1. Lecture Two International Business Environment
Dr Joanna Pokorska

2. Reading Hollensen: Chapters: 5, 6, and 7
Articles as per the reading list

3. Lecture Objectives
To examine how international marketing environment impacts upon international marketing decisions
To understand how variables interlink
To discuss the key economic facilitators
To understand how marketers may try to influence the environment in international marketing context

4. Environment

5. Environment
It is not the marketing environment itself that is important but the firm’s ability to cope with it.
Bradley, F (1999) International Marketing Strategy, New York: Prentice Hall

6. Global Marketing Environment
It can be defined as:
‘Those variables, largely out of the organization’s control but which it must account for, within which it conducts its business globally’
Considerable variations between countries in the laws governing business conduct
There is no global ‘standard practice’

7. Why should you account for environmental factors?

8. Marketing environment

9. The Political Environment
Includes any national or international political factors which may affect an organization’s decision making, planning, implementation, and control mechanisms
Marketers have to work within the political framework of the host country
Important question – what role does the target market’s government play in the economy? Its level of participation in economic development?

10. Political risks and considerations
Ownership Risk
Operating Risk (import restrictions, local content laws, labour restrictions, etc)
Transfer Risk (exchange control)
Considerations:
1. Avoiding local production
2. Partnering with local companies
3. Flexibility

11. The Legal Environment Key Aspects of International Legal Environment:
Local domestic laws – can limit what can be exported/imported
International laws – patents, trademarks, copyrights and tariff reduction etc.
If involved in disputes with international trading partners, the organization will need to understand the law systems

12. The Legal Environment
Common law
Civil law
Islamic law
Socialist law

13. Common Law vs Civil Law

14. Islamic Law Derived from the Quran & the Hadith
Legal system in many Middle Eastern countries
Sharia is a comprehensive code governing Muslim conduct in all areas of life

15. Socialist Law Arose from the Marxist ideological system
Legal system used in Communist states
Economic power was centralised
Business laws absent
Economy liberalisation is forcing many socialist countries to improve their legal system

16. Intellectual Property
Must be registered in each country where business is conducted
Patent – exclusive rights to inventor
Trademark – distinctive logo used for differentiation
Copyright – establishes ownership
Infringement of intellectual property
Protecting intellectual property
Federal Patent Office/European Patent Office etc
International Convention for the Protection of Industrial Property

17. The Economic Environment
Market potential can be gauged by assessing population size, growth, density, distribution, age distribution, disposable income and its distribution

18. The Economic Environment
Developed Economies
account for 80% of world trade
Emerging Economies
huge and growing consumer demand
government directed economic reforms
‘dual economies’
Less Developed Countries (LDCs)
low GDP, limited manufacturing base
infrastructure weaknesses
heavy reliance on one product/one trading partner

19. The Economic Environment
An Economic Environmental Analysis can involve asking:
How big is the population and at what rate is it growing?
Where is the population located and how dense is it?
What is the population age and distribution?
What is its disposable income and distribution?

20. The Socio-Economic Environment
Global socio-cultural environment is manifested in a number of ways
Social class and income have significant impact on purchases of consumer goods and services
Spain and Portugal are highest consumers of fish in the EU; Scandinavians consumed most bread and cereals
Switzerland is the largest consumer of coffee in the world; Greece the smallest
French the largest consumer of mineral water
Germans the largest consumer of beer
The impact of the ageing global population
The increasing global trends of urbanisation

21. The Competitive Environment
Competition is intensifying internationally and locally due to trade liberalization and privatization
Assessing competitors involve (Kotler, 2003):
Identifying the organization’s competitors
Determining competitors’ objectives
Identifying competitors’ strategies
Assessing competitors’ strengths and weaknesses
Estimating competitors’ reactions
Selecting competitors to attack and avoid

22. Considerations
What form of government does your target market possess? How open is it to free enterprise?
What law regime does your country have? What is the societal attitude towards rules? How could these factors affect your business plans?
Is your target country currently being embargoed/boycotted? If so, why and by whom? Is your product/service affected? 
How politically risky is your target country? What factors contribute to political risk in your country? 
What political risk insurance is available? What events does it cover? In particular, what coverage would be available for your product/target market? 
What regulations specific to your business can you find? How might they affect your plans?