INTERNATIONAL BUSINESS

PEST

Dr. Manohar Pandit

WHY GO INTERNATIONAL
Benefits Greater range of mode of entry e.g. via trade, licensing, subcontracting, franchising (locational specialization) Better access to external resources and capabilities that may need to complement their core competencies (outsourcing) Fewer constrains on geographic dispersion of the value chain (spatial mobility)

INTERNAL ENVIRONMENT
International Business is an attitude of mind, approach of the company with a global outlook, seeking profits around the world on a planned and systemic basis Audit Resources Capabilities Core Competencies leading to competitive advantage

INTERNAL ANALYSIS
Marketing Products/services Price/promotion Distribution/location People Management Office staff/other Sales force

INTERNAL ANALYSIS
Operations/facilities Implementation Facilities/equipment Cost management/efficiency Finances Profitability Debt position/capital structure Inventory/receivable management

RESOURCES
Resources are firms capital equipment, skill of individual employees, patents, finance, and talented managers
Ta n g i b l e Re s o u rc e s Assets that can be seen and quantified I nta n g i b l e Re s o u rc e s Organizational culture, reputation, intellectual property rights, patents, trademarks, copyrights, networks, Family commitment

RESOURCES
By themselves, resources do not create a strategic advantage for the firm Firm needs Capabilities Capabilities can create competitive advantage for International Business

INTERCOUNTRY DIFFERENCES AFFECTING INTERNATIONAL BUSINESS

Cultural Factors
Economic Systems

International Business

Legal and Political Factors

GLOBAL ENVIRONMENTAL SCAN

Uncontrollable factors that affect International Business : Political-Regulatory factors Economic factors Cultural factors Controllable factors 4 Ps

GLOBAL ENVIRONMENTAL SCAN

Competition Legal restraints Government controls Weather Fickle consumers Natural disasters and many other uncontrollable elements can, and frequently do, affect the profitable outcome of good, sound marketing plans

GLOBAL ENVIRONMENTAL SCAN

The marketer cannot control or influence these uncontrollable elements but instead must adjust or adapt to them What makes marketing interesting is the challenge of molding the controllable 4 Ps within the framework of the uncontrollable elements (competition, politics, laws, consumer behavior, level of technology, and so forth) in such a way that marketing objectives are achieved

ENVIRONMENT
Non market Factors
Governments Politics Legal/regulatory bodies Local/national/ regional cultures Infrastructures Nongovernmental organizations Intergovernmental organizations

ENVIRONMENT
Non market factors Economy Geography Climate Natural disasters Public Opinion Competition

ENVIRONMENT
Market Factors

Culture Heterogeneity (a measure of differences across markets and within markets) of customer tastes and preferences Competitors in the market Product offerings

POLITICAL ECONOMY
Economic, Political, Legal and Cultural Systems are interdependent Politicians Shape Laws Laws help Economic Activity Economic Activity affects Culture Culture influences Nation Understanding inter-relation of these factors help in International Business

POLITICAL ECONOMY
Political Environment
Government intervention, protectionism, and barriers to trade and investment Bureaucracy, red tape, administrative delays and corruption Lack of legal safeguards for IPR Legislation unfavourable to foreign firms Occupational Economic failures and Culture mismanagement (CAD, Gold) Social and political unrest and instability

POLITICAL ECONOMY
Political System System of government in nation
Parliamentary, Absolutist

Democratic vs Totalitarian
Elected, Dictator, Communist Totalitarianism

Individualism vs Collectivism
Representative Democracy, Socialism, Communism

DR.MANOHAR PANDIT

ECONOMIC ENVIRONMENTAL CONSIDERATIONS

Economic Factors: Stage of Economic Development Economic Infrastructure Consumer Income and Purchasing Power Currency Exchange Rates

DR.MANOHAR PANDIT

ECONOMIC ENVIRONMENTAL FACTORS

Stage of Economic Development Market Economy Government role to encourage free and fair competition, discourage monopoly Command Economy or CPE Govt. Sets Goals and Decides Price and Quantity to be Produced Mixed Economy Mix of Market & C P E
DR.MANOHAR PANDIT

ECONOMIC ENVIRONMENTAL FACTORS

Economic infrastructure Countrys communication, transportation, financial, & distribution systems Critical for determining how, where, & to whom to do business, market
LG in India

DR.MANOHAR PANDIT

ECONOMIC ENVIRONMENTAL FACTORS

Consumer Income & Purchasing Power Marketers must consider the average household incomes of the consumers Inflation Growth rate PPP
Big Mac

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ECONOMIC ENVIRONMENTAL FACTORS

Currency Exchange Rates A currency exchange rate is the price of one countrys currency expressed in terms of another countrys currency. Failure to consider exchange rates can have severe consequences
Asian currency crisis

DR.MANOHAR PANDIT

POLITICAL ECONOMY
Legal Systems
Common Law Civil Law

Theocratic Law

DR.MANOHAR PANDIT

POLITICAL ECONOMY
Key Legal Issues
HR

Contracts, Visa, Recruitment, Work norms, Repatriation

Marketing

Packaging Norms - legal requirements, IPR - Trademark, Copyright, Patents Infringement, Unfair competition Counterfeiting, Gray Market

DR.MANOHAR PANDIT

POLITICAL ECONOMY
Key Legal Issues Finance Trade and Investment Regulations Financial Flow Regulations Taxation Reporting Requirements Ownership Regulations Dispute Resolutions

INTER-COUNTRY DIFFERENCES AFFECTING INTERNATIONAL BUSINESS

Cultural Factors Economic Systems

International Business

Legal and Political Factors

DR.MANOHAR PANDIT

SOCIAL / CULTURE

DR.MANOHAR PANDIT

CULTURE
" Culture is more often a source of conflict than of synergy. Cultural differences are a nuisance at best and often a disaster."
Prof. Geert Hofstede, Emeritus Professor, Maastricht University

The collective programming of the mind distinguishing the members of one group or category of people from another is culture
DR.MANOHAR PANDIT

LEVELS OF CULTURE
National Culture
Sub Culture
Organisational Culture Occupational Culture

National cultures belong to anthropology; organizational cultures to sociology. Organizational cultures are rooted in practices, they are to some extent manageable; national cultures, rooted in values. Values are acquired in childhood, national cultures are remarkably stable over time

CULTURE
Culture Prescriptive Socially Shared Facilitates Communication Learned Its Characteristics - Purchase Decisions That Are Socially Acceptable - Based On Social Interaction & Creation - Advertising & Communication - Not Genetically Passed on, Learned & Acquired

CULTURE
Culture
Subjective Enduring Cumulative Dynamic

Its Characteristics
- Different Ideas About Same Object. Unique & Arbitrary - Shared & Passed From Generations To Generations - Broader Based, Adapts New Ideas, Discards Old - Adapts To New Situations And Knowledge
DR.MANOHAR PANDIT

CULTURAL ENVIRONMENTAL FACTORS

A cross-cultural analysis involves the study of similarities and differences among consumers in two or more nations or societies The cross-cultural analysis creates an understanding about values, customs, symbols, & languages of other societies.

DR.MANOHAR PANDIT

CULTURAL VALUE DIMENSIONS

Culture as a system of values and norms Values Abstract ideas about what a group believes to be good, right, and desirable. Values are shared assumptions of how things ought to be Norms Social rules and guidelines that prescribe appropriate behaviour in particular situations Occupational Values influence the behavior of the consumers Culture McDonalds in India (Veg outlets) Business lunch
DR.MANOHAR PANDIT

CULTURAL ENVIRONMENTAL FACTORS

Customs Customs are the norms and expectations about the way people do things in a specific country
Cosmetics French view Japanese Valentines Day Touching feet in India Celebrations India, Worldwide

DR.MANOHAR PANDIT

CULTURAL ENVIRONMENTAL FACTORS

Customs and Practices The Foreign Corrupt Practices Act makes it a crime for U.S. corporations to bribe an official of a foreign government or political party to obtain or retain business in a foreign country
Bribes are a tax deductible expense in France & Greece Cooperation money in Indonesia

DR.MANOHAR PANDIT

CULTURAL ENVIRONMENTAL FACTORS

Symbols

Cultural symbols are things that represent ideas and concepts. Semiotics is the study of these symbols. Improper use of symbols can be disastrous for global marketers

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CULTURAL ENVIRONMENTAL FACTORS

Symbols
Coke with the Parthenon

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CULTURAL ENVIRONMENTAL FACTORS

Symbols
Nike Air

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CULTURAL ENVIRONMENTAL FACTORS

Symbols
Kali Ma

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CULTURAL ENVIRONMENTAL FACTORS

Symbols
Swastik

DR.MANOHAR PANDIT

CULTURAL ENVIRONMENTAL FACTORS

Language Language serves as a window on the culture of a society The best language to communicate with consumers in is their own The most powerful aspect of culture that
Can become political weapon Has created a nation Words carry values
DR.MANOHAR PANDIT

CULTURAL ENVIRONMENTAL FACTORS

Language Over 3,000 languages spoken world-wide Japanese, Mandarin, Cantonese Every language has limitations except Sanskrit
Vicks in Germany Pepsi in Arabic countries Jalapeno , J and Y ( : - ) Makaya Ntini Water in English
DR.MANOHAR PANDIT

CULTURAL ENVIRONMENTAL FACTORS

Language & Back Translation Some words can not be translated. These are concepts
Shraddha Anubhuti Avatar

In back translation, a translated word is retranslated into the original language by a different interpreter (error checking control)
Yeh aansoo mere dil ki juban hai

DR.MANOHAR PANDIT

CULTURAL ENVIRONMENTAL FACTORS

Language & Back Translation
When Parker Pen marketed a ball-point pen in Mexico, its ads was Parker Pens "won't leak in your pocket and embarrass you" was mistranslated to "No te embarazar chorrendose en tu bolsillo" which means Parker Pens "Won't leak in your pocket and impregnate you". Printed T-shirt for the Spanish market which promoted the Pope's visit. Instead of "I saw the Pope" (el Papa), the shirts read "I saw the Potato" (la papa)
DR.MANOHAR PANDIT

CULTURAL ENVIRONMENTAL FACTORS

Communication
Chances of miscommunication increase substantially when the people are from different cultures. Different interpretations Suspect American vs British English Boeings 767 aircraft - a mirror finish. Expensive to resolve Nova is No go in Spanish. Chevy failure
DR.MANOHAR PANDIT

CULTURAL ENVIRONMENTAL FACTORS

Nonverbal Communication
Gestures, both intended and self-directed, such as anger, fear, joy, frustration, pensive, puzzled Facial expressions, such as smiles, frowns, and yawns Posture and stance Clothing and hair styles (hair being more like clothes than like skin, both subject to the fashion of the day) Walking behaviour Interpersonal distance Touch conveys emotions

CULTURAL ENVIRONMENTAL FACTORS

Colour symbolism

Eye contact and direction of gaze, particularly in listening behaviour Architecture and interior design Artefacts and nonverbal symbols, such as lapel pins, walking sticks, and jewellery Graphic symbols, such as pictures to indicate mens room or handle with care Smell (olfaction), including body odours, perfumes, and incense Speech rate, pitch, inflection, and volume
DR.MANOHAR PANDIT

CULTURAL ENVIRONMENTAL FACTORS

Synchronization of speech and movement Taste, including symbolism of food and the communication function of chatting over coffee or tea; oral gratification, such as smoking or gum chewing Cosmetics: temporary, such as powder and lipstick; permanent, such as tattoos Drum signals, smoke signals, factory whistles, police sirens Time symbolism: what is too late or too early a time to telephone or visit a friend or too long or too short to make a speech or stay for dinner. Leaner, circular, procedural Timing and pauses within verbal behaviour. Silence
DR.MANOHAR PANDIT

CULTURAL ENVIRONMENTAL FACTORS

Gift-Giving and Hospitality Gifting rituals Tiffany in Japan, nos. Knifes and scissors Flowers Apparels Handkerchiefs Forcing to eat more, similar to one for the road Showing emotional bonding
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CULTURAL ENVIRONMENTAL FACTORS

Beliefs Psychological Superstition Cults Rituals Black Magic Voodoo Religious practices
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CULTURAL ENVIRONMENTAL FACTORS

Cultural context of various countries In a low-context culture, the words used by the speaker explicitly convey the speakers message to the listener. Anglo-Saxon countries, such as Canada, the UK, and the USA, and Germany etc are lowcontext cultures In a high-context culture, the context in which a conversation occurs cultural clues are important in understanding what is being communicated as in Arab countries and Japan
DR.MANOHAR PANDIT

CULTURAL ENVIRONMENTAL FACTORS Saying

NO
America, India, Arabic countries

DR.MANOHAR PANDIT

CULTURAL ENVIRONMENTAL FACTORS

Cultural context of various countries

DR.MANOHAR PANDIT

CULTURAL ENVIRONMENTAL FACTORS

Religion Hinduism rather emphasizes spiritual accomplishment than economic success. Cycles of death and rebirth. Moksha Protestant ethic makes a virtue of high savings rates, striving for efficiency, and reinvestment of profits to improve future productivity, all are necessary for the smooth functioning of a capitalist economy
DR.MANOHAR PANDIT

CULTURAL ENVIRONMENTAL FACTORS

Religion Islam, supportive of capitalism, but places more emphasis on the individuals obligation to society. Zakat, Namaz Happy Holidays. Walmart The impact of religion on international businesses varies from country to country. Impacts countrys legal system, homogeneity of its religious beliefs, and its tolerance to other religious viewpoints and banking
DR.MANOHAR PANDIT

CULTURAL ENVIRONMENTAL FACTORS

Other factors that affect the culture Social Structure
Individuals, Families, and Groups Oriental and Western social values Belongingness, for whom one works not the position Social Stratification Class and Caste Individualism Collectivism

DR.MANOHAR PANDIT

ROLE OF CULTURE IN MARKETING

Culture plays significant role in influencing consumer perception, that influences preference and purchase

Marketing Mix can be effective as long as it is relevant to given culture

DR.MANOHAR PANDIT

SELF-REFERENCE CRITERION
In behaving as is usual in the United States, the salesperson forgot the answer to a critical question: Who is the foreigner?

DR.MANOHAR PANDIT

WE ALL ARE DIFFERENT

Ethnocentrism Polycentrism Geocentrism

DR.MANOHAR PANDIT

IF THE WORLD WAS A VILLAGE OF 100 PEOPLE

How many would be from which major regions of the world? How many would speak what languages? How many would practice what religions? How many would have what degree of education? How many would be malnourished? How many would have regular access to clean drinking water?
DR.MANOHAR PANDIT

IF THE WORLD WAS A VILLAGE OF 100 PEOPLE

61 Asians 12 Europeans 14 from the Western Hemisphere, both north and south 13 Africans 50 would be female 50 would be male 74 would be nonwhite 26 would be white
DR.MANOHAR PANDIT

IF THE WORLD WAS A VILLAGE OF 100 PEOPLE

67 would be non-Christian 33 would be Christian 89 would be heterosexual 6 people would possess 59% of the entire world's wealth and all 6 would be from the United States 80 would live in substandard housing 14 would be unable to read
DR.MANOHAR PANDIT

IF THE WORLD WAS A VILLAGE OF 100 PEOPLE

33 would die of famine 1 would be near death; 1 would be near birth 7 would have a college education 8 would own a computer 11 would be homosexual

DR.MANOHAR PANDIT

ETHNOCENTRISM
Definition Ethnocentrism derives from the Greek word for people, ethnos and English word, center Tunnel vision is what the Ethnocentrism is generally referred as

DR.MANOHAR PANDIT

ETHNOCENTRISM
False assumptions about others ways based on our own limited experience is outcome of Ethnocentrism
Ethnocentrists see their community or nation as the model against which all others have to be judged

DR.MANOHAR PANDIT

PROBLEM WITH ETHNOCENTRISM?

Ethnocentrism leads to misunderstanding other persons
One falsely distort what is meaningful and functional to other peoples through our own cultural reference. One see their ways in terms of ones life experience, not their context

DR.MANOHAR PANDIT

PROBLEM WITH ETHNOCENTRISM?

One does not understand that he/she does not understand One is not aware that he/she can develop more valid understandings about how they experience life Very few Westerners understand Indian spiritualism, when they understand Indian perspective
DR.MANOHAR PANDIT

PROBLEM WITH ETHNOCENTRISM?

Expression of Ethnocentrism Violence Discrimination Proselytizing Verbal aggressiveness

DR.MANOHAR PANDIT

PROBLEM WITH ETHNOCENTRISM?

Effects

Creates the feeling that ones own culture is superior to other groups cultures Moves one to criticize, subordinate, undermine, and develop conflicting relationships with other groups Ethnocentric feelings can even cause an individual or group to fear for their own existence By implication other people's ways of thinking, behaviour are aberrant, strange and inferior
DR.MANOHAR PANDIT

PROBLEM WITH ETHNOCENTRISM?

PREJUDICE STEREOTYPE DISCRIMINATION
Generalized attitude towards members of a group

Generalized belief about members of a group

Behaviors directed towards people on the basis of their group membership

DR.MANOHAR PANDIT

PROBLEM WITH ETHNOCENTRISM?

Extreme effects of Ethnocentrism Racism Colonialism Ethnic cleansing

DR.MANOHAR PANDIT

RESOLVING ETHNOCENTRISM
Cultural Relativism Self-determination Interethnic encounters

DR.MANOHAR PANDIT

Environmental Adaptation
Ability to effectively interpret the influence and impact of the culture in which you hope to do business
Cultural adjustments

Establish a frame of reference

Avoid measuring and assessing markets against the fixed values and assumptions of your own culture

DR.MANOHAR PANDIT

THE SELF-REFERENCE CRITERION AND ETHNOCENTRISM

The key to successful international marketing is adaptation to the environmental differences from one market to another Primary obstacles to success in international marketing are
SRC Associated ethnocentrism

DR.MANOHAR PANDIT

THE SELF-REFERENCE CRITERION AND ETHNOCENTRISM

SRC is an unconscious reference to Ones own cultural values, experiences, and knowledge as a basis for decisions Dangers of the SRC
Failing to recognize the need to take action Discounting the cultural differences that exist among countries Reacting to a situation in an offensive to your hosts
DR.MANOHAR PANDIT

THE SELF-REFERENCE CRITERION AND ETHNOCENTRISM

Ethnocentrism is notion that ones own culture or company knows the best Ethnocentrism and the SRC can influence an evaluation of the appropriateness of a domestically designed marketing mix for a foreign market The most effective way to control the influence of ethnocentrism and the SRC is to recognize their effects on our behavior
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DR.MANOHAR PANDIT

SELF REFERENCE CRITERION (SRC)

As unconscious reference to ones own cultural values, experiences, and knowledge as a basis for decision-making is made
The SRC significantly influences ability of international managers to objectively evaluate environmental factors and make business decision
DR.MANOHAR PANDIT

APPROACH TO ELIMINATE SRC

Step 1:Define the business problem or goal in home-country traits, habits, or norms Step 2:Define the business problem or goal in foreign country cultural traits, habits, or norms. Make no value judgments Step 3:Isolate the SRC influence in the problem and examine it carefully to see how it complicates the problem Step 4:Redefine the problem without the SRC influence and solve for the optimum business goal situation
DR.MANOHAR PANDIT