Principles of Marketing U5

UNIT 5 i
Extending marketing
Unit 5
BBM 104/05
Principles of Marketing
Extending Marketing
ii WAWASAN OPEN UNIVERSITY
BBM 104/05 Principles of Marketing
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UNIT 5 iii
Extending marketing
Contents
Unit 5 Extending Marketing
Unit overview 1
Unit objectives 2
5.1 Creating a competitive advantage 3
Objectives 3
Introduction 3
Competitor analysis 4
Identifying competitors 5
Assessing competitors 6
Selecting competitors to attack and avoid 8
Designing a competitive intelligence system 9
Competitive strategies 10
Approaches to a marketing strategy 10
Basic competitive strategies 11
Competitive positions 13
Suggested answers to activities 18
5.2 The global marketplace 21
Objectives 21
Introduction 21
Global marketing in the 21st century 21
Looking at the global marketing environment 22

The international trade system 23
Economic environment 24
Political-legal environment 25
Cultural environment 25
Deciding whether to go international 27
Deciding which markets to enter 28

iv WAWASAN OPEN UNIVERSITY
Deciding how to enter the market 29

Exporting 29
Joint venturing 30
Direct investment 32
5.3 Market ethics and social responsibility 37
Objectives 37
Introduction 37
Social criticisms of marketing 38

Marketing’s impact on individual consumers 39
Marketing’s impact on the society as a whole 43
Marketing’s impact on other businesses 45
Citizens and public actions to regulate marketing 46

Consumerism 46
Environmentalism 50
Business actions towards socially responsible marketing 56

Enlightened marketing 56
Marketing ethics 57
Summary of Unit 5 65
Course summary 69
Unit practice exercise 71
Suggested answers to self-tests 75
Suggested answers to practice exercise 81
Terminology 85
References 87
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Unit Overview
C ongratulations, you have reached the last unit of this course. In the previous
units, you learnt the marketing fundamentals starting from understanding
marketing, environmental factors, marketing planning, marketing information
system (MIS) and finally the 4P strategies. In this unit, you will learn how to
develop competitive strategies. Understanding your consumers is a vital initial step
towards planning and developing your marketing efforts. This has to be followed
by an understanding of your competitors and the other elements of your marketing
environment. In this unit, you will be exposed to the real concept of competition
and how to manage the impact of competition in your organisation. With these
inputs, you will be able to realise the importance of providing quality products
and services to gain a competitive advantage. Besides that, one of the effective
ways to expand your business is to look for opportunities in the foreign market.
We will also discuss the scope and processes required to launch an international
marketing effort in this unit.
This unit comprises three major topics, namely, creating a competitive advantage,
global marketing and marketing ethics. In the first section of this unit, you will
cover topics on competitors’ analysis and competitive strategies. The second
section of the unit will cover topics on global marketing, which encompasses the
global marketing environment and various global marketing decisions that need
to be taken by marketers. Finally, this unit will cover topics on social criticisms
of marketing, efforts of citizen and public action to regulate marketing, business
actions towards socially responsible marketing and marketing ethics.
Competitions are moving into a new era in this millennium. Innovations and
creativity have become the essential determinants of success in modern day business
practices due to rapid competition. There are many companies being wiped out
of business due to their incapability to compete successfully. Companies which
become stagnant and are not willing to change become obsolete in the market.
Due to these reasons, competitor analysis and tracking have become essential tools
for an organisation’s sustenance in the market. In the first section of this unit, you
will understand the ways and means to analyse your competitors. You will also be
exposed to different competitive strategies practised by various business entities in
the world.
Today, many marketers are advocating the practice of a borderless market. In a

borderless market simply means that a company brings its products and services
to every corner of the earth and sources its raw materials from anywhere in the
world, provided this sourcing presents a competitive advantage to the company.
The second section in this unit will allow you to identify the environmental forces
that affect the international ventures. You will also get some answers to important
questions in your effort to move in to a global market.
2 WAWASAN OPEN UNIVERSITY
In the third section of this unit, which is also the final section of this module,
you will be presented with some ethical issues in marketing which marketers face
today. You will also be exposed to the broad scope of marketing ethics which are
normally never thought of by many business practitioners. Finally, you will be
given inputs on the methods used to conduct business without jeopardising the
publics’ interests.
Unit Objectives
By the end of Unit 5, you should be able to:
1. Discuss the need to understand competitors as well as customers through

competitor analysis.
2. Explain the fundamentals of competitive marketing strategies based on

creating value for customers.
3. Explain and apply different competitive positions.
4. Discuss how the international trade system, economic, political-legal, and

cultural environments affect a company’s international marketing decisions.
5. Discuss entry strategies for international markets.
6. Describe three key approaches to entering international markets.
7. Identify the major social criticisms of marketing and defend your marketing
practices.
8. Define consumerism and environmentalism and explain how they affect

marketing strategies.
9. Describe the principles of socially responsible marketing.
10. Explain the role of ethics in marketing and help develop ethical marketing
practices.
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5.1 Creating a Competitive Advantage

Objectives
By the end of this section, you should be able to:
1. Describe why you need to understand competitors as well as customers

through competitor analysis.
2. Discuss the steps involved in carrying out a competitive analysis.
3. Explain the essentials of competitive marketing strategies required to create

value for customers.
Introduction
No business is an island. For the success of your business, you will need to deal
with customers, suppliers, employees and others. In almost all cases, there will
also be other organisations offering similar products to the same customers. These
other organisations are your competitors and their objectives are also similar to
yours — to grow, make money and succeed. Effectively, the businesses are at war —
fighting to gain the share of the same markets, resources and territory: the customer.
Just like in a war, it is necessary to understand the adversary (competitors). For a
further illustration of how competition affects market practices, read the following
extract from The Star online:
“Telecommunications (telcos) industry, mired by competitive pressures, rising

capital expenditure and near-saturation cellular penetration rates, pretty much
sums up what’s in store for the country’s telecommunications players. With that, a
second round of painful price slashes was indeed inevitable. And while that could
be good news for consumers in the short term, a significant price slashing could
end up being painful for the telcos.
Firing the shot is Maxis Communications Bhd; it cuts the price of its prepaid starter
packs by a third to lure new subscribers in a landscape that has long turned brutally
competitive. As it stands now, Malaysia has some 21.5 million mobile phone users
as of first half this year, a penetration rate of 81% out of its 27 million population.
Analysts believe that the new plans by Maxis would appeal to low volume users
and those who want a mobile phone to mainly receive calls. Nonetheless analysts
do not foresee prices falling any much lower, as telcos are making a loss with the
generous preloaded airtime.
AmResearch telecommunications analyst Fiona Leong sees Maxis’ latest move as

a strategy to boost subscriber growth in order to maintain its market leadership”.
Source: Tee L S, ‘Telco price war breaks out’, The Star 7 October, 2006
Around the year 500 BC, the great Chinese military strategist, Sun Tzu wrote a
treatise on the Art of War. From a 21st century perspective, many of Sun Tzu’s
views on strategy are still relevant today — for both military commanders and
business leaders looking at how to win against competitors. For instance:
If you are ignorant of both your enemy and yourself,

then you are a fool and certain to be defeated in every battle.
If you know yourself, but not your enemy,
for every battle won, you will suffer a loss.
If you know your enemy and yourself, you will win every battle.
Competitor analysis
When a marketer plans a company’s marketing strategies, he/she needs to find out
all it can about its competitors. Comparison of the marketing strategies, price,
product, place and promotion with close competitors must be constantly made to
ensure the company maintains or improves its competitiveness in the market.
Besides allowing you to have a direct comparison of your strategies with those
of your closest competitors, competitor analysis also helps you to find ways to
create competitive advantage and to minimise your competitive disadvantages.
For example, assume that you own a shoe retailing business and recently your
sales have dropped. You notice that your main competitor who is located next
to your shop, offers more varieties of shoes and has just had the shop renovated
to project a classier image and comfortable physical environment to customers.
The competitor has captured more business and also grabbed some of your old
customers with the change. Here, we could say that the competitor has created a
competitive advantage over you by offering more varieties of shoes and presenting a
more impressive shopping environment to its customers. Under such circumstances,
you need to conduct a competitor analysis to find out your competitor’s strengths
and weaknesses are and use the results of the analysis to create a comparable
competitive advantage. For instance, let us say the competitor does not provide
good customer service though the shop’s physical environment is impressive and
shoes are highly priced. You may use the marketing strategies of brand building
(branding) by emphasising high quality products, value-for-money prices as
well as good customer service to build strong customer relationships with your
customers.
Now, let us look at the steps in analysing competitors. As shown in Figure 5.1,
competitor analysis involves, first, identifying and assessing competitors and then,
selecting which competitors to attack or avoid.
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Identifying the company’s competitors
Assessing competitors’ objectives, strategies, strengths

and weaknesses, and reaction patterns
Selecting which competitors to attack or avoid
Figure 5.1 Steps in analyzing competitors, Kotler and Armstrong (2012)
Identifying competitors
If you define the term narrowly, competitors are suppliers who sell similar type of
product or services at similar prices to the same customers as yours. Thus, Proton
might view Perodua as a major competitor, but not DaimlerChrysler and Jaguar.
McDonald’s might see KFC as a major competitor but not roadside Ramly Burger
and Saudi Burger.
In practice, the scope of competition is wider than what is mentioned above.

You can also classify those suppliers who cater to the same need, as competitors.
For example, Pepsi Cola is the direct competitor of Coca-Cola in a very narrow
definition. In a wider sense, even Mirinda, Fizzy, Schweppes and other soft
drinks can also compete with Coke. In fact, anything that is used as a satisfier
for the same need, in this case quenching of thirst, should be seen as a potential
competitor. So, suppliers of products like Yeohs, Milo, Ribena and mineral water
can also be considered as competitors for F&N, which produces Coca-Cola.
At a broader level, all companies which compete for the same share of expenditure
by consumers can be considered as competitors. Based on the discussion above,
competitors can be viewed both in a narrow or broad context. You have to make
a decision on the scope of competition for your product. This is the first step to
create value-added services in order to gain a competitive advantage.
Activity 5.1
There are more than 10 types of “3-in-1” coffee brands in the

supermarket. Identify how those brands create competitive
advantage for themselves.
Activity 5.2
The first step in creating a competitive advantage is to identify

the competitor. Prepare a list of accommodation providers (i.e.,
motels, hotels, hostels and lodging houses) in your state. Try to
categorise them according to their standard of service, price range
and types.
Assessing competitors
It is important for a company to monitor its competitors’ strategies and operations.

If the company finds that a competitor has discovered a new segment, this might
be an opportunity. If the company finds its competitor is reducing price or
providing discounts or applying sales promotion strategies, this might be a threat.
In Malaysia, the role and the importance of the small-scale retailers have changed
due to the emergence of hypermarkets and huge supermarkets. The role of sundry
shops, which supply convenience goods, has changed. Many customers buy from
hypermarkets during sales periods and store the goods for future use. Sundry shops
are mainly visited for the purchase of perishable goods and convenience goods,
which are required urgently. This situation explains how the nature of business
changes due to competition.
It has been a routine activity for many companies to assess their competitors’
strategies and operations. There are many instances to show that a company
learns from its competitors’ strategies. Some even use their competitors’ strategies
as the benchmark to improve their services thus raising their own profitability.
Developing and maintaining competitor intelligence systems have become a
routine for many companies.
As a marketer, you have to assess your competitors’ strength and weaknesses to

answer the following critical questions:
Step 1: What your competitors do?
a. As a first step, you need to gather relevant data of your competitors’ goals
and strategies. You must understand that the collection of the mentioned
data is not that easy.
b. You can also learn about the competitors’ strengths and weaknesses through
secondary data, personal experience and word of mouth.
c. Sometimes you can conduct marketing research involving customers,

suppliers and dealers to find out their perception of your competitors.
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d. You can benchmark your company against other companies, comparing

your company’s products and processes with those of your competitors
or leading firms in other industries to find ways to improve quality and
performance.
Step 2: What will our competitors do or how will they respond to our strategies?
You must be able to understand the basis of your competitors’ objectives and
strategies, and foresee your competitors’ likely actions in the market. You must
also be able to reasonably forecast their likely reactions against your marketing
strategies. For example, Tesco, Giant, Carrefour and other hypermarkets often
compete with each other by slashing prices of some necessity goods. They
distribute leaflets, advertise in local newspapers on the price cut items regularly
to attract mass customers and have a fairly clear idea as to how their competitors
would react to these price cuts.
Step 3: How fast are the competitors likely to react?
Depending upon the individual style of functioning, some of your competitors

may take time to react to your strategies while others may react very quickly. For
example, MAS Airline did not reduce its airfare despite having major competition
from AirAsia. This shows that they keep to their culture of serving the upper
middle class and corporate customers and take time to develop a strategic response
to the threat from AirAsia.
Under this scenario, you must know how your competitor would react against
your strategies. The nature of rivalry is intense if there is immediate response from
your competitors. For example, petrol stations in the country are in the category
of oligopoly market. The price reductions of competitors will trigger immediate
retaliation from other competitors. If this continues, the suppliers of petrol will
incur a great loss even though the customers will gain. Due to this reason, the
government has to intervene by fixing the price of petrol to avoid price wars
among the petrol suppliers. In some countries, a group of companies will form a
price cartel to avoid price competition which can eventually threaten the survival
of the company. This example may not apply to products under a monopolistic
competition.
Accurately forecasting your competitors’ reactions against your strategies would

enable you to prepare yourself to defend your current competitive position. Also,
you may avoid implementing some strategy if you know they will do the same.
Avoidance is a better option if you feel that the retaliation from your competitor
may cause both of you to lose rather than gain.
Selecting competitors to attack and avoid
When operating in a competitive environment, you have to decide whether to

retaliate against your competitor or be quiet. This decision is made when you
have selected your competitors while you decided on the design of your marketing
mix elements. Sometimes you may choose to compete with weaker competitors
rather than the stronger ones. By doing this, you spend less money and resources
to compete. You must understand that it will cost you more to compete with
bigger and stronger competitors than with smaller or weaker ones. At the same
time, the rewards of larger market shares or consolidation of your own position
may justify taking on strong competitors. Also, you may sharpen your abilities to
compete. AirAsia was small when they started competing with MAS. Now it is a
very successful airline.
Based on the discussion in the previous page, you must carefully select whom you
want to compete with and with whom you want to avoid competition. Sometimes,
this decision will determine the survival of a company in the market.
You can use customer value analysis to determine the strength of your competitors.
Customer value analysis means that you need to clearly understand, through an
analysis of your consumers, what the benefits in the product offerings that consumers
value the most are. Also, how do they rate the various competitors on their ability
to provide these benefits.
For example, why do some customers buy Mercedes Benz while others buy BMW?
What are the values created by Mercedes Benz and BMW for their respective
customers? An analysis of the values sought by the consumers will help the companies
to design their competitive strategies against each other in the automobile market.
Some admit that customers who purchase BMW are young, single, and wealthy;
they lead an active lifestyle whereas those who prefer Mercedes Benz are very much
family-oriented, wealthy and image-conscious. The analysis must, however, go
further to understand the benefits and values that each set of customers seek from
these products.
To understand your competitors well, you must investigate your competitors’

strengths and weaknesses in each customer segment. You also need to examine
how much your product is preferred compared to your competitors’ product and
on what criteria.
Many companies prefer to compete with close competitors. For example, Coca-Cola
competes with Pepsi Cola rather than 7Up.
It is interesting to note that the existence of competitors can also give you some
benefits.
1. Total demand may increase due to competitors’ marketing efforts as the

overall market size goes up on account of competitive activity.
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2. You can update your product technology or improve your services after
setting competitors as your benchmark.
3. Their existence will help you to get more customers to visit your outlet,
particularly in the case of specialty or shopping products. You must have
noticed that customers prefer to buy jewels, watches or even sunglasses at
the place where there are many independent outlets. The reason is very
simple, customers have more choices. So the existence of competitors
would sometime help you to attract more customers.
However, not all competitors are beneficial to the existence of a company.

Industries in general, comprise good and bad competitors. Good competitors
generally engage in fair play whereas bad ones often break the ethical codes of
conduct. They are prepared to do anything to destroy their competitors. There are
many instances where the government intervenes to ensure that the competition
among two or more rival companies does not go out of control. Good competitors
build and respect ethical norms in the industry which help shape the nature of
competition.
Competition is a fact of business life. It is a good business practice to support fair

competitors and focus your combative energies at bad competitors. The industries
where the number of good competitors is substantial as compared to the number
of bad competitors, present a healthy growth environment to most of their
participants. In Malaysia, VCD and DVD piracy have cost losses in millions of
ringgit to legitimate suppliers. Another example is the existence of illegal betting
outlets which compete against the authorised betting agencies. Bad competitors
still exist despite drastic actions taken by the government.
Designing a competitive intelligence system
In the previous section, you have identified the importance of understanding your
competitors and their strategies. To identify them, you need to collect information
about their strategies. More established companies may be required to set up a
more formal competitive intelligence system (CIS). The CIS is a systematic and
comprehensive tool that enables you to collect, analyse and use information
pertaining to your competitors. However, maintaining and implementing a CIS is
not cheap or easy. To set up a good CIS, you must first identify what information
you need. Secondly, you must know how to collect it. Thirdly, you design the
CIS so that you can use it to continuously identify and collect the information
and make it available to the decision makers for informed decision making.
A good CIS is also capable of evaluating the validity and reliability of information.
It interprets and reports the information in a simple format. Smaller companies that
cannot afford a CIS can appoint marketing staff to focus on gathering and reporting
information in respect of identified competitors.
This information should be regularly filed and analysed so that it can be a useful
input in your decision making. When you set up your CIS, make sure you are
aware of the cost incurred to perform such activities. The collection of information
would sometimes require you to spend on additional resources especially on
manpower and IT. Due to this reason, you should focus your resources only on
information that you really require.
Activity 5.3
If competitive intelligence systems are very important, why are

there so few smaller companies using them?
Competitive strategies
After identifying your competitors, you must develop competitive strategies to
provide added values to your customers which enable you to gain a competitive
advantage. There are many approaches to designing competitive marketing strategies
and not all the approaches are suitable for all companies and their products. Let us
discuss these approaches to a marketing strategy and the basic competitive strategies
a company can adopt to create a competitive advantage and consolidate its market
position.
Approaches to a marketing strategy
The nature of competition and competitive strategies varies according to country,

industry and products. The nature of competition is also complex most of the time.
There is no single best strategy to gain competitive advantages that would suit all
companies.
Each company is unique and the environment where it operates may differ from
that of other companies. The strategy development process should therefore follow
a deep and thorough analysis of both internal and external factors that are unique
to the company. This would include an analysis of the company’s own objectives,
its strengths and weaknesses as well as the opportunities and threats present in the
company’s environment; in the form of competitors and other components.
Pepsi and Coca-Cola are always at war with each other in their bid to capture a
larger market share or retaliate against competitive moves. Retaliation strategies
can also be seen in the cell phone market between Maxis, Celcom and Digi.
Initially, when AirAsia was riding on lower airfares, MAS surprisingly increased its
airfares. The pricing strategy imposed by MAS allowed AirAsia to stay in a comfort
zone. Eventually after six months, MAS also started slashing its prices.
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Basic competitive strategies
As discussed in your textbook, Michael Porter has identified four competitive

positioning strategies for companies. Out of the four, three are winning strategies
and one is a losing strategy. Let us look at the three winning strategies.
1. Overall cost leadership: Under this strategy, a company can gain a

competitive advantage by maintaining low costs and offering reduced
prices to the market. You are able to so by reducing your production costs
through cost efficiency and effectiveness. To develop this competitive
advantage, your production costs must be lower than those of any other
competitor in the market. AirAsia is a good example of this approach. It
maintains lower operational costs and reduces prices to very low levels,
thus achieving the cost leadership goal in the airline industry.
2. Differentiation: This strategy requires you to gain a competitive

advantage by providing differentiated products and services compared to
your competitors. Pizza Hut in Malaysia differentiates itself from
Domino’s Pizza and US Pizza by offering more local flavours of pizza.
JobStreet.com, the largest online talent bank in Malaysia and one of the
largest in the South Asian region (Malaysia, Singapore, India, Philippines,
Indonesia and Bangladesh) differentiates itself from competitors by
offering a comprehensive suite of interactive recruitment services
connecting businesses with talent in the region. Shell petrol differentiates
itself from Esso, Caltex and Petronas by claiming that Shell’s V-Power
premium petrol adds power to pickup and speed and keeps the engine
clean even though it costs an extra RM0.20 per litre.
3. Focus: This strategy requires you to focus your effort on serving a specific
and defined group of customers rather than serving the entire market.
Luxury car distributor in Malaysia, NAZA Motors, markets Ferrari,
Lamborghini, BMW (7 Series) and Mercedes Benz (S-Series) to wealthy
customers in Malaysia. The manufacturers of luxury cars rarely involve
themselves directly in manufacturing and distributing cheaper models
despite having the resources and technology to do so simply because their
market focus is on the luxury segment rather than the entire market for
automobiles.
Many marketers believe that pursuance of clearly defined strategies would enable
the company to perform well. “Middle-of-the-roaders” often do not have a clear
direction and distinction in offering their products or services. Their positioning
is not very clear and customers do not have a clear idea of their distinctions. If
the question “what is your company or its product good for?” was raised, the
suppliers would not be able to really answer it. This type of companies may not
last long in a competitive market. Michael Porter suggests that companies position
themselves properly and clearly to avoid business failure. Maggie is known for
instant noodles and Gardenia is known for its tasty breads. Though there are many
companies operating in the market, so far they have not created identities for
themselves. For example, Fresh & White and Sparkle brands of toothpaste have
been established quite some time ago but have yet to create their product identities
and position their brand names in the market.
In addition, three strategies focusing on operational excellence or building up

consumer intimacy or developing product leadership through innovation have
also been suggested as alternative positions that companies can develop. Some
companies, in order to create an appeal for a larger segment of the market, combine
two or more of these values and gain a strategic advantage.
Activity 5.4
Read the following article and answer the following questions.

Spend 30 minutes on this activity.
Jobstreet launches mobile application

10 May 2011
KUALA LUMPUR, 10 MAY 2011 — Malaysian online recruitment

website JobStreet.com has launched its mobileapplication for
major operating systems — iOS (iPhone, iPad), Android and RIM
(BlackBerry).
“This launch is timely as we are now seeing an uptrend in the usage

of Smartphone as well as a boom inemployment opportunities,”
said JobStreet country manager, Chook Yuh Yng. “In JobStreet.com
alone, we havemore than 20,000 jobs available now. We therefore
expect more people to apply for jobs via their smartphone.”
Chook said that after the JobStreet.com mobile application was

made available on iPhones last May, the number of downloads has
exceeded 100,000. “With the application now made available on
all major smartphones, we are confident the number of downloads
and usage of the JobStreet mobile application will increase very
quickly.”
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She said the JobStreet.com mobile application made job searching

more convenient because it helped jobseekers to find and apply
from anywhere, anytime. “Using the JobStreet mobile application,
jobseekers can simply type job related keywords into their
smartphones or scroll through job categories. The jobseekers can
view the job description and apply immediately or save the job
posting in a folder. Users can also receive job alerts and view past
searches to facilitate their job hunt.”
The JobStreet.com mobile application can be downloaded free

of charge from Apple iTunes, Blackberry Application world and
Android Market.
Source: Retrieved from Computerworld Malaysia — JobStreet

launches mobile application, www.computerworld.com.my/print-
article/11808/ 2/2
1. List the possible competitors for JobStreet.com.
2. How does JobStreet.com create value for its customers?
3. How far do you think its latest service strategy would affect its
competitors?
Competitive positions
Competitive positions provide you with alternatives on competitive strategies.

Some companies would prefer to be a leader in the industry, some position
themselves as challenger, others as followers and nichers. Table 5.1 shows specific
marketing strategies that are available to market leaders, challengers, followers
and nichers.
Again there is no one strategy which is better or superior to others. Companies

choose their strategies according to their culture, tradition, experience, policy,
situation, resources, customers and market. If you notice, there are some companies
that would like to carry on with their marketing plans without considering
much of their competitors’ strategies. On the other hand, some companies react
immediately to the competitors’ strategies.
Companies that position themselves as leaders usually have the largest market
share in a given market. They lead the industry in terms of price changes,
innovations, R&D and development of new products. There are also many
companies that claim they are leaders in a particular area such as quality, customer
preference, sales, track record, years of establishment and so forth. For example,
Volvo always claims that it is the leader in car security. However, most industries
contain an acknowledged market leader. For example in Malaysia, the following
companies can be considered to be the market leaders in their own ways: Maxis,
7 Eleven, AirAsia, Great Eastern Life, Seng Heng, SEC, Secret Recipe, Rotiboy,
Nationwide, Redtone, F&N’s Coca-Cola and Maybank.
Market challengers are usually runner-up companies in the market and sometimes
they can grow fairly large. A challenger can take a stance of challenging the leader
in a bid for leadership or at least an enlarged market share. Alternatively, it can also
choose a policy to “live and let live”.
As we have discussed earlier, the challenger can choose to take on the leader or to
concentrate its energies on smaller and weaker competitors and thereby consolidate
its own position.
From your own exposure to the market, you would know that there are several
competitors in a given market. While one competitor may develop the position
of being a challenger, the remaining competitors are content to act as followers,
thereby adopting the market position of a follower. These companies clearly
recognise that the leader has significantly more resources and staying power to
combat any competitive challenges they may be able to offer. They, therefore,
choose to protect their own market through creating enough differentiation, but
closely follow the leader in terms of price and quality ranges.
The fourth positioning alternative is that of being a market nicher. Almost every
industry includes companies that specialise in serving market niches. Instead of
pursuing the whole market, these companies target sub-segments. Nichers are
often smaller companies with limited resources but can gain a strategic marketing
advantage by focusing on very small segments and customising their products and
services to produce high levels of satisfaction in that segment. Over a period of
time, specialisation in that particular segment allows them to have a consolidated
position and a distinct competitive edge within that segment. Smaller divisions of
larger companies may also pursue niching strategies.
UNIT 5 15
Extending marketing
Type of market
Characteristics Examples
leader strategies
Market leader • Expand total market Maxis is the largest mobile operator
strategies • Protect market share (market leader) in Malaysia. Maxis
• Expand market share continuously expands its market
(for companies by offering more packages to all
which hold the groups of customers, giving free
highest stake in the value added services to protect
market) market share, as well as aggressively
advertising and charging lower
price to expand the market share.
Market challenger • Full frontal attack Celcom is ranked as the second
strategies • Indirect attack largest mobile operator company
in Malaysia. Full frontal attack and
(for companies indirect attack strategies have been
which hold the used to increase its market share.
second highest Celcom is aggressively collaborating
stake in the market) with other companies to gain
competitive advantage. For instance,
Celcom made a strategic partnership
with HP, Vodafone and Google to
deliver quality products with global
usage. This will provide Celcom
a competitive advantage over its
competitors.
Market follower • Follow closely DIGI, the third largest mobile
strategies • Follow at a distance operator in Malaysia, adopts the
to avoid retaliation market follower strategies by
(for companies observing the market leader and
which hold the market challenger’s strategies. For
third or lower instance, when Maxis offered the
highest stake in prepaid starter packs at RM8.80,
the market) Celcom attacked the strategies
by collaborating with AirAsia and
offered its prepaid starter pack at
RM4.99. DIGI later closely followed
the two competitors by offering
RM8.50 prepaid SIM packs.
Market nicher • Create segments by Redtone, Malaysia’s number one
strategies customer, market, discounted call provider adopted
quality-price, service a market nicher strategy by mainly
(for companies • Multiple niching targeting international call makers,
which serve small providing attractive calling rates
segments not to customers, as well as having
pursued by other multiple niching of the general
companies) public, foreign workers and tourists
who travel abroad.
Table 5.1 Strategies for market leaders, challengers, followers and nichers
Activity 5.5
Assume that your company is the overall cost leader in the

manufacture of hard disk drives for PCs, capturing a 35% market
share. In a group, prepare a sample of recommendations designed
to maintain your market leadership position.
Summary
Two key trends in marketing for the twenty-first century are

clearly discernible:
1. The trend towards the use of relationship marketing to

improve customer satisfaction.
2. The trend towards in-depth competitor analysis as the means

of identifying the company’s major competitors using both
an industry and market-based analysis.
Competitive analysis involves closely examining the relevant

information regarding competitors’ objectives, strategies, strengths
and weaknesses, and reaction patterns and utilising the same for
the development of competitive strategies.
To be successful, a company must consider its competitors as well

as its actual and potential customers. In the process of performing
a competitor analysis, the company carefully gathers and analyses
information on competitors’ strategies and programmes. A
competitive intelligence system (CIS) helps the company acquire
and manage competitive information. The company must then
develop a competitive marketing strategy of its own. The chosen
strategy depends on the company’s industrial position and its
objectives, opportunities and resources. Several basic competitive
strategies are outlined in this section. Some of these are time-tested
and some are relatively new.
Four primary competitive positions were reviewed in the section.

The first is that of the market leader which faces three challenges:
expanding the total market, protecting market share and expanding
the market share. The market leader is interested in finding ways
to expand the total market because it will benefit most from any
increased sales. The leader must also have an eye towards protecting
its share. Several strategies for accomplishing this protection task
are also presented. Aggressive leaders also try to expand their own
UNIT 5 17
Extending marketing
market share. The second position is that of the market challenger.

This is a company that aggressively tries to expand its market share
by attacking the leader, other runner-up firms or smaller companies
in the industry. The third position is that of the market follower
which is designated as a runner-up company that chooses not to
rock the boat (usually out of fear that it stands to lose more than
it might gain). Lastly, the market nicher is a position option open
to smaller companies that serves some part of the market that is
not attractive to the larger companies. These companies often
survive by being specialists in some function that is attractive to
the customer in the small market niche that they have chosen for
themselves.
The analysis of the four competitive position options presented

in this section would help you identify the various options that
companies would like to use in their positioning strategy.
Self-test 5.1
1. You have been asked by your company director to prepare an

effective marketing strategy plan. Discuss why the need to
understand competitors as well as customers through competitor
analysis is important in your marketing strategy planning.
2. As a newly appointed research manager, your first project is to

conduct a competitor analysis for the company. Explain the
steps involved in conducting the competitor analysis.
3. Pick a company of your choice and demonstrate how the

company could analyse one of its competitors. You may focus
your efforts on the Internet if you so choose.
4. What are the advantages and disadvantages of a market nicher

competitive strategy?
Suggested answers to activities
Feedback
Activity 5.1
There are more than 10 “3-in-1” coffee brands in Malaysia, e.g.,

Gold-mix, CNI, Super, Gold Leaf, Tesco, Old Town, Aik Cheong,
Nescafe, Radix Café, Saudi Ali Café, Gold Choice Tongkat Ali
Coffee, Per’l Café, Deli-Bes, SunnySide Coffee etc. Each brand
tries to create its competitive advantage by developing its unique
attributes to its respective target market. For example, Perl Café
Kacip Fatimah which targets the women market emphasises
that the product contains water soluble Kacip Fatimah extract.
Radix Café captures the market by focusing on the product’s
7 Herbs formula which helps to keep the body healthy and
energised. Nescafe emphasises the perfect cup of coffee to keep
its customers awake, Old Town Coffee emphasises on its brand
name “Old Town”, a synonym of the first of all the white coffee
producers in Malaysia.
Activity 5.2
The answer may vary according to the location or the city you live
in. Anyway, the bigger the town or the city, the more intense the
competition among the accommodation providers.
Activity 5.3
The primary reason a small company does not develop and

maintain a competitive intelligence system is because it cannot
afford the resources necessary to build and operate one. Based on
the following description, it is easy to see why small companies
cannot afford to have a competitive intelligence system. Here is an
abbreviated outline of the steps necessary to build and maintain
a system:
a. Identify the vital types of competitive information and the

best sources of this information.
b. Continuously collect information from the field (sales force,

channels, suppliers, market research firms, trade associations,
websites) and from published data (government publications,
speeches, articles).
UNIT 5 19
Extending marketing
c. Check the information for validity and reliability, interpret it,

and organise it in an appropriate way.
d. Send key information to relevant decision makers and respond

to inquiries from managers about competitors.
Activity 5.4
1. Jobstreet’s competitors can be newspapers, magazines, head-

hunters and other online recruitment companies JobsDB.com
in Malaysia.
2. It creates value by introducing an innovative service strategy.

Now the customers can apply for jobs via SMS.
3. To a certain extent, its innovative strategy would affect its

current competitors because, due to the innovative services,
more job seekers are expected to register with JobStreet.com.
This will lead to an increase in the database of job seekers.
Eventually, it will use this information to attract more
companies to advertise in the jobstreet.com to recruit. The
budget spent on other modes of advertisement by the
companies will be affected in the long run.
Activity 5.5
There are three lines of strategy recommended for a market leader:
• Expand the total market
• Protect the market share
• Expand the market share
The following is a sample of recommendations that could be made

for a hard disk manufacturer.
1. Expand the total market:
a. New users — high reliability product for users operating

in extreme environmental conditions (heat, cold, rough
treatment) where hundreds of gigabit storage is required.
b. New uses — store and record music, video (TiVo type

applications).
c. More usage of current product — aggressive promotion.
2. Protect market share:
a. Plug holes in line — fill any hole in the standard line that
might allow a competitor an opportunity, particularly in
the high price, high-margin area.
b. Continually innovate — new higher capacity, faster drives

at reduced price/gigabit. Better customer support and
service programmes.
3. Expand market share:
a. Build up your share in core or served market by taking it

from weaker competitors. Gain share by increasing the
customer value of core market products, but the focus needs
to be on increased value by providing more benefits to the
customer, rather than reducing price.
Increase in promotion — increase advertising and sales

promotion.
UNIT 5 21
Extending marketing
5.2 The Global Marketplace

Objectives
1. Discuss how a company’s international marketing decisions are affected

by the international trade system, economic, political-legal and cultural
environments.
2. Comment upon the considerations that must be assessed before the company
decides to go international.
3. Identify and describe the approaches used in entering international markets.
Introduction
In the last section, you learnt about the importance of understanding competitors,
the scope of competition and competitive strategic options.
In this section, we will extend these fundamental concepts to the arena of global
marketing. We will begin by understanding the considerations that affect the
company’s decision to go for international markets. On account of globalisation,
the economies of different countries in the world, as well as the different markets
are linked as never before. Companies are finding it easier to reach distant markets
and source their supplies from anywhere in the world. Today, companies of all sizes
can enjoy the opportunities created by the rapid internationalisation of markets but
will also be affected by the developments in supply and demand, competition and
economic forces in other parts of the world.
In this section, let us look at the components of the international marketing

environment and the way they impact the international marketing effort of a
company. We will also study the approaches companies use to enter international
markets.
Global marketing in the 21st century

Global marketing in the twenty-first century has become more complex than ever
before. The emergence of new economic powers, regional economic agreements,
terrorism, the spread of technology and the Internet has changed the dimension of
marketing and business in every context. Today, looking into the future is harder
than ever. Powerful economic, technological, industrial, political and demographic
forces are converging to build the foundations of a new global economic order on
which the structures of businesses are built.
Amidst all these forces, customers continue to spend, keeping the world economy
afloat. Companies are expanding their markets aggressively into new international
markets to capture larger market opportunities. Companies that stay at home to
play it safe might not only lose their chances to enter other markets but also risk
losing their domestic markets (Kotler and Armstrong 2012).
In the process of going global, companies have to make several major decisions
in international marketing. As shown in Figure 5.2, a company faces six major
decisions in international marketing (Kotler and Armstrong 2012). Let us discuss
each of these decisions in detail.
1. Looking at the global

marketing environment
2. Deciding whether to go
international
3. Deciding which markets

to enter
4. Deciding how to enter

the market
5. Deciding on the global

marketing program
6. Deciding on the global

marketing organization
Figure 5.2 Major decisions in international marketing, Kotler and Armstrong (2012)
Looking at the global marketing environment

It is important for companies to understand the international marketing environment
especially in relation to the country in which they are planning to venture into.
Conducting a comprehensive marketing research would reduce risk of losses.
The international marketing environment has changed greatly. You can refer to
Unit 2 of this module to further describe the influences of the macroenvironment
and microenvironment on marketing in general.
UNIT 5 23
Extending marketing
The international trade system
For any company that wishes to go international, it is important to understand the

trade system in the international markets and the forces that shape international trade.
Companies face many types of trade restrictions in their attempts to secure business
abroad. If you are planning to open a business in Singapore, your application will
be processed within a week. In some countries, the approval may take more than
6 months. In some other countries, you will never get approval unless you create a
joint venture with the local business partners. The most common trade restrictions
are tariffs, quotas, maximum and minimum price regulations, embargo and indirect
restrictions such as subsidies to local manufacturers and producers to help them
maintain their competitiveness.
Type of trade
Descriptions
restrictions
Tariff A tariff is a tax on imported goods, to give domestic competitors
an advantage in the marketplace by making foreign competitors’
goods more expensive than domestic goods. For example the
tariff for imported passenger cars is between 140% to 300% based
on engine displacement.
Import Restrictions on the quantity of goods entering a country. For
quotas example, Malaysia imposes import quotas on rice, Poland imposes
import quotas on gasoline, diesel fuel, wine and alcohol, China
has import quotas on edible oils.
Embargos Total ban on imports from another country. For example,
Malaysian companies are not allowed to import any goods from
Israel.
Non-tariff These include health and safety regulations, standards for products,
barriers certifications and preferences for domestic providers. For example,
health products imported to Malaysia should get clearance from
the Ministry of Health. A company must achieve ISO standards to
export products to European countries.
Government The government provides subsidies to local providers to increase
subsidies the competitiveness of local providers. For example, the Malaysian
government provides subsidies to local farmers in terms of
short-term loans, land, technology, seeds, fertilisers and machinery.
Table 5.2 Types of trade restrictions
However, despite the above trade restrictions, there are some forces which facilitate
a company to venture into foreign trade smoothly. For example, the General
Agreement on Tariffs and Trade (GATT), the Asian Pacific Economic Cooperation
(APEC), the Association of South-East Asian Nations (ASEAN), the Organisation
for Economic Cooperation and Development (OECD) and free trade agreements
(FTAs) between countries.
These leading forces of economic integration are finding ways and means to reduce
trade barriers among member countries. Forums are held to discuss and debate the
possibilities of lifting trade barriers. Progress, however has been slow. The World
Trade Organization (WTO) and International Monetary Fund (IMF) usually act
as facilitators in the process of removing trade barriers. Some third world countries
are still sceptical about the developed nations’ proposals of removing trade barriers
completely. They fear that their products will not be able to meet the standards of
products bought from overseas thus they lose their business to foreign MNCs. In
Malaysia, the automobile industry is a good example to explain this. Just imagine
what will happen to our national car manufacturer, Proton if our government lifts
the trade restrictions completely on the imported cars.
Besides the role of reducing trade barriers, WTO also enforces General Agreement
on Tariffs and Trade (GATT) policies worldwide. Sometimes, WTO also acts as a
mediator to solve trade disputes between countries or big companies from different
countries.
Activity 5.6
Malaysia has a trade restriction on imported cars. Is this restriction

a tariff, quota or embargo? To what extent does this trade restriction
allow Malaysia to protect local car manufacturers?
Economic environment
Before venturing into international business, you must first understand the economic
structure of the other country in terms of employment rates, per capita income,
inflation, interest rate, economic stability, exchange rate policies, etc.
A high unemployment level in a country could lower the per capita income earned
and this will further lead to lower purchasing power. If this happens, luxury
product businesses would suffer immediately. During the 1997 financial crisis in
Malaysia, many companies retrenched their workers. During this period, many
hire-purchase cars were seized by banks due to unsettled monthly installments
to finance companies. Second-hand car dealers were also badly affected during
the period. This, in turn had an adverse effect on the performance of other
companies. With this example, you should be able to realise why it is important to
understand a country’s economic conditions before venturing into the international
market. However, if you are planning to set up a manufacturing plant overseas,
a country with a high unemployment rate would provide you with a fast and
cheap workforce.
Patterns of income distribution are another variable that you must study carefully
because this has important implications on purchasing power. When there are
wide income disparities, you have a situation characterised by a very small number
of people with very high incomes, and a large population with low or subsistence
level of incomes. This pattern would significantly affect the size of your market
if you are in the household appliances, consumer durables or even hospitality
business.
UNIT 5 25
Extending marketing
Political-legal environment
Each country has its own political environment. Marketers should seriously study
four political-legal factors before venturing into overseas markets. As explained
by Kotler and Armstrong (2006), these factors include the host country attitude
towards international business, government bureaucracy, political stability and
monetary policies.
For example, instances of political instability in Thailand would have affected

foreign investments in that country. Anti-American slogans and sentiment in
some Middle-East countries could also affect the American businesses from
expanding their operations in these nations.
Another factor for you to consider is government bureaucracy. As mentioned

earlier, in some countries, you will receive an operating license easily compared to
other countries. In Malaysia, to obtain a business license, it may take three to six
months. The Penang state government however, encourages foreign investments
by providing many tax relief benefits. Malaysia is also the provider of medium-
skilled workers which are not readily available in other neighbouring countries.
Government bureaucracy can be a real hindrance to a business venture. In some

countries, getting a business license for export and import could take months for
approval. This could slow down your business progress in the country.
When you are looking into the political factor, you should also consider the
country’s exchange rate policies. Malaysia adhered to the fixed exchange rate policy
after the 1997 economic crisis and recently changed it to a moveable peg policy
which allows the currency to fluctuate controllably. The exchange rate policy of a
country will influence the value of money you take back to your country after the
business. If the exchange rate value of the other country drops, your profit also
will drop and vice versa.
Cultural environment
It is understood that each country has its own culture, norm, values and beliefs.
Sometimes, culture also determines the success of your marketing practices in the
foreign market. For example, KFC introduced rice in its menu to cater for local
customers who prefer to eat fried chicken with rice. So when you design global
marketing strategies, it is advantageous for you to adjust your products or services
according to the local customs, norms, beliefs and behaviour. The culture of the
host country always brings in surprises to marketers. You must be aware of the
cultural taboos in foreign cultures. For example, in Malaysia it is inappropriate to
present a clock to a Chinese counterpart. Besides that, never offer pork to Muslims
and never offer beef to Hindus. A Halal certificate is compulsory for restaurants
planning to cater for Muslims. These are some of the norms that foreigners need
to follow if they are planning to open a restaurant in Malaysia.
When you are planning to venture abroad, you must understand how your
customer think and react. As mentioned earlier, such knowledge could save you
from surprises that you may be unprepared for.
Business norms vary from country to country. In Japan, the power distance is high
compared to America. Uncertainty avoidance is also higher in Japan compared
to China. In Asia, companies emphasise relationship-based marketing whereas in
western countries, the common norm is to practice transaction-based marketing.
This means the Japanese prefer to engage in business only after they know and
understand you. In America, the companies prefer to do transactions rather than
getting to know you better. In Malaysia, it is a common custom for the companies
to invite their foreign business partners for a dinner after the working hours. On
the other hand, this practice is not usual in western countries.
In Japan, the number one priority of supermarkets is their customers’ health

and welfare. Due to this priority, the supermarket groups have established a very
reputed image in the Japanese market in terms of protection towards customers
and this is paramount to the success of the stores. To export food products to
Japan, packaging should be done well. The packaging should include some basic
information on its ingredients, weights, expiry dates and quality endorsements.
The knowledge of such cultural preferences enables a marketer to appropriately

position his product in a foreign market. Some marketers often worry about the
impact of culture on their global marketing strategies. But there are also many
marketers who break cultural barriers by adapting their products and marketing
communication appropriately to stabilise their overseas businesses.
Local languages, dialects, symbols, religions, festivals and ethnic groups are some
of the important elements to take into consideration before starting a business
venture. For example, if you are interested in marketing food products in Dubai,
your must make sure that the product is endorsed by local authorities as Halal.
Refer to Unit 2 for more examples on the effects of the cultural environment.
Reading
Please read the article ‘Dimensions of culture’. This article is

available in the WOU MyDigitalLibrary E-Course Reserve.
UNIT 5 27
Extending marketing
Activity 5.7
Suppose that you are the Regional Director of an advertising

agency’s international division, headquartered in Kuala Lumpur.
Chris Wyatt, President of the international division, wants you
to prepare a memo outlining the potential cultural and political
issues facing the company if it were to advertise for its clients in
China. Form a small group and discuss the issues that should be
considered. Draft a memo based on these discussions.
Deciding whether to go international

There are many companies doing very well locally which refuse to venture into the
global market. They are happy consolidating their grip on the local market and
are not really interested in the additional challenges they may have to face if they
go international. This is a conscious decision based on the relative attractiveness
and growth opportunities in the domestic market itself. On the other hand, many
companies have also successfully ventured into the international market and are
doing well. The decision of going international depends on many reasons. Some of
the reasons are as follows:
• To seek new markets and opportunities.
• To avoid competition in the local market.
• To utilise resources.
• To benefit from trade requests from abroad.
• Pro-active management action to distribute and manage risk of growth and

development.
However, operating domestically is much easier and less risky. In the domestic
market, you do not have to worry much about cultural differences, language
barriers, customs and norms. But you would also understand that in terms of
growth, venturing into international business certainly has its advantages. You
must, however collect sufficient data and study them first before making any
serious decisions. Many companies conduct marketing research and feasibility
studies before investing in foreign ventures.
The following are some questions which you need to answer before going abroad.
• Are you able to gather information to understand your customers’ preferences

abroad?
• Are you able to offer attractive products and gain a competitive advantage?
• Are you able to adapt yourself to the new business culture in the foreign
markets?
• Do you have trained and knowledgeable staff to handle international

market penetration?
• Have you considered the trade regulations and restrictions in the country
which you are planning to venture into?
Many companies enter international market after receiving a request to do so from

the dealers and suppliers abroad. In this way, they feel safer since they already have
buyers and some assured business.
Deciding which markets to enter

Before you enter the international market, you must set your objectives and
policies clearly. In the statement of objectives, you should include the target
or volume of sales that you expect to achieve. Most companies start on a small
scale first. Some companies do not do very well in the overseas market due to
massive competition from other big players. There are some companies that enter
international markets on a big scale, usually through a local joint venture. Some
companies go into international ventures after getting a lead from the government’s
connections.
At the initial stages of your international marketing effort, it is always less risky
for you to look at one country at a time. Having too many countries in your
agenda in a short period of time may cause you to lose your concentration and
focus. Eventually, you may not be able to cope effectively with the different set of
challenges presented by each country.
Another matter that you need to consider is the choice of the country you are
planning to enter. For this purpose, you need to start gathering relevant data on
the country which you feel would provide you with opportunity. The choice you
make regarding the country to enter depends on the micro and macroenvironmental
factors in general. To be specific, a country’s political stability, economic situation,
socio-cultural factors and technological factors will influence your decisions.
Before making the selection, you must develop a list of countries you prefer to
venture into. After that, you have to screen the various options on the basis of an
environmental analysis and create a priority list; giving preferences based on an
analysis of the strengths and weaknesses for each country on the list. The goal of
screening is to filter out the least attractive country from the list and to determine
the potential markets by using suitable indicators. Some of the indicators are
targeted sales volumes, returns on investments, risk factors and profitability ratios.
UNIT 5 29
Extending marketing
Deciding how to enter the market

After you have decided to enter a foreign country, you must determine the best
mode of entry. According to Kotler and Armstrong (2012), there are three market
entry strategies as follows:
Joint venturing
Direct investments
Exporting • Licensing
• Assembly facilities
• Direct • Contract manufacturing
• Manufacturing
• Indirect • Management contracting
facilities
• Joint ownership
Figure 5.3 Market entry strategies, Kotler and Armstrong (2012)
Exporting
Exporting is the simplest way to enter the foreign market. Exporting can be
defined as entering a foreign market by selling goods produced in the company’s
home country (Kotler and Armstrong 2012). Exports are done only after you have
secured orders from abroad. In many instances, your buyers or the forwarding
companies will assist you to market your goods. Trade finance divisions from the
banks will provide some short-term financial support for you to complete the
business without complications. If you are expecting to receive the order frequently
from abroad, it would be cheaper to form your own export department. Exporting
activities would require you to modify your organisation structure to incorporate
international tasks. Also, you may be required to modify your product line to suit
the foreign market. Exports may be both indirect and direct.
1. Indirect exporting
Indirect exports happen when you sell your products through international
intermediaries such as export management companies. Usually, it is cheaper
for you to sell products through intermediaries. The only concern you may
have is how your product will be marketed in the overseas market. You will
not have control over the pricing or positioning of your product in indirect
exports. This mode of business does not require you to understand your
customers. Your intermediary will absorb all the risks if the product fails.
2. Direct exporting
After going through indirect exporting for some time, you may eventually
move into direct exporting. The risk and resource requirements are greater
in direct exporting since you have to develop your own marketing strategy
and implement it abroad. It will be easier to penetrate the markets if your
product is already known in the market through indirect exporting efforts
earlier.
According to Kotler and Armstrong (2012), you can conduct direct

exporting in several ways.
a. You can set up an export department locally that carries out export
activities.
b. You can set up an overseas sales branch that handles sales, distribution
and perhaps promotion. You can also send home-based salespeople
abroad at certain times in order to find business.
c. Finally, you can export either through foreign-based distributors or

foreign-based agents who sell the goods on behalf of the company.
Joint venturing
You can also enter foreign markets through joint ventures. It means joining forces
with foreign companies to produce or market products or services.
According Kotler and Armstrong (2012), there are four types of joint ventures.
1. Licensing
Licensing refers to an agreement in which one company sells another

company the right to use a brand name, manufacturing process, trademark,
patent, or trade secret for a specific period and for a specific purpose of
time. For example, when HP announced the opening of its Asia Pacific
IP Licensing Centre in Singapore, the centre, which initially focused on
developing new technology licensing agreements in Singapore, Taiwan,
Korea, Japan, India and China, is now focusing on brand and technology
licensing. Under brand licensing, companies can license the HP brand and
use the HP logo on their own products.
Licensing is also a simple way to enter a foreign market with minimum

risk. Under this mode, you will sell your overseas manufacturing rights
to your foreign counterpart for a royalty price. Your foreign partner will
use your manufacturing process, trade mark, brand, patent, goodwill and
other relevant resources to manufacture and market the product in return
for the royalty paid to you. One major disadvantage of this mode is that
you will have less control over the product being produced and marketed.
By giving license, you have also given up the possibility of developing
your own market overseas and may have created a competitor after the
license ends.
KIA Motors provides a license to NAZA Motors to assemble and market

KIA cars locally. This would enable KIA Motors to market the KIA series
of cars in Malaysia with less import taxes. Lately, Naza has also obtained
the license to assemble Peugeot cars.
UNIT 5 31
Extending marketing
2. Contract manufacturing
Another option of entering abroad is by allowing contract manufacturing

to local participants in the overseas market. Contract manufacturing
involves your permission to allow the foreign partner to manufacture your
product. Again, similar to licensing, you may lose your control over the
product manufacturing processes and potential profits.
The key advantage is that you allow the product to start faster in the
foreign market with less risk and effort. If the deal is successful, you can
buy out the company later.
For example, branded sports shoes such as Nike, Adidas and Reebok
found in local sports outlets are mostly made in Taiwan. You also can find
similar shoes made in US. The price for both types would be significantly
different even though the design and features are the same. Most Japanese
car spare parts also have two versions: one made in Japan and another in
Taiwan.
3. Management contracting
Management contracting involves the local or domestic company

providing management services, expertise, consultancy and technology to
companies abroad who are expected to provide the capital. In other words,
you export intellectual property to another company. This is another
mode of low risk overseas venture.
For example, Proton set up a joint venture with Mitsubishi Motors to

develop the first version of Proton Saga in Malaysia two decades ago.
Mitsubishi Motors provided the technology and some management
expertise to Proton. Now Proton Malaysia is an independent entity,
which has the potential to rely on its own technology and R&D.
4. Joint ownership (Joint venture)
Joint ownership involves two or more companies investing in a business

or project overseas, with one of the partners being a local company from
the host country. They share the ownership according to agreed business
shares. Normally, the ownership depends on the percentage of shares
held by the respective companies. Under the joint ownership effort, the
companies involved may start a new business venture together, buy stakes
or takeover a foreign business or jointly work on big contracts.
Sometimes, the joint venture mode is imposed by the foreign government

as a pre-requisite to obtain the operating license. A joint venture business
reduces the political and economic risks. In some countries, joint venture is
the only way to enter the market. Other strategic reasons to take up a joint
venture project are to obtain financial support, obtain local knowledge,
to gain access to distribution channels and to capture a huge market

in the country. For example, Golden Hope Overseas Capital (GHOC)
signed a joint venture agreement with Cognis Oleochemicals (HK) Ltd
and China’s Lonkey Industrial Co Ltd to establish Guangzhou Keylink
Chemical Co Ltd. The new company will manufacture, distribute and sell
methyl ester sulphonates (MES), an oleochemical derivative used in the
production of detergent. The joint venture will strengthen Golden Hope’s
biodiesel business by capitalising on the potential of MES as a replacement
for linear alkybenzene sulphonate in the detergent industry.
ASTRO ALL ASIA RKS NETWORK plc (“ASTRO”) and Yes Television
(Hong Kong) Limited entered into a joint venture to develop and strengthen
the aggregation and distribution of content through two 24-hour channels
dedicated to football fans in the region.
Curtin University of Technology, Sarawak campus has joint ownership

with the Sarawak State Government and Curtin University of Technology,
Bentley, Perth, Australia. Curtin University, Australia and the local
management team manages the Sarawak campus jointly.
One of the disadvantages of a joint venture business is that your foreign

partner may disagree with some of your objectives, policies or strategies.
Many Malaysian companies like to reinvest earnings for growth but
foreign companies often prefer to take out these earnings. When you enter
into a joint venture, these issues must be taken into consideration while
drafting your agreement with the local partners.
Direct investment
In Malaysia, the biggest form of foreign investment comes from direct investments.
This mode of entry is commonly found in the manufacturing sector. The company
invests abroad bringing in capital, technology and other relevant resources.
Under this mode, the ownership of the company is controlled by the foreign
investor who has far greater control over how the company should be managed.
In Malaysia, you can find Sony, Intel, Acer, Motorola and many other companies
who have come in through the direct investment route. These companies capitalise
on cheap workforce, infrastructure, raw materials and natural resources from
foreign countries. For example, on account of lower labour costs in Malaysia, it
would cost more for Sony to produce a television set in Japan compared to doing
the same in Malaysia.
Companies that are involved in direct investments provide vast job opportunities
for local people. This is one of the key benefits why many governments, including
Malaysia, encourage foreign investments. Direct investment provides a win-win
situation both for the foreign investors and the local people of the host country.
Under this mode of entry, the company has full control over its operations and
investments. They develop good relationships with the government, customers,
suppliers and the general public.
UNIT 5 33
Extending marketing
Some disadvantages of direct investments are high risks due to currency

fluctuations, uncertainties in the political and economic environments, fall in
global demand, changes in trends and competition.
Contract
Manufacturing Direct
Licensing Joint ownership
Exporting venture
Lower risk
Higher risk
Figure 5.4 The various methods of entering the international market place by the
degree of risk
Source: Adapted from Lamb, C W, Hair, J F, McDaniel, C, Summers, J and Gardiner, M
(2009) MKTG, Asia-Pacific Edition, Cengage Learning, Australia.
Activity 5.8
Discuss the advantages and disadvantages of direct investments

in a foreign market. Name two foreign markets where an apparel
manufacturer would be interested in investing and two foreign
markets where it would have no interest in investing. Support
your answers.
Summary
The world is shrinking rapidly with the advent of faster

communication, transportation and financial flows. In the
twenty-first century, the trend shows that companies need to
seek and develop new markets to stay competitive. Domestically,
companies cannot rely on government protection to survive.
Economic communities in the world are striving to eliminate trade
barriers. In Malaysia, many industries are global in nature. These
companies that operate globally achieve lower costs and higher
brand awareness.
However, venturing in the global market has never been an easy task.
A company may have to overcome many challenges and obstacles
to be successful. The risk factor is always there when entering
international markets and so are the opportunities.
Due to the uncertain nature of the global marketplace, companies

have to make careful decisions on which country to enter and
how to enter. It is necessary to conduct feasibility studies before
embarking on any serious steps to enter a global market. In this
section, inputs have been given to you on some of the important
questions.
1. How to look at the global market environment.
2. Deciding whether to go international.
3. Deciding which markets to enter.
4. Deciding how to enter the market.
You must consider the questions above seriously before committing

to any investments. Some companies prefer to use safer modes of
entry like licensing and indirect exports while some prefer a riskier
mode. Whichever choice you make, be prepared to support it with
valid findings and background studies.
Countries, customers, suppliers, people and competition differ

from country to country. Making a similar judgment to serve all
the places may lead to fatal losses. International ventures require
thorough planning, careful implementation and a good control
of tasks. Planning requires you to decide on the allocation of
resources. You need to balance your resources locally and abroad.
In terms of implementation, you should be able to coordinate the
activities to suit the expectations and requirements of the foreign
stakeholders. Global marketing demands extensive learning and
adaptation practices. Rigidity may not be the right answer to
develop a successful market catering to global requirements.
Another important matter for you to consider is how you can

work with new partners from different cultural backgrounds.
Gift giving in Japanese culture is common but in the Malaysian
context, it can be viewed as bribery. In this situation, what will be
your option? The answer lies in adapting to the culture of the host
country where you plan to do business. In conclusion, the global
market brings you you many surprises. You must be sure that
you know the best way to deal with them. In many instances, a
matter which is very insignificant to you may be very important
UNIT 5 35
Extending marketing
for others. So you must decide whether to stand by your usual

practices or adapt for the sake of market growth, customer
relationship and business as you enter different markets.
Self-test 5.2
1. Assume that your company is interested in the global market

potential for body massage and SPA treatment centres in
Singapore. Prepare a summary of the demographic, economic
and cultural differences you expect to find in this country.
2. Assume your boss has asked you for your opinion on how
your company should enter the Japanese, South Korean and
Vietnamese markets with a new line of electronic home
appliances. Recommend the strategies your company can
choose to enter the global market.
3. Identify the joint venture opportunities a roti canai

manufacturer would have if it were looking to market to the
European Union?
Feedback
Activity 5.6
Tariff and quota
Almost all foreign cars need to pay import duties (tariff ) to the
Malaysian government. Malaysia also restricts the number of
foreign cars entering the country through Approved Permits
(AP). The tariff restrictions enable local car manufacturers to stay
competitive in the domestic market by charging lower prices to the
customers in comparison with the foreign car prices. For example,
the price of Honda Civic would be lower than Proton Perdana
without the import duty. This may result in Perdana losing more
of its customers to Honda.
Activity 5.7
The memo needs to describe in as much detail as possible the

cultural, political and economic issues the agency will face in
expanding into China. The following are the topics that are
important in such an assessment.
Cultural: family; religion; education; nationalism; personal

sensitivity; etiquette; ethics; status; aesthetics; personal appearance.
Political: Rules and regulations on advertisements. Prior permission

from the respective authorities; current political situation; future
political situation; feelings towards the Malaysian companies;
feelings towards advertising agencies, etc.
Activity 5.8
You may focus on the advantages and disadvantages of direct

investments in a foreign country. Potential foreign countries to
invest in would be those where the production costs are low,
low costs of labour, low raw material costs, attractive investment
incentives, political stability and minimal regulations on the control
of investments.
Foreign countries which are less attractive for direct investments

are those where there are political unstability, unstable exchange
rate, currency restrictions and limited people for market expansion.
UNIT 5 37
Extending marketing
5.3 Market Ethics and

Social Responsibility
Objectives
1. Identify the reasons why marketing is facing major social criticisms.
2. Define consumerism and environmentalism and describe the roles they play
in the formulation of marketing strategies.
3. Explain how marketers could adhere to the principles of socially

responsible marketing.
4. Describe the roles and importance of ethics in carrying out marketing

activities.
Introduction
In this final section, let us look at marketing not only as an important business
function but also as a social institution. Firstly, you will cover the criticism on
marketing practices. You will also understand the impact marketing creates for
stakeholders; namely shareholders, customers, suppliers, competitors and the
public.
In this section, you will also study the impact of marketing on the environment,
consumerism and citizens. Finally, you will also become familiar with the
methods of conducting marketing efforts through adhering to the codes of social
responsibility.
Before moving on, let us examine DIGI’s concept of the social responsibility.
Reading
Extract 5.1
Digi team visits Yogyakarta
KUALA LUMPUR: On May 27, 2006, an earthquake measuring

5.9 Richter-Scale shook Yokyakarta and its surrounding area, leaving
nearly 5,000 dead and 40,000 injured. Many answered the call for
assistance as relief teams arrived from all corners of the world. Then
DIGI Telecommunications Sdn. Bhd (Digi) participated in relief
efforts led by the government as well as contributed RM250,000

worth of talk-time to local Indonesian subscribers to help them stay
connected with loved ones back in their home country. Four months
on, Digi team revisited Yogyakarta to see for itself the recovery
process in the stricken area while making its own contribution to
the people of Yogyakarta.
Earlier, a special team from Digi visited Dusun Bedukan, a village

under Desa Pleret which had not received much aid since the
earthquake. Here, Digi contributed toiletries to meet the material
needs of 700 residents.
Digi’s Head of Segment Marketing Yohani Yusof explained the

visit to Yogyakarta was part of Digi’s commitment to charitable
causes as responsible corporate citizen.
“We, like so many people around the world, are concerned for the
people of Yogyakarta. But we aren’t just satisfied with donating
money or goods, we wanted to do something different and really
meaningful. This is why we decided to visit these villages.
Digi worked alongside with Aksi Cepat Tanggap (ACT), a local

Indonesian non-governmental organisation (NGO) that has been
actively conducting relief work in Yogyakarta since May 2006.
Source: Retrieved from Borneo Post, ‘Digi team visits Yogyakarta’,

16 October, 2006
Social criticisms of marketing

Marketers are criticised for many reasons. However, not all the criticisms are
justified. Many NGOs in Malaysia write adverse comments on marketing practices.
They warn the consumers and general public on the consequences of consuming
some products which are hazardous to health. From time to time, the media in
Malaysia also report on unlawful practices of some irresponsible individuals.
This sort of publicity not only tarnishes the image of the company but it can
also put it out of business. You will find that when a company implements the
marketing concept well and is sensitive to consumer interests, it faces little or no
social criticism.
However, sometimes marketing activities are also praised for contributing to the
well-being of customers and the society in general. The problem arises only when
the non-target group is against the approach of the marketing and tends to be very
negative or aggressive in nature. For example, the following advertisements may
cause unpleasantness to some viewers in our society.
UNIT 5 39
Extending marketing
Marketing’s impact on individual consumers
Marketing influences customers in many ways. When we incorporate the integrated

marketing approach which blends the product, price, place and promotion correctly,
the consumers are happy. Unfortunately, there are also some instances when
customers may not be able to accept the price in comparison with the products or
services acquired. For example, after dining at a restaurant, you may feel cheated when
the operator charges an exorbitant price for a glass of mineral water. The operator
may argue that when you dine, you are also paying for the intangible services and the
posh environment which they have created for you. These elements may be unseen,
but contribute to the fixed overhead costs of the organisation. The consumer may
not be able to accept this reasoning and will never return to the restaurant anymore
if he feels that he has been cheated by artificially high prices.
Kotler and Armstrong (2012) have cited the following as some of the source of
negative impact created by marketing activities on consumers.
1. Criticism on charging high prices
Many marketers are blamed for charging high prices for their products or
services. These charges are levelled on account of high intermediary costs
or the successive layers of costs that are added by each level of distribution,
from wholesalers to distribution agents and retailers. For example, the prices
of agricultural goods such as tomatoes, vegetables and fruits fluctuate from
time to time. The farmers and consumers always blame the intermediaries
and retailers for such problems; the latter on the other hand, cite their own
costs of storage, transportation and risk.
Marketers are also blamed for incorporating the heavy cost of advertisements
and promotions into the price of the products or services. While advertising
plays the crucial role of informing the consumers about products and
services, it does add to the cost of goods sold. It is therefore important for
the marketers to detect and understand the customers’ concern over the
issue before carrying out major advertising campaigns.
Customers also complain about the marketers for marking up the price
of goods excessively. Critics claim that some companies mark up goods
excessively and that the prices have no relationship to the costs incurred in
producing and marketing the products. For example, in the case of the price
of branded perfumes, no one really knows the cost of the ingredients used
to produce these perfumes, but a hefty price is paid for the brand rather
than the value of the actual content of the products.
2. Deceptive practices
Marketers are sometimes blamed for deceptive practices that mislead

the consumers into believing in something which is not true. Deceptive
practices fall into three groups (Kotler and Armstrong 2012).
Marketers advertise low prices when in fact, they mark up the price on a
regular basis and slash it lower on special occasions to show a discounted
price which is actually nearer to the real price of the product. This is
called deceptive pricing. Customers can report such practices to the local
authorities. Legal action can be taken if the prices are found to be deceptive.
Deceptive promotions involve misleading the customers with false claims in

the mass media. Some features included in the publicity are not actually
found in the product or service. Customers are given some excuses for not
being provided with added services or promotions. For example, a computer
accessory supplier indicates on the banner that you can purchase a 1GB
pen drive for RM19.00. When you visit the supplier, you are told that the
pen drive is out of stock or they have already been given to the first five
customers.
UNIT 5 41
Extending marketing
Some marketers are accused of practising deceptive packaging. They are

accused of not disclosing the true contents or the complete ingredients of a
product in the label. For example, some vegetarians do not consume eggs.
Some marketers who do not show the complete list of ingredients on the
label may not disclose that their products contain eggs or egg derivatives
and thus mislead the customers on the product contents.
However, most marketers today avoid deceptive practices in this competitive

environment. Deceptive practices are easily exposed. Once the practices
are exposed, the casualties are big and sometimes unpredictable. Most
marketers do not want to take chances by cheating their customers.
3. High-pressure selling
Customers also frequently complain against the sales personnel who

apply high-pressure selling techniques to close a sale. Sometimes, these
people will force the prospective customers into buying products which
are not essential or required at that point of time. In the long run, these
sales techniques may not survive since the customers will tend to avoid
buying from such marketers. Selling of insurance and credit cards are
some examples of high-pressure selling. Modern marketers are moving
towards relationship-based selling rather than transactional-based selling.
Under the relationship marketing approach, marketers make all the effort
to establish good rapport and long standing relationships with customers
while selling the product. This approach works better than high-pressure
selling.
4. Issues on quality
Another criticism levelled at marketers is that the products are not up to

the expected quality or standards. Even though quality can be a subjective
matter, customers will generally identify the products with sub-standard
quality. The consequences for the marketers are even greater if the customers
pay a high price for sub-standard quality. Sometimes they tend to accept low
quality products if they pay an extremely low price for the products which
they have purchased.
Other than quality, some products may provide little extra benefits to the
customers in comparison to the competing products in the market. In these
situations, customers may not want to come back to the supplier again. In
the long run, the supplier will lose his customers. Product safety has also
become an issue for customers.
However, most marketers today avoid such adverse consequences by

delivering products which are at par with or above the expected quality in
comparison to the price paid by the customers. This practice enables them
to increase customer loyalty and sustain themselves in the business for a
longer period of time.
5. Issues on search for replacement parts
Customers also accuse that some products become obsolete very fast and
it is difficult to obtain spare parts for such products. For example, there
are many types of cameras in the market, a product which has a very short
life span. Customers may have to buy a brand new camera just because
they are unable to find a replacement for minor parts of the camera.
Normally, these problems occur after the warranty period. There are also
other products such as computers, laptops and electrical appliances which
have similar problems. While the products are still functional, some small
part may become defective which hampers the product performance and
therefore must be replaced. Consumers feel cheated and irritated if the
replacement parts are not easily available. You must, however, appreciate
that companies do not deliberately design their products to break down
earlier because they do not want to lose customers to other brands. Instead,
they seek constant improvement to ensure that products will consistently
meet or exceed customer expectations.
Critics also argue that marketers plan for the obsolescence of their existing
products by introducing new and improved versions which make your
older versions obsolete.
Conversely, in some cases, the criticism is that marketers deliberately

withhold introduction of new features until the demand for the current
version is completely exhausted.
Activity 5.9
Review the claims made by consumers that marketers are harming

consumers through planned obsolescence, shoddy or unsafe
products and poor services. Do you agree with these claims?
Activity 5.10
As a marketing director, discuss how you would apply ethical

business behaviour to your company’s marketing mix.
UNIT 5 43
Extending marketing
Marketing’s impact on the society as a whole
There are many instances that despite stringent rules and regulations, some
entrepreneurs act irresponsibly to gain short-term profits by jeopardising the
interest of the society as a whole. Some of the cases have been highlighted in
NTV7 — Edisi Siasat showing illegal timber logging, improper disposal of
chemical wastes, river pollution due to unauthorised development and unplanned
projects, open burning, dumping of factory wastes, damages in school buildings
and defective housing projects.
Formulation of codes/charters/guidelines
Working with the respective consumer, industry and government bodies, the
Federation of Malaysian Consumer Association (FOMCA) has been instrumental
in formulating codes, charters and guidelines with regard to relevant products
and services in Malaysia. The association works closely with other consumer,
industry and government agencies. These include:
a. Malaysian Code of Business Ethics (in collaboration with National

Advisory Council for Consumer Protection).
b. Code of Repossession of Goods (in collaboration with the Malaysian

Hire Purchase Associations, financial institutions and the Ministry of
Domestic Trade and Consumer Affairs).
c. Guidelines for Guarantors (in collaboration with Bank Negara and

financial institutions).
d. Guidelines for Credit Card Usage (in collaboration with Bank Negara
and financial institutions).
e. Malaysian Code of Advertising Practice (in collaboration with the

advertising industry).
f. Patient’s Charter (in collaboration with the Malaysian Medical Association,

the Malaysian Dental Association and the Malaysian Pharmacy Association).
Source: Retrieved from http://www.fomca.org.my/achievements.html, 15 October 2006
Some business entrepreneurs are accused of conducting their business at the

expense of the public good. For example, uncontrolled timber logging can cause
flash floods, landslides and reduction in water catchment areas and pollute the
rivers with mud. Private companies, on the other hand, make millions of ringgit
by selling forest resources which belong to everyone. You must be aware of the
public debate going on regarding the climate change crisis created by unethical
business practices.
Another example is an increase in automobile ownership (private good) that

requires more highways, traffic control, parking spaces and police services (public
goods). The overselling of private goods will result in “social costs”. Therefore, a
way must be found to restore a balance between private and public goods.
One of the ways in which marketers could take responsibility for their actions is
by ensuring that they bear the total social costs of their operations. Some examples
could be car manufacturers investing in the development of safer and non-
polluting vehicles, textile companies investing in effluent treatment plants, large
agriculturists investing in research on non-chemical fertilisers, etc.
The government could also terminate the logging license of those who destroy the
forests without following to the rules stipulated by the government even though
sometimes, it is hard to prove such practices.
Another option is to charge the customers for social costs. Common examples today
are toll taxes or expressway taxes that consumers pay for using the relatively faster
expressways to avoid traffic congestion.
Critics also charge the marketers for causing cultural pollution. Some advertisements
pollute students’ and children’s minds with too much violence and sex oriented
messages. In some instances, they even glorify the bad and rough guys as heroes.
Although in Malaysia, such advertisements are under serious scrutiny, the exposure
to the Internet make things difficult for the parents to control.
The following are the marketers’ arguments on the charges.
1. In many cases, it is impossible to prevent non-target groups from watching

or seeing some advertisements which are actually targeted to a selected
group of customers. Sometimes, marketers take the chance without making
any deliberate efforts to limit their marketing communication to the
identified target group. The availability of the media is also limited to reach
out to their specific group of customers and marketers end up using generic
mass media vehicles that reach both the target segment and the larger
population of the non-target segment.
2. Marketers believe that the advertisements bring many benefits in addition

to convey the marketing message to the customers and people who watch
the advertisements. The costs of newspapers and magazines are low because
a big portion of the cost for publications is absorbed by the advertisers.
3. Marketers also claim that today’s consumers have the alternative not to
watch the advertisements if they want.
UNIT 5 45
Extending marketing
Activity 5.11
Do you agree that marketing creates false wants and too much
materialism, too few social goods, cultural pollution and too
much political power?
Marketing’s impact on other businesses
The activities of one company can harm other companies directly or indirectly.
These activities are generally directed at restricting competition in one way or
another. Some huge hypermarket operators open up their businesses in small
towns; sometimes located not far from each other. This strategy will eventually
wipe out other small mini markets and sundry shop operators in that vicinity.
Later these hypermarkets will compete with each other and eventually the weaker
ones will close down. Once this happens, they monopolise the area and eventually
will start to mark up their prices to gain high profits. Finally, the customers
become the losers.
According to Kotler and Armstrong (2012), a company can harm other companies
in three ways: acquisitions of competitors, marketing practices that create barriers
to entry and unfair competitive marketing practices.
Competition is reduced when a company acquires another competitor rather than

developing its own products.
In 2002, Maxis purchased Timecel, a rival mobile service provider from TimedotCom
Berhad. After the purchase, Maxis claimed that it has the best line coverage on
the North-South highway. Marketers may argue that the acquisition has actually
provided enhanced customer services which may actually be true. Through the
acquisition, Maxis has also reduced its competition and obtained competitive
advantage over other telecommunication service providers.
It is a good idea for you to take a balanced view of the acquisition because while
it may reduce competitive activity, it may also bring benefits to the consumers.
The acquiring company may gain economies of scale that lead to lower costs and
lower prices. A well-managed company may take over a poorly managed company
and improve its efficiency. In Malaysia, banks are encouraged to merge in order to
withstand intense global competitions.
Reducing the threat of new entries into the market is another criticism levelled at
marketers. Some large companies can tie up with major suppliers to set barriers for
entry in the market. By doing this, they keep potential competition at check but
they also deprive customers of more choices.
Some companies practise unfair marketing with the intention to eliminate their
competitors from the market. These companies set very low price to destroy the
smaller competitors or literally “price them out” of the market. Even though there
are laws to protect weaker firms, it is usually very difficult to prove such intentions
and practices.
Citizens and public actions to regulate marketing

Citizens and the general public usually form their own channels to address their
dissatisfaction or grievances over unfair trade practices. Kotler and Armstrong
(2006) have divided these group actions or channels into three categories, namely,
consumerism, environmentalism and public actions to regulate marketing.
Consumerism
The Malaysian government is always sensitive to complaints received from

the public. There are many NGOs and political parties that work to provide
channels for consumers to voice their complaints. All the political parties have
set up their own complaint bureaus to receive and act upon complaints lodged
by customers. There are many instances that government authorities support
these complaint bureaus to take action against errant business practitioners.
The MCA complaint bureau and the Consumer Association of Penang (CAP)
have been instrumental in exposing many errant business practitioners in
Malaysia. CAP publishes a monthly newspaper that highlights the tricks and
trades of many mischievous claims and practices undertaken by some business
entities. The organised movement that enforces the rights of consumers is called
“consumerism”. Organisations working for consumerism aim at making the
consumers more aware of their rights as well as taking organised action to seek a
redressal for consumer complaints.
According to Kotler and Armstrong (2012), traditional sellers’ rights include:
1. To introduce products or services which are not hazardous to personal

health or safety. In Malaysia, all the cigarette packets must print the
warning statement “Smoking is Hazardous to Health, Health Ministry of
Malaysia”.
2. Avoid discrimination by charging the same price for similar products to

customers.
3. To promote the products without engaging in unfair competition. In

Malaysia, petrol stations or distributors are not allowed to carry out price
reduction campaigns.
4. Provide or distribute messages which are not misleading to the customers.

Our government allowed AirAsia to continue its advertising campaign after
investigating public complaints that its advertisements were misleading.
UNIT 5 47
Extending marketing
5. To use any sales promotion tools to attract the customers as long as they
are not misleading. Our local authorities try to ensure that the price
cuts advertised as discounts are genuine. The authorities often inspect
discounted items sold in hypermarkets. Legal action will be taken against
those who mislead the consumers.
Traditional buyers’ rights include:
1. Customers have the right not to buy a product offered for sale. A sales
agent may take you for a dinner, might spend money on gifts, might offer
you a free vacation trip and you can still reject the purchase if you want.
For example, some locally registered companies selling hotel membership
for a fee will invite you to attend a 2 hours preview. In return, they will
offer a free trip to some local resorts during non-peak seasons. There is no
obligation on the part of customers to buy the membership.
2. Customers have the right to ensure the product is safe to use or consume.
For example, some medical products will carry instructions on the
symptoms of consuming the medicine. Some will indicate that it is not
safe to drive after consuming it. In this respect, the buyers must be alert
and should follow the given instruction. The company will not be liable
for any legal damages due to accidents after consuming the product.
3. Customers have the right to expect that the product which they purchase
has all the features and benefits as claimed by the sellers or advertisement
messages. The suppliers often provide warranty for the purchased electronic
goods. Any defects due to production faults are normally replaceable.
Comparing the rights of the sellers and buyers, Kotler and Armstrong feel that
the balance of power is more favourable to the sellers than to buyers. Buyers are
weaker since they often do not have enough information to make the correct
judgment and are sometimes not organised enough to take follow-up action on
their complaints.
To enable the consumers to have a more balanced power equation in the market,
advocates of consumerism feel that the following additional rights should also be
given to the consumers.
1. The right to know about the product accurately and correctly.
2. The right to be protected against products which are doubtful in qualities

and against the normal marketing practices.
3. The right to influence products and marketing practices for a better

quality of life.
In Malaysia, consumers who believe they have had a bad deal have several remedies
available, including contacting the company or the media; contacting federal, state
or local agencies; and going to the small-claims court. For example, a non-profit
organisation like the National Consumer Complaints Centre (NCCC) provides
Malaysian consumers with an alternative and independent avenue to lodge
complaints and seek assistance.
Reading
Extract 5.2
Malay Mail: Direct sellers say they comply with rules

2 October 2006
DIRECT Selling Association of Malaysia has maintained that

its members do not make outlandish claims about their health
products to dupe customers as alleged.
Its vice-president, Frederick Ng, said direct selling companies

do not make baseless claims as all the benefits offered by their
products are backed by clinical research.
He said in addition, all their products are vetted by the Health

Ministry before they are made available to consumers.
“The Health Ministry has strict guidelines which we must adhere to.
The Ministry will check our products before giving their go-ahead
for us to sell them to consumers,” he said.
Ng was refuting the statement by Malaysian Dietary Supplement

Association protem president Jagdev Singh in The Malay Mail on
Sept 29, that some direct selling agents made outlandish claims
about products which had very little effects or were of no use at all.
Jagdev, commenting on the heavy usage of health supplements

by Malaysians, had also said that such irresponsible agents had
created havoc in the industry for making baseless claims, affecting
genuine players whose products were backed by clinical trials.
Jagdev had also urged consumers to be careful when buying health

supplements from people whose only motivation was money.
Ng said the Domestic Trade and Consumer Affairs Ministry

would also ensure that direct selling companies comply with
Health Ministry regulations.
UNIT 5 49
Extending marketing
“For us to obtain our operating licence, we must ensure that our

products are in compliance with Health Ministry regulations,”
he said. He added apart from that, the association also closely
monitors its members.
“Any complaint received against our members or their products

will be investigated thoroughly, and we have a code of conduct for
our members to adhere to,” he said. Ng said consumers are not
forced to buy the members’ products.
“What we do is we explain to them the benefits of our products

and let them decide.”
Source: Retrieved from http://nccc.org.my/index.php?option=com_

content&task=view&id=159&Itemid=51 Accesssed 20 October 2006
Activity 5.12
Read the above article regarding the action taken by the Malaysian
Dietary Supplement Association against some direct selling
agents’ outlandish claims about their products. Do you think
the direct selling agents have the right to sell and promote their
supplementary products in such an aggressive way?
Activity 5.13
Refer to Extract 5.2. Discuss what rights buyers have to protect

themselves from the irresponsible direct sales agents that make
baseless claims about products which have very little positive
effects or are of no use at all.
Environmentalism
Environmentalists are concerned with marketing effects on the environment and the
cost to the environment for serving consumer needs and wants. Environmentalism is
an organised movement of concerned citizens, businesses and government agencies
to protect and improve the people’s living environment (Kotler and Armstrong
2006). In Malaysia, there are many environmental groups that are actively involved
in educating the general public on activities which threaten the environment. The
following are some examples:
• Malaysian Environmental NGOs — MENGO is a federation of 18

different NGOs which are concerned about the environment.
• Centre for Environment, Technology and Development, Malaysia —

CETDEM.
• Coalition for Tobacco Free Malaysia — Facts and figures on tobacco

consumption and its effects in Malaysia.
• Force of Nature Aid Foundation — Charitable organisation helping

survivors of natural disasters, tsunami victims etc.
• The Malaysian National Animal Welfare Foundation — MNAWF.
• R.E.A.C.H. — Regional Environmental Awareness Cameron Highlands.
• SEPA — the Sabah Environmental Protection Association.
Source: Retrieved from http://www.mycen.com.my/search/ngo_02.html, Accessed

15 October 2006
Environmentalists are not anti-marketing or anti-business. Their objective is to

ensure that marketers do not damage the environment or nature in their attempt
to serve a specific group of customers. They strive to re-instate the quality of life
which is lost due to the rapid development of technology. They define quality of
life as inclusive of the quality of a healthy environment. They are strictly against
the activities that cause damage to the environment such as pollution and damage
to the ecosystems. If you notice, global warming is one of the key issues that has
attracted the concern of many countries and NGOs. The concerned organisations
in these countries disseminate their messages through documentaries and media to
audiences all over the world on the damages done to nature. People are getting more
alert, worried and aware of these issues. In Malaysia, residents in Shah Alam and
Johor Bahru suffered for weeks due to flash floods. This type of floods has rarely
occurred before. Thousands of people lost their belongings, cars and properties to
the flood. Some NGOs blame the errant contractors who are involved in illegal
logging activities as the major cause of the flood.
UNIT 5 51
Extending marketing
Surprisingly, environmentalists create special opportunities and challenges for

the marketers. Many marketers use the societal marketing approach to win the
customers. For example, TV3’s 8 o’clock news is popular due to its unflinching
effort to reveal the activities of irresponsible traders. Due to its efforts, TV3 receives
the highest viewership in Malaysia compared to any other channel. This is a good
two-in-one strategy. On one hand, it gains popularity and on the other hand, it
makes profits due to incoming advertisement revenues.
In the late 90s, Shell carried out an advertising campaign by spreading the
message that it was involved in a research and development activity to find better
alternatives to petrol. Its advertisement carried an environment friendly message
to the general public which triggered a positive perception on the noble efforts of
the company.
It is reported that consumer interest in environmentally compatible products has

grown dramatically. According to Grimes (1996), various consumer polls show
that shoppers change their purchasing decisions based on concerns about the
environment. The data indicate three trends:
1. Consumers avoid purchasing a product because they believe the product

or package is environmentally harmful.
2. Consumers purchase a product specifically because of environmental

advertising or labelling.
3. Consumers are willing to pay more for products perceived as environmentally

preferable.
Given these strong statements of consumer concern and preferences, it is not

surprising that marketers have increased their advertising and labelling of
“environmentally friendly” products. In Malaysia, the effectiveness of environment
friendly marketing campaigns is still a question mark. An environment friendly
message may not be strong enough to encourage customers to purchase and these
trends are still under study by marketers. Despite this uncertainty, many companies
take the necessary steps to incorporate environment friendly messages into their
advertisements.
In US the scenario is different. Grimes (1996) states that when environmental

marketing mushroomed in the late 1980s and early 1990s, many of the claims
were exaggerated and unsubstantiated. Many agencies and organisations expressed
concerns that there was little truth in environmental advertising. The US Federal
Trade Commission addressed this problem by investigating individual cases of
possible false advertising, such as plastic bags and diapers that claimed to be
biodegradable and aerosol sprays that contained ozone-depleting chemicals yet
claimed to be ozone friendly.
Reading
Extract: 5.3
The case of Legpage’s biodegradable transparent tape
LePage’s manufactured a cellophane tape made from wood pulp

and adhesive material called “Biodegradable Transparent Tape.”
The tape was sold with a hard clear non-foam polystyrene plastic
dispenser and attached to a non-corrugated paperboard backcard.
The Federal Trade Commission’s (FTC) complaint charged that
LePage’s represented without substantiation that its Biodegradable
Transparent Tape would “completely break down and return to
nature” (i.e., decompose into elements found in nature) within a
reasonably short period of time after customary disposal as compared
to other transparent tape. The complaint also asserted that the tape
claimed to offer a significant environmental benefit after customary
disposal. The complaint further charged that LePage’s falsely
represented that the plastic tape dispenser and paperboard backcard
of LePage’s Biodegradable Transparent Tape were recyclable. The
FTC contended that the plastic tape dispenser and the paperboard
package were not recyclable, because there were only a few collection
facilities nationwide that would accept the non-foam polystyrene
tape dispenser or the non-corrugated paperboard or cardboard
backcard for recycling.
The consequences
The proposed consent agreement prohibited LePage’s from directly

or impliedly claiming that any of its products or packages are
degradable, biodegradable, photodegradable, or that any product
or package offers any environmental benefits when consumers
dispose of it as trash that is buried in a sanitary landfill, unless
at the time of making such representation, LePage’s possesses
and relies upon competent and reliable scientific evidence that
substantiates its claims.
Similarly, the agreement also proscribed claims that any of LePage’s

products or packages are capable of being recycled, or that recycling
collection programs for its products or packages are available.
The agreement did allow recyclability claims if LePage’s discloses
clearly, prominently and in close proximity to the claim: (a) that
the product or package is recyclable in the few communities with
recycling collection programs for non-foam polystyrene or for non-
corrugated paperboard or cardboard; (b) the approximate number
of U.S. communities with recycling collection programs for the
product or package; or (c) the approximate percentage of U.S.
population to which recycling collection programs for such product
UNIT 5 53
Extending marketing
or package are available, and in addition, in the case of any non-foam

polystyrene product or package, the product or package itself bears
a clear identification of the specific plastic resin(s) from which it is
made. Lastly, the agreement required LePage’s to distribute a copy
of the proposed order to each of its officers, agents, representatives,
and employees who prepared or placed advertisements, promotional
materials, product labels or other sales materials.
Source: Grimes, K D (1996) Environmental Marketing Claims, http://

www.mlmstartup.com/articles/swapr96.htm, Accessed 20 October
2006
Reading
Extract 5.4
Microsoft phases out PVC from its packaging
REDMOND, Wash., Dec. 7, 2005 — Those (polyvinyl chloride

or vinyl) PVC clamshell packs that protect new copies of
Microsoft Office Excel, PowerPoint, Word and other products
fall short when it comes to protecting the environment and
human health. That’s why Microsoft is phasing out the popular
but potentially hazardous PVC in favor of more eco-friendly
alternatives. Microsoft today announced it will complete its phase
out of packaging made of PVC by the end of 2005 — a move the
company took with the help of partners such as the Center for
Health, Environment and Justice (CHEJ). To learn more about
the PVC phase-out and its significance, PressPass spoke with Jay
Watts, senior manager of the package engineering management
team at Microsoft; Joan Krajewski, Microsoft’s environmental
attorney, and Lois Gibbs, executive director for Falls Church,
Va.-based CHEJ.
PressPass: What are some of the dangers associated with PVC?
Gibbs: PVC — a combination of plastic and chlorine that we call

the poisonous plastic — is the worst plastic from an environmental
health perspective. It’s dangerous throughout its entire life cycle of
production, use and disposal. When produced or burned, it releases
dioxins, which are the most potent synthetic chemicals ever tested
and can cause cancer and harm the immune and reproductive
systems. Studies have shown plasticizers such as phthalates have
migrated out of PVC consumer products, exposing people to toxic
additives linked to reproductive defects and other health problems.
PVC cannot be effectively recycled due to the many toxic additives
used to soften or stabilize it which can contaminate the recycling

batch. There are many safer alternatives to PVC, such as a plastic
without chlorine called PET that’s commonly used in recyclable
milk cartons and soda bottles.
PressPass: What is the significance of Microsoft’s taking this

action?
Krajewski: Microsoft works with the major retailers in the country,

so when we say we contacted our channel partners and asked that
they not use PVC packaging on our products, it’s very significant.
That heightens their awareness, too, and some of these channel
partners have initiated storewide programs to remove PVC as well.
We estimate that we have already eliminated 361,000 pounds
[approx. 164,000 kilograms] of PVC packaging since July 2005,
and based on our historical product shipments, we anticipate that
we will eliminate 1.6 million pounds [3.5 million kilograms] of
PVC over the next two years, so it’s really quite significant.
Gibbs: A decision by a major corporate leader like Microsoft to

phase out PVC sets the bar for other corporations. That’s really
important and we’re very excited about it. Also, in asking the
big-box retailers not to use PVC in repackaging its products,
Microsoft went a step further than they had to, because they
really wanted to do the right thing throughout the whole lifecycle
of their product, and this is helping us to educate these other
corporations and hopefully move them in the same direction as
Microsoft. It’s a huge help.
PressPass: Is Microsoft looking at any other alternative packaging

materials?
Watts: Yes, our sustainability efforts include more than eliminating

PVC. We are still looking at and we have plans to test biodegradable
PET alternatives, such as packaging made of cornstarch, sugar
and vegetable oils. We also participate in industry groups that
specifically address sustainability issues, such as the Sustainable
Packaging Coalition — an industry working group committed to
encouraging a sustainable flow of packaging materials. We also
use alternatives to PET such as corrugated cardboard, plastic-type
packaging used on the Xbox 360, and we have put into place
requirements for recyclable content in our paper packaging.
UNIT 5 55
Extending marketing
PressPass: What other efforts has Microsoft made to be eco-

friendly?
Krajewski: Since we are a global company, we address these

sustainability commitments on a lot of different fronts, so I’ll
only cover some of them here. We have corporate procedures
that conserve environmental resources at our facilities and in
our products, packaging and supplier operations. And we follow
strict policies to ensure that we remain in full compliance with
international environmental regulations as well as the specific
environmental requirements of each country where we do business.
Our environmental program focuses on three main areas:
Recycling and Conservation. Microsoft reduces waste and

conserves resources at our facilities, recycling a daily average of
24 tons [21.7 metric tons] of material from glass, plastic and
aluminum to cardboard, paper and copper wire cabling. We also
work with a contractor to recycle our old PCs, monitors, servers
and other surplus technology, ensuring that our surplus equipment
is recovered or recycled at an environmentally compliant facility.
In addition, we participate in programs throughout the world that
refurbish thousands of PCs every year and donate them to schools
and nongovernmental organizations (NGOs).
Improving Air Quality. At our corporate headquarters in the

U.S., internal campaigns have been organized to encourage
employees to use non-Single Occupant Vehicle (SOV) commuting.
We provide employee subsidies and education to promote the use
of car pools and van pools, offer a public transportation pass to
employees and provide shuttle services to employees who need to
move around our corporate campus during their workday. This
year, we were recognized by the U.S. Environmental Protection
Agency as being among the top five of Fortune 500 companies
with respect to meeting a National Standard of Excellence for
our role in offering Microsoft employees commuter benefits that
reduce fuel consumption, vehicle emissions and traffic congestion
across the country.
Products and Packaging. We design our software and hardware

products to comply with worldwide environmental regulations.
We use no heavy metals, such as lead and cadmium, in packaging
or plastics for any Microsoft products, and we restrict the use
of toxic substances in our manufacturing operations. Microsoft
contracts for manufacturing throughout the world, and we require
that our vendors abide by the applicable environmental laws
and follow good environmental practices that reflect the spirit
of those laws. In addition, we design our hardware and software
packaging to reduce environmental impact, avoiding the use of
standard plastic shrink-wrap on our product packages and manuals.
We promote the use of compact discs (CDs) and Web-based
downloads for computer programs, and whenever possible we use

online instructions in place of paper manuals. We also forbid the
use of old-growth trees in our packaging.
Source: http://www.microsoft.com/presspass/features/2005/dec05/
12-07Packaging.mspx Accesssed 20 October 2006
Business actions towards socially responsible marketing

Sometimes one may think that environmentalists are a hindrance to marketers.
However in actual fact, they are not. They help to educate the customers on their
rights and also provide suggestions on how to develop businesses without hurting
the environment. There are many benefits that can be derived from adhering to
their requests. Under certain circumstances, their demands can suggest a positive
strategy and should be incorporated into the marketing plans to win the publics’
confidence. Companies looking for short-term gains sometimes face greater losses
when they continue to ignore environmentally sensitive or socially responsible
practices in marketing. In summary, if your company is somehow or other involved
in environmental issues, it is important for you to seriously consider the request of
the environmental groups to at least take care of the company’s image in the midst
of customers and the general public. With extensive media coverage, companies
certainly cannot afford or may not survive bad publicity. Kotler and Armstrong
(2006) have suggested two approaches to carry out socially responsible marketing
activities, namely, the enlightened marketing concept and marketing ethics.
Enlightened marketing
According to Kotler and Armstrong (2006), the philosophy of enlightened marketing

holds that a company’s marketing should support the best long-run performance
of the marketing system.
Enlightened marketing consists of the following five principles.
1. Consumer-oriented marketing suggests that the companies develop,

organise and implement marketing activities based on consumers’
perspectives. Marketers should always strive to understand what their
customers want before making some important marketing decisions. (For
further explanation, please refer to marketing management orientation in
Unit 1 of this module). KFC restaurants in US, for instance, stopped the
usage of cholesterol raising trans-fatty acids from their products by April
2007 and replaced it with soya oil; stopped adding salt to fries and banned
smoking in all its outlets in January 2006. Such changes would deliver
superior value to KFC consumers, and in the long-term, it will help KFC
to build lasting and profitable customer relationships.
UNIT 5 57
Extending marketing
2. Innovative marketing principle suggests that companies should always

strive to improve their product and services to meet the ever changing
expectations of their customers by finding better and innovative ways to
fulfill consumer needs. In other words, they should provide updated product
and services to their customers. Companies which are complacent about
their existing achievement may not be able to maintain their profitability
if they refuse to improve themselves.
3. The company’s resources should be directed towards adding value to the

customers. In other words, marketers should strive to provide value-added
marketing services to gain customers’ trust and confidence in their products
and services. The company’s marketing strategy should use long-term
customer relationships rather than transaction based marketing.
4. The principle of sense-of-mission marketing suggests that the

company’s mission should incorporate socially responsible marketing
activities rather than focusing on narrow product sales. Serving a social
mission makes the working environment better. Customers and the
general public also like to be a part of such institutions.
5. The principle of societal marketing indicates that responsible companies

always make marketing decisions after taking into consideration the
consumers’ interests, the company’s interests and long-term societal
interests. They understand that forsaking any of these groups may lead to
imbalance in terms of long-term survival and growth plans of the
company.
Activity 5.14
Discuss how “Enlightened Marketing” helps your company to

build long-term profitable customer relationships.
Marketing ethics
Marketers today face many ethical dilemmas. It is difficult to get every employee
to follow the ethical code of conduct set by the company. The enforcement of an
ethical code of conduct requires commitment from all levels in the organisation
as well as from all the partners who are involved in delivering the ultimate value
to the consumers. The Direct Selling Association of Malaysia (DSAM), for
instance, has set the code of conduct for members to adhere to.
However, sometimes even the finest guidelines are unable to resolve some of
the ethical dilemmas faced by the marketers when they carry out their job. The
following are some examples of morally difficult situations in marketing.
• Whether to sell products according to the needs of the customers or

products which yield the highest profit margin.
• Whether to continue promoting a product to the customer even though

you know your competitor’s product is much better and cheaper. You
might also be in a dilemma if your customer asks your sincere opinion on
the competitor’s product.
• Whether to support excessive spending on the customer under the motive

of securing business contracts if all your competitors are also doing so.
• How to stop illegal pay offs to customers by unethical salespersons as

inducement for getting a business contract.
• How to stem the possibility of some employees accepting financial

payment from competitors for leaking some vital information.
Visit http://www.dsam.org.my/code.html for a sample of the code of ethics.

You may refer to other examples by looking at the code of ethics of your own
organisation or other organisations that you are familiar with if such codes have
been developed by these organisations.
Companies are encouraged to develop and practise socially responsible and

ethical marketing practices. Under the societal marketing context, marketers
should develop marketing activities based on personal integrity, corporate
conscience and the long-run welfare of consumers. In the international market,
environmentalism poses special challenges for marketers. Business standards and
practices vary a great deal from one country to the other. Accepting or giving
bribes is a very serious offence in many countries. However, enforcement efforts
to implement the Anti-Corruption Act can be slow in some countries.
One key question to ask is: Does the company need to lower its ethical standards
to suit the standards of other countries that it has chosen to work with? Many
established companies will answer in a firm “no” because they adhere to their code
of ethics in securing new contracts or businesses. They also do not give any room
for their staff to bend the ethical code of conduct in any circumstances. Those
companies that breach the ethical codes set by itself and the society will have
image problems that will in the long run, undermine the business interests of the
company.
UNIT 5 59
Extending marketing
Ethics and social responsibility require a total corporate commitment. The effort
must be considered as a part of the corporate culture of the organisation. Malaysia
is ranked 39 under the Transparency International Corruption Perceptions,
2005. This ranking should provide a significant impact on the perceptions of
individuals, public and businesses as well as on the Malaysian business environment
as a whole. It would be good if we could improve our ranking from year to year
to portray a positive image of our country.
Activity 5.15
What principle should guide companies and marketing managers

on issues of ethics and social responsibility?
Summary
This section examines the social effects of marketing practices by

companies. A marketing system should sense, serve and satisfy
consumer needs and improve the quality of consumers’ lives. In
working to meet the consumer’s needs, marketers may take some
actions that are not approved of by all the consumers or the publics
within the social sector. Marketing managers must understand
the criticisms that the marketing function may encounter. By
understanding the criticisms, the manager is better prepared to
respond to them in a proactive manner. Some of the criticisms are
justified; some are not.
The primary criticisms of the marketing function with respect to its

impact on individual consumers have been categorised in relation to:
1. High prices.
2. Deceptive practices.
3. High-pressure selling.
4. Shoddy or unsafe products.
5. Planned obsolescence.
6. Poor service to disadvantaged consumers.
These criticisms have emerged from the failure to practise consumer

orientation effectively and adequately.
A separate set of criticisms is directed towards the marketing

function by the society in general. Criticisms from this larger
public body include comments on creating:
1. False wants and too much materialism.
2. Too few social goods.
3. Cultural pollution.
4. Too much political power.
In addition, critics have also pointed out that the marketing impact
on other businesses may not always be good either. Marketing is
accused of harming competitors and reducing competition by
acquiring competitors, creating barriers to entry and using unfair
marketing practices.
The current trend indicates that many marketers are practicing

environment friendly marketing. They understand that marketing
is beyond selling products and services. Many companies are
taking environmental issues seriously. They respect and adhere
to legislations which protect the environment. Adverse publicity
regarding the negative impact of a company’s activities on the
environment can ruin a company’s business completely.
Most successful companies have recognised that their companies

need to follow enlightened marketing. This concept is based on the
principles of consumer orientation, innovation, value creation, social
mission and social orientation.
A code of ethics needs to be incorporated into company policies

and mission statement to ensure widespread practice and serve
as an implementation guideline. The policies include guidelines
for customer relationships, distributors’ relations, staff relations,
promotions, pricing and product development and services. In the
long run, companies which adhere to a strict code of conduct will
certainly reap the benefits.
UNIT 5 61
Extending marketing
Self-test 5.3
1. Review the responses offered by marketers on claims that high

distribution costs, high advertising and promotional costs
and excessive mark ups lead to high prices harmful to the
consumer. Do you agree with the marketers’ responses?
2. Can an organisation be focused on both consumerism and

environmentalism at the same time? Explain.
3. Would a dilemma occur when a marketer has two sets of

ethical values — a personal set and a business set? Explain.
4. Describe the two philosophies of ethics and social responsibility

discussed in this section. Is one a better philosophy than the
other? Explain.
5. Suppose you are a marketing director of your company. You

recently learnt that your company is marketing an unsafe
product that has already resulted in a few consumer injuries.
Publicly acknowledging the problem would damage your
brand’s image and would require an expensive product recall.
However, you believe that you could quietly introduce an
improved version of the product, avoiding both the recall and
the harmful publicity. What would you do?
Feedback
Activity 5.9
Yes. Marketers are often less sensitive towards customers and yes,
poor service, unsafe or shoddy products are often delivered to
consumers. The latter circumstance can often be tracked back to
a function of cost or the sense of urgency in getting a product to
market quicker, rather than intentionally deliver a sub-performing
product to customers. Companies cannot build lasting customer
value in a competitive world like today if they consistently deliver
poor products and services to their target markets. At present, it is
hard to survive and prosper with quality products and services let
alone expecting to succeed and profit with the worst.
Activity 5.10
As a marketing director, the application of ethical business behaviour

in your company’s marketing mix involves the following:
1. Ensure the products are safe to use.
2. Price the products fairly.
3. Use ethical ways to promote your products. Be honest with

your customers.
4. Promote products honestly.
5. Focus on product quality.
6. Ensure that the products are marketed to customers ethically.
Activity 5.11
There has been a tremendous amount of criticism on advertising

because it has created too much materialism, too few social goods,
too much political power and cultural pollution. You would
find that while some of these criticisms are justified, many are
not. Businesses need to be more ethical in their practices and
not resort to activities like misleading advertising, heightened
claims of product performance, etc., simply because they do not
lead to long-term profitability. On the other hand, the focus on
materialism and cultural pollution are deeply linked to societal
values in a given society and the blame cannot be laid solely at the
door of advertising. Heightened social responsibility can be used
for improving marketing decisions.
Activity 5.12
According to Kotler and Armstrong (2012), traditionally, sellers

have the right to introduce any product in any size and style,
provided it is not hazardous to personal health or safety. If it is,
they should include proper warnings and controls. They have the
right to charge any price for a product, provided no discrimination
exists among similar kinds of buyers; they can also spend any
amount to promote the product, provided it is not defined as
unfair competition. They also have the right to use any product
message, provided it is not misleading or dishonest in content or
execution; and the right to use any buying incentive programmes,
provided they are not unfair or misleading.
UNIT 5 63
Extending marketing
Activity 5.13
Traditionally, buyers have rights to expect the product to perform

as claimed. Though it is claimed that buyers can refuse to buy,
critics feel that the buyer has too little information, education
and protection to make wise decisions when facing sophisticated
sellers. Buyers therefore also have the right to be well informed
about important aspects of the product; the right to be protected
against questionable products and marketing practices; and the
right to influence products and marketing practices in ways that
will improve the “quality of life” (Kotler and Armstrong 2012).
Activity 5.14
Enlightened marketing helps companies to build their long-term

and profitable customer relationships in a few ways. First, companies
which are high in marketing integrity would be able to attract more
customers. Marketing with integrity means that companies are
honest about their product strengths and weaknesses. Customers
will be more likely to patronise companies which are sincere and
trustworthy. Second, enlightened marketing also helps companies to
instill an innovative culture to produce more innovative products to
maintain and develop a stronger market share. Third, enlightened
marketing helps companies to improve the long-term value of
products, rather than a short-term sale focus and finally it helps
companies to define their mission in broad social terms which
might be appreciated by the customers.
Activity 5.15
According to Kotler and Armstrong (2006), there is one principle

that suggests such issues to be decided by the free market and
legal system. Under this principle, companies and their managers
are not responsible for making moral judgments. Companies
can, in good conscience, do whatever the system allows.
A second principle puts responsibility not on the system but in the

hands of individual companies and managers. This enlightened
philosophy suggests that a company should have “social conscience”.
Companies and managers should apply high standards of ethics
and morality when making corporate decisions, regardless of “what
the system allows”.
UNIT 5 65
Extending marketing
Summary of Unit 5
Summary
There are three sections covered in this unit. Section 5.1 highlighted
the topic of creating competitive advantage. Competitive advantage
is a company’s ability to perform in one or more ways that
competitors cannot or will not match. In this section, we learnt
the three steps in analysing competitors:
1. Identifying the company’s competitors.
2. Assessing competitors’ objectives, strategies, strengths and

weaknesses and reaction patterns.
3. Selecting which competitors to attack or avoid.
Designing a competitive intelligence system is important in

order to access information that a company needs about the
competitor. A company’s competitive intelligence system first
identifies the vital types of competitive information and the
best sources of this information. Then, the system will help you
to continuously collect information from the field (salesperson,
suppliers, customers’ feedback, market research and the Internet)
and from published data. After identifying and evaluating major
competitors, a company must then design competitive marketing
strategies to create competitive advantage. A competitive advantage
can be obtained by offering superior customer value to customers.
Michael Porter’s three basic competitive positioning strategies have
been discussed in this section. The three strategies are:
1. Overall cost leadership.
2. Differentiation.
3. Focus.
Strategies for market leaders, market challenger, market follower

and market nichers have also been discussed in this section. A
market leader is dominant in its industry and has substantial
market share. A market challenger is a company in a strong but
not dominant position that is following an aggressive strategy of
trying to gain market share. A market follower is a company in a
strong but not dominant position that is content to stay at that
position. A market follower tends to develop strategies that are

similar to those of a market leader and tries to gain the market
share from the market leader. A market nicher is a company that
concentrates on a selected target market with focus on one or two
narrow market segments and tailors its marketing mix to these
specialised markets.
Section 5.2 highlighted the inputs on marketing for the global

marketplace. Issues of global marketing in the 21st century and
the global marketing environment were discussed in this section.
There are six major decisions that need to be considered in
international marketing:
1. Global marketing environment analysis.
2. Deciding which country to enter.
3. Deciding which market to enter.
4. Deciding how to enter the market.
5. Deciding on the global market programme.
6. Deciding on the global marketing organisation.
There are a few market entry strategies that can be used to enter a
global market. These include exporting, joint-venturing and direct
investment.
The last section in this unit covers the topics of market ethics
and social responsibility. You have learnt that the marketing
impact on individual consumers has been criticised for its
high prices, deceptive practices, high-pressure selling and poor
service to disadvantaged consumers. The marketing impact
on society has been criticised for creating false wants and too
much materialism, too few social goods and cultural pollution.
Consumerism is an organised social movement intended to
strengthen the rights and power of consumers relative to sellers. Alert
marketers view it as an opportunity to serve consumers better by
providing more consumer information, education and protection.
Environmentalism is an organised social movement which seeks
to minimise the harm done to the environment and quality of
life by unethical marketing practices. You were also exposed to
the topic on the principles of socially responsible marketing and
should understand that some companies have followed a policy of
enlightened marketing, which holds that a company’s marketing
UNIT 5 67
Extending marketing
should support the best long-run performance of the marketing

system, by considering both the company goals and long-term
societal benefits.
UNIT 5 69
Extending marketing
Course Summary
Summary
By now you would have an idea over the exciting world of

marketing which involves delivering values to the customers by
an organisation. You would have an in-depth understanding
the underlying principles of managing profitable customers’
relationships, building internal and external partnerships and
developing the marketing mix elements into effective marketing
strategies for an organisation.
You would have studied the environments that may have an

impact the marketplace and the customers. Therefore, it is
important that marketers continually systematically gather market
information through market research and integrating them into
the marketing information system. It is important for every
marketer to understand how their customers purchase. This course
has exposed you to consumer buying behaviour and business
buying behaviour.
As the market is large and offers a wide variety of goods and

services for customers to purchase, it is important for marketers
to be able to focus in terms of their customers’ wants, needs
and lifestyle. This course provided you with an understanding
of why marketers must first segment their market, target on the
customers they wish to serve and finally position themselves in
the consumers’ mind as a preferred provider. In order to be the
preferred provider, the marketer must use the marketing mix
elements, i.e., product, price, promotion and place to optimise
their market position.
The definition of success in the marketplace is measure by

how well a marketer is able to deliver value to the customers in
comparison to the competitors. You should be able to analyse ways
marketers create competitive advantage and analyse competitors
which are keys to effective marketing. In the final section, you
have learnt strategies for global marketing which is imperative for
today’s organisation. Marketers should be conscious of ethical and
social responsibilities, when the discharging of their duties to the
customers.
UNIT 5 71
Extending marketing
Unit Practice Exercise
Case Study 5.1
Maxis Communications Berhad is a mobile phone service provider

based in Malaysia. It was started in the year 1995. It uses the
dialling prefix identifier of “012” and “017”. Their mobile services
are provided over the 900 MHz GSM band and as of recently, the
2100 MHz UMTS band.
In 2002, Maxis purchased Timecel, a rival mobile service provider,

from TimedotCom Berhad. Prior to the purchase, Maxis offered
phone numbers beginning with 012, and TimeCell 017. Now,
subscribers can choose between the two. In 1999, Maxis introduced
the popular pre-paid brand “Hotlink”, which currently has 6.3
Million customers.
Maxis’ expansion into Indonesia and India is another milestone

in our aspiration to be the regional communications leader of
choice. The acquisition of a 51% stake in PT Natrindo Telepon
Seluler (NTS), Indonesia and a 74% equity interest in Aircel, India
provides new growth opportunities for Maxis. These acquisitions
give Maxis a strong foothold in two of the world’s most attractive
high-growth, low-penetration markets.
This marks the beginning of the new world of Maxis — a world

beyond voice, and beyond borders.
Maxis in Indonesia
On 29th April 2005, Maxis acquired 51% of PT Natrindo Telepon

Seluler. Maxis is currently in the middle of rolling out a Java wide
network to establish the company as a national operator. The
initial launch phase encompasses 1,300 BTS, providing both 2G
and 3G services. NTS expects to have up to 480 employees by
launch date and to increase significantly upon launching.
Maxis in India
Maxis completed the acquisition of a 74% stake in Aircel on

March 21, 2006. Aircel has operations in Chennai, Tamil Nadu,
West Bengal, Orissa, Assam, North East and Jammu and Kashmir.
Operations in the last 5 circles have only been launched in the past
few months, but have already met tremendous response from the
market.
Aircel is also in the process of rolling out operations in Bihar

and Himachal Pradesh, where services are expected to begin in
Quarter 4, 2006. Licenses are also still pending for all other circles
in India. Having licenses in all circles would enable Maxis to
provide connectivity to India’s 1.1 billion population.
As of September 2006, Aircel serves 3.8 million subscribers with

a network comprising over 3,000 BTS. It is the No 1 provider in
the Tamil Nadu and Chennai circle, where it competes head on
with major national players.
A further 1,200 BTS will be rolled out this year, with a similar
number planned for 2007. Aircel’s network provides 2G and GPRS
services, and is EDGE capable. EDGE services are expected to be
launched at the end of the year. In addition, Aircel is the first in
India to launch wireless Internet services using WiMAX technology.
It aims to extend its coverage to over 20 cities to serve enterprise
broadband customers.
Aircel currently have 1,700 personnel, with an additional outsourced

workforce of 1,300 personnels. Aircel’s current and proposed
footprint is illustrated below.
Jammu & Kashmir Uttar Pradesh Bihar North East
Himachal Pradesh
Punjab
Haryana
Assam
Delhi
Rajasthan West Bengal
Gujarat Kolkata
Madhya Pradesh Orissa

Mumbai
Andhra Pradesh
Maharashtra
Karnataka Chennai Metro circle
Tamilnadu Present operations

Kerala Launching in Q4’2006
Awaiting licences
Source: http://www.maxis.com.my/personal/about_us/intl_ventures/
intl_ventures.asp Accessed 8 October 2006
UNIT 5 73
Extending marketing
Questions
1. Discuss the benefits derived by Maxis in this International

venture?
2. In your opinion, what factors should Maxis consider in its

international venture?
3. What are the competitive advantages for Maxis in acquiring

Aircel and Natrindo?
UNIT 5 75
Extending marketing
Suggested Answers to Self-tests
Feedback
Self-test 5.1
1. To prepare an effective marketing strategy, a company must

consider its competitors as well as its customers. Assessing
competitors is needed to find out what the competitors’
objectives, their strategies, their strengths and weaknesses,
etc. are. Building profitable customer relationships requires
satisfying target consumer needs better than competitors do.
A company must therefore continuously analyse competitors
and develop competitive marketing strategies so as to create a
competitive advantage over its competitors.
2. Competitor analysis first involves identifying the company’s

major competitors. The research manager will then gather
information on competitors’ objectives, strategies, strengths
and weaknesses and reaction patterns. With this information
in hand, he/she can select competitors to attack or avoid.
Competitive intelligence must be collected, interpreted and
distributed continuously. The research manager should be able
to obtain full and reliable information about any competitor
affecting the company’s marketing decisions.
3. Proton and Perodua have been competing with each other

for many years. The rivalry never ends. Proton could analyse
Perodua’s strategies through the following:
• Compile the latest advertisements and study the marketing

themes and messages.
• Set up a marketing intelligence unit to specifically monitor

its movements.
• Talk to Perodua’s customers on the reasons they prefer

Perodua compared to Proton.
• Investigate how the market, customer and general public

are responding to its advertising campaigns through
observations and market research.
• Observe the internal sales data to identify the changes in

relation to Perodua’s marketing campaign.
4. Advantages of the strategy:
• It enables a company to better meet the needs of its target

group than other companies.
• It specialises on a specific target.
• It facilitates high value added providers.
• The company can charge higher prices.
• It generally helps to achieve a high margin.
Disadvantages of the strategy:
• The niche may dry up and disappear.
• The market may grow big enough to attract larger

competitors.
Self-test 5.2
1. In evaluating potential foreign markets, companies may

examine the economic health of Singapore using its gross
domestic product, its economic infrastructure and its level of
economic development to classify it as a developing or
developed country, Singapore’s political and legal environment,
its economy conditions, trade regulations such as local content
rules, and labour and human rights regulations. You also need
to examine Singapore’s cultural environment, that is its
values, norms and customs, symbols, superstitions, language
and ethnocentricity.
2. Different foreign market entry strategies represent different

levels of commitment of a company. Exporting of goods
involves little commitment but allows little control over how
products are sold. Global entry strategies like licensing or
franchising allow greater control. Joint ventures involve
greater commitment. A company can also choose to invest
directly by buying an existing company or starting a foreign
subsidiary in the foreign country.
UNIT 5 77
Extending marketing
3. There are four levels of joint ventures the roti canai

manufacturer could assess:
License:
• Advantages: relatively easy; less risk than other methods;

receives a fee or royalty.
• Disadvantages: less control; may give up profits if licensee

is very successful; at the end of contract it may have created
a competitor.
Contract manufacturing:
• Advantages: chance to start fast in a new area; less risk;

could form partnership at end of agreement.
• Disadvantages: decreased control over manufacturing; loss

of potential profits.
Management contracting:
• Advantages: less risk; generate profits from the beginning;

could have option to buy part of managing company.
• Disadvantages: may limit opportunity to set up own

operation.
Joint ownership:
• Advantages: greater opportunity for profit; more control.
• Disadvantages: partners may not always agree on policies

and strategy; inherently more risk.
Self-test 5.3
1. Addressing each of the three instances individually, the

students should agree with the marketers that too “many”
intermediaries will not last a long time in most markets. There
is not enough profit for extra channel players to enjoy.
The argument about high advertising and promotion costs

has merit. One simply has to look at the short but fast-paced
history of ethical drugs being advertised and promoted to
the consumer to appreciate how advertising costs can impact
the retail price of a drug. Although not the primary driver of
raising drug prices, it is a significant contributor.
Excessive mark-ups do not last long. Either the market

correction mechanisms resolve the problem or the authorities
do. During the 2004 fall hurricane season, many unethical
businesspersons tried to take advantage of the Floridians who
were unfortunate enough to incur damages, but there were
laws to prohibit unconscionable pricing when emergencies
were declared.
2. Consumerism and environmentalism are not mutually

exclusive. An organisation can therefore be centered on both
consumerism and environmentalism, but these organisations
are generally not profit-oriented commercial entities that sell
to consumers (Kotler and Armstrong 2006).
By definition, consumerism is an organised movement of

citizens and government agencies to improve the right and
power of buyers in relation to sellers. You could easily read
into this definition that business is not an integral part of
the consumerism movement, but rather the focus of the
movement.
3. Realistically, the answer is yes. A marketer may easily have two

sets of personal values — one for his/her personal life and one
for his/her business life. But to avoid conflict between these
sets of values, a company has an obligation to establish a
corporate ethics policy. This policy should define as many
moral situations in which employees may find themselves as
possible. The text discusses the type of situations to be
covered in an ethics policy as: distributor relations, advertising
standards, customer service, pricing, product development
and general ethical standards (Kotler and Armstrong 2006).
4. The first of the two philosophies states that “issues” are

decided by the free market and legal system. Companies and
managers are not responsible for making moral judgments, so
they can, in all conscience, do whatever the system allows.
The second philosophy puts responsibility not in the system

but in the hands of individual companies and managers.
UNIT 5 79
Extending marketing
Without a doubt, you will have considerable debate on this

issue. I personally believe that companies and individuals are
responsible for deciding moral issues that they may encounter
in the course of business, and they do need to have a “social
conscience” that guides them to the “right” answer.
5. There are only three rules for this situation:
• Always be prepared for a problem like this.
• Make the announcement as soon as possible.
• Do not lie.
UNIT 5 81
Extending marketing
Suggested Answers to Unit Practice

Exercise
Feedback
Case Study 5.1
1. Advantages
• Able to become the regional communications leader of

choice.
• Would be able to venture into new growth opportunities

in overseas markets.
• Indonesia and India with high population densities will

provide huge market potential for Maxis.
• Maxis would also be able to exchange the resources and

technology from Indonesia and India, providing competitive
advantages.
• The holdings of 74% in India and 51% in Indonesia will

provide Maxis full control over the companies, thus reducing
the risk of uncertainty. Maxis would be able to turn around
these companies and in directions for it to achieve its
objectives.
• As telecommunication is considered a utility industry,

purchasing controlling shares are rare opportunities that
cannot be missed.
• Experience derived by Maxis in the Malaysian competitive

market would be very useful for it to be successful.
• Aircel is facing a rapid growth with readily available

3.8 million customers. There are no providers in Tamil
Nadu and Chennai circle.
• Achieving economies of scale by utilising their satellite

technology and resources.
2. Maxis should be cautious in the following areas:
• Political stability and changes in the political power in both

countries.
• Legal matters: Rules and regulations for each country vary.

Maxis should be able to understand and adhere to different
rules and regulations imposed by both countries.
• Cultural and social issues: It should be cautious in the use

of proper language in both countries due to the existence
of different ethnic groups with different values, languages
and belief systems. Favouring any one particular group may
result in fatal mistakes.
• Technology: The technological infrastructure varies

according to different countries. Its ability to provide also
depends on the availability of infrastructure facilities in
both countries.
• Other marketing matters: Decisions on product packages,

price, places, intermediaries (distribution channels), public
relations activities, and design and implementation of
communication strategies.
• Other management issues: The mentioned joint venture

gives control to Maxis on the operations. Now it has to think
of the resources restructuring plans, new organisational
structure and design, policies on the existing staff and
managing changes.
3. Competitive advantages are as follows:
• Efficient use of resources would lead to reduction of cost

per unit of production which in turn would result in
economies of scale.
• Can choose and apply the best technology and management

practices among the three countries. For example, India
could provide more inputs on technology and Malaysia
could provide more inputs on marketing strategies.
• This takeover project will make Maxis bigger, thus giving

it a competitive edge compared to other small players.
• Able to provide very competitive services to the customers

due to advantages of economies of scale. Small-scale
competitors may have to leave the industry.
UNIT 5 83
Extending marketing
• Will boost the image of Maxis as the leading provider of

telecommunication services. Will attract more customers.
For example it would be cheaper to call from Maxis to
Maxis compared to Maxis to other service providers. Maxis
would be able to apply this strategy at the international
level to encourage more subscriptions.
UNIT 5 85
Extending marketing
Terminology
Competitive advantage Kelebihan bersaing ゲѝӬ࢓
Competitive marketing Strategi pemasaran ゲѝᏖഎㄪ⬹ゲѝ៬⬹

strategy kompetitif
Competitor analysis Analisis pesaing ゲѝߚᵤゲѝᗻߚᵤ
Competitor-centered Syarikat yang ゲѝᇐ৥݀ৌ

company berorientasikan pesaing
Consumerism Kepenggunaan ֱᡸ⍜䌍㗙ᴗⲞ䖤ࡼ
Customer value analysis Analisis nilai pelanggan 乒ᅶӋؐߚᵤ
Customer-centered Syarikat yang ᅶ᠋ᇐ৥݀ৌ

company berorientasikan pelanggan
Direct investment Pelaburan langsung Ⳉ᥹ᡩ䌘
Embargo Embargo ⽕ℶ䗮ଚ⽕ℶ䰤ࠊ
Environmentalism Berorientasikan ⦃๗ֱᡸ䆎⦃๗䆎

persekitaran
Joint venturing Pelaburan bersama ড়䌘
Licensing Perlesenan থ㒭䆌ৃ䆕ˈ⡍䆌
Management contracting Pengurusan kontrak ㅵ⧚ᡓࣙ
Market challenger Pencabar pasaran Ꮦഎᣥ៬㗙
Market follower Pengikut pasaran Ꮦഎ䎳䱣㗙
Market leader Peneraju pasaran ᏖഎЏᇐ㗙
Market-centered company Syarikat yang Ꮦഎᇐ৥݀ৌ

berorientasikan pasaran
Non-tariff trade barriers Halangan perdagangan 䴲݇⿢䌌ᯧຕ൦

yang tidak mengenakan
tarif
Quota Kuota 䜡乱䰤乱

UNIT 5 87
Extending marketing
References
Brassington, F and Pettitt, S (2002) Principles of Marketing, 3rd edn, Pearson
Education Asia.
Borneo Post, ‘Digi team visits Yogyakarta’,16 October, 2006
‘Direct sellers say they comply with rules’, Malay Mail, 2 October, 2006 http://
nccc.org.my/index.php?option=com_content&task=view&id=159&Itemid=51
(Accessed 20 October 2006)
Grimes, K D (1996) Environmental Marketing Claims, http://www.mlmstartup.

com/articles/swapr96.htm, (Accessed 20 October 2006)
JobStreet.com launches SMS Apply, http://my.jobstreet.com/aboutus/preleases60.htm

(Accessed 15 September 2006)
Kotler, P, Adam, S, Brown, L and Armstrong, G (2003) Principles of Marketing,

2nd edn, Prentice Hall, Pearson Education Australia.
Kotler, P and Armstrong, G (2012) Principles of Marketing, 14th edn, New Jersey:
Pearson Prentice Hall.
Kotler, P, Armstrong, G, Ang S H, Leong S M, Tan C T and Tse, K (2005),

Principles of Marketing and Asian Perspective, 1st edn, Asian Original Publications.
Lasserre P, Shcutte H, (1999) Strategies for Asia Pacific: Beyond Crisis. New York
University Press.
Maxis international ventures, http://www.maxis.com.my/personal/about_us/intl_

ventures/intl_ventures.asp (Accessed 8 October 2006)
Microsoft phases out PVC from its packaging, http://www.microsoft.com/presspass/

features/2005/dec05/12-07Packaging.mspx (Accessed 20 October 2006)
Stanton, W, Etzel, M and Walker, B (1991) Fundamentals of Marketing, 9th edn,

New York: McGraw-Hill.
Tee, L S ‘Telco price war breaks out’, The Star, 7 October, 2006, http://biz.thestar.
com.my/bizweek/story.asp?file=/2006/10/7/bizweek/15634704&sec=bizweek.
(Accessed 15 October 2006)
Zikmund, W and D’Amico, M (1989) Marketing, 3rd edn, John Wiley & Sons.

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UNIT 5 i

EXTERNAL COURSE ASSESSOR

© 2008 Wawasan Open University

First revision 2010

Wawasan Open University

5.1 Creating a competitive advantage 3

Suggested answers to activities 18

5.2 The global marketplace 21

Global marketing in the 21st century 21

Looking at the global marketing environment 22

Deciding whether to go international 27

Deciding which markets to enter 28

Deciding how to enter the market 29

Suggested answers to activities 35

5.3 Market ethics and social responsibility 37

Social criticisms of marketing 38

Citizens and public actions to regulate marketing 46

Business actions towards socially responsible marketing 56

Suggested answers to activities 61

Unit practice exercise 71

Suggested answers to self-tests 75

Suggested answers to practice exercise 81

Today, many marketers are advocating the practice of a borderless market. In a

1. Discuss the need to understand competitors as well as customers through

2. Explain the fundamentals of competitive marketing strategies based on

3. Explain and apply different competitive positions.

4. Discuss how the international trade system, economic, political-legal, and

5. Discuss entry strategies for international markets.

6. Describe three key approaches to entering international markets.

8. Define consumerism and environmentalism and explain how they affect

9. Describe the principles of socially responsible marketing.

5.1 Creating a Competitive Advantage

1. Describe why you need to understand competitors as well as customers

2. Discuss the steps involved in carrying out a competitive analysis.

3. Explain the essentials of competitive marketing strategies required to create

“Telecommunications (telcos) industry, mired by competitive pressures, rising

AmResearch telecommunications analyst Fiona Leong sees Maxis’ latest move as

If you are ignorant of both your enemy and yourself,

Identifying the company’s competitors

Assessing competitors’ objectives, strategies, strengths

Selecting which competitors to attack or avoid

Figure 5.1 Steps in analyzing competitors, Kotler and Armstrong (2012)

In practice, the scope of competition is wider than what is mentioned above.

There are more than 10 types of “3-in-1” coffee brands in the

The first step in creating a competitive advantage is to identify

It is important for a company to monitor its competitors’ strategies and operations.

As a marketer, you have to assess your competitors’ strength and weaknesses to

Step 1: What your competitors do?

c. Sometimes you can conduct marketing research involving customers,

d. You can benchmark your company against other companies, comparing

Step 3: How fast are the competitors likely to react?

Depending upon the individual style of functioning, some of your competitors

Accurately forecasting your competitors’ reactions against your strategies would

Selecting competitors to attack and avoid

When operating in a competitive environment, you have to decide whether to

To understand your competitors well, you must investigate your competitors’

1. Total demand may increase due to competitors’ marketing efforts as the

However, not all competitors are beneficial to the existence of a company.

Competition is a fact of business life. It is a good business practice to support fair

Designing a competitive intelligence system

If competitive intelligence systems are very important, why are

Approaches to a marketing strategy

The nature of competition and competitive strategies varies according to country,

Basic competitive strategies