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Environment of International Business

 


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Domestic Economy of Foreign Nations

Market Characteristics

  • Size of the Market

– Population

  • Population growth rate
  • Distribution of population - Age distribution, life expectancies, household size, urbanization

– Income

  • Distribution of low, medium, and high incomes
  • Gross domestic product per capita
  • Purchasing power parity

– Consumption patterns

  • Income spent on necessities and luxuries
  • Product saturation or diffusion
  • Product form differences
  • Nature of the economy

– Physical endowment

  • Natural resources
  • Topography
  • Climate

– Availability and quality of infrastructure

  • Rail traffic networks for distribution capabilities
  • Communication systems for marketing
  • Energy (electrical and fuel) consumption
  • Foreign involvement in the economy

– Degree of foreign direct investment in country or in a specific industry

– Rules governing foreign investment

  • Impact of the economic environment on social development

– Urbanization, life expectancy, literacy rates, etc.

– Physical Quality of Life Index (PQLI)

THE CULTURAL ENVIRONMENT

Culture and a solid understanding of culture is essential in international marketing. Cultural references impact significantly on consumers’ cognitive, affective and connotative behaviour.

Definition: Culture prescribes the forms of behaviour that are acceptable to people in a specific community. It is an integrated sum total of learned behavior …traits that are shared by members of any given society.

  • Culture is learned
  • Culture is dynamic
  • Culture is subjective

Key Concepts

A high context culture is one where what is said only conveys a limited portion of the meaning, which must also be interpreted in terms of how it is being said, where it is being said, and the body language of the speaker.

In a low context culture, messages are mostly explicit and the words convey most of the meaning in the communication.

The Elements of Culture

  • Material Elements
  • Language - verbal and non-verbal
  • Aesthetics
  • Education
  • Religion
  • Values and Attitudes
  • Manners and Customs
  • Social Institutions

Hofstede’s Dimensions of Culture

  • Individualism

“I” consciousness versus “we“ consciousness

  • Power distance

Level of equality in a society

  • Uncertainty avoidance

The need for formal rules and regulations

  • Masculinity

Attitudes toward achievement

The roles of men and women

  • Orientation

Long-term versus short-term results approach

Adjusting to Cultural Differences

  • Recognition of differences

• The Self-reference Criterion

is the basis of most international business problems.

• Ethnocentrism

– “…regarding one’s culture as superior to others”

Making Culture Work for Your Success

  • Embrace local culture
  • Employ locals to gain cultural knowledge
  • Build relationships
  • Adapt products to local markets
  • Help employees understand you
  • Coordinate by region

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