PROJECT REPORT ON

FACTORS INFLUNCING SALES IN INTERNATIONAL

MARKET

BY
NAYANA PREMCHAND PULIYAMKOTTU
MMM-V
BATCH: 2012 -2015
ROLL NO: 43

UNDER THE GUIDANCE OF

PROF POONAM CHAUHAN

K. J. SOMAIYA INSTITTE OF MANGEMENT STUDIES & RESEARCH

VIDYANAGAR, VIDYA VIHAR (E), MUMBAI- 400 077

Executive Summary
Exports of a country play an important role in the economy. A healthy balance, a
sustainable development with trade and foreign exchange reserves to maintain the
country's export growth should be a constant and high rate. Exports as a whole affect
the industrial environment. To compete internationally, the industry standard for
quality products, competitive price, good packaging, etc, which is important for
overall industry.
India's GDP growth rate in exports is strong factor contributing to GDP increases
constantly day by day India in terms of population after China the second largest
country in the world. India's economy has performed well in recent years after the
country began to open in 1991. India's exports enter the WTO since 1995 has
doubled.
Exports in India decreased to 25634.08 USD Million in April of 2014 from 29578.43
USD Million in March of 2014. Exports in India averaged 3936.48 USD Million
from 1957 until 2014, reaching an all time high of 30541.44 USD Million in March
of 2013 and a record low of 59.01 USD Million in June of 1958.

Objective of the Project:

1. To understand International market and International Sales
2. Factors influencing International sales.
3. Hurdles in International sales.
4. Solution to overcome the huddles.

Introduction
What is international marketing and sales?
International marketing is the performance of business activities designed to plan,
price, promote, and direct the flow of a companys goods and services to consumers
or users in more than one nation for a prot. The only difference between the
denitions of domestic marketing and international marketing is that in the latter
case, marketing activities take place in more than one country.
And like wise an international sales is the sale carried on in between two nations.
There is a huge difference between International marketing and Domestic. The
uniqueness of foreign marketing comes from the range of unfamiliar problems and
the variety of strategies necessary to cope with different levels of uncertainty
encountered in foreign markets. Competition, legal restraints, government controls,
weather, ckle consumers, and any number of other uncontrollable elements can, and
frequently do, affect the protable out- come of good, sound marketing plans.
Generally speaking, the marketer cannot control or inuence these uncontrollable
elements but instead must adjust or adapt to them in a manner consistent with a
successful outcome. What makes marketing interesting is the challenge of molding
the controllable elements of marketing decisions (product, price, promotion,
distribution, and research) within the framework of the uncontrollable elements of the
marketplace (competition, politics, laws, consumer behavior, level of technology, and
so forth) in such a way that marketing objectives are achieved. Even though
marketing principles and concepts are universally applicable, the environment within
which the mar- keter must implement marketing plans can change dramatically from
country to country or region to region. The difficulties created by different
environments are the international marketers primary concern. The international
marketers task is more complicated than that of the domestic marketer because the
international marketer must deal with at least two levels of uncontrollable uncertainty

instead of one. Uncertainty is created by the uncontrollable elements of all business

environments, but each foreign country in which a company operates adds its own
unique set of uncontrollable factors.
In this study we will try to understand those factors deeply and will also look into
some of the cases which will make us understand its consequences.

FACTORS INFUENCING INTERNTIONAL SALES

A pilot has to check the atmosphere prior to take-off and landing his aircraft. A sailor
has to understand the depth of waters before sailing peacefully. A farmer has to plant
seeds depending on the nature of the soil and monsoon. On the same line, an
international business entry or operation depends upon multiple environmental
factors. They may change the direction, strategy and every moment of international
business operations.
An international marketer is required to understand, evaluate and work out various
parameters before venturing into any country. These Parameters are called
environmental factors and they determine the direction and purpose of the
international business operation. Many decisions depend upon environmental factors
right from selection of the country, location of the plant, liaison with the government,
and

entry

of

investment

from

local

bodies,

products

launch, channel management, promotion and opening of outlets. The first challenge
for an organization is to navigate from its home country to the host country.
Thereafter it has to develop a proper system so that the venture is successful in the
host country learn all about the regulatory bodies both in the host country and home
country; understand the customers changing tastes and attitude towards foreign
goods and finally obtain revenue and make the business effective with right people. A
majority of the multinational corporations and large business houses appoint a team
of experts who are specialists in economies, political science, sociology, industry
psychology and policy matters, to advice the management on its strategic decisions.
These experts are called risk analysts. Prior to entry or investing millions of dollars,
the experts gather all the relevant information about the country and interpret those
facts to facilitate the company. By such risk analysis, companies can safeguard
themselves from future dangers.The major risks are;
1. Political
2. Economic

3. Exchange
4. Socio culture
5. Financial
6. Legal
7. Technological
8. Competitive
9. Infrastructural and
10. Labour.
An organization can overcome the effects of all the risks by taking into account the
different environmental factors. Since the home environment is known, one can
understand and overcome the pitfalls in the event that any action goes wrong.
The international business related environments vary from continent, country to
country

and

even

from region

to region.

A detailed

and

comprehensive

analysis of such fast changing environment is essential for formulating business

strategies. Even well known companies with financial power, advance technology
and an efficient management team have failed in other countries. Examples are the
Enron project which did not take off in India; American style of managing a sales
force which never worked for Procter and Gamble in Japan; the multilayer marketing
technique

of

Amway,

which

South Korea and Kentucky Fried Chicken (KFC)

did

not

work

in

and McDonaldshamburgers,

which failed in Brazil and Tashkent respectively. Thus, it is important for a company
to have an international team to design strategies to suit varying environments of
different countries.
The economic environment, political environment, cultural

environment,

technological environment, legal environment and competitive environment plays a

vital role in determining an international business operation. Certain environments

are quite conducive to a company at the time of entry and later on they may pose
major

challenges

attracted huge investments before 2000. After 2002, they became

Argentina
detrimental

to

innumerable organizations. Hence environmental factorscould be stimulant or detrim

ental.If it is stimulant, the business will flourish. But if it is detrimental, then the
company has to be cautious.

ECONOMIC ENVIRONMENT:
The economic environment can be classified into three categories: a) Economy
in the home country b) Economy in the host country c) Economy at a global level.
A) Home country Economy
Since 1940, hundreds of MNCs from the USA have ventured abroad, with the support
of their home country. After 1990, many Indian companies started venturing into subSaharan Africa, South East Asia and LatinAmerica due to the liberal policies adopted
in India. In order to encourage the business community to venture overseas, it is
necessary for a country to have liberal economic and trade policies
1. Economic policies
The countrys economic policies are formulated and the targets are fixed looking at
business opportunities in other countries. It is made simpler for businessmen to invest
or set up units abroad.
2. Trade and commercial policies
The trade policy is announced by the ministry of commerce and industry and the
target for rational foreign trade is fixed. All the promotional bodies are
geared to achieve the target. Many incentives are held out to overseas companies, so
that they set up operations in the home country through local partners, Indonesia,
Thailand and Brazil extend all facilities in their home country to promote their
nationals
3. Promotion and regulatory measures
The home country should take the opportunity to do business abroad. It can do this by
being proactive, encouraging persons to take risks and extending fiscal and
promotional support. If restrictions are imposed and bureaucratic hurdles are
encountered at all stages the business community will not think of taking any risks.
By removing exchange control restrictions and draconian codes of business and

providing an environment conductive to foreign trade, small countries like Malta,

Cyprus and Mauritius have today transformed themselves into foreign trade
economies.
B) Host Country Economy.
When a firm from one country enters any other country, the following major criteria
are taken into account:
1. Size of the market many multinational firms are thinking of entering India, China,
Brazil and Indonesia, because of their large potential markets. Coca cola, Pepsi,
Hewlett Packard and Samsung are looking to India as a future destination keeping in
mind the size of population which represents the size of the market.
2. Gross Domestic Product (GDP), GDP is an indicator o the health of the economy;
it also determines per capita income. A country with a high GDP is an attractive
destination for any international businessman. If a constant growth rate ismaintained,
such a country would always be a magnet for investors. Thailand, Malaysia and
Indonesia were attractive during the 1990sdue to a very high growth rate in GDP,
until the currency crisis affected their economies.
3. Industrialization many firms in the developing world were interested in entering
into Europe or the USA. The recent trend amongst companies in India is towards
Latin America specially, Brazil, Argentina, Chile. This is due to the industrialization
program, which is taking place in these countries. It is obvious that industrialization
brings about prosperity and affluence.
4. Banking is the only channel through which remittances take place, and hence is a
major infrastructure for international business. European, American and Far East
economies have highly effective banking systems. Sub Saharan Africa and common
wealth Independent states (CIS) are not able to provide good banking services to the
international business community. Thus, a firm which enters Africa or the CIS
countries has to necessarily depend on other countries for banking services.

5. Purchasing Power: Another major determining factor for any international business
unit is whether the people can afford to buy for a product is low. In other countries
like Saudi Arabia, both the income and willingness to pay for the product are high. In
the Scandinavian countries the per capita income is very high and they are ready to
pay a premium price for highly sophisticated items. However, the low population is a
limiting factor.
6.
Foreign ExchangeAnother determining factor in international business is whether for
eign exchange facilities are available transactions. Although more than 70% of the
countries in the world do not have foreign exchange reserves, the majority of them
are becoming liberal in transacting foreign exchange as a long term strategy for their
future

economicdevelopment.

Against this, some countries with surplus foreign

exchange reserves do not permit free movement of the currencies. Such countries that
have

restrictions in

repatriation of

foreignexchange will not be attractive to international business firms.Therefore, count

ries withsufficient foreign exchange reserves, aliberal policy on repatriation and whic
h have a demand for the products and services are an ideal destination for any
company to do international business.
7. Income Levels: Economies are classified into low income and high income
economies
industrialized nations are high income economies andenjoy a high per capita income.
Companies manufacturing or marketing premium quality or high technology products
have an easyentry into such advanced countries with the proper strategies.Developing
countries, which are the low income economies, are price sensitive. Many of them are
under pressure from high population, unemployment and lack the vision to
industrialize fast. Still they need only primary goods and rated one amongst less
developed

countries.

Differences

income levels may limit the involvement andinvestments. Sometimes,

in the
in

densely populated country, a small percentage of the population can afford to buy

premium products. Since this does not represent the purchasing power of the whole
country, the revenue is minimum.
8.

Economic

diversity:

In the same country, a few urban

centers may offer outstanding business opportunities, while in remaining areas there
is no demand a tall. Nairobi I Kenya, Lusaka in Zambia, Johannesburg in South
Africa, Sao Paulo in Brazil and Casablanca in Morocco are cities with the highest
purchasing power and demand for refrigerators, air conditioners, TV sets etc.
However in other parts of the country, there is hardly any opportunity to do business.
In Madagascar, despite the fact that it is a highly resourceful country, one cannot get
even the basic item for survival, except in two cities, Tamatave and Antamarino.
C) ECONOMY AT A GOBAL LEVEL
Besides the home country and the Host country, there are certain other factors,
which can
influence the pattern of international business.Organizations such as the World Trade
Organization, World Bank,International Monetary Fund, Asian development bank an
d the organization of petroleum Exporting countries (OPEC) can affect international
business. The preferential treatment given to the members of NAFTA, ASEAN, the
European Union and COMESA can have a negative impact on the trade between
outside cartels and non-members. When shipments move from one destination
to another, there are transit ports which charge huge sums as surcharge or transit
charges.

SOCIAL ENVIRONMENT
The social environment encompassing religious aspects, language, customs, traditions
and beliefs, influences buying consumption habits. Many companies face failure in
foreign countries, due to their inability to understand the socio cultural environment.
For example whenever any company establishes business in some African countries,
the local population expects that many jobs will open up for them. Very few countries
perceive that they may be exploited. Due to the entry of foreign firms the economic
and hence the social environment of an area can completely change. An example is
southern China, which has completely changed to an affluent society due to the fact
that almost 2000 companies get their products manufactured in coastal south China.
1. National Taste: In Thailand, People prefer black shampoo; Nestle brews different
varieties of instant coffee because people in those countries have different tastes,
uncommon in other countries. Green is the favorite color of all the Arab countries;
Red is still widely used in Russia, in banners, posters, and hoardings although
communism is in no way relevant to modern Russia.
2. Language: Cross culture and cross border operations call for necessary
language skills, e.g. South Koreans have learnt Indian languages to operate in India.
One can see this in Hyundai or LG factories in India. Companies also have to change
their brand names and slogans in different countries. In Japan, General Motors
slogan body by fisher means corpse by fisher, and Pepsi Cola slogan come
alive means come out of the grave. Prior to promoting the brand, one has to take into
account

the

socio-cultural

background

of a

specific nation and different

interpretations of a name in the local language.

3. Values and beliefs: It is also important for companies to understand the
significance
of different designs and colors in different countries. For example, blue is perceived a
s
feminine in Holland andmasculine in widen. Green is favorite color in the Muslimwo

rld, but is associated with illness in Malaysia although it is a Muslim country. White
indicated death in china and Korea but it is the color of bridal dresses in Europe.
Red is associated with danger in many countries but it is a favorite in Russia. Another
example is swastika, which is considered sacred in India, but has completely
different connotations in the west.
4. Demography: A number of demographic factors such as age, sex ratio, family size
and occupation influence the business of many companies. Different companies
concentrate on different segments. For example, Barbie generates huge revenues
through the childrens segment of affluent countries.
5. Literacy rate: Countries with a high literacy rate experience a better standard of
living. Here the need is for standardizes goods, supported by technical services. For a
country with an educated population, the amount of training required for the staff will
be far less than in the case of the country which has a low literacy rate. This is
an important factor, as it influences the cost incurred. An argument holds in the case
of educating the consumer about the products manufactured.6.Female Work force the
most spectacular change that has taken place in the current era is the empowerment of
women

throughout

the

world.

InChina, Indonesia, Russia and Thailand, women are major contributors to the GDP.
With economic independency, women no longer have to depend on men to make
decisions about what to buy; they can make their own decisions about whether
to purchase

any

consumer product or durable. Dulex, a wellknown brand of paint in Europe was prom
oted throughcampaigns directed at women, because it was felt that women
have an aesthetic taste for colors in the household paint segment. The performance of
the

i-pod

of

Apple

hit

the

roof

in

terms of revenue generation due to female customers. The female work force is very
strong in various sectors in many countries. Examples are: Indian women in IT
enabled services and handicrafts, Chinese women in the soft toys and ceramics and

Indonesian women in garments and paper work, who have brought great success to
their countries.
7. Double Income Families: As the household income increases, the demand for the
number of products increases proportionately. This is especially true for packaged
food items, electronic gadgets, household appliances, health equipment, Japanese
entertainment electronics and French perfumes dominate in the whole of Europe and
NorthAmerica. Pizza Express, McDonald and Kentucky Fried Chicken invariably
rule the households of double income families throughout the world
8. Impulse buying: Benefit oriented buying is taking place everywhere. Pre- planned
shopping and scheduled purchases are gradually going away. Throughout the world,
people

need

instant

items.

They

see, ask and buy.

It is a major challenge to international businessmen to provide benefits to lure

impulse buying

POLITICAL ENVIRONMENT.
The political environment in international business operates indifferent dimensions:
1. The home country political environment;
2. The host country political environment, and
3. The global political environment.
1. Home Country Political Environment
In an ideal world, one would not normally expect domestic policies to affect the
firms international activities. Some countries like the USA encourage their
organization to establish activities abroad, especially in their core competency fields.
Japan encouraged their electronics and auto companies to spread their activities
outside Japan. Domestic firms that continue to invest and manufacture abroad while
ignoring their home country are often accused of creating domestic unemployment
problems and may be subject to political pressure, from the government. Indian
government encourages business houses to go and perform outside in steel,
healthcare, mining, textile and automobile.
2. Host Country Political Environment
If the actual benefits of foreign firms are shared in terms of employment, taxes and
social security with the locals, political atmosphere tends to be hospitable. If it is felt
that the foreign firms contribute nothing to the well being of the nation, it may
produce a hostile reaction from the business community and labor organization,
which in turn puts pressure on the government. In extreme cases, this may lead to
either political turmoil or the appropriation of the assets of the foreign firm .Mc
Donald had to face a change in the ruling party, in Israel. When the National
Religious Party (NRP) came into the power it demanded that McDonald should
change its practices or be shutdown.
3. Global Political Environment
This may be describes as the combined politics of the home country, the host country
and the other countries in the world. Multilateral agreements between international
organizations, such as GAAT, the UNO and the Commonwealth, may constitute an
impediment to free trade as well as to the nature and scope of the operation of
international firms. Embargos, Cartels, free trade pacts and customs unions allow

a few nations

to enjoy competitive

advantages, whilst others lose their business prospects. However, there may also be
advantages, e.g., the common wealth generalizes Systems of Preferences (CWGSP)
offers good opportunities to all commonwealth countries to supply and receive goods
and services at concessional rates, which ultimately give them a competitive edge
over non-commonwealth nations. Global politics can influence business in vastly
varying ways. For example the economic embargo on Iraq by the Security Council of
the United Nations in 1991 meant that conducting trade with that country was illegal
for

all

international

firma.

Another

China Ordering Microsoft to stop selling. Windows 95

example
as it

is

contained

politically offensive material including phrases likescommunist bandits. Microsoft

agreed to change the material for re-entry.

CULTURAL ENVIRONMENT
The cultural environment for international business refers to these of factors which
shape the material and psychological development of a nation and represents the
primary influence on individual lifestyle, attitude, pre-deposition and behavior as
consumers in the market.

The most important task of international

business is to identify relevant similarities and differences among countries, and

means and methods to matchthe organizations culture with that of the country of its
operation. For example, when Toshiba gained 100 percent ownership of RankToshiba in the Plymouth all the managers in charge learnt the British Style
of working. Working it is the operation of a business or dealing with customers
one cannot

overlook cultural elements.

The performance of a

company

in the international arena partly depends on how well the strategic elements fit into
the culture of the host country. Culture may be described as the totality
of the complex and learned behavior of members of a given society. Elements of
culture include beliefs, art, morale, code of conduct and customs. Culture has the
following three characteristics:
-It is learned: acquired by people over time through their membership in a group that
transmits culture from generation to generation.
- It is interrelated: i.e. one aspect of the culture is connected with another part, e.g.
religion and marriage, or business and social status.
-It is shared: i.e. tenets of a culture extend to other members of the group
Culture is perhaps one of the most important determinants of human behavior. Food
habits, social class, the family system, community units and other cultural and subcultural elements influence the process of decision making in day to day dealings and
the buying habits of customers. Thus, there is a need for cross-cultural
understanding because of the

significant differences in attitude, belief,

motivation, perception and life styles between

nations. For example, branded products will move fast in Europe and America, but
Africans perceive branded products as being very expensive.

The Influence of Culture on International Business

1. The Utility value of a product may differ considerably fromcountry to country
because of differences in beliefs, values and lifestyles. Fast foods, such as Kentucky
Fried

Chicken,

McDonalds, hamburgers and pizzas are more popular in modern

societies than in traditional societies. Similarly, branding and packaging are very
susceptible to cultural bias.
2. Products are launched in markets on the basis of either perceived or real utility
value. Products from certain parts of the world such as Western Europe, Japan
and United states command premium prices in developing countries because it is felt
that they are of better quality than locally manufactures products. They have a higher
value.
3. Culture is perhaps the most powerful influence in determining the acceptability of
advertising copy, design and other elements in various countries. Advertisements
released in France may not be acceptable in the United Kingdom. Many
advertisements acceptable to the other parts of the world will not be accepted in the
Saudi Arabia. Liquor advertisements are prohibited in many countries
4. Holidays in different countries vary on religious grounds. Friday is a holiday in
the whole of gulf region. In China, the offices and factories are closed for a week for
the New Year celebrations. For companies having firms in different countries,
it is therefore

impossible to impose the rule of common business

practices

everywhere, as productivity would be very low during festive days. Any strict
implementation of company policy will have direct repercussions, which may even
lead to closure of the business in different countries.

5. Local norms and practices may affect certain distribution strategies. Eating in
public .Places during Ramadan days is prohibited in Muslim countries. Therefore,
eateries are notopened during the day at this time. In Spain, mail order shopping
is very popular, whereas in the US and Europe chain stores are preferred, and doorto-door delivery is common in many Scandinavian countries. Shopping malls are
coming up in urban India faster than in any other country in the world. Still
small traditional shops near hometown are perceived as trustworthy suppliers when
the customers need groceries.
CASE: IKEA
In order to further understand the impact of culture on real life basis, we will consider
studying the case study of IKEA in China which would provide the cultural view
from a marketing perspective. Marketing which forms a key aspect of the companys
strategy to enter a new region needs to be customized according to the culture of the
region. IKEA Shanghai focused on the local culture and behaviour whilst creating its
marketing strategy for the local customers.
IKEA Shanghais marketing mix of 4 Ps will further elaborate on this customization
to meet local culture.
Product
Ian Duffy, IKEAs CEO of Asia-Pacific region, said IKEAs localization in China is
to appeal to Chinese customers taste. For example, the range of products offered in
the Chinese market should match the customers preference. The showrooms should
be designed and arranged in accordance with a Chinese style.
The company adapted such a product strategy that was insync with the oriental design
which achieved success (Armstrong and Kotler 2006). The company took into
consideration of the Chinese eating habits and produces its range of cooking style
cutlery which were 3 kinds of meat cleavers and 3 kinds of chopsticks together with
Western style of knives and forks. Anders Dahlvig, IKEAs CEO, states that that 5%

of the products IKEA sells in China is for China only, in contrast to 1% in IKEAs
European market (China-CBN 2005).
While the company is known for creating furniture and fixings which have a simple
design, they introduced specific designs for the Chinese new year which were dark in
color as preferred by the Chinese customers while designs which have an oriental
touch to it. Thus company further imbibed the local culture in its products by placing
logo of a red rooster indicating the new year, which is considered as auspicious by the
Chinese customers and hence it was a move which was well appreciated by the local
buyers.
One of the areas which the company has not looked into it is its form of simple
packaging while the Chinese customers prefer a brighter and fancy packaging which
also matches the goods inside. However the company communicates and focuses to
say to its customers that it uses simple and recyclable wrappings. Another point
which the company makes and is in line with the customer preference is that they do
not use such expensive packaging and hence are able to keep the end costs low,
which remains the critical selling point of the company.
Price
Understanding the Chinese customer preference for items tagged as low priced, the
company focuses on reducing prices, which has effectively attracted more customers.
Initially when the company entered the Chinese market, it focused on customers in
the tier 1 segment of income as their buyers, however when the company realized the
preference of cheaper priced goods by tier 1 segment of customers as well it further
reduced its prices substantially thus attracting more customers from all classes of
income. From 2000 to 2005, IKEA managed to reduce the general price of its
products by 46% to 70%.
Initially, when the company started operations in China, a large number of products
were being imported thus inviting more duty and import taxes on it making the final
price go higher. This was perceived by the Chinese customers as a brand with

expensive products, later on the company decided to source locally and thus cutting
down the prices which were easily affordable by the customers (Song 2005). Other
moves to cut cost were to expensive product brochures which were thick to a thinner
brochure with cheaper quality of paper (AFX News Limited 2006).
Thus it can be seen that the company understands price as a critical part of their
selling process and customizing it according to the local culture preference which is
for lower priced goods.

Place
Usunier (2000) proposes that according to the view from culture, any option of place
or distribution is one of the two elements of the marketing mix, which are important
in reaching out towards the customer. Since distribution also interacts with the
consumers in an indirect manner, it can be termed as a key point in the cultural
consideration as an efficient distribution can result in better priced products. For this
reason, the company established efficient and low cost network of distribution
channel and thus managed to reduce price or keep them in control. The company built
its own logistics centre rather than depending on other providers which was seen as a
key move to cost cutting since they could contain more than 300,000 cubic metres of
products (Chen 2006). These actions by the company solidify the fact that the
company has always looked out to keep operation costs in check and thereby offer the
best prices possible to the Chinese customers, which is one of their key preference.
Promotion
The companys strategy of promotion mainly includes its mixture of advertising,
sales promotion, public relations and other marketing tools. While the company uses
these set of tools to effectively communicate customer value it also needs to be
careful while delivering such messages so as to be in the boundary of the local culture
(Armstrong and Kotler 2006).

The company does not market its products specifically to each type of customer but
rather Let the customers to make their own choices through its catalogues. As seen
from the literature review that independence and liberty in decision making is well
appreciated by employees of a firm, it may well apply to the Chinese customers as
well who would like to make their own decision rather than be told what to buy.
Using local faces for better assimilation in an advertisement is useful to get
customers attention (Mummert 2007). Hence, characters in IKEAs commercials are
mostly Chinese trying to show that IKEA is suitable for a Chinese home.
The company also blends well with the Chinese cultural value developing relations
rather than just a business deal by selling things at the right price when they are
needed and not bring guided by profits by selling umbrellas when it is raining at the
standard price (Fan 2000)
Conclusion
Based on the case study of Ikea along with Hofstedes cultural dimensions framework
we can propose that culture has a critical influence on any international business
performance as it involves not only the consumers or the end users of services or
products of the company but also employees performance and communication skills.
While the Hofstede model provides a useful tool to quantify the new regions location
on four important dimensions, the case study provides a product and service based
view for the new company to focus on with regards to culture of that place. In the
current scenario where there is an increase of travel of company executives, culture is
much more exposed than it was before thus an employee transferred from a high
power distance country like USA to low power distance country like Malaysia may
have aggressive communication style which could be perceived in a negative manner,
thereby causing turbulence in the management of the company in that region. While
at the same time the importance a company gives to tis marketing mix which is
customized according to local requirements as seen in the case IKEA also remains
critical.

Some of the limitations of this approach would be the critique of Hofstede model by
other researchers wherein they state that he quantifying of cultural issues may
possibly hamper validity of research. This also remains the same case for various
companies entering different regions with an entirely different culture thus creating
culture clash possibilities. The employees of the parent firm may be working with
newly hired employees in a foreign region either in person or remotely however
culture would play a key role if the new development has to take place smoothly

TECHNOLOGY ENVIRONMENT
Technology and its applications are key factors in determining theinternational
competitiveness of a firm in conducting international business. Multimedia using
Pentium 4 is common in advanced countries whereas it will take at least another five
years to introduce such products in Africa. Leadership in technology is achieved and
maintained

through

consistent program of intensive research

and development, which can be

very

expensive.

Only those companies that are able to maintain their technological

activities

will

remain competitive A Company may invest millions of dollars in R&D, despite the
fact that the projected revenue in the home country would be very low.
However other countries will generate huge revenues over a period of time. The
Hoffkins, Bio Rad, Genen technology and Pfizer are examples of institutions and
firms, who are investing huge sums of money in R&D, because they are sure of their
returns on their investments over a period of time. In the late20th century, Asian
tigers,

Japan,

South

Korea,

Hong

Kong,

Singapore

and

Taiwan achieved a miraculous success due to their investment and implementation of

the technology policies in specific sectors.
Few countries, such as Japan for electronic equipment, Germany for medical
equipment, and the USA for pharmaceuticals have remained leaders in their fields for

decades. Other countries have remained behind them. The time between the
innovation and its adoption and its adoption may vary

to country. Innovating

countries are few. Following countries are many. Technology leaders encash on
skimming

pricing

strategies,

wherein

the

margins are huge.

Eriksson, Nokia, Motorola and LG have beensuccessful since they manufactured cell
phones. Currently, the businessopportunities exist in every country in the world. The
people around the world are adaptable to the technology too. While technology
innovation is adaptable to the masses, the companies involved in such business
prosper.

Today

Hewlett

Packard,

Fujitsn, Apple, Samsung and Lenova competeagainst each other by educating the
workers on using their laptops and launch their new versions everywhere

LEGAL ENVIRONMENT:
This relates to the laws and regulations governing the conduct of business activities in
the country. Before entering any country, firms avail of the services of local legal
firms to understand business interpretations pertaining to labor legislations, taxes,
environment, pollution, investment, distribution, contracts, logistics etc.
The international legal environment has three aspects:
a) Home country laws b) Host country laws c) International laws.
a) Home Country Laws
These deal with two important issues: i) Conduct of the firm in the domestic territory.
ii) Trade with the other countries
For international operators, the home country laws are not stringent. They are more of
facilitating or regulating in nature, but not controlling in normal practice.
b) Host country laws

These include investment regulations, tariffs and duties, anti-dumping regulations and
protection of local industries from unfair competition from industrialized countries.
Tariffs and duties are used to discourage imports of non-essential products in order to
conserve foreign exchange and maintain a favorable balance of trade and to generate
revenue. Seven advanced countries impose laws against developing countries. Super
301 against Indian nylon skirts imposed by USA as inflammable fabric and ban on
Indian sea food by Europe are the examples.
c) International Laws
These comprise treaties, conventions and agreement between nations, and have
basically the same standing as laws. They are particularly in areas relating to patents
and trademark protection and privacy laws. One has to understand the broad
provisions of UN resolutions, and multilateral trade agreements such as the WTO.
Disputes

are

solved

bydifferent means. Food and drug administration, health regulation,

registration

formalities are judiciously implemented in international

operations.

Investment

Business

restrictions in some sector, promotionin others and the role of regulatory

authorities are part of legal

environment.

For

example,

Nigerian government

nationalized the assets of British petroleum, when it was revealed that the company
as selling Nigerian crude oil to South Africa, despite an embargo.

COMPETITIVE ENVIRONMENT:
Competition is a threat imposed by an environment, which may effect or hamper or
challenge the operation of an international business firm. Competition either could be
from the firms home country or host country or third country. Sometimes product
related

competition

may

crop up through substitutes or low cost production process or technology

or

cost

reduction through economies of scale. The current international business operation

has to encounter competition as various levels such as entry, operation, production,
administration, human

resource,

technical

resource,

and

financial

resource. Distribution and logistics. Motorola had to face the face the competition
from Nokia, soon Nokia concentrated in fast growing markets of India and China
resulting the follower became leader in the world. Cuba based White
Spirit Company; Havana club entered very

late in the field and

surpassed

the

erstwhile leader like Smirnoff .Tusker and Phoenix the major beer brands in
COMES Countries (Common Market for East and South Africa) have been overtaken
by King Fisher after UB group took over National Breweries of South Africa. For
international companies, facing competition is a way of life. According to them,
competition keeps their mind alert, quality war isinevitable. Beyond theoretical
models, they believe in learning competitiveness in streets, countries and production
centers. They consolidate competitive advantages and succeed. Hyundai motors in
India, Honda motors in Europe and Tata Motors in Africa withstood all the
competitive forces and succeeded.

HURDLES IN INTERNATIONAL SALES

PRICING
Pricing is one of the most important marketing mix decisions, price being the only
marketing mix variable that generates revenues. Pricing is not a single concept, but a
multidimensional one with different meanings and implications for the manufacturer,
the middleman and the end-customer. Pricing strategy is of great importance because
it affects both revenue and buyer behaviour. The whole pricing environment is
therefore considered, first from the point of view of the company and its strategies
and then from the aspect of the consumer. However, it must not be forgotten that
there are other, external influences on pricing - not just a firms competitors but also
from government and legislation. Once these factors have been taken into account,
various pricing strategies are reviewed and some attention is given to how best to
implement those strategies; how pricing levels can be adjusted and how such tactics
do affect buyer behaviour and company revenue. The multidimensional character of
price should be taken into account for the pricing of products and services. Pricing
involves the determination (and adjustment) of a price structure and price levels, as
well as decisions on short-term price changes. A more effective, goal-oriented
approach to pricing is needed that explicitly takes into account the role of price as a
marketing mix instrument and as a profit generator. This provides a framework for
effective, goal-oriented pricing, and to highlight the major aspects and factors of the
pricing decision.
CASE:
THE PRICE WAR
The battle between Procter & Gamble and Kimberly-Clark brought Pampers and
Huggies, respectively, to places they have never been, forcing down diaper prices

worldwide, and expanding the global market for disposable diapers. A battle in Brazil
between the two giants gives an interesting glimpse of the global markets of
tomorrow. Disposable diapers are still considered a luxury by the vast majority of
Brazils 194 million people, whose average annual income is under $8,000. Before
P&G and Kimberly arrived, rich and poor alike generally made do with cloth or
nothing at all. The disposables that were avail- able were expensive, bulky, and leaky.
W hen less than 5 percent of the Brazilian mass market used disposable diapers, P&G
launched Pampers Uni, a no-frills, unisex diaper. Before Uni, it cost more to pay for
disposable diapers than to pay for a maid to wash the cloth ones. The introduction of
the relatively cheap, high-quality Uni fundamentally changed the economics of the
diaper market for most middle-class Brazilians.

T he plan was to put such

nonessentials as disposable diapers within the reach of millions of Brazilians for the
rst time. At the same time, the Brazilian economy was on the upswing ination
had subsided, and overnight, the purchasing power of the poor increased by 20
percent. Low-priced products ew off the shelves. P&G had to truck in diapers from
Argentina as it struggled to open new production lines.

But the good days did not

last. Kimberly-Clark entered the market and began importing Huggies from
Argentina. With the help of a Unilever unit as its Brazilian distributor, KimberlyClark gained immediate distribution across the country and quickly made deep
inroads into the market. Unilever agreed to work with Kimberly-Clark because its
archrival in soap was P&G, and Kimberly-Clarks archrival in diapers was P&G. The
two companies previously had entered into a global alliance to look for winwin
situations when it was in both their best interests to partner and help each other, from
a competitive standpoint, against the dominant P&G. The Brazilian market was the
perfect case for cooperation. With Unilevers help, Kimberly-Clark push girls invaded markets to demonstrate the diapers absorption. Sales rose rapidly and began to
exceed production. To increase market share, Kimberly-Clark formed an alliance with
Kenko do Brazil, P&Gs largest home-grown rival, and created the Monica brand.
Monicas Gang, a comic strip similar to Peanuts in the United States, sells widely
in Bra- zil. So Paulo malls were crowded with thousands of kids waiting to get an

Easter photo taken with actors in Monica suits, an honor that required the purchase of
three packs of diapers. Monica diapers were a big hit, and Kimberly-Clark became
number one in the Brazilian market. It was a tough blow to P&G. The company had
devoted an entire page of its annual report to how Pampers Uni had tripled its market
share in Brazil, helping P&G retain the number one position in a market that has
grown vefold. Now it suddenly found itself on the defensive. First it cut prices, a
step P&G loathes. Price cutting is like violence: No one wins, said the head of its
Brazilian operation. Then it broadened its prod- uct range, rolling out an up-market
diaper called Super-Seca, priced 25 percent higher than Pampers Uni. Later, in a
ank- ing move, it also unveiled Confort-Seca, a bikini-style diaper originally
developed for Thailand and priced 10 to 15 percent lower than the alreadyinexpensive Uni. K imberly-Clark red back, matching the price cut and then
introducing a cheaper version of Monica called Tippy Basic. Four weeks later, P&G
cut prices another 10 percent on Super- Seca and Confort-Seca. Despite the price
cuts, the two brands were still relatively expensive; then a wave of really cheap
diapers arrived. Carrefour, a French retailer that is now Brazils biggest supermarket
chain, sells crudely made Bye-Bye Pipi diapers from Mexico. Despite their inferior
quality, the cheap imports pulled down diaper prices across the board. The real war
started when lower prices became so attractive that consumers who otherwise could
not afford diapers came into the market. As prices continued to drop, the market
grew; that attracted more producers, which were mostly small, local Brazilian
companies that offered even lower- priced competitive diapers. One such company,
Mili, saw its market share increase from 4.8 percent to 16.2 percent over a three-year
period. What accounts for growth of these smaller companies? One analyst suggests
that the multi- nationals are too sophisticated and, thus, too expensive for the
Brazilian market: Smaller companies are just supplying what consumers need at a
price they can afford. But it also can be said that as prices drop, products become
more attractive to a larger segment of the total market.
This case shows how pricing affect a companys sales and how it can change buying
behaviour of consumers.

POLITICAL RISK
Companies look at the host countrys current or future political system to assess the
political risk. However, international businesses always face some political risk. If
you operate a Canadian company, foreign customers may be unable to pay in full and
on time because of instability from currency controls imposed by the government.
Types of Political Risk A company needs to evaluate all of these issues when
analyzing level of political risk in a country. Companies must consider the safety of
both their products and their people in unstable political situations.
1) Risk of General Political Instability: General political instability may not be
considered serious enough to cause investors to withdraw from a country. However,
general instability risk raises uncertainty about Canadian projects overseas.
2) Ownership Risk: when operations are threatened by government takeover or
expropriation, owners may lose their offshore property. This is referred to as
protectionism and nationalization of business.
3) Operations Risk: Government policies of the host country may impede business
operations such as finance, marketing, or property. These policies are known as
operations risk.
4) Transfer Risk: government policy may adversely affect currency exchange rates.
When policy results in currency devaluation or economic downtime which can affect
a companys ability to transfer capital out of the host country. When a company
creates wealth in another country it may be forced to return a considerable amount to
the countrys government. This process is known as repatriation of earnings.

Even if a company cannot know in advance the scope of the risks, if it can predict the
possibility of risk, provide for it, and still project a profit, its venture may be ready for
approval. There are a number of questions that the company should ask itself:
1. Is terrorism part of the political landscape? Terrorism, civil unrest, and the overthrow
of governments can seriously affect the international business community. 2. Could
extremist groups pose a danger to the general stability of society? 3. Has there been a
withdrawal of freedoms? If the countrys nationals are treated in this way, foreign
companies doing business there could find themselves having to conform to
restrictive laws. Withdrawal from freedoms is a signal of unstable government and
risk. As the government tries to protect a weakening hold on power, it becomes more
controlling. 4. What, if any, is the militarys role in government? If it is in power,
how firm is its grasp on power? 5. Is corruption part of the business ethic? Could a
company find itself having to make higher and higher payments to officials? 6.
Could religious or ethnic pressures lead to civil strife and endanger employees or
property?

COUNTERFEITING AND PIRACY

Counterfeit and pirated goods come from a wide range of industriesapparel,
automotive parts, agricultural chemicals, pharmaceuticals, books (yes, even
management books such as the one you are reading right now), records, lms,
computer software, mobilephones,

baby formula, auto parts, and even cars

themselves. Estimates are that more than 10 million fake Swiss timepieces carrying
famous brand names such as Cartier and Rolex are sold every year, netting illegal
prots of at least $500 million. Although dif- cult to pinpoint, lost sales from the
unauthorized use of U.S. patents, trademarks, and copyrights amount to more than
$300 billion annually. That translates into more than two million lost jobs. Software,
music, and movies are especially attractive targets for pirates because they are costly
to develop but cheap to reproduce and distribute over the Inter- net. Pirated CD music
sales are estimated to exceed $5 billion annually and are growing at 6 percent per
year. And unauthorized U.S. software that sells for $500 in this country can be
purchased for less than $10 in East Asia. The Business Software Alliance, a trade
group, estimates that software companies lost over $16.5 billion in the Asia-Pacic
region, $16.4 billion in Europe, and $9.4 billion in North America in 2009. Judging
from the press on the topic, one might conclude that China is the biggest piracy
problem. However, China has moved fast off the list of 20 worst piracy rates,
according to Exhibit 7.2. At this writing, it ranks #27 and piracy has fallen to 79
percent, down from 92 percent just a few years earlier. Moreover, the dollars lost in
the Unites States because of software piracy are the most in the world at $8.4 billion,
with China coming in a close second at $7.6 billion. Chinas progress is due primarily
to education programs, enforcement, and Microsofts historic agreement with
Lenovo. We also note that other populous nations have made major progress in
reducing software piracy (e.g., Russia down 11, Brazil down 10, Japan and Vietnam
both down 7 percent, India down 11 percent) between 2004 and 2009. Recent
research implies that for companies like Microsoft, some level of piracy actually can
serve the company. It can be seen as a kind of product trial that ultimately builds
commitment. As updated versions of products become available, purchases may

actually follow. Particularly as countries such as China begin to enforce WTO statutes
on piracy, customers conditioned on pirated goods may indeed be willing and able to
pay for the new versions. Factors leading to counterfeit are as stated below;
1) Inadequate protection
The failure to protect intellectual property rights adequately in the world marketplace
can lead to the legal loss of rights in potentially protable markets. Because patents,
processes, trademarks, and copyrights are valuable in all countries, some companies
have found their assets appropriated and protably exploited in foreign countries
without license or reim- bursement. 17 Furthermore, they often learn that not only
are other rms producing and selling their products or using their trademarks, but the
foreign companies are the rightful owners in the countries where they operate. There
have been many cases in which companies have legally lost the rights to trade- marks
and have had to buy back these rights or pay royalties for their use. The problems of
inadequate protective measures taken by the owners of valuable assets stem from a
variety of causes. One of the more frequent errors is assuming that because the
company has established rights in the United States, they will be protected around the
world or that rightful ownership can be established should the need arise. This
assumption was the case with McDonalds in Japan, where enterprising Japanese
registered its golden arches trademark. Only after a lengthy and costly legal action
with a trip to the Japanese Supreme Court was McDonalds able to regain the
exclusive right to use the trademark in Japan. After having to buy its trademark for
an undisclosed amount, McDonalds maintains a very active program to protect its
trademarks.
The failure to protect intellectual property rights adequately in the world marketplace
can lead to the legal loss of rights in potentially protable markets. Because patents,
processes, trademarks, and copyrights are valuable in all countries, some companies
have found their assets appropriated and protably exploited in foreign countries
without license or reim- bursement. 17 Furthermore, they often learn that not only
are other rms producing and selling their products or using their trademarks, but the

foreign companies are the rightful owners in the countries where they operate. There
have been many cases in which companies have legally lost the rights to trade- marks
and have had to buy back these rights or pay royalties for their use. The problems of
inadequate protective measures taken by the owners of valuable assets stem from a
variety of causes. One of the more frequent errors is assuming that because the
company has established rights in the United States, they will be protected around the
world or that rightful ownership can be established should the need arise. This
assumption was the case with McDonalds in Japan, where enterprising Japanese
registered its golden arches trademark. Only after a lengthy and costly legal action
with a trip to the Japanese Supreme Court was McDonalds able to regain the
exclusive right to use the trademark in Japan. After having to buy its trademark for
an undisclosed amount, McDonalds maintains a very active program to protect its
trademarks.
2) Prior use versus Registration
In the United States, a common-law country, ownership of IP rights is established by
prior use whoever can establish rst use is typically considered the rightful owner. In
many code-law countries, however, ownership is established by registration rather
than by prior usethe rst to register a trademark or other property right is
considered the rightful owner. For example, a trademark in Jordan belongs to
whoever registers it rst in Jordan. Thus you can nd McDonalds restaurants,
Microsoft software, and Safeway groceries all legally belonging to Jordanians.
After a lengthy court battle that went to the Spanish Supreme Court, Nike lost its
right to use the Nike brand name for sports apparel in Spain. Cidesport of Spain
had been using Nike for sports apparel since 1932 and sued to block Nike (U.S.)
sportswear sales. Because Cidesport does not sell shoes under the Nike label, Nike
(U.S.) will be able to continue selling its brand of sports shoes in Spain. A company
that believes it can always establish ownership in another country by proving it used
the trademark or brand name rst is wrong and risks the loss of these assets. Besides
the rst-to-register issue, companies may encounter other problems with registering.

China has improved intellectual property rights protection substantially and generally
recognizes rst to invent. However, a Chinese company can capture the patent for a
product invented elsewhere; it needs only to reverse-engineer or reproduce the
product from published specications and register it in China before the original
inventor. Latvia and Lithuania permit duplicate registration of trademarks and brand
names. A cosmetics maker registered Nivea and Niveja cosmetics brands in the
former Soviet Union in 1986 and again in Latvia in 1992, but a Latvian rm had
registered and had been selling a skin cream called Niveja since 1964. Neither the
Soviet nor the Latvian authorities notied either rm. Applicants are responsible for
informing themselves about similar trademarks that are already registered. The case is
being taken to the Supreme Court of Latvia. It is best to protect IP rights through
registration. Several international conventions provide for simultaneous registration
in member countries.
3) International conservation
Many countries participate in international conventions designed for mutual
recognition and protection of intellectual property rights. There are three major
international conventions:
1. The Paris Convention for the Protection of Industrial Property, commonly referred
to as the Paris Convention, includes the United States and 100 other countries.
2. The Inter-American Convention includes most of the Latin American nations and
the United States.
3. The Madrid Arrangement, which established the Bureau for International
Registration of Trademarks, includes 26 European countries.
In addition, the World Intellectual Property Organization (WIPO) of the United
Nations is responsible for the promotion of the protection of intellectual property and
for the administration of the various multilateral treaties through cooperation among
its member state
Approaches to protect the Intellectual Property and stop counterfeit.
The traditional, but relatively feeble, remedies for American companies operating in
countries such as China are several: (1) prevention, that is, engage local
representation and diligently register IP with the appropriate agencies; (2) pursue

negotiation and alternative dispute resolution; (3) complain to the Chinese

authorities; and (4) complain to the U.S. government and World Trade Organization
(WTO). Beyond these traditional strategies, research is now being conducted to better
understand consumers motivations with respect to counterfeit brands, and creative
thinkers of enterprise have come up with several new ideas that we brie y describe
next.
Microsoft: Bill Gatess negotiation strategy with Chinese software pirates demonstrates his guile, prescience, and patience. He accidentally revealed his strategy in
1998 in an interview at the University of Washington.
Although about 3 million computers get sold every year in China, people dont pay
for the software. Someday they will, though. And as long as theyre going to steal it,
we want them to steal ours. Theyll get sort of addicted, and then well somehow
gure out how to collect something in the next decade.
W ell, it didnt take a decade for this marketing/product trial approach to work. On
April 18, 2006, one day ahead of Chinese President Hu Jintaos arrival in Redmond,
Washington, for dinner at Gatess home and on his way to a meeting with President
George W. Bush, Gates inked a deal with Lenovo for $1.2 billion of software to be
included in the Chinese rms computers.
Philips: One of the originators of open innovation is Philips Research in the
Nether- lands. Thirty years ago, it pioneered the concept of partnering to develop and
market new ideas. Open innovation for Philips also means that it buys ideas from
R&D partners and sells ideas to marketing partners, rather than developing and
marketing only its own ideas. One projects ex emplies its innovative approach to
developing and protecting intellectual property in China. The PHENIX Initiative was
a commercial, industrial, and R&D project to develop mobile interactive digital
services for the 2008 Olympics. Led by France Tele- com, it involved nancing and
technology contributions from both European and Chinese corporations and
governmental organizations. Although many American rms have established design
and R&D centers in China al- ready, U.S. government restrictions on high-tech export
and American executives competitive angst prevent associations such as the
PHENIX Initiative for U.S. rms in China. Thus, our arms length relationships in

China limit both the amount of technology we develop and the degree of protection
afforded it compared with European and Asian competitors. Moreover, our pleas for
the Chinese government to protect our intellectual property sound exploitative to
both the authorities and the public there.
Warner Bros: Finally, we suggest an excellent way for IP-rich rms to make money
in China currently and in the near future, using the oldest pricing strategy of all:
Charge what the market will bear. Even with the reluctant help of the Chinese
authorities in en- forcing the WTO/TRIPs agreement, Chinese consumers will
continue the creative copying of foreign intellectual property until they are charged
what they perceive as reasonable prices. Indeed, we applaud the recent heroic,
albeit controversial, marketing strategies of Warner Bros. in China, which nearly
halved the prices of its DVDs to $1.88 and distributed the products within days of
their release in theatres earlier than anywhere else in the world.
CASE: Counterfeit Automotive Spare Parts Investigation
Background
Without authentic parts a vehicle can become compromised and turn into a
deadly weapon. Many people take for granted the fact that when a vehicle is
purchase from a genuine retailer, the automobile received is authentic. While this
may be true, the danger lies in the authenticity of each individual part that builds
the actual automotive itself
The economic downturn has pressured manufacturers to cut costs and seek
cheaper parts. While many industries have been affected, the automotive
industry has been particularly hard hit. The crisis has forced many outsourced
manufacturers to seek a more intensive cost cutting strategy through reduced
labor or cheaper materials. When manufacturers begin to source cheaper
materials they often neglect to check the quality and authenticity of the new
supplier. Instead the focus is shifted to cost savings which results in substandard
parts, from less trusted suppliers entering the supply chain. Quite
obviously, the results can have a devastating effect on the customer, and an
equally damaging effect on the brand owner. It is essential for the top automotive
companies to be aware of the situation and take action against counterfeit autoparts,
to protect their consumers, and their brand One of the worlds top 5 automotive
makers was recently experiencing large problems with counterfeit brake pads. Given
the huge and immediate problems with low-quality brake pads, the brand owner was
understandably worried about the deadly consequences. The manufacturer asked the

TV Rheinland Group to undertake an investigation to discover the full extent of the

situation in a specific city in China.
Objective and Process
The objective of the investigation was to examine the level of counterfeit brake
pads in the local market and to determine the financial damages and risk level to
the brand reputation. The investigators conducted mystery-shopping in 50 shops,
across 10 shopping areas, and randomly purchased both authentic and
counterfeit goods.
Results
Our investigation team identified that in total, 31 of the 50 shops investigated
offered counterfeit brake pads. Of the 31 shops, nearly half offered both genuine
and fake branded brake pads while the other half were selling counterfeit
branded brake pads ONLY.
Analysis revealed that one method of distribution was salting. Given that 30% of
the shops were offering both counterfeit and genuine brake pads, it can be
assumed that this common method is widely used in this location. Salting is a
sales method where the retailer mixes both counterfeit and genuine products into
their inventory. As all the products are packaged as genuine, the retailer can sell
the counterfeit products at genuine prices and generate a hefty profit from the
margin. While the tactic is profitable for the retailer, the results can be deadly for
the purchaser. The fact that of the existing products available, only 25% of the
stock was genuine, proves the high probability that consumers are in fact
unintentionally purchasing counterfeit brake pads at the cost of genuine ones.
Other aspects revealed by the investigation include the appearance of certain
counterfeit brake pads which are not actually manufactured by the brand owner.
In other words, counterfeit versions have appeared in several shops indicating
that the counterfeiters have a wider product line that the actual brand owner!
With the counterfeit versions supplying the demand for the specific vehicle types,
the client is losing out on potential revenue.
Perhaps the most worrying of all the findings was that out of the 50 shops, total
stocks of the genuine brake pads make up only 36.4% of the actual total market
of the branded brake pads. With the client producing at least 250,000
automobiles each year in China, we speculate that the minimum size of the entire
true market volume of branded brake pads is at least one million units (four brake
pads for one automobile). Applying this cost analysis to the true market volume,
the client is foregoing a minimum of 24 million RMB each year in China.
Conclusion
The alarming rate of counterfeit brake pads in the market is a huge threat to the
brand owners brand reputation and consequently value. More importantly, the
unintentional purchase of chip board brake pads or the equivalent can result in
deadly consequences for the end-user. After the conclusion of the investigation,
the TV Rheinland Group provided the client with a range of anti-counterfeiting
solutions to ensure brand risk management and protection. Now that the client is
much more knowledgeable and understands the high risks to their company, they

are ready to take the next steps forward to protecting their brand and consumers.
Further discussions are currently underway.

Targeted Fear and/or Animosity

It is important for marketers not to confuse nationalism, whose animosity is directed
generally toward all foreign countries, with a widespread fear or animosity directed at
a particular country. This confusion was a mistake made by Toyota in the United
States in the late 1980s and early 1990s. Sales of Japanese cars were declining in the
States, and an advertising campaign was designed and delivered that assumed the
problem was American nationalism. However, nationalism was clearly not the
problem, because sales of German cars were not experiencing the same kinds of
declines. The properly dened problem was Americans fear of Japan. Indeed, at
the time, Americans considered the economic threat from Japan greater than the
military threat from the Soviet Union. So when Toyota spent millions on an
advertising campaign showing Camrys being made by Americans in a Toyota plant in
Kentucky, it may well have exacerbated the fear that the Japanese were colonizing
the United States.

Best-selling titles in France, including The World Is Not

Merchandise, Who Is Killing France? The American Strategy, and No Thanks Uncle
Sam, epitomize its animosity toward the United States. Although such attitudes may
seem odd in a country that devours U.S. movies, eats U.S. fast foods, views U.S. soap
operas, and shops at U.S. Walmart stores, national animositywhatever the cause
is a critical part of the political environment. The United States is not immune to the
same kinds of directed negativism either. The rift between France and the United
States over the IraqU.S. war led to hard feelings on both sides and an American
backlash against French wine, French cheese, and even products Americans thought
were French. Frenchs mustard felt compelled to issue a press release stating that it is
an American company founded by an American named French. Thus, it is quite
clear that no nation-state, however secure, will tolerate penetration by a foreign
company into its market and economy if it perceives a social, cultural, economic, or
political threat to its well-being.

Resistance to Change
A characteristic of human culture is that change occurs. That peoples habits, tastes,
styles, behavior, and values are not constant but are continually changing can be
veried by read- ing 20-year-old magazines. However, this gradual cultural growth
does not occur without some resistance; new methods, ideas, and products are held to
be suspect before they are accepted, if ever. Moreover, research shows that consumers
in different cultures display differing resistance. The degree of resistance to new
patterns varies. In some situations, new elements are accepted completely and
rapidly; in others, resistance is so strong that acceptance is never forthcoming.
Studies show that the most important factors in determining what kind and how much
of an innovation will be accepted is the degree of interest in the particular subject, as
well as how drastically the new will change the oldthat is, how disruptive the
innovation will be to presently acceptable values and behavior patterns. Observations
indicate that those innovations most readily accepted are those holding the greatest
interest within the society and those least disruptive. For example, rapid
industrialization in parts of Europe has changed many long-honored attitudes
involving time and working women. Today, there is an interest in ways to save time
and make life more productive; the leisurely continental life is rapidly disappearing.
With this time consciousness has come the very rapid acceptance of many
innovations that might have been resisted by most just a few years ago. Instant foods,
labor-saving devices, and fast-food establishments, all supportive of a changing
attitude toward work and time, are rapidly gaining acceptance. A n understanding of
the process of acceptance of innovations is of crucial importance to the marketer. The
marketer cannot wait centuries or even decades for acceptance but must gain
acceptance within the limits of nancial resources and projected protability periods.
Possible methods and insights are offered by social scientists who are concerned with
the concepts of planned social change. Historically, most cultural borrowing and the
resulting change has occurred without a deliberate plan, but increasingly, changes are

occurring in societies as a result of purposeful attempts by some acceptable

institution to bring about change, that is, planned change