INTERNATIONAL BUSINESS MANAGEMENT
LESSON 30
MANAGING GLOBAL MARKETING-MARKET FACTORS
Promotion
Promotion is the presentation of messages intended to help
sell a product or service. The types and direction of messages
and the method of presentation may be extremely diverse,
depending on the company, product, and country of operation.
The Push-Pull Mix
Promotion may be categorized as push, which uses direct selling
techniques, or pull, which relies on mass media. An example of
push is Avon’s door-to-door selling of cosmetics; an example
of pull is magazine advertisements for a brand of “cigarettes.
Most companies use combinations of both marketing strate-
gies. For each product in each country, a company must
determine its total promotional budget as well as the mix of
the budget between push and pull.
Several factors help determine the mix of push and pull among
countries
• Type of distribution system
• Cost and availability of media to reach target markets
• Consumer attitudes toward sources of information
• Price of the product compared to incomes
Generally, the more tightly controlled the distribution system,
the more likely a company is to emphasize a push strategy
because it requires a greater effort to get distributors to handle a
product. This is true, for example, in Belgium, where distribu-
tors are small and highly fragmented, forcing companies to
concentrate on making their goods available. Also affecting the
push-pull mix is the amount of contact between salespeople
and consumers. In a self-service situation, in which there are no
salespersons to whom customers can turn for opinions on
products, it is more important for the company to use a pull
strategy by advertising through mass media or at the point of
purchase.
Because of diverse national environments, promotional
problems are extremely varied. For example, about 70 percent
of India’s population is rural, and many people in rural areas are
illiterate, poor, and without access to televisions and radios.
Some mass consumer merchandisers such as Colgate-Palmolive,
Unilever, Coca-Cola, and Pepsi provide samples at religious
pilgrimages that millions attend in the expectation that their
subsequent word-of-mouth promotions will yield sales.
In many countries, government regulations pose an even greater
barrier. For example, Scandinavian television has long refused to
accept commercials. Other countries may put legal constraints
on what a company says, thus affecting the push-pull mix. For
example, in me United States, pharmaceutical companies have
been using more pull promotions even for prescription drugs.
They talk about the product and brand in television ads and tell
the viewer to ask their physicians about it. European countries
are more restrictive. Thus, in Europe, Pfizer’s advertisements
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talk about the symptoms of erectile dysfunction and tell TV
viewers to speak with their physicians about it; however, Pfizer
never mentions its drug, Viagra, in these ads.
Finally, the amount of consumer involvement in making a
purchase decision varies by country because of income levels.
When a product’s price compared to consumer income is high,
consumers usually will want more time and information before
making a purchase decision. Information is best conveyed in a
personal selling situation, which fosters two-way communica-
tion. In developing countries, MNEs usually have to use more
push strategies for mass consumer products because incomes
are low compared to price.
Standardization of Advertising Programs
The savings that result from using the same advertising
programs as much as possible-on a global basis or among
countries with shared consumer attributes-are not as great as
those from product standardization. Nevertheless, they can be
significant.
In addition to reducing costs, advertising standardization may
improve the quality of advertising at the local level (because local
agencies may lack expertise), prevent internationally mobile
consumers from being confused by different images, and speed
the entry of products into different countries. For example,
Sony’s “My first Sony” was aimed at young consumers allover
the world. However, standardized advertising usually means a
program that is similar from market to market rather than one
that is identical in each one. For example, Pepsi had Tina Turner
sing the Pepsi-Cola theme song with local bands in different
countries. Some of the problems that hinder complete,
standardization of advertising relate to translation, legality, and
message needs.
Standardization usually implies using the same advertising
agency globally. However, companies may differentiate cam-
paigns among countries even if they use the same agency
everywhere. By using the same agency, companies such as IBM,
Colgate, and Tambrands have found that they can take good
ideas in one market and quickly introduce them into other
markets because they need not worry about legal and ethical
problems from having one agency copy what another has done.
However, some companies, such as Procter & Gamble, prefer to
use more than one agency to keep the agencies in a state of
perpetual competition and to cover one agency’s weak spots by
drawing on the ideas of another agency.
Translation When media reach audiences in multiple countries,
such as MTV programs aired throughout most of Europe, ads
in those media cannot be translated because viewers watch the
same transmission. However, when a company is going to sell
in a country with a different language, translation is usually
necessary unless the advertiser is trying to communicate an aura
of foreignness. Toyota used this tactic in ads in the United
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States that were done completely in French and Italian with
subtitles. The most audible problem in commercial translation
is dubbing, because words on an added sound track never quite
correspond to lip movements. Marketing managers can avoid
dubbing problems by creating commercials in which actors do
not speak, along with a voice or print overlay in the appropriate
language. Pillsbury does this in India, a country with multiple
languages, where its Doughboy ads are in six languages.
On the surface, translating a message would seem to be easy.
However, some messages, particularly plays on words, simply
don’t translate-even between countries that have the same
language. The number of ludicrous but costly mistakes
companies have made attest to translation difficulties. Some-
times what is an acceptable word or direct translation in one
place is obscene, misleading, or meaningless in another. For
example, the Milk Board’s “Got milk?” ad comes out as “Are
you lactating?” in Spanish. Another problem is choosing the
language when a country has more than one. For example, in
Haiti, a company might use Creole to reach the general popula-
tion but French to reach the upper class.
Legality What is legal advertising in one country may be illegal
elsewhere. The differences result mainly from varying national
views on consumer protection, competitive protection,
promotion of civil rights, standards of morality, and national-
ism. In terms of c0nsumer protection, policies differ on the
amount of deception permitted, what can be advertised to
children, whether companies must list warnings on products
that cite possible harmful effects, and the extent to which they
must list ingredients. The United Kingdom and the United
States allow direct comparisons with competitive brands (such
as Pepsi versus Coca-Cola), whereas the Philippines prohibits
them. Only a few countries regulate sexism in advertising.
Some governments restrict the advertising of some products
(such as contraceptives and feminine hygiene products) because
they feel they are in bad taste. Elsewhere, governments restrict
ads that might prompt children to misbehave or people to
break laws (such as advertising automobile speeds that exceed
the speed limit) and those that show scantily clade women.
New Zealand banned a Nike ad in which a rugby team tackles
the coach, as well as a Chanel ad in which the model said to her
male lover before kissing him, “I hate you. I hare you so much
I think I’m going to die from it darling.” In both cases, the ads
were deemed to threaten violence.
Message Needs An advertising theme may not be appropriate
everywhere because of national differences in how well consum-
ers know the product and how they perceive it, who will make
the purchasing decision, and what appeals are most important.
Recall from the discussions of gap analysis and product life
cycles how product-knowledge conditions vary. For example,
few Japanese own dishwashers even though they own most
other appliances. In addition to size-constraints, which some
manufacturers have overcome with new designs, Japanese
housewives feel guilty about buying for the sake of conve-
nience. Matsushita, which promotes convenience elsewhere, has
shifted its Japanese ads to hot water conservation and hygiene.
The reaction to how messages are presented may also vary. For
example, Leo Burnett Worldwide produced a public service
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advertisement to promote checkups for breast cancer. It showed
INTERNATIONAL BUSINESS MANAGEMENT
an attractive woman being admired in a sundress with a voice-
over message, “If only women paid as much attention to their
breasts as men do…” Japanese viewers found it a humorous
way to draw attention to an important health issue, but French
viewers found it offensive because there is nothing humorous
about the issue.
Branding
A brand is an identifying mark for products or services. When a
company registers a brand legally, it is a trademark. A brand
gives a product or service instant recognition and may save
promotional costs. MNEs must make four major branding
decisions:
1. Brand versus no brand
2. Manufacturer’s brand versus private brand
3. One brand versus multiple brands
4. Worldwide brand versus local brands
The international environment substantially affects only the last
of these branding decisions. Some companies, such as Coca-
Cola, have opted to use the same brand and logo globally.
Other companies, such as Nestle, associate many of their
products under the same family of brands, such as the Nestea
and Nescafe brands, in order to make sure that these brands all
share in the companies’ goodwill. Nevertheless, there are a
number of problems in trying to use uniform brands interna-
tionally.
Language Factors
One problem is that brand names may carry a different associa-
tion in another language. For example, GM thought its Nova
model could easily be called the same in Latin America, because
the name means, “star” in Spanish. However, people started
pronouncing it “no, va,” which is Spanish for “it does not go.”
Coca-Cola tries to use global branding wherever possible but
discovered that the word diet in Diet Coke had a connotation
of illness in Germany and Italy. The brand is called Coca-Cola
Light outside the United States.
Unilever has successfully translated the brand name for its fabric
softener, while leaving its brand symbol, a baby bear, intact on
the packaging. The U.S. name Snuggle is Kuschelweich in
Germany, Cajoline in France, Coccolino in Italy, and Mimosin in
Spain. But Snuggle did not quite convey the same meaning in
English-speaking Australia, where Unilever uses Huggy.
However, brand symbols don’t necessarily work everywhere
either. Big Boy put its customary statue (a boy with checkered
overalls and cowlick curl) outside its restaurant in Thailand, and
many Thais placed offerings at his feet because they thought it
was a Buddha.
Pronunciation presents other problems, because a foreign
language may lack some of the sounds of a brand name or the
pronunciation of the name may be a word with a meaning that
is different from the original. For example, McDonald’s uses
Donald McDonald, not Ronald McDonald, in Japan because
the Japanese have difficulty pronouncing the letter R. Marcel
Bich dropped the H from his name when branding Bic pens
because of the fear of mispronunciation in English. Some
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 locally popular soft drinks have unappetizing meanings when
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pronounced in English-Mucos (from Japan), Pipi (from
Serbia), Pshitt (from France), and Zit (from Greece).
Different alphabets present still other problems. For example,
consumers judge English brand names by whether the name
sounds appealing, whereas brand names in Mandarin and
Cantonese need to have visual appeal as well because the
Mandarin and Cantonese alphabets are pictograms. Such
companies as Coca-Cola, Mercedes-Benz, and Boeing have taken
great pains to assure not only that the translation of their
names is pronounced roughly the same as in English but also
that the brand name is meaningful. For example, Coca-Cola is
pronounced Ke-kou-ke-le in Mandarin and means tasty and
happy. Further, companies have sought names that are consid-
ered lucky in China, such as a name with eight strokes in it and
displayed in red rather than blue.
Brand Acquisitions
Much international expansion takes place through the acquisi-
tion of companies in foreign countries that already have
branded products. For example, when Avon acquired Justine in
South Africa, it kept the Justine name because the brand was
well known and respected. However, Sara Lee acquired various
Brazilian coffee roasters and is now trying to consolidate them
into Brazil’s first national brand because stretching the promo-
tional budget over so many brands means that promotions are
not as effective as they might be given that less “” spent on
anyone brand to build significant positive recognition.
Country-of-Origin Image
Companies should consider whether to create a local or a
foreign image for their products. The products of some
countries, particularly developed countries, tend to have a higher
quality image than do those from other countries. For example,
Czechs associate locally made products with poor quality, so
P&G has added German words to the labels of detergents it
makes in the Czech Republic.41 There are also image differences
concerning specific products from specific countries. For
example, the British have a positive image of Australian wine;
thus, a young Australian winery sought a very Australian name,
Barramundi, for its wine exports to the United Kingdom.
But images can change. Consider that for many years, various
Korean companies sold abroad under private labels or under
contract with well-known companies. Some of these Korean
companies, such as Samsung, now emphasize their own trade
names and the quality of Korean products.
In an’ innovative effort to create a British ice cream flavor along
the lines of its American Cherry Garcia, Ben & Jerry’s ran a
contest for the best name and flavor. The flavor name Cool
Britannia won out over such entrants as Minty Python, Grape
Expectations, Choc Ness Monster, and The Rolling Scones.
Generic and Near-Generic Names
Companies want their product names to become household
words, but not so much that competitors can use trademarked
brand names to describe their similar products. In the United
States, the brand names Xerox and Kleenex are nearly synony-
mous with copiers and paper tissues, but they have,
nevertheless, remained proprietary brands. Some other names
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that were once proprietary, such as cellophane, linoleum, and
Cornish hens, have become generic-available for anyone to use.
In this context, companies sometimes face substantial differ-
ences among countries that may either stimulate or frustrate
their sales. For example, aspirin and Swiss army knives are
proprietary names in Europe but generic in the United States, a
situation that impairs European export sales of those products
to the United States because U.S. companies can produce aspirin
and Swiss army knives.
Distribution
A company may accurately assess market potential, design
goods or services for that market, price them appropriately, and
promote them to probable consumers. However, it’s unlikely
the company will reach its sales potential if it does1ft make the
goods or services conveniently available to customers. Compa-
nies need to place their goods where people want to buy them.
For example, does a man prefer to buy shampoo in a grocery
store, barbershop, drugstore, or some other type of outlet?
Distribution is the course-physical path or legal tide-that goods
take between production and consumption. In interna1rional
marketing, a company must decide on the method of distribu-
tion among countries as well as the method within the country
where final sale occurs.
Companies may limit early distribution in given foreign
countries by attempting to sell regionally before moving
nationally. Many products and markets lend themselves to this
sort of gradual development. In many cases, geographic barriers
and poor internal transportation systems divide countries into
very distinct markets. In other countries, very little wealth or few
potential sales may lie outside the large metropolitan areas. In
still others, advertising and distribution may be handled
effectively on a regional basis.
Difficulty of Standardization
Within the marketing mix, MNEs find distribution one of the
most difficult functions to standardize internationally for
several reasons. Each country has its own distribution system,
which an MNE finds difficult to modify because it is entwined
with the country’s cultural economic, and legal environments.
Nevertheless, many retailers are successfully moving internation-
ally.
Some of the factors that influence how goods will be distrib-
uted in a given country are citizens’ attitudes toward owning
their own store, the cost of paying retail workers, labor
legislation differentially affecting chain stores and individually
owned stores, legislation restricting the operating hours and
size of stores, the trust that owners have in their employees, the
efficacy of the postal system, and the financial ability to carry
large inventories. For example in comparison to those in the
United States, Hong Kong supermarkets carry a higher propor-
tion of fresh goods, are smaller, sell smaller quantities per
customer, and are located closer to each other. This means that
companies selling canned, boxed, or frozen foods will encoun-
ter less per capita demand in Hong Kong than in the United
States. They would also have to make smaller deliveries because
of store sizes and would have a harder time fighting for shelf
space.
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A few other examples should illustrate how distribution norms
differ. Finland has few stores per capita because general-line
retailers predominate there, whereas Italian distribution has a
fragmented retail and wholesale structure. In the Netherlands,
buyers’ cooperatives deal directly with manufacturers. Japan has
cash-and-carry wholesalers for retailers that do not need
financing or delivery services. In Germany, mail-order sales are
very important; this is not the case in Italy, however, because of
the country’s unreliable postal system.
How do these differences affect companies’ marketing activities?
One soft drink company, for example, has targeted most of its
European sales through grocery stores. However the method
for getting its soft drinks to those stores varies. In the United
Kingdom, one national distributor has been able to gain
sufficient coverage and shelf space to enable the soft drink
company to concentrate on other aspects of its marketing mix.
In France, a single distributor has been able to get good
coverage in the larger supermarkets but not in the smaller ones;
consequently, the soft drink company has been exploring how
to get secondary distribution without upsetting its relationship
with the primary distributor. In Norway, regional distributors
predominate, so a soft drink company has found it difficult to
launch national promotion campaigns. In Belgium, the
company could find no acceptable distributor, so it bas had to
assume that function itself
Choosing Distributors and Channels
We will now compare why companies self-handle their distribu-
tion or contract with other companies to do it for them, and we
will discuss how they should choose outside distributors.
Internal Handling When sales volume is low, it is usually
more economical for a company to handle distribution by
contracting with an external distributor. By doing so, however,
it may lose a certain amount of control. However, small
companies may lack the resources needed to handle their own
distribution. Managers should reassess periodically whether
sales and resources have grown to the point that they can handle
distribution internally.
Circumstances conducive to the internal handling of distribu-
tion include not only high sales volume but also several other
factors, including
• When a product has the characteristic of high price or high
technology, or the need for complex after-sales servicing
(such as aircraft), the producer probably will have to deal
directly with the buyer. The producer may simultaneously
use a distributor within the foreign country that will serve to
identify sales leads.
• When the company deals with global customers, especially in
business-to-business sales-such as an auto-parts
manufacturer that sells original equipment to the same auto
makers in multiple countries-such sales may go directly from
the producer to the global customer.
• When the company, such as some food franchisers, views its
main competitive advantage to be its distribution methods,
it eventually may franchise abroad but maintain its own
distribution outlet to serve as a flagship. Amway, Avon, and
Tupperware are examples of companies that have
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successfully transferred their house-to-house distribution
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methods from the United States to their operations abroad.
Dell Computer has successfully handled its own mail-order
sales in Europe.
Distributor Qualifications A company usually can choose
from a number of potential distributors. Common criteria for
selecting a distributor include:
• Its financial strength.
• Its good connections with customers.
• The extent of its other business commitments.
• The current status of its personnel, facilities, and equipment.
The distributor’s financial strength is important because of the
potential long-term relationship between company and
distributor and because of the assurance that money will be
available for such things as maintaining sufficient inventory.
Good connections are particularly important if sales must be
directed to certain types of buyers, such as government
procurement agencies. The number of other business commit-
ments can indicate whether the distributor has time for the
company’s product and whether it currently handles competitive
or complementary products. Finally, the current status of the
distributor’s personnel, facilities, and equipment indicates not
only its ability to deal with the product but also how quickly
start-up can occur.
Spare Parts and Repair Consumers are reluctant to buy
products that may require spare parts and service in the future
unless they feel assured they will be readily available in good
quality and at reasonable prices. The more complex and
expensive the product, the more important after-sales servicing
is. When after-sales servicing is important, companies may need
to invest in service centers for groups of distributors that serve
as intermediaries between producers and consumers. Earnings
from sales of parts and after-sales service sometimes may match
that of the original product. .
Gaining Distribution Companies must evaluate potential
distributors, but distributors must choose which companies
and products to represent and emphasize. Both wholesalers
and retailers have limited storage facilities, display space, money
to pay for inventories, and transportation and personnel to
move and sell merchandise, so they try to carry only those
products that have the greatest profit potential.
In many cases, distributors are tied into exclusive arrangements
with manufacturers that prevent new competitive entries. For
example, there are about 25,000 Japanese outlets that sell only
Shiseido’s cosmetics, 13,000 that sell only Toshiba products,
and 11,000 that sell only Hitachi products. A company that is
new to a country and wants to introduce products that some
competitors are already selling may find it impossible to find
distributors to handle its brands. Even established companies
sometimes find it hard to gain distribution for their new
products, although they have the dual advantage of being
known and of being able to offer existing profitable lines only
if distributors accept the new unproven products.
A company wanting to use existing distribution channels may
need to analyze competitive conditions carefully before offering
effective incentives for those distributors to handle the product.
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 It may need to identify problems that distributors experience
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and offer assistance in order to gain their loyalty. Companies
alternatively may offer other incentives, such as higher profit
margins, after-sales servicing, and promotional support-any of
which may be offered on either a permanent or introductory
basis. The type of incentive should also depend on the
comparative costs within each market. In the final analysis,
however, incentives will be of little help unless the distributors
believe a company’s products are viable. The company must sell
the distributors on its products as well as on itself as a reliable
company.
Hidden Cost in Foreign Distribution
When companies consider launching products in foreign
markets, they must determine what final consumer prices will
be in order to estimate sales potential. Because of different
national distribution systems, the cost of getting products to
consumers varies widely from one country to another. Five
factors that often contribute to cost differences in distribution
are (1) infrastructure conditions, (2) the number of levels in the
distribution system, (3) retail inefficiencies, (4) size and
operating-hours restrictions, and (5) inventory stock-outs.
Infrastructure In many countries, the roads and warehousing
facilities are so poor that getting goods to consumers quickly, at
a low cost, and with minimum damage or loss en route is
problematic. In Nigeria, for example Nestle has had to build
small warehouses across the country because it could not
depend on a central warehouse that one would normally expect
based on the country’s area. Roads are in such poor condition
that travel is slow and trucks are prone to breakdowns. Further,
because of crime, Nestle uses armed guards on its trucks and
allows them to travel only during daylight hours.
Levels in distribution system Many countries have multitiered
wholesalers that sell to each other before the product reaches the
retail level. For example, national wholesalers sell to regional
ones, who sell to local ones, and so on. This sometimes occurs
because wholesalers are too small to cover more than a small
geographic area. Japan typifies such a market. There are, on
average, 2.21 wholesale steps between producer and retailer in
Japan, compared with 1.0 in the United States and 0.73 in
France. Because each intermediary adds a markup, product prices
are driven up. However, such overall figures obscure differences
by product. For example, fresh food passes through much
longer and complex channels than such products as electronic
goods.
Retail inefficiencies In some countries, particularly developing
countries, low labor costs and a basic distrust by owners of all
but family members result in retail practices that raise consumer
prices. This distrust is evident in companies’ preference for
counter service rather than self-service. In the former case,
customers wait to be served and shown merchandise. A
customer who decides to purchase something gets an invoice
which is taken to a cashier’s line for payment. Once the invoice is
stamped as paid, the customer must go to another line to pick
up the merchandise after presenting the stamped invoice. Some
retailers have counter service for purchases as small as a pencil.
The additional personnel add to retailing costs, and the added
time people must be in the store means fewer people can be
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served in the given space. In contrast, most retailers in some
(mainly industrialized) countries have equipment that improves
the efficiency of handling customers and reports-for example,
electronic scanners, cash registers linked to inventory control
records, and machines connecting purchases to credit-card
companies.
Restrictions Many countries, such as France, Germany, and
Japan, have laws to protect small retailers. These laws effectively
limit the number of large retail establishments and the
efficiencies they bring to sales. Many countries also limit
operating hours as a means of protecting employees from
having to work late at night or on weekends. At the same time,
the limit keeps retailers from covering the fixed cost of their
space over more hours, so these costs are passed on to consum-
ers. In Sweden, 7-Eleven stores cannot use longer
open-for-business hours as a competitive advantage because
Swedish law prohibits sales of a full range of goods between
midnight and 6 A.M.
Stock-outs Where retailers are small, as is true of grocers in
many developing countries, there is little space for storing
inventory. Wholesalers must incur the cost of making small
deliveries to many more establishments and sometimes may
have to visit each retailer more frequently because of stock
outages.
The Internet and Electronic Commerce
Estimates vary widely on the current and future number of
worldwide online households and the electronic commerce
generated through online sales. Nevertheless, they all indicate
substantial growth. Table 8.3 shows some comparative
estimates of growth. As electronic commerce increases, custom-
ers worldwide can quickly compare prices from different
distributors, and this development should drive prices down.
Electronic commerce offers companies an opportunity to
promote their products globally. It also permits suppliers to
deal more quickly with their customers. For example, Lee Hung
Fat Garment Factory of Hong Kong supplies apparel to about
60 companies in
Europe and now flashes picture samples of merchandise to
them over the Web. Customers such as Kingfisher of the
United Kingdom, can tinker with the samples and transmit
new versions back to Hong Kong so that Lee Hung Fat
produces exactly what the distributors want.
Global Internet sales are not without problems. Many house-
holds, especially in emerging economies, lack access to Internet
connections. Therefore, if a company wants to read mass global
markets, it will need to supplement its Internet sales with sales
that use other means of promotion and distribution. A
company also needs to set up and promote in Internet sales,
which can be very expensive. Royal Bank of Canada is spending
about $75 million up-front to promote Internet sales in the
United States.
A company cannot easily differentiate its marketing program for
each country where it operates. The same Web advertisements
and prices reach customers everywhere, even though different
appeals and prices for different countries might yield more sales
and profits. If the company makes international sales over the
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 INTERNATIONAL BUSINESS MANAGEMENT
Table 8.3 COMPARATIVE ESTIMATES: INTERNET USERS WORLDWIDE, 2000-2006 (IN
MILLIONS)
2000 2001 2002 2003 2004 2005 2006

Computer Industry Almanac (CIA) 413.6 538.5 673.0 825.4 - - -

eMarketer* 352.2 445.9 529.9 622.9 709.1 - -
eTForecasts 414.0 - 673.0 - - 1,174.0 -
Gartner Dataquest 330.4 4.3.9 480.3 549.4 604.7 - -
International Data Corporation 400.0 - - - - 977.0 -
Ipsos-Read - 400.0 - - - - -
Morgan Stanley Dean Witter - - 449.0 536.0 - - -
Neilsen/Netratings - 426.5 - - - - -
Ovum - - - - - - 923.0
Pegasus Research International 252.0 - - - - - -

Internet, it must deliver what it sells expeditiously. This may
necessitate placing warehouses and service facilities abroad,
which the company mayor may not own and manage itself.
Note:* eMarketer’s year 2000 baseline is from the international
Telecommunication Union’s estimate of internet users aged
two years and older, who have accessed the Internet within the
previous 30 days.
Source: Marketer’s, “ Charting the Future of the Business.”
(January 22, 2003): www.emarketer.com/products/
report.php?eglobal/welcome.html.Reprinted by permission of
eMarketer, Inc.
Finally, the company’s Internet ads and prices must comply with
the laws of each country where the company makes sales. This
is a challenge because a company’s Web page reaches Internet
users everywhere. For example, Land’s End, a U.S. merchan-
diser, has long depended on its unconditional lifetime
guarantee to help sell its merchandise. But German law
prohibits such a guarantee on the grounds that it is a gimmick
hidden in the sales price. Land’! End may have to exclude
Germany from its Internet sales. Clearly, although the Internal
creates new opportunities for companies to sell internationally,
it also creates new challenges for them.
lines. Rather, companies will identify consumer niches that cut
across country lines.
At the other extreme, because of growing numbers of poor
people with little disposable income, companies will have
opportunities to develop low-cost standardized products to fit
the needs of the have-nots. Thus, companies will have
conflicting opportunities-to develop luxury items to serve the
haves and to cut costs to serve the have-nots.
Despite the growing proportions of haves and have-nots,
demographers project that the actual numbers of people
moving out of poverty levels and into middle-income levels
will increase. This is largely because of population and income
growth in many developing countries, especially in Asia. Such a
shift will likely mean that companies’ sales growth in develop-
ing countries will mainly be for products that are mature in
industrial countries, such as telephones and household
appliances. Further, with increased access to the Internet and
lower barriers to trade, customers will be able to purchase goods
from anywhere in the world. In the process, companies will find
it more difficult to charge different prices in different countries.
But they will more effectively be able to cut out middlemen in
the distribution of their products.

Looking To The Future
Will the “Haves” and the “Have-Nots”
Meet the “Have-Somes”?
Most projections are that disparities between the “haves” and
“have-nots” will grow in the foreseeable future, both within
and among countries. Further, because the “haves” will have
greater access to the Internet, they will be better able to search
globally for lower prices for what they buy. Therefore, globally,
the affluent segment will have more purchasing power and will
not likely forgo buying because of antimaterialistic sentiments.
As people’s discretionary income increases, what are now luxury
products become more commonplace (partly because it takes
fewer hours of work to purchase them), and seemingly
dissimilar products and services (such as cars, travel, jewelry, and
furniture) compete with each other for the same discretionary
spending. Because of better communications and rising
educational levels of the haves, they will want more choices.
However, these choices may not fall primarily along national
What products and services are likely to enjoy the major growth
markets? It is probable that data generation and storage will
continue to be a major growth area during the next few decades.
It also is probable that among the market-growth leaders will
be companies making breakthroughs in process technologies
that improve productivity (e.g., lasers, optics, and robotics) and
those making breakthroughs in energy conservation (e.g., solar
photovoltaics, fuel cells, and coal conversion).
Ethical Dilemma
What Products Should Companies
Market Internationally?
Critics complain MNEs pay too little attention to the needs of
developing countries. For example, they chide pharmaceutical
companies for spending less on antimalarial research than on
research for diseases more prevalent in industrial countries, even
though malaria results in more fatalities. At the same time these
critics have encouraged developing countries not to use DDT,
although malaria deaths increased with the nonuse. They

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 criticize so-called superfluous products and luxury goods
INTERNATIONAL BUSINESS MANAGEMENT

because it is “the moral property if women.” Yet U.S. antiabor-

because they shift spending away from necessities and contrib- tion activists took out full-page news paper ads urging U.S.
ute to the enhancement of elitist class distinctions. For instance, consumers not to use Allegra, a Hoechst anti hay fever treat-
they question making soft drinks available to consumers who ment because Hoechst continued to sell mifepristone outside
lack funds for pharmaceuticals. Soft drink companies have the United States. Thus, Hoechst faced ethical criticism whether
responded that consumers should make their own choices, that to marketed the abortion poll in the United States or not.
introduction sanitary bottling operations has aided other Subsequently to donated its U.S. mifepristone patent rights to
industries (including pharmaceuticals), and that attempts to ass the population Council, a nonprofit research organization.
vitamins or nutrition to tasty food has failed on the market-
place. Nevertheless, critics question whether this is sufficient
justification for continuing to sell the soft drinks. Even if Notes -
product reach only affluent customers companies may be
criticized. For example Benetton has been taken to task for
opening hard-currency-only shops for tourists in Cuba and
North Korea because thus shops are an affront to the local
population that is to people who are economically and legally
prohibited from buying the merchandise.
Critics have also complained that MNEs promote products to
people who do not understand the products negative conse-
quences. The most famous case involved infant formula sales in
developing countries where infant mortality increased when
bottle-feeding supplanted breast-feeding. Because of law
incomes and poor education mothers frequently over diluted
formula and gave it to their babies in unhygienic conditions.
Critics argued that promoting formula manufacturers claimed
that other factors increased bottle-feeding specifically more
working mothers and fewer products and services being made
in the home. The promotion they argued persuaded people to
give up their “home brews” in favor of the most nutritious
breast milk substitute available. Regardless the world health
organization passed a voluntary code to restrict formula
promotion in developing countries. Critics hit nestle hardest
because its name-identified products facilitated the organization
of a boycott. The company ceased advertising that could
discourage breast-feeding limited free formula supplies at
hospitals and banned personal gifts to health officials. Despite
these events few governments have4 prohibited infant formula
sales or promotion. In the absence of regulations (for infant
formula and other products and other products), how far
companies should go to protect consumers is unclear. The
controversy has been compounded by the transmission of HIV
virus through breast milk a particular problem in Africa where
many women are HIV/AIDS infected. At the same time
pharmaceutical companies have responded to the pressure by
offering AIDS drugs to African consumers at prices substan-
tially below those in their home countries. However is it ethical
to sell at a low price in some markets but not to consumers in
their home markets?
Is it unethical for a company to give in to the pressure groups
that organize a boycott? A French company Roussel Uclaf
development the abortion poll RU 486, now called
mifepristone. A German company Hoechst then acquired
Rousse Uclaf. Hoechst fearful of adverse publicity initially for
bade the sale of mifepristone except in the three countries (the
United Kingdom, France and Switzerland)
Where Roussel Unlaf had already begun selling it. The French
health ministry has insisted that the product remain in sale

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