Term Paper, 2005
19 Pages, Grade: 1,3 (A)
2 The Impact of Culture on International Marketing Plans
2.1 What is culture?
2.1.1 The elements of culture
2.1.2 Model of Geert Hofstede
2.2 Market analysis
2.3 Market entry strategies decision
2.3.1 Indirect exporting
2.3.2 Direct exporting
2.3.3 Foreign production
2.4 Marketing strategy - segmentation, targeting and positioning
2.5 Marketing mix
2.5.7 Physical evidence
2.6 Implementation and control
3 Critical Review of the French Wine Industry
3.1 Impact of the Wine Industry, especially of the French Wine Industry
3.2 The international marketing environment of wine
3.2.1 STEEPLE Model
3.2.2 Porters 5 Forces – Competition Model
3.3 Market segmentation for wine
3.4 Wine and the marketing mix
3.4.7 Physical evidence
Companies like IBM, Coca Cola, Nike, Kellogg’s, Nestlé, McDonalds do business around the world. An important challenge for the international marketing phase of a firm is the need to understand the different environments the company needs to operate in. To understand different cultural, economic, and political environments is necessary for the success of a company. Culture is one of the most challenging elements of the international marketplace.
Culture is the “patterns of behaviour” and thinking that people living in social groups learn, create, and share. Culture differentiates one human group from anothers. A people's culture includes their beliefs, rules of behaviour, language, rituals, art, technology, styles of dress, ways of producing and cooking food, religion, and political and economic systems. (Lackmann, Hanson and Lanasa, 1997)
The important elements of culture are language, religion, values and attitudes, education, social organisation, technology and material culture, law and politics, and aesthetics. (Carter, 2002)
Language: Language can be verbal and non-verbal. Verbal means how the words are spoken (tone of voice) and non-verbal includes gestures, body position and eye contact. It is important to really understand how language is used by the people in your target market. Consider the following examples: When the Pepsi slogan "Come alive with the Pepsi Generation" was translated in Taiwanese, it came out as "Pepsi will bring your ancestors back from the dead” or the Kentucky Fried Chicken slogan "Finger-lickin’ good" in Chinese, came out as "Eat your fingers off." (www.asianjoke.com). These can irritate and frustrate the customer and therefore these misunderstandings should be avoided. It does not give the best impression of the company that has produced it.
Religion: Many international companies ignore the influence of religion. Most cultures find in religion a reason for being. It is important to identify the difference between the shared beliefs, for example, in Islam, Buddhism, or Christianity. An example of the effect of religious beliefs on international marketing is the ban of pork products and alcoholic beverages in the Middle East. The international market manager must be aware of religious division in the countries of operation.
Values and attitudes: Values and attitudes can affect reaction to a product or to its origins. For example, a firm using yellow flowers in its logo or on the packaging of a product was well accepted in the United States but was a disaster in Mexico, where a yellow flower symbolizes death or disrespect. (Kotler and Armstrong, 1999) An international company needs to understand the differences in values and attitudes within the country.
Education: It is significant for international firms are to know about the educational system of a country. The level and nature of education can have a major impact on how receptive consumers are to foreign marketing activities.
Law and politics: Certain issues in the political environment are significant. Some countries, such as Russia, have relatively unstable governments, whose policies may change dramatically if new leaders come to power by democratic or other means. Some countries have little tradition of democracy, and thus it may be difficult to implement. When a company is going into a foreign market it is also important to look at the ownership regulations, the employment law, health and safety system, financial law and patent protection.
Social organisation: The social systems are different in every country, for example the family relations, the social stratifications, the interest groups and the status in a community group. Social organisation also determines the roles of managers and subordinates and how they relate to one another.
Technology and material culture: Material culture results from technology and is directly linked to how a society systematizes its economic activity. For example a producer of microwave meals might not have much success selling into markets where the penetration of microwave ovens is very low. It is important to look at the work of the exporter within the existing technological infrastructure or how an investment will have to be made in developing it or finding alternative solution. Another good example is the potential of the internet user, which also can be limited by technological infrastructure. The knowledge of this is helpful to a company that plans to sell products over the internet.
Aesthetics : The perception of brand names and labels, beauty, good taste or smell and the symbolism of colours, forms and music can vary from country to country. For example the perception of the colour of Cadbury’s was different in the UK to what it was in Taiwan. The British associated Cadbury’s with the colour purple and the Taiwanese linked it with brown. (Journal of Marketing Management, 1998) It is important for an international company to know about the relationship between colour associations and international branding in a cross-cultural context.
International managers has to understand this system. They need factual and interpretive knowledge of culture. An international marketer should study deeply the particular culture of a country the company is planning to act in. (Jeannet and Hennessey, 2001)
Geert Hofstede, a Dutch researcher, was able to interview a large number of IBM executives in various countries. He identified four basic culture dimensions. The following appendices explain Hofstede's cultural parameters, but only few countries will demonstrate these here like USA, Germany, France, Italy and the Eastern Europe.
Appendix 1: Appendix: 2
Power Distance vs. Individualism Masculinity vs. Uncertainty Avoidance
- Individualism vs. collectivism: This dimension focuses on the relationship between the individual and the group. The people in a collectivist society make a decision that is the best for the group and they have a “we” mentality. (e.g. Eastern Europe) The individual people are basically supposed to care for themselves and their immediate family. (e.g. USA)
- Power distance: Here the focus is on the nature of human relationship in terms of hierarchy. High power distance means culture with more centralized authority and the hierarchy is strong. (e.g. France) Low power distance means people tend to feel equal, close to each other in their daily work relationship. (e.g. USA) The authority is more decentralized.
- Masculinity vs. femininity: This dimension reflects cultures dominated by roles of males and females. That means the characteristics of masculinity, which are, emphasizing ambition, earning money and showing off possessions. (e.g. Germany) Femininity is seen to be the trait which stresses caring and nurturing behaviours, sexual equality and environmental awareness. (e.g. Eastern Europe)
- Uncertainty avoidance: This dimension focuses on how cultures adapt to changes and cope with uncertainty. It measures the extent to which people in a society tend to feel threatened by uncertain, ambiguous, risky or undefined situations. In general, countries like the USA with lower uncertainty avoidance tend to be more tolerant of risk.
The western European countries cluster relatively close together, the USA in some things too, but the Eastern Europe ones clearly distinct. Geert Hofstede's dimensions analysis gives an overview of how better to understand the intercultural differences between countries. It becomes necessary for a company to provide some analytical framework before dealing with cultural differences. Knowledge of the target market’s position on these dimensions will help a company operate for an optimum result. All this presents new challenges for international marketers. (Usunier, 2000)
The before mentioned elements of cultures have to be considered by the market analysis. When a company decides to go international it has to analyse the target market. That involves the micro- and macro environments. The micro environment will be analysed by the SWOT analysis describing the strengths, weaknesses, opportunities, and threats that the company is facing as well as marketing information for example market research data. To analyse the macro environment we will do a Porter’s 5 forces analysis (that include the role of the customers, suppliers, new entrants, substitutes and competitors) and the STEEPLE analysis (social/cultural, technological, economical, educational, political, legal environment and environmental protection). (Brassington and Pettitt, 2000)
After the market analysis of these particular elements of the culture, the company must decide which the best markets are and how these should be entered. When a company decides to target a country, it has to find out the best method of entry into this foreign market. Its broad choices are indirect exporting, direct exporting and foreign production with direct investments like joint ventures or strategic alliances or without direct investment like licensing, franchising and contracting. These market entry strategies involve more commitment, risk, control and profit potential (Jeannet and Hennessey, 2001)
Companies usually start with indirect exports because it is easier and faster to enter foreign markets. They produce goods at home and then sell them through an intermediary and thus indirectly. The most common types of intermediaries are export management companies, trading companies (e.g. United Africa Company and Jardine Mathieson), domestic-based organisations or Piggy-backing. Piggy-backing is a special form of cooperation in exporting. That means one company uses the facilities to sell another’s product.
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