Cultural Dynamics in Assessing Global Markets

1. Cultural Dynamics in Assessing Global Markets Chapter 3

2. Chapter Learning Objectives The importance of history and geography in understanding international markets The effect of geographic diversity on economic profiles of a country Economic effects of controlling population growth and aging population Communications are an integral part of international commerce The importance of culture to an international marketer The origins and elements of culture The impact of cultural borrowing The strategy of planned change and its consequences

3. Is There a Cultural Divide in Australian International Trade? Culture deals with a group’s design for living. The successful marketer clearly must be a student of culture. Markets are the result of the three-way interaction of a marketer’s: Efforts Economic conditions All other elements of culture Culture is defined as a society’s accepted basis for responding to external and internal events.

4. History and Contemporary Behaviour Japanese History: Seven centuries under the shogun feudal system. The isolation before the coming of Admiral Perry in 1853. Threat of domination by colonial powers. Rise of new social classes. Western influences. Humiliation of Second World War. Involvement in the international community. Historically, loyalty and service, a sense of responsibility, and respect for discipline, training, and artistry were stressed to maintain stability and order. A historical perspective gives the foreigner in Japan a basis on which to begin developing cultural sensitivity and a better understanding of contemporary Japanese behaviour.

5. Geography and Global Markets Understanding of how a society’s culture and economy are affected as a nation struggles to supply its people’s needs within the limits imposed by its physical makeup. Climate and Topography Altitude, humidity, and temperature extremes affect uses and functions of products and equipment South America British resistance of the English Channel

6. Geography, Nature and Economic Growth Less privileged countries suffer disproportionately from natural and human-assisted catastrophes. As countries prosper, natural barriers are overcome. Environmental issues: Disruption of ecosystems Relocation of people Inadequate hazardous waste management Industrial pollution

7. Resources The availability of minerals and the ability to generate energy are the foundations of modern technology. The principal supplements to human energy are: Animals Wood Fossil fuel Nuclear power Ocean tides Geothermal power The sun Location, quality and availability of resources affects the pattern of world economic development and trade.

8. World Energy Consumption Insert Exhibit 3.3

9. Dynamics of Global Population Trends Controlling population growth The most important deterrent to population control is cultural attitudes about the importance of large families. Rural/urban migration Result of a desire for greater access to sources of education, health care, and improved job opportunities. Population decline and aging Population growth in many countries has dropped below the rate necessary to maintain present levels. A nation needs a fertility rate of about 2.1 children per woman to keep population rates steady Not one major country has sufficient internal population growth to maintain itself.

10. Dynamics of Global Population Trends (cont.) Population decline and aging Population growth in many countries has dropped below the rate necessary to maintain present levels. A nation needs a fertility rate of about 2.1 children per woman to keep population rates steady. Not one major country has sufficient internal population growth to maintain itself. In developed world, number of ‘old’ will grow much faster than ‘young old’. UN projects by 2050 worldwide: 1.3 billion people aged 65 – 84 years 175 million people aged 85 – 94 years 2.2 million people aged 100+ years

11. Dynamics of Global Population Trends (cont.) Worker Shortage and Immigration The free flow of immigration will help to ameliorate the dual problems of explosive population expansion in less-developed countries and worker shortage in industrialised regions. Europe will need 1.4 billion immigrants over the next 50 years. Japan and the U.S. will need 600 million immigrants between now and 2050.

12. Communication Links Effective communication is underpinning of commerce: Telegraph Telephone Television Satellites Computer Internet

13. Culture’s Pervasive Impact Culture affects every part of our lives, every day, from birth to death, and everything in between. China – the year of the Dragon. Japan – the year of the Fire Horse. As countries move from agricultural to industrial to services economies, birthrates decline. Consequences of consumption Tobacco Culture not only affects consumption, it also affects production. Wine in Australia and New Zealand.

14. Consumer Expenditures for Selected Countries

15. Consequences of Consumption

16. Definitions and Origins of Culture Most traditional definitions of culture centre around the notion that culture is the sum of the values, rituals, symbols, beliefs, and thought processes that are learned, shared by a group of people, and transmitted from generation to generation. Humans make adaptations to changing environments through innovation. Individuals learn culture from social institutions through: Socialisation (growing up) Acculturation (adjusting to a new culture)

17. Origins, Elements, and Consequences of Culture

18. Definitions and Origins of Culture (cont.) Geography The ideas of Jared Diamond and Philip Parker. History Tobacco being the original source of the Virginia colony’s economic survival in the 1600’s. The political economy Three approaches to governance competed for world dominance: Fascism Communism Democracy/Free Enterprise Technology The birth control pill.

19. Definitions and Origins of Culture (cont.) Social institutions Family Favouritism of boys in some cultures. Religion Misunderstanding of beliefs. School No country has been successful economically with less than 50% literacy.

20. Definitions and Origins of Culture (cont.) The media Media time has replaced family time. Government Governments try to influence the thinking and behaviours of adult citizens. Corporations Most innovations are introduced to societies by companies.

21. Elements of Culture Cultural values Individualism/Collectivism Index (IDV) – focuses on self-orientation. Power Distance Index (PDI) – focuses on authority orientation. Uncertainty Avoidance Index (UAI) – focuses on risk orientation. Masculinity/Femininity Index (MAS) – focuses on assertiveness and achievement. Cultural Values and Consumer Behaviour Rituals Marriage Funerals

22. Hofstede’s Indexes, Language, and Linguistic Distance Insert Exhibit 4.5

23. Elements of Culture (cont.) Symbols Language Linguistic distance Aesthetics as Symbols Insensitivity to aesthetic values can offend, create a negative impression, and, in general, render marketing efforts ineffective or even damaging. Beliefs To make light of superstitions in other cultures when doing business there can be an expensive mistake. Thought processes Difference in perception Focus vs. Big-Picture

24. Cultural Knowledge Factual knowledge vs. interpretive knowledge Has meaning as a straightforward fact about a culture but assumes additional significance when interpreted within the context of the culture. Mexico is 98% Catholic - factual Being Catholic within Mexico - interpretive Cultural sensitivity and tolerance Being attuned to the nuances of culture so that a new culture can be viewed objectively, evaluated and appreciated. Cultures are not right or wrong, better or worse, they are simply different. The more exotic the situation, the more sensitive, tolerant, and flexible one needs to be.

25. Cultural Change Cultural borrowing: Effort to learn from others’ cultural ways in the quest for better solutions to a society’s particular problems. Similarities: an illusion A common language does not guarantee a similar interpretation of word or phrases. Just because something sells in one country doesn’t mean it will sell in another. Resistance to change: Gradual cultural growth does not occur without some resistance; new methods, ideas, and products are held to be suspect before they are accepted, if ever. Resistance to genetically modified (GM) foods.

26. Cultural Change (cont.) Planned and unplanned cultural change: Determine which cultural factors conflict with an innovation. Change those factors from obstacles to acceptance into stimulants for change. Marketers have two options when introducing and innovation to a culture: They can wait They can cause change Cultural Congruence Consequences of innovation: Consequences of diffusion of an innovation may be functional or dysfunctional, depending on whether the effects on the social system are desirable or undesirable. Introduction of a processed feeding formula into the diet of babies in underdeveloped countries where protein deficiency is a health problem.

27. Summary A prospective international marketer should be reasonably familiar with the world, its climate, and topographic differences. Geographic hurdles must be recognised as having a direct effect on marketing and the related activities of communications and distribution. Without a historical understanding of a culture, the attitudes within the marketplace may not be fully understood. The study of history and geography is needed to provide the marketer with an understanding of why a country has developed as it has rather than as a guide for adapting marketing plans.

28. Summary (cont.) A complete and thorough appreciation of the origins and elements of culture may well be the single most important gain to a foreign marketer in the preparation of marketing plans and strategies. Marketers can control the product offered to a market – its promotion, price, and eventual distribution methods – but they have only limited control over the cultural environment within which these plans must be implemented. When a company is operating internationally each new environment that is influenced by elements unfamiliar and sometimes unrecognisable to the marketer complicates the task.