the segments and focusing marketing efforts on a country, region, or group of people that has significant potential to respond.
Such targeting reflects the reality that a company should identify those consumers it can reach most effectively, efficiently, and profitably. Focus on the segments that can be reached most effectively. |
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What is positioning?
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Positioning is how the company should present its product to the target market so that its perception is most advantageous.
Exactly how the company should present its product to the target market(s) so its perception is most advantageous relative to competition. i.e. How to differentiate the product or brand in the minds of the target market. Proper positioning is required to differentiate the product or brand in the minds of target customers. |
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What are the contrasting views of global segmentation?
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The 2 contrasting views are:
1. Conventional wisdom 2. Unconventional wisdom |
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What is conventional wisdom in global segmentation? (5 main points)
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1. Assumes heterogeneity among countries (Brazil likes world cup but USA doesn't).
2. Assumes homogeneity within a country (Since India's per capita income is $1,180, all Indians have low incomes) 3. Focuses on macro-level cultural differences. 4. Relies on clustering of national markets (groups together countries that have an absence of government regulation in a particular industry). 5. Less emphasis on within-country segments. |
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What is unconventional wisdom in global segmentation? (4 main points)
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1. Assumes emergence of segments that transcend national boundaries (the "global jock" element referring to the world cup that extends to the USA liking the world cup)
2. Recognizes existence of within-country differences (Even though India has a per capita of $1,180, you must note the higher-income and middle-class segment that exists). 3. Emphasizes micro-level differences. 4. Segments micro markets within and among countries (the customer base for a mcdonalds and subway in China and India is larger than the size of entire developed countries). |
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What are the 4 common variables of global market segmentation?
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1. Demographics
2. Psychographics 3. Behavioral characteristics 4. Benefits sought |
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What is demographic segmentation?
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It is based on measurable characteristics of populations.
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Regarding demographic segmentation, what are the 6 main measurable characteristics of populations?
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1. Income
2. Population 3. Age distribution 4. Gender 5. Education 6. Occupation |
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What are the 3 main demographic facts and trends?
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1. America's 3 main ethnic groups (blacks, mexicans, asians) represent a combined annual buying power of $1 trillion.
2. By 2030, 20% of U.S. population will be 65 or older, compared to the present amount of 13%. 3. India has the youngest demographic profile among the world's large nations: More than half its population is under 25. |
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What is segmentation by income and population?
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Income is a valuable segmentation variable (75% of world GNP is in the Triad but only 13% of the population is in the Triad).
Do not read into numbers too much (some services are free in developing countries so there is more purchasing power). For products with low enough prices, population is a more important variable than income. |
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What is age segmentation?
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Global teens: young people between the ages of 12 and 19 (a group of teenagers randomly chosen from different parts of the world will share many of the same tastes).
Global elite: affluent consumers who are well traveled and have the money to spend on prestigious products with an image of exclusivity. |
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What is gender segmentation?
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In focusing on the needs and wants of one gender, do not miss opportunities to serve the other.
While some companies may market primarily or exclusively to one gender (fashion designers and cosmetic companies), other companies offer different lines of products to both genders (nike, and levi's are trying to start a girl line). |
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What is ethnic segmentation?
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The population of many countries includes ethnic groups of significant size.
The three main ethnic groups in the U.S. are: 1. african americans 2. asian americans 3. hispanic americans Hispanic Americans: -40-plus million Hispanic Americans (14% of total population) with $560 billion annual buying power. -California Mexicans have after tax income of $100 billion. -The number of Hispanic teens will rise from 12% of the U.S. teen population to 18% in the next decade. |
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What is psychographic segmentation?
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Grouping people according to their attitudes, values, and lifestyles.
4 main lifestyle groups: 1. Successful Idealists: 5-20% of population, achieved personal or material success while maintaining commitment to abstract or socially responsible ideas. 2. Affluent Materialists: These status-conscious "up-and-comers", many of whom are business professionals, use conspicuous consumption to communicate their success to others. 3. Comfortable Belongers: 25-50% of a country's population, this group is conservative and most comfortable with the familiar. Belongers are content with the comfort of home, family, friends, and community. 4. Disaffected Survivors: Lacking power and affluence, this segment harbors little hope for upward mobility and tends to be either resentful or resigned. This segment is concentrated in high-crime, inner-city-type neighborhoods. Despite Disaffecteds' lack of societal status, their attitudes nevertheless tend to affect the rest of society. The Porsche example: Top Guns (27%): ambition, power, control Elitists (24%): old money, car is just a car Proud Patrons (23%): car is reward for hard work Bon Vivants (17%): car is for excitement, adventure Fantasists (9%): car is form of escape |
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What is geodemographic targeting?
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Consumers who reside within geographic clusters such as zip codes or neighborhoods also share demographic and lifestyle similarities.
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What is behavior segmentation?
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Focuses on whether people buy and use a product, as well as how often and how much they use or consume.
Consumers can be categorized in terms of Usage Rates (heavy, medium, light, or nonuser). Consumers can also be segmented according to User Status (potential users, nonusers, ex-users, regulars, first-timers, or users of competitors' products). Marketers sometimes refer to the 80/20 rules (also called the "law of disproportionality" or "Pareto's Law") when viewing Usage Rates. This rule suggests that 80% of a company's revenues or profits are accounted for by 20% of a firm's products or customers (mainly customers). |
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What is benefit segmentation?
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Global benefit segmentation focuses on the numerator (the 'B') of the value equation:
Value equation is: Value = Benefit / Price This is based on understanding the problem a product solves, the benefit it offers, or the issue it addresses. |
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What are the 3 basic criteria when asessing market potential?
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1. Current size of segment and anticipated growth potential.
2. Competition 3. Compatibility with the company's overall objectives/feasibility of reaching a designated target. |
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In regards to asessing market potential, what is current segment size and growth potential?
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Is the current market segment currently large enough to present a company with the opportunity to make a profit?
If the answer is no, does it have significant growth potential to make it attractive in terms of a company's long-term strategy? |
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In regards to asessing market potential, what is potential competition?
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Is there strong competition in the target segment currently?
Is the competition vulnerable in terms of price or quality disadvantages? |
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In regards to asessing market potential, what is feasibility and compatibility?
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If a market segment is judged to be large enough, and if strong competitors are either absent or deemed to be vulnerable, then the final consideration is whether a company can and should enter the market.
Will adaptation be required? If so, is this economically justifiable in terms of expected sales? Will import restrictions, high tariffs, or a strong home-country currency drive up the price of the product in the target market currency and effectively dampen demand? |
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What are marketing model drivers?
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They are key elements or factors required for a business to take root or grow in a particular country market environment. The drivers may be different depending on if a company serves consumer or industrial needs.
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What are enabling conditions?
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They are structural market characteristics who presence or absence can determine whether the marketing model can succeed.
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What are 3 types of target market strategy options?
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Three types:
1. Standardized global marketing 2. Concentrated global marketing 3. Differentiated global marketing |
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What is standardized global marketing?
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Based on the premise that a mass market exists around the world.
Mass marketing on a global scale Also known as undifferentiated target marketing Standardized marketing mix Product adaptation is minimized Intensive distribution |
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What is concentrated global marketing?
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It involves developing a market strategy to reach a niche. A niche is simply a single segment of the global market.
Markets and segments can be given more attention and markets positions fortified. This is particularly advantageous when the country or segment competitive rivalry is intense. Concentrated marketing is also the strategy employed by hidden champions of global marketing: Companies unknown to most people that have succeeded by serving a niche market that exists in many countries. These companies define their markets narrowly and strive for global depth rather than national breadth. (A dish washing machine company that sells only to hotels and restaurants in one country) Examples: Chanel, body soap |
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What is differentiated global marketing?
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Represents a more ambitious approach than concentrated target marketing. This approach entails targeting two or more distinct market segments with multiple marketing mix offerings. This strategy allows a company to achieve wider market coverage.
Also known as multisegment targeting. In developing a global strategy, some companies make a conscious effort to be a player in different countries and different market segments. Difficulties in one market segment or country can be offset by gains elsewhere. Example: P&G markets Old Spice and Hugo Boss for Men. |
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What are the 4 general positioning strategies?
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1. Attribute or benefit
2. Quality and price (Johnny Walker) 3. Use or user 4. Competition |
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What is the positioning strategy of attribute or benefit?
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A frequently used positioning strategy exploits a particular product attribute, benefit, or feature.
Economy, reliability, and durability are frequently used attribute/benefit positions. In global marketing, it may be deemed important to communicate the fact that a brand is imported. This approach is known as foreign consumer culture positioning (FCCP). |
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What is the positioning strategy of quality and price?
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This strategy can be thought of in terms of a continuum from high fashion/quality and high price to good value (rather than "low quality") at a reasonable price.
Examples: Johnny Walker; Stella beer using a Steinway piano. Marketers sometimes use the phrase "transformation advertising" to describe advertising that seeks to change the experience of buying and using a product (in other words, the product benefit) to justify a higher price/quality position. |
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What is the positioning strategy of use or user?
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It represents how a product is used or associates the brand with a user or class of users.
Examples: Duracell battery saying that when in remote locations for a set, the director of lord of the rings exclusively uses Duracell batteries (back when lord of the rings was popular); Max Factor makeup is positioned as "the makeup that makeup artists use". |
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What is the positioning strategy of competition?
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Implicit or explicit reference to competitors can provide the basis for an effective positioning strategy.
Example: Dove positioning their brand around a new definition of beauty; "real beauty" since only 2% of women find themselves to be beautiful. This position of "real beauty" was then copied by other shampoo and soap companies. |
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What is GCCP?
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Global consumer culture positioning (GCCP). It is defined as a strategy that identifies the brand as a symbol of a particular global culture or segment.
Proven to be an effective strategy for communicating with global teens, cosmopolitan elites, globetrotting laptop warriors who consider themselves members of a "transnational commerce culture", and other groups. High touch (reflects an ideal self-image, creates an emotional or spiritual connection) and high tech products (sophisticated, technology complex, and/or difficult to explain or understand; consumers have specialized needs or interests and rational thoughts when buying these products). Example: Sony's brightly colored "My First Sony" line is positioned as THE electronics brand for youngsters around the globe with discerning parents. |
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What is FCCP?
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Foreign consumer culture positioning (FCCP)
Associates the brand's users, use occasions, or product origins with a foreign country or culture. Example: Fosters "AUSTRALIAN FOR BEER" with all caps and a big can and the image that Australians drink a lot and party a lot. |
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What is LCCP?
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Local consumer culture positioning (LCCP)
Identifies with local cultural meanings Consumed by local people Locally produced for local people Used frequently for food, personal, and household nondurables Example: Budweiser (and the clydesdale horses) is identified with small-town America. |
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What is Grey Trade?
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A Grey Market (also spelled gray market), or parallel market,[1] is the trade of a commodity through distribution channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer. The most common type of grey market is the sale of imported goods (brought by small import companies or individuals not authorized by the manufacturer) which would otherwise be more expensive in the country they are being imported to.
Grey trade of products means that products that have been put into circulation on a specific local market – most frequently in a developing country find their ways due to their low price into a more developed market such as the USA or Europe. Consequences: Financial losses for the manufacturer Repackaging and rewriting of expiry dates are common, thus consequences and damage for the consumers in the developed markets. The market in the underdeveloped country does not receive the product, making the counterfeited product more appealing. |
