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Chapter 2: Global, Ethical, and Sustainable Marketing
p. 43 3.3 The Technological Environment
Changes in technology profoundly affect marketing activities.
Amazon had been working on drones, unmanned aircraft
controlled by a GPS, to deliver packages. A patent is a legal
document that grants inventors exclusive rights to produce and
sell a particular invention in that country. Marketers monitor
government patent applications to discover innovative products
they can purchase from the inventor.
Website: H&M virtual fashion: www.hm.com
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3.4 The Political and Legal Environment
The political and legal environment refers to the local, state,
national, and global laws and regulations that affect businesses.
3.4.1 American Laws
Laws in the United States governing business have two purposes.
Some such as the Sherman Antitrust Act and the Wheeler–Lea
Act make sure that businesses compete fairly with each other.
Others, such as the Food and Drug Act and the Consumer
Products Safety Commission Act, make sure that businesses do
not take advantage of consumers.
3.4.2 Political Constraints on Trade
Global firms know that the political actions a government takes
can drastically affect their business operations. Short of war, a
country may impose economic sanctions that prohibit trade with
another country (as the United States has done with several
countries, including Cuba and North Korea), so access to some
markets may be cut off. Nationalization occurs when the
domestic government reimburses a foreign company (often not
for the full value) for its assets after taking it over.
Expropriation occurs when a domestic government seizes a
foreign company’s assets (and that firm is just out of luck). Now
that the United States has normalized relations with Cuba, it
remains to be seen if these firms seek reimbursement for their
lost property.
3.4.3 Regulatory Constraints on Trade
Governments and economic communities regulate what products
are allowed in the country, what products should be made of, and
what claims marketers can make about them. Local content
rules are a form of protectionism stipulating that a certain
proportion of a product must consist of components supplied by
industries in the host country or economic community.
3.4.4 Human Rights Issues
Some governments and companies are vigilant about denying
Table 2.3
Significant
American
Legislation
Relevant to
Marketers
Table 2.4
U.S. Regulatory
Agencies and
Responsibilities
Copyright © 2018 Pearson Education, Inc.
Chapter 2: Global, Ethical, and Sustainable Marketing
p. 45
business opportunities to countries that mistreat their citizens.
They are concerned about conducting trade with local firms that
exploit their workers or that keep costs down by employing
children or prisoners for slave wages.
3.4.5 The U.S. Generalized System of Preferences
The U.S. Generalized System of Preferences (GSP) is a
program established by Congress to promote economic growth in
the developing world. GSP regulations allow developing
countries to export goods duty-free to the United States.
Websites:
Environmental Protection Agency (EPA): www.epa.gov
Federal Communications Commission: www.fcc.gov
Federal Trade Commission (FTC): www.ftc.gov
Food and Drug Administration (FDA): www.fda.gov
Discussion question: What human rights issues are particularly of concern among your students?
Why?
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3.5 The Sociocultural Environment
Another element of a firm’s external environment is the
sociocultural environment. This term refers to the characteristics
of the society, the people who live in that society, and the culture
that reflects the values and beliefs of the society. Whether at
home or in global markets, marketers need to understand and
adapt to the customs, characteristics, and practices of its citizens.
3.5.1 Demographics
Demographics are statistics that measure observable aspects of a
population, such as size, age, gender, ethnic group, income,
education, occupation, and family structure.
3.5.2 Values
Every society has a set of cultural values, or deeply held beliefs
about right and wrong ways to live, that it imparts to its
members. For example, for most Americans, punctuality is a core
value; indeed, business leaders often proclaim that “time is
money.” For countries in Latin America and other parts of the
world, this is not at all true.
In collectivist cultures, such as those found in Venezuela,
Pakistan, Taiwan, Thailand, Turkey, Greece, and Portugal, people
tend to subordinate their personal goals to those of a stable
community. In contrast, consumers in individualist cultures,
such as the United States, Australia, Great Britain, Canada, and
the Netherlands, tend to attach more importance to personal
goals, and people are more likely to change memberships when
the demands of the group become too costly.
Copyright © 2018 Pearson Education, Inc.
Chapter 2: Global, Ethical, and Sustainable Marketing
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3.5.3 Social Norms
Social norms are specific rules dictating what is right or wrong,
acceptable or unacceptable.
3.5.4 Language
Language barriers can affect product labeling and usage
instructions, advertising, and personal selling.
3.5.5 Consumer Ethnocentrism
Ethnocentrism refers to the belief that one’s own norms and the
products made in your country are superior. Consumer
ethnocentrism refers to consumers’ beliefs about products
produced in their country versus those from another.
►Marketing Moment In-Class Activity
Have students identify countries and products or stereotypes they associate with those countries.
For example, chocolate may be associated with Switzerland while wine may be associated with
France. What products do students associate with Brazil? Nothing? What does that mean if you
are the minister of trade for Brazil? What other countries did students associate with ‘wine’?
What does that say about the global wine industry?
p. 48 4. HOW “GLOBAL” SHOULD A GLOBAL
MARKETING STRATEGY BE?
Going global is not a simple task. If a firm decides to expand
beyond its home country, it must make important decisions about
how to structure its business and whether to adapt its product
marketing strategy to accommodate local needs.
p. 49 4.1 Company-Level Decisions: The Market Entry
Strategy
Just like a romantic relationship, a firm deciding to go global
must determine the level of commitment it is willing to make to
operate in another country. At one extreme, the firm simply
exports its products; while at the other extreme it directly invests
in another country by buying a foreign subsidiary or opening its
own stores. The decision about the extent of commitment entails
a trade-off between control and risk. Direct involvement gives
the firm more control over what happens in the country, but risk
also increases if the operation is not successful.
Table 2. 5
Market-Entry
Strategies
p. 49 4.1.1 Exporting
If a firm chooses to export, it must decide whether it will attempt
to sell its products on its own or rely on intermediaries to
represent it in the target country. These specialists, or export
merchants, understand the local market and can find buyers and
negotiate terms. An exporting strategy allows a firm to sell its
products in global markets and cushions it against downturns in
its domestic market.
Copyright © 2018 Pearson Education, Inc.
Chapter 2: Global, Ethical, and Sustainable Marketing
p. 49 4.1.2 Contractual Agreements
The next level of commitment a firm can make to a foreign
market is a contractual agreement with a company in that country
to conduct some or all of its business there.
In a licensing agreement, a firm (the licensor) gives another
firm (the licensee) the right to produce and market its product in
a specific country or region in return for royalties on goods sold.
Franchising is a form of licensing that gives the franchisee the
right to adopt an entire way of doing business in the host country.
p. 50 4.1.3 Strategic Alliances
Firms seeking an even deeper commitment to a foreign market
develop a strategic alliance with one or more domestic firms in
the target country. These relationships often take the form of a
joint venture: Two or more firms create a new entity to allow
the partners to pool their resources for common goals. Strategic
alliances also allow companies easy access to new markets,
especially because these partnerships often bring with them
preferential treatment in the partner’s home country.
p. 50 4.1.4 Direct Investment
An even deeper level of commitment occurs when a firm
expands internationally through ownership, usually by buying a
business in the host country outright. Instead of starting from
scratch in its quest to become multinational, buying part or all of
a domestic firm allows a foreign firm to take advantage of a
domestic company’s political savvy and market position in the
host country.
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4.2 Marketing Mix Strategies
In addition to “big picture” decisions about how a company will
operate in other countries, managers must decide how to market
the product in each country. They may need to modify the
famous four P’s—product, price, promotion, and place—to suit
local conditions.
4.2.1 Standardization versus Localization
Advocates of standardization argue that the world has become so
small that basic needs and wants are the same everywhere. In
contrast, those in favor of localization feel that the world is not
that small; you need to tailor products and promotional messages
to local environments. These marketers feel that each culture is
unique, with a distinctive set of behavioral and personality
characteristics.
Troubleshooting tip: The decision to employ a standardization vs. localization strategy is a very
complex one for a firm, so plan to have an in-depth discussion of the pros and cons related to
each type of strategy.
Copyright © 2018 Pearson Education, Inc.
Chapter 2: Global, Ethical, and Sustainable Marketing
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4.2.2 To P or Not to P: Tweak the Marketing Mix
4.2.3 Product Decisions
A firm seeking to sell a product in a foreign market has three
choices: sell the same product in the new market, modify it for
that market, or develop a brand-new product to sell there.
A straight extension strategy retains the same product
for domestic and foreign markets.
A product adaptation strategy recognizes that in many
cases people in different cultures do have strong and
different product preferences.
A product invention strategy means a company
develops a new product as it expands to foreign markets.
In some cases, a product invention strategy takes the form
of backward invention. A firm may find that it needs to
offer a less complex product than it sells elsewhere.
4.2.4 Promotion Decisions
Marketers must also decide whether it is necessary to modify
their product promotions for a foreign market. Some firms
endorse the idea that the same message will appeal to everyone
around the world, while others feel the need to customize it.
4.2.5 Price Decisions
Costs stemming from transportation, tariffs, differences in
currency exchange rates, and even bribes paid to local officials
often make a product more expensive for a company to
manufacture for foreign markets than in its home country. To
ease the financial burden of tariffs on companies that import
goods, some countries have established free trade zones. These
are designated areas where foreign companies can warehouse
goods without paying taxes or customs duties until they move the
goods into the marketplace. One danger of pricing too high is
that competitors will find ways to offer their product at a lower
price, even if they do this illegally. Gray market goods are
items that are imported without the consent of the trademark
holder. Another unethical and often illegal practice is dumping,
in which a company prices its products lower than they are
offered at home—often removing excess supply from home
markets and keeping prices up there.
4.2.6 Place/Distribution Decisions
Getting your product to consumers in a remote location can be
quite a challenge. It is essential for a firm to establish a reliable
distribution system if it is going to succeed in a foreign market.
Copyright © 2018 Pearson Education, Inc.
Chapter 2: Global, Ethical, and Sustainable Marketing
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5. ETHICS IS JOB ONE IN MARKETING PLANNING
It’s hard to overemphasize the importance of ethical marketing
decisions. Businesses touch many stakeholders, and they need to
do what’s best for all of them where possible. When major
companies defraud the public, everyone suffers.
5.1 Ethical Philosophies
What constitutes ethical behavior is often different for different
people. We can point to various ethical philosophies and see how
each guides people to make their decisions.
Utilitarian approach: The decision that provides the most
good or the least harm
Rights approach: The decision that does the best job of
protecting the moral rights of all affected
Fairness or justice approach: The decision that treat all
human beings equally
Common good approach: The decision that contributes to
the good of all in the community
Virtue approach: The decision is in agreement with
certain ideal virtues
Ethical relativism suggests that what is ethical in one culture is
not necessarily the same as in another culture.
5.2 Codes of Business Ethics
Business ethics are basic values that guide a firm’s behavior. A
code of ethics refers to written standards of behavior to which
everyone in the organization must subscribe.
5.3 Is Marketing Unethical?
There are examples of questionable or unethical marketing.
Criticisms of marketing:
Marketing serves the rich and exploits the poor
Products are not safe
Poor-quality products
Planned obsolescence
Marketing creates interest in products that pollute the
environment
Easy consumer credit makes people buy things they don’t
need and can’t afford
5.4 When Is a Bribe Not a Bribe? Ethical Issues for Global
Business
Understanding the environment where you do business means
staying on top of the ethical values and norms of the business
culture in the marketplace. Bribery occurs when someone
voluntarily offers payment to get an illegal advantage. Extortion
occurs when someone in authority extracts payment under
Table 2.6
Some Common
Ethical
Philosophies
Table 2.7
Highlights of the
American
Marketing
Association
Statement of
Ethics
Copyright © 2018 Pearson Education, Inc.
Chapter 2: Global, Ethical, and Sustainable Marketing
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duress.
6. SUSTAINABILITY: MARKETERS DO WELL BY
DOING GOOD
Firms today have a triple-bottom-line orientation. They don’t just
look at their financial successes but also focus on how they
contribute to their communities (their social bottom line) and
create sustainable business practices (the environmental bottom
line).
6.1 Sustainability Is a Sensible Business Decision
Sustainability adds to the need of the firm to sustain itself and the
long-term future of society. Sustainable companies that satisfy
the long-term needs of customers will survive.
Find out what other students taking this course would do and
why www.mymktlab.com
Are you more likely to shop at a store that offers recycling?
6.2 Developing a Sustainable Marketing Mix
How some companies already implement sustainable marketing
practices:
Target marketing strategies: They target green customers
who are likely to buy eco-friendly products.
Product strategies: Some firms choose fair trade
suppliers who pay a fair price to producers in developing
countries.
Price strategies: Sustainable marketing practices aim to
establish prices for green products that equal the prices of
other products.
Place/distribution strategies: Locavorism means that
shoppers buy products from farms within 50 to 100 miles
of their homes.
Promotion strategies: Some firms “reuse” old
commercials and tell customers that this is their way of
practicing sustainability.
6.3 Sustainable Customer Behavior
Marketers need to understand what will motivate customers to
seek out, pay for, and use sustainable options.
►METRICS MOMENT
Sustainability metrics are tools that measure the benefits an
organization achieves through the implementation of
sustainability. Unfortunately, unlike many widely used financial
metrics, today there is no standardized method of measuring the
other two elements of the triple bottom line. Hence, it is
extremely hard to compare one company working toward
sustainability with another. The social capital metrics are
possibly the hardest set of metrics to develop—there are simply
too many variables to measure societal progress, and, as a result,
Exhibit:
A campaign for
fair trade bananas
from New
Zealand.
Ripped from the
Headlines:
Ethical/
Sustainable
Decisions in the
Real World
Exhibit:
American
consumers’
values are
changing as
many more of us
are prioritizing
“natural” food
products that
don’t contain
extra additives.
Copyright © 2018 Pearson Education, Inc.
Chapter 2: Global, Ethical, and Sustainable Marketing
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it is extremely difficult to develop standardized metrics.
Apply the Metrics
Today most large firms have a section on their website
that points to their sustainability initiative. Select any
large company that manufactures products. Review their
website and find their section on sustainability.
What are several of the key specific activities the firm
points to as evidence that they are engaged in
sustainability-related activities?
What specific evidence do they report that quantify their
level of success in sustainability?
Copyright © 2018 Pearson Education, Inc.
