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14.4: Factors Shaping the Global Marketing Environment

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  • What you’ll learn to do: explain the importance of understanding how demographic, cultural, and institutional factors shape the global marketing environment

    While the same basic domestic marketing principles apply to global marketing, there are additional layers of complexity for marketers to consider when working across markets in different countries and world regions. Much of this complexity centers the need to develop a keen understanding of the consumer and the target market—a task essential for effective marketing, whether global or domestic. But in the global environment, there are additional questions to ask and issues to consider in order to fully appreciate the consumer and the marketing opportunities in a target market.

    Additional complexity resides in the business environment created by government, regulatory bodies, and other societal institutions that shape the behaviors of individuals and institutions. This business environment is somewhat unique to every country and target market. Understanding these dynamics can help marketers work more effectively to achieve their organizations’ business objectives.

    The specific things you’ll learn in this section include:

    • Explain the importance of evaluating the demographic profile of a country to determine product demand and acceptance
    • Describe how different cultural environments can affect the global marketplace and the marketing mix
    • Explain how governmental regulation and available supporting institutions can impact marketing in specific countries or regions

    Using Demographics to Guide Global Marketing Strategy

    Whether marketing to domestic or international markets, demographic information can provide important insights about a target market and how to address consumer needs. As discussed during this our discussion of consumer behavior, demographics refer to statistical information about the characteristics of a population.

    Marketers typically combine several variables to create a demographic profile of a target market. A demographic profile (often shortened to a “demographic”) is a term used in marketing and broadcasting to describe a demographic grouping or a market segment. Common demographic variables to consider for global and domestic marketing purposes include the following:

    • Age: Age bands, such as 18–24, 25–34, etc., are great predictors of interest in some types of products. For example, few teenagers wish to purchase denture cream.
    • Social class: Social-class bands such as wealthy, middle, and lower classes. The rich, for instance, may want different products than middle and lower classes, and may be willing to pay more.
    • Gender: Males and females have different physical attributes that require different hygiene and clothing products. They also tend to have distinctive male/female mindsets and roles in the family and household decision making.
    • Religious affiliations: Religion is linked to individual values as well as holiday celebrations, often tied to consumer preferences and spending patterns.
    • Income brackets: Indicating level of wealth, disposable income, and quality of life.
    • Education: Level of education is often tied to consumer preferences, as well as income.
    • Geography: Area of residence, urban vs. rural, and population density can all be important inputs into marketing strategy and decisions about where and how to target advertising and other elements of the promotion mix.

    Demographic research may include a variety of other characteristics used to separate a country’s population into groups that fit a company’s target customer profile. A demographic profile also provides enough information about the typical member of this group to create a mental picture of this hypothetical aggregate. For example, a marketer might speak of the single, female, middle-class, aged 18–24, college-educated demographic.

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    Country of birth of Swedes in 2001: Demographics can be measured in a variety of ways. The map shows an estimation of foreign-born residents in Sweden.

    Researchers examining demographics typically have two objectives in mind: first, to segment the market by determining which subgroups exist in the overall population; and second, to create a clear and complete picture of the characteristics displayed by typical members of each segment. Once these profiles are constructed, marketers can use them to develop the targeting strategy and accompanying marketing strategy and marketing plan.

    With demographic profiles about target segments in hand, marketers evaluate the marketing mix. They make recommendations about whether to change, decrease, or increase the goods or services offered. Based on demographic data, marketers may adjust product features, distribution strategy, or other factors in order to reach a market segment that has the most potential.

    A demographic profile can be very useful in determining the promotional mix and how to achieve maximum results. Advertising is usually part of the promotional mix, especially when businesses are still in the early stages of entering a global market and launching products that are new to that market. Advertisers want to get the most results for their money, and so in global markets as in domestic markets, careful media research is conducted to match the demographic profile of the target market to the demographic profile of the advertising medium.

    Cautions About Demographic Profiling in Global Markets

    Demographic profiling is essentially an exercise in making generalizations about groups of people. As with all such generalizations, many individuals within these groups will not conform to the profile. Demographic information is aggregate and offers probabilistic data about groups—not specific individuals. Critics of demographic profiling argue that such broad-brush generalizations can only offer limited insight.

    Marketers must also be careful to avoid interpreting demographic information using the the mindset of their own “home” cultures. For example, the generalizations that apply to “tweens” (9–12-year-olds) in the U.S. may not apply at all to children in this same age range in other geographies. Similarly, assumptions about how social class affects consumer preferences may be very different in a socially mobile society versus one with very rigid separation between groups from different social classes. Marketing research should seek to understand a complete picture of how demographic characteristics tend to influence consumer behavior in a given market, rather than simply applying stereotypes from elsewhere.

    The Immense Impact of Culture in Global Marketing

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    Culture refers to the influence of religious, family, educational, and social systems on people, how they live their lives, and the choices they make. Marketing always exists in an environment shaped by culture. Organizations that intend to market products in different countries must be sensitive to the cultural factors at work in their target markets. Even cultural differences between different countries–or between different regions in the same country–seem small, marketers who ignore them risk failure in implementing their programs.

    Culture is complex, and fully appreciating its influence takes significant time, effort, and expertise. Various features of a culture can create an illusion of similarity, but marketers need to dig deeper to make sure they truly understand the people and environments in which they work. Even a common language does not guarantee similarity of interpretation. For example, in the U.S. we purchase “cans” of various grocery products, but the British purchase “tins.” In India, where English is one of a number of officially recognized languages, “matrimonial” is used as a noun in casual conversation, referring to personal ads in newspapers seeking marriage partners.

    Several dimensions of culture that require particular attention from global marketers are listed below.

    Language

    As suggested above, the importance of language differences cannot be overemphasized, and there are nearly three thousand languages in the world. Language differences can be a challenge for marketers designing IMC campaigns, product labels, brand and product names, tag lines, and so on. Finding a single brand name that works universally in terms of pronunciation, meaning, and “ownability” is a monumental challenge. Of course, correct and grammatical use of language in marketing communication is essential for a product, brand, or company to be viewed as credible, trustworthy, and of high-quality.

    Language gains complexity when a country has more than one officially recognized language. To illustrate, in Canada, national law requires that labels include both English and French. In India and China, more than two hundred different dialects are spoken. India has more than twenty officially recognized languages. Mainland China’s official spoken language is Standard Mandarin, and several autonomous regions have designated other additional official languages. Meanwhile in Hong Kong and Macau, Cantonese Chinese, English, and Portuguese are the official languages. Clearly language can become a very complicated issue for marketers very quickly!

    Finally, marketers should be attuned to what they communicate when they choose which languages to use–or not use. In Eastern Europe, for example, the long history of Soviet occupation during the Cold War has left many inhabitants with a negative perception of the Russian language. Products that carry Russian labeling may suffer accordingly.

    Customs and Taboos

    2113881040_cd2ee31279_b-1024x768.jpgAll cultures have their own unique sets of customs and taboos. It is important for marketers to learn about these customs and taboos so that they will know what is acceptable and unacceptable for their marketing programs. For example, in Japan, the number four is considered unlucky, and products packages containing four items are avoided by many consumers. In Middle Eastern countries where Islamic law is strictly observed, images displaying the uncovered arms or legs of the female body are considered offensive. Meanwhile in Egypt, where many women wear the headscarf or hijab in public, an increasing number of younger women are in work and educational settings where gender segregation does not exist. Marketers struggle with whether to portray women with or without the hijab, knowing that they risk offending some of their target audience with either choice. Marketers should seek guidance from native experts familiar with local culture and customers. Marketing research can also help marketers understand and navigate these complex issues.

    Values

    The role of values in society is to dictate what is acceptable or unacceptable. Values are part of the societal fabric of a culture, and they can also be expressed individually, arising from the influence of family, education, moral, and religious beliefs. Values are also learned through experiences. Not surprisingly, values can influence consumer perceptions and purchasing behavior. For example, consumers in some countries, such as the United States, tend to be individualistic and make many purchasing decisions based on their own personal preferences. In other countries, such as Japan, the well-being of the group is more highly valued, and buying decisions are more influenced by the well-being of the group, such as the family. Based on these differences in values, it is not surprising that ads featuring individuals tend to do better in countries where individualism is an important value, and ads featuring groups do better in countries where the group’s well-being is a higher value.

    Time and Punctuality

    Different cultures have different sensitivities around time and punctuality. In some countries, being slightly late to a meeting is acceptable, whereas in other countries it is very insulting. For cultures that highly value punctuality, being on time is a sign of good planning, organization, and respect. In cultures where precise punctuality is less important, there is often a greater emphasis on relationships. The fact that a meeting happens is more important than when it happens.

    While there are cultural stereotypes about time management (such as the laid-back “island time” many residents of island nations refer to), the best rule of thumb in business is to be punctual and meet deadlines as promised. You will not insult people by following this rule. Also, it is wise not to apply popular stereotypes to individual people for whom the cultural stereotype may or may not be true. You should let a person’s behavior speak for itself, and always treat others with the same level of courtesy you would expect from them.

    Business Norms

    Business norms vary from one country to the next and may present challenges to foreigners not used to operating according to the particular norms of the host country. In business meetings in Japan, for example, it is expected that the most senior person representing an organization will lead the discussion, and more junior-level colleagues may not speak at all. The role of alcohol in business meetings varies widely by culture: in Middle Eastern cultures where alcohol is forbidden, it may be insulting to serve or even offer an alcoholic beverage. In China, many rounds of toasts are customary as part of formal dinner meetings.

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    President Barack Obama clasps his hands in the traditional “namaste” greeting in India.

    Likewise, business norms around greetings and physical contact also vary. American-style handshakes have become accepted as a business norm in many cultures, but this custom is not universal. In Japan and some other Asian cultures, a respectful bow is the traditional business greeting, although the handshake is becoming more common. In Islamic cultures, contact between men and women is a sensitive issue, even in business settings. In those regions and cultures, it is best to shake hands with a woman only if she extends her hand first. Similarly, Western women may avoid causing embarrassment by shaking hands only if a hand is extended to her. In India, the namaste (a slight bow with hands brought together on the chest) remains a respectful, if traditional business greeting particularly when interacting with women and older people.

    Always seek guidance from a trusted colleague or friend who has experience in the local customs and can offer coaching on proper etiquette.

    Religious Beliefs and Celebrations

    As discussed earlier in this module, religious beliefs and practice can strongly influence what consumers buy (or don’t buy), when they shop, and how they conduct business. It is important for marketers to understand the influence of religion on consumer culture in the markets where they operate, so that their marketing activities can be appropriately sensitive. Failing to respect religious beliefs or cultures can seriously undermine the reputation of a company or brand. At the same time, marketers who are attuned to the impact of religion on local culture can find great advantage in aligning marketing messages and promotional opportunities to religious practice.

    For example, all the major world religions observe holidays that include feasting and gift giving. These festival seasons tend to be prime shopping seasons as well, such as the Christmas season in Western cultures, or Ramadan in Muslim cultures. Religious beliefs lead to sensitivities about certain products: in the Hindu religion, cows are considered sacred and people refrain from eating beef. Observant Jews and Muslims consider pork unclean, and they consume only kosher or halal meats, respectively. Many religions eschew alcohol: for example, devout Sikhs, Muslims, Mormons, Buddhists, and Southern Baptists all refrain from drinking.

    Religious beliefs may cause sensitivities around revealing images or sexually suggestive material. Religious beliefs associated with the symbolism of different colors may create either preferences for or rejection of certain products and marketing materials. The link between religious practice and gender roles may affect which members of the family influence which types of buying decisions. It is important, however, for marketers not to oversimplify how decision making happens in these settings. Even if a woman, for example, is not the primary buyer, she may exercise strong influence of many consumer decisions.

    Here, as in other areas of cultural impact, is it crucial for marketers to educate themselves about the people and cultures they are targeting for marketing and business in order to use cultural knowledge to advantage.

    The Influence of Government and Regulations on Global Marketing

    Political Stability

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    The Haitian National Palace (Presidential Palace) in Port-au-Prince, Haiti, heavily damaged after the earthquake of January 12, 2010. Besides struggling to rebuild the country after the earthquake, Haiti has had to cope with decades of political conflict and instability.

    Business activity tends to grow and thrive when a nation is politically stable. When a nation is politically unstable, multinational firms can still conduct business profitably, but there are higher risks and often higher costs associated with business operations. Political instability makes a country less attractive from a business investment perspective, so foreign and domestic companies doing business there frequently must pay higher interest rates on business loans, higher insurance rates, and often higher costs to protect the security of their employees and operations. Alternatively, in countries with stable political environments, the behavior of consumers and markets is more predictable, and organizations can rely on governments enforcing the rule of law, meaning that governments do not exercise power arbitrarily. Instead, they adhere to established, recognized, and well-defined laws.

    Domestic and Global Business Law

    Governments around the world maintain laws that regulate business practices. In some nations, these laws are more heavy-handed, and in other countries, the environment for business is more freewheeling and self-regulating. Some of these laws and regulations are designed to create a stable environment for business (both domestic and international) with the establishment and enforcement of property rights and contracts. Others are designed to protect consumers and the environment, requiring businesses to adhere to responsible, safe, and ethical practices. Still other laws and regulations privilege domestic businesses and protect or partially shield them from foreign competition. There are even laws and regulations that affect what marketers are allowed to include in marketing communications, although these are far more strict in some countries than in others. And of course, some laws and regulations deal with taxation and other costs of conducting business.

    Marketers should become familiar with the political and regulatory environments in the countries and world regions where they operate, and specifically the laws, regulations, and legal processes that may affect business and marketing operations. For example, it is common for countries to maintain laws and regulations in the following areas:

    • Contract law governing agreements about the supply and delivery of goods and services
    • Trademark registration and enforcement for brand names, logos, tag lines, and so forth
    • Labeling for the purposes of consumer safety, protection, and transparency
    • Patents to enforce intellectual property rights and business rights associated with unique inventions and “ownable” business ideas
    • Decency, censorship, and freedom-of-expression laws to which marketing communications are subject
    • Price floors, ceilings, and other regulations regarding the prices organizations can charge for some types of goods and services
    • Product safety, testing, and quality control
    • Environmental protection, conservation, and the use of permits and other regulatory tools to encourage acceptable and responsible business practices
    • Privacy, including laws governing data collection, storage, use, and permissions associated with consumers and their digital identities
    • Financial reporting and disclosure to ensure that organizations provide transparency around using sound business and financial practices

    In some cases, international laws and regulations also seek to govern these issues, looking out for ways to manage the friction that can surface between national governments, as well as ways to serve the common interests of regional allies and economic partners.

    Free Trade and Protectionism

    Free trade refers to the free exchange of goods and services across international borders without governmental restrictions such as quotas (which limit amounts of goods that can be traded), tariffs (which are taxes charged for imported or exported goods), and other restrictions. Many nations encourage free trade by inviting foreign firms to invest in and conduct business without severe disadvantages or restrictions compared to domestic businesses. Often these same governments encourage domestic firms to engage in overseas business. When governments have a strong free-trade orientation, they typically prefer not to enact regulations that strictly limit imports and discriminate against foreign firms–at least not in most product and service categories. When countries enact free trade agreements with one another, they agree to allow advantageous terms for the flow of goods and services between designated countries.

    Regional trading blocs represent a group of nations that join together and formally agree to reduce trade barriers among themselves. The North American Free Trade Agreement (NAFTA) enacted between Canada, the U.S., and Mexico boosts export sales between these countries by enabling companies to sell goods at lower prices because tariffs are reduced or eliminated. The EU Single Market attempts to guarantee free trade between the twenty-eight member states of the European Union. The Association of Southeast Asian Nations (ASEAN) is an example of a regional trading block. This agreement allows for the free exchange of trade, service, labor, and capital across the ten independent member nations. In addition, ASEAN promotes the regional integration of transportation and energy infrastructure.

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    Figure 1. The Association of Southeast Asian Nations (ASEAN)

    One of the potentially interesting results of trade agreements like ASEAN or NAFTA is that many products previously restricted by dumping laws—which are laws designed to keep out foreign products—would be allowed for sale.

    Almost all the countries in the Western hemisphere have entered into one or more regional trade agreements. Such agreements are designed to facilitate trade through the establishment of a free-trade area, customs union, or customs market. Free-trade areas and customs unions eliminate trade barriers between member countries while maintaining trade barriers with nonmember countries. Customs unions maintain common tariffs and rates for non-member countries. A common market provides for harmonious fiscal and monetary policies while free trade areas and customs unions do not.

    Governments engage in protectionism when they enact policies that privilege domestic industries and businesses over those based in foreign countries. Protectionist policies may enact quotas that strictly limit the numbers of imported or exported goods allowed. Quotas are designed to prevent foreign imports from meeting all the demand for a product; instead, they carve out room for domestic suppliers to meet some of this demand. Another common protectionist policy is to levy tariffs that restrict trade by placing taxes on imported goods to make them more expensive in the domestic market. The amount of the tariff varies in proportion to the value of the good and the degree to which the government wants to make it prohibitively expensive for foreign businesses to sell products in a domestic market. Protective tariffs are frequently established to protect domestic manufacturers against competitors by raising the prices of imported goods. Not surprisingly, U.S. companies with strong business traditions in foreign countries may support tariffs to discourage entry by other U.S. competitors.

    Expropriation

    All multinational firms face the risk of expropriation. Expropriation takes place when a government takes ownership of property or business operations such as real estate, manufacturing plants, or other assets, sometimes without compensating the owners. In many expropriations of foreign business property by domestic governments, there have been payments, and it is often equitable. While expropriation is often carried out by a government on behalf of its people, in fact many of these facilities end up in private hands rather than as publicly owned and operated entities. Because of the risk of expropriation, multinational firms are at the mercy of foreign governments, which are sometimes unstable and can change the laws they enforce at any point to meet their needs.

    Trade Policy and the World Trade Organization

    Countries engage in international trade for two basic reasons, each of which contributes to the country’s gain from trade. First, countries trade because they are different from one another. Nations can benefit from their differences by reaching agreements in which each party contributes its strengths and focuses on producing goods efficiently. Second, countries trade to achieve economies of scale in production. If each country produces only a limited range of goods, it can produce each of these goods at a larger scale and hence more efficiently than if it tried to produce everything. While international trade has been present throughout much of history, its economic, social, and political importance have increased in recent centuries, mainly because of industrialization, advanced transportation, globalization, multinational corporations, and outsourcing.

    The World Trade Organization (WTO) was formed to supervise and liberalize international trade on January 1, 1995, under the Marrakech Agreement. The organization deals with the regulation of trade between participating countries. It provides a framework for negotiating and formalizing trade agreements and a dispute resolution process aimed at enforcing participants’ adherence to WTO agreements.

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    World Trade Organization participation: The WTO was founded in 1995 with 123 member countries. By 2019 it included 164 member states.

    Trade Sanctions

    Trade sanctions are penalties imposed on one country by one or more other countries. Allied countries may impose sanctions on their enemies. On occasion, the WTO authorizes trade sanctions against a specific country in order to punish that country for some action. An embargo, a severe form of externally imposed isolation, is a blockade of all trade by one country on another. For example, the United States initiated a longstanding commercial, economic, and financial embargo against Cuba in 1960 after Cuba expropriated American-owned oil refineries located in Cuba without compensation.

    Trade Barriers

    Although there are usually few trade restrictions within countries, international trade is usually regulated by governmental quotas and restrictions and often taxed by tariffs. Tariffs are usually on imports, but sometimes countries may impose export tariffs or subsidies. All of these are called trade barriers, which are established by a government that implements a protectionist policy. If a government removes all trade barriers, a condition of free trade exists. The WTO helps arbitrate and settle disputes about trade barriers between different countries.

    Fair Trade

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    International Fairtrade Certification Mark

    The fair trade movement promotes the use of labor, environmental, and social standards for the production of commodities, particularly those exported from developing countries to industrialized nations. Importing firms voluntarily adhere to fair trade standards, or governments may enforce them through a combination of employment and commercial law. Proposed and practiced fair trade policies vary widely, ranging from the common prohibition of goods made using slave labor to minimum-price support schemes such as those for coffee in the 1980s, to industry-focused marketing schemes to boost consumer demand for fair trade products. Nongovernmental organizations (NGOs) also play a role in promoting fair trade standards by serving as independent monitors of compliance with fair trade labeling requirements. Today fair trade certification processes inspect grower and manufacturer facilities to confirm that ethical practices are in place, and participating organizations are authorized to market their products using an increasingly visible “Fairtrade” certification mark.

    A Case in Point: China

    China offers an interesting and current example of the affects of political, regulatory, and trade policy on economic growth and the business environment. Beginning around 1978, the People’s Republic of China (PRC) began an experiment in economic reform. In contrast to the previous Soviet-style, centrally planned economy, the new measures progressively relaxed restrictions on farming, agricultural distribution, and, several years later, urban enterprises and labor.

    China’s more market-oriented approach reduced inefficiencies and stimulated private investment, particularly by farmers, which led to increased productivity and output. The reforms proved successful in terms of increased output, variety, quality, price, and demand. In real terms, the economy doubled in size between 1978 and 1986. By 2008, the economy was 16.7 times the size it was in 1978, and 12.1 times its previous per capita levels.

    International trade progressed even more rapidly, doubling every 4.5 years on average. In 1991, the PRC joined the Asia-Pacific Economic Cooperation group, a trade-promotion forum. Total two-way trade in January 1998 exceeded that for all of 1978. In 2001, China joined the World Trade Organization. In 2007, China surpassed the U.S. in exports, and in 2009, China surpassed Germany to become the world’s leading exporter. [1] Today, US companies must compete with Chinese imports as a reality of doing business, but also have easier access to China’s labor force and natural resources as an option in sourcing. For many companies manufacturing relationships with China and sales opportunities in China have led to efficiencies and new market opportunities.


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