Lecture 2_ 20400_International Marketing(aut 24).pdf

International Marketing - 20400 Lecture 2 Dr. Nigel Bairstow UTS CRICOS 00099F UTS CRICOS 00099F  Weekly themes International Marketing Introduction to Internat...

International Marketing - 20400 Lecture 2 Dr. Nigel Bairstow UTS CRICOS 00099F UTS CRICOS 00099F  Weekly themes International Marketing Introduction to International Marketing The International Macroeconomic Environment Researching International Markets and Market Entry Cultural Influences in International Marketing SME’s in International Marketing Digital Transformation in International Marketing Product and Promotions in International Marketing Pricing and Distribution in International Marketing Ethics and Sustainability in International Marketing Contemporary Issues in International Marketing 2 The International Macroeconomic Environment Learning objectives Understand how PESTLE is applied as an external environment tool to investigate business factors of political, economic, social, technological, environmental and legal factors that may impact success or failure in country markets. Each country market in Asia Pacific is unique and requires customisation. Research of country markets will increase chances of success. Analytical tools International Environmental analysis is a strategic tool. It is a process to identify and make sense of all the external factors, which may impact a firm’s success in penetrating international markets abroad. It helps in analysing risk in country markets Assists in screening the best markets to target. PESTEL, PEST, SLEPT, Porter’s Five Forces, SWOT PESTEL What is the political situation of the country and how can it affect the industry? What are the prevalent economic factors? How much importance does the country’s socio-cultural environment has in the market and what are its determinants? What technological innovations are likely to pop up and affect the market structure? What are the environmental concerns for the industry? Are there any current legislations that regulate the industry or can there be any change in the legislations for the industry? Macro (External) Environment Factor Impact of Factor Potential Opportunity or Threat Political/legal Increased legislation on product Mild threat (-1) liability Economic Recession in key overseas markets Major threat (-4) Technological Little innovation likely from competitors Neutral impact (0) Socio-cultural Increased awareness of environmental Significant opportunity (+5) protection issues The Political Environment Political How stable is it? Government Leadership Structure Are there pressure groups? Protectionism? Government Degree of involvement Policies Trade Relationships Regional? Geo-political Global? Tensions Sanctions? Extremist influences? Geo-political JP SK tensions regional / global INDIA H TAIWAN K Hongkong – China SE A South Korea – Japan India - Kashmir Taiwan – China South China Sea Ukraine – Russia Israel - Palestine  Trade Embargo on Vietnam (1975- 1995) Geo-political tensions economic sanctions Vietnam today: One party Communist state One of the fastest growing economies in Asia 2nd largest coffee producer after Brazil 2nd largest exporter of rice worldwide 3rd largest footwear manufacturer after China and Italy  Corruption Perceptions Index Ranking 2023 Transparency international corruption perceptions index Global movement against corruption Index ranks 180 countries by their perceived levels of public sector corruption, using a scale of 0-100, where 0=highly corrupt and 100 is very clean Source: Transparency International WORLDWIDE GOVERNANCE INDICATORS WORLD BANK DATA Key Dimensions: Voice and Accountability Political stability and Absence of violence Government Effectiveness Regulatory Quality Rule of Law Control of Corruption The Economic Environment  Economic Economic GDP indicators Management Fiscal indicators Domestic Labour Market Economy Monetary Indicators Export/Import data (Balance of Trade) International Government programs and incentives Trading Trade relationships Environment Ease of Doing Business Other Consumption pattern indicators Per capita / income relevant to Industry indicators and trends your trade The Top Largest Economies in the World Austrade Benchmark Report 2019 Source: IMF data (as of February 07, 2024) The Next Ten Top Economies Source: IMF data (as of February 07, 2024) Economic Programs AND INITIATIVES China Made in China 2025 Belt and Road Initiative India Make in India campaign Digital India Philippines Build, build, build campaign Australia Foreign Direct Investment incentive INTERNATIONAL TRADING ENVIRONMENT EASE OF DOING BUSINESS REPORT WORLD BANK a project of the World Bank, measuring the business regulatory environment in 190 countries. Use this report to supplement your macro environmental analysis How does your country rate? INTERNATIONAL TRADING ENVIRONMENT TARIFF AND NON-TARIFF BARRIERS Tariff barriers are taxes on certain imports Non-tariff barriers – rules which make trade more difficult Quotas Subsidies Embargo INTERNATIONAL TRADING Electric ENVIRONMENT cars in GOVERNMENT SUBSIDIES China A subsidy to a particular domestic industry is a barrier to trade Subsidies make those goods cheaper to produce than in foreign markets. This results in a lower domestic price, making the Farm subsidies price of foreign goods relative in US to domestic goods, more expensive  Other Economic Indicators Consumption Index Government Consumer Spending Government Spending Household Debt Government Debt Inflation Rate Fiscal Policy The Big Mac Index 2024 Sources: https://www.economist.com/big-mac-index  Beyond GDP THE Legatum PROSPERITY INDEX Dimensions of the Index Safety and Security Personal Freedom Ranking 2023 Education 1. Denmark Governance 2. Sweden Social Capital Investment Environment 3. Norway Natural Environment 15.Australia Economic Quality 16.Japan Living Conditions 17.Singapore Health Market Access & Infrastructure 18.Belgium 19.United States 55. China The Social Environment Socio-cultural factors Population trends Gender Demographics Religious Affiliations Education Geography Culture Social Social Class Reference Groups  Demographic considerations Population trend - Ageing population; Young? Gender - Male to Female ratio Religion – Dominant religious affiliation? Education - attainment? Geography – Urban vs rural/provincial population Country Median Life Population Trends Age Expectancy Aging (2023) Japan 47 83.5 Hong Kong 44 82.5 Korea 42 82.3 Singapore 41 83.1 Thailand 39 74.9 the over 65’s in Asia will the largest China 38 76.1 and fastest growing market in the Australia 38 82.8 world. There are more over 65’s in Asia than Malaysia 29 75 there are people in all of North Indonesia 29 69.1 America Consumption is expected to go down India 27 68.3 in an ageing society Philippines 24 68.5 WHO Global Data  Population Trends Urbanisation ASIA ’s URBAN population is growing faster than in any region 6 out of the top 10 are in ASIA  Social factors Consumer behaviour are influenced by: Culture Social Class Similar attitudes Live in similar neighborhoods Attend same schools Similar tastes in fashion Reference Groups church groups Online social network groups Sporting groups Professional groups  Social Class Social class Example: USA Upper Class 1% Top execs, celebrities $500,000+ income Elite education Upper Middle Class 15% Managers, Professionals $100,000+ income Highly educated with degrees Middle Class 32% Skilled contractors, artisans, business owners $35-75,000 income Some college training, secondary education likely Working Class 32% Clerical, blue collar, $16-30,000 income High school education Lower Class 20% Poorly paid positions, government assistance Some high school education Photo by Ben Rosett on Unsplash The Technological Environment Technological Factors Information & Digital Infrastructure and Connectivity Communication Mobile Network Technology Broadband Bandwidth (ICT) Digital Reach Cybersecurity Road Logistics Rail Infrastructure Air Water Innovation and R&D Spend Research Global Innovation Index Intellectual Property (Patents, trademarks, etc)  Digital services depend on infrastructure for delivery, DIGITAL and without digital services, infrastructure providers INFRASTRUCTURE have little for their infrastructure to do. STAKEHOLDERS  Digital reach Internet Users Mobile phone users Active Social Media Users World: 4.9 billion World: 5.28 billion World 4.66 billion Asia: 2.21 billion Asia: 4.42 billion Asia: 2 billion Americas: 798 million Americas: 1.06 billion Americas: 673 million Digital 2012, Global Digital Yearbook (Collaboration project by We Are Social & Hootsuite  “a trusted reference that measures the commitment of countries to cybersecurity at a global level” Global Cybersecurity Legal Cybercrime legislation, cybersecurity regulation, Containment Index 2023 Top 10 Countries Technical Measures Standards, Child Online protection mechanisms, etc committed to Cybersecurity Organisational Measures. National Cybersecurity 1. UK Strategy, Responsible Agency, Cybersecurity Metrics 2. USA 3. France 4. Lithuania Capacity Building Measures Public awareness campaigns, Professional training, etc 5. Estonia 6. Singapore 7. Spain Cooperation Measures bi-lateral/multi agreements, Best 8. Malaysia Practices, inter-agency partnerships, etc 9. Norway 10.Canada Key Cybersecurity Challenges Lack of adequate and interoperable national or regional legal frameworks Lack of secure software for ICT-based applications Lack of appropriate national and global organizational structures to deal with cyber incidents Lack of information security professionals and skills within governments; lack of basic awareness among users Lack of international cooperation between industry experts, law enforcements, regulators, academia & international organizations, etc. to address a global challenge Complexity of ICTs imply a need for the ability to respond, not just protect, as cybersecurity incidents will happen even if protective measures are deployed. Source: Cybersecurity in Asia-Pacific State of play , key issues for trade and e-commerce By Sameer Sharma, Sept 2017, Yogyakarta, Indonesia  Logistics infrastructure “Logistics are the backbone of trade. Good logistics can lower trade costs and help countries compete globally.” High speed rail Maritime ports Airports China and Japan has the world’s Eight out the top 10 busiest ports Four out of the top 10 busiest fastest trains in the world are in Asia airports in the world are in Asia #1 Singapore, #2 Shanghai #1 Atlanta, #2 Beijing, #3 Dubai, #4 LAX, #5 Tokyo Haneda, #6 Chicago, #7 London Heathrow, #8 Hongkong, #9 Shanghai, LOGISTICS PERFORMANCE INDEX (LPI) WORLD BANK DATA Customs Infrastructure International Shipments Logistics Competence Tracking and Tracing Timeliness  Who is leading the innovation? 129 countries, 80 indicators Global Innovation Index 2023 #1: Switzerland #2: Sweden #4: Netherlands #5: UK Key Dimensions #9: Germany Creative outputs #3: USA #8: Singapore #11: Korea Knowledge and technology #13: Hongkong outputs #14: China Infrastructure #15: Japan Institutions Business Sophistication Market Sophistication Human Capital and Researc Insead, Cornell Uni, and World Intellectual Property Office  Who filed the most applications in 2023? Patents Trademarks Industrial Patents, 1. China 1. China Designs trademarks, 2. USA 2. USA 1. China 3. Japan industrial designs 3. Japan 2. EU 3. Korea Asia accounted for more than two-thirds of all patent, Patents Industrial trademark, and industrial design Trademarks Designs 3,326,300 14,321,800 applications in 2023, with China worldwide 1,312,600 driving overall growth worldwide worldwide China: 46% China: 51% US: 18% China: 54% US: 4.5% EU: 8% World Intellectual Property 2019 Report The Environment Environmental factors Paris Agreement targets Climate Government stance Change Pressure Groups Policies Land Degradation and deforestation Sustainability Industrial and Natural disasters Food production Water Security Environmental Risks and Concerns What environmental policies does the government have in place? What is their stance on climate change? How active are the environmental pressure groups? What is the country’s record on sustainable practices? Is the country vulnerable to natural disasters? What has been the country’s response to natural or industrial disasters? How does the country rate in air and water pollution that could impact the business? Asia’s challenge In 2021, Asia was home to China (#1), India (#3) and Japan (#5) world’s worst polluting countries (Global Carbon Project) Asia is the most vulnerable region from the effects of climate change: growing population frequency of natural disasters high urbanization rate rising sea levels Deforestation for palm oil production in Indonesia continues Paris Agreement Bringing 195 countries to a common cause to keep global warming below 2 deg C Enhancing support to developing countries in order to carry this out Each country has its own target. The US is the only country that did not support this agreement.  China and the US, are responsible for more than 40% of the world’s CO2 emissions. Co2 GLOBAL EMISSIONS CO2 was 280 ppm By 2013, it reached 400 ppm In June 2022, it was at 414 ppm World Economic Forum, Oct 2019 Australia’s Dilemma Coal - #2 export (Adani Coal Mine) Climate change policy – politicized No policy = business will be reluctant to invest Pollution in Beijing Natural Disasters 2015 Earthquake in Nepal 2013 Super Typhoon Haiyan 2004 Tsunami in Thailand on in the Philippines Dec 26 Natural Disasters Toyota – interruption in the supply chain of Thai-made components à output loss of 37,500 cars Western Digital and Seagate drives – Thailand is the 2nd largest exporter of hard disk drives à shortage of PCs and Macbooks Thailand 2011 Floods  Industrial Disasters Earthquake + 15m tsunami = Power Failure à Nuclear cooling system meltdown 2nd worst nuclear plant disaster in the world Over 1/3 of Japan’s energy was from nuclear energy Disaster – major review of energy strategy Fukushima, Japan Nuclear Reactor 2011 Earthquake and Tsunami Combined natural and industrial disaster  Industrial disaster Bangladesh Garment Factory Fire – Rana Plaza 2013 Bangladesh – 2nd largest garment exporter in the world, powered by cheap labour costs Collapse of the 9-storey garment factory due to construction defects. 1100 died, 2400 injured Factory supplied retail stores like JC Penney, The Children’s Place Challenge for Business Review supply chain and ensure compliance to Innovate and invest in sustainable practices Environment sustainable products (product Sustainability design, packaging, circular economy) Lead the charge, and influence others in the industry move from “nice to have” to committed strategies on sustainability The Legal Environment International trade usually involves two or more legal systems. Hence the legal complexities are greater for international trade than they are for domestic trade. Legal factors Legal System What system – Civil Law, Common Law, Religious Law PE Rule of law - Is ST there a well-established legal environment both to E L as well as to challenge them? enforce policies and rules Foreign trade Import regulations (Duty, Licenses, Tariffs, Non-tariff barriers eg regulations Quotas, subsidies, restrictions, embargoes ) Foreign direct investment rules Cross border e-Commerce laws Regulatory Product environment Price for trade Place Promotion Worldwide governance indicator Rule of law and regulatory quality indicators Source: https://www.worldbank.org/en/publication/worldwide-governance-indicators/interactive-data-access  Product Price What system – Civil Law, Common Law, Religious Law Packaging & Labelling requirements Tariffs Intellectual Property Is there a well-established Value Added Tax legal environment PESTE both to enforce Product Safety & Acceptability Anti-dumping policiesrules and rules as well as to Regulatory Local content requirements L Consumer Protection Laws challenge them? Anti-competitive laws environment Import regulations (tariffs, non-tariff barriers) for trade Marketing Foreign direct investment rules Cross border e-Commerce laws Mix Place (Logistics) Promotions Market entry requirements (local Product Advertising laws (ex cigs Australia) partner) Price Consumer Protection laws Industry requirements (eg China Place– cattle) Promotion  Country-specific regulations Tariff and import duties Non-tariff barriers Liquor, Tobacco, etc Duties and Sales Tax (GST, VAT) Customs and Excise Import restrictions China = If setting up a website in China, Internet Content Provider (ICP) license is required Thailand – requires an application Country-Specific Regulations Import restriction Singapore - Legal Consideration Selling chewing gum is illegal (1992) $100,000 fine or 2 years prison  Packaging and labeling requirements Cigarette packaging in Australia 1976 – banned in radio and television 1990 – banned in newspapers and magazines 1996 – banned on billboards 2000 – banned on all types of sponsorships 2012, - Tobacco Plain Packaging Act - all tobacco products sold in Australia must be in plain packaging, and should display graphic warning to 75% of total area. Not without big challenges passing local legislation, the High Court and WTO This Photo by Unknown Author is licensed under CC BY-ND  Foreign Investment Laws Indonesia – Investment Negative List Examples of recent changes: Tourism – Bars, cafes previously capped at 49% foreign ownership à 100% allowed Retail trading via mail or internet for certain categories are CLOSED to foreign investment Passenger land transport – previously CLOSED allows for foreign investment capped at 49% List of business investment activities that specifies which are either entirely closed or conditionally open to foreign investment. Key takeaways The PESTLE framework stands as a vital tool for comprehending the external factors influencing business operations within diverse country markets. By scrutinizing the political, economic, social, technological, legal, and environmental aspects, businesses gain profound insights into potential success or failure. This approach is particularly indispensable in the distinct Asia Pacific region, where each country market necessitates tailored strategies. Employing the PESTLE analysis aids in crafting customized approaches that resonate with local dynamics, bolstering the likelihood of triumph. Highlights research into country markets serves as an imperative step towards navigating complexities and enhancing the prospects of success for businesses in this diverse and evolving landscape.