Chapter 6: Consumer, Industrial, and Government Markets Flashcards
(163 cards)
1
Q
Global consumer
A
An individual or an organizational buyer that exhibits similar needs and tastes worldwide
2
Q
Emergence of global consumer coincides with two important driving trends:
A
- Globalization
- Technological developments in information and communications
3
Q
Globalization
A
Characterized by a combination of falling trade barriers and the industrialization and modernization of nations worldwide
4
Q
Technological developments in information and communications
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Transportation and global media
5
Q
Global market segments
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Groupings of consumers that exist in multiple countries and display similar characteristics regarding preferences and consumption of specific product or service categories.
6
Q
Individual global consumers
A
in some industries (e.g., furniture, home appliances, office supplies, automobiles, consumer electronics, etc.)
But still specialized in some other industries (e.g., food, books, music, clothing styles)
7
Q
Influences on the global consumer
A
- Situational Factors
- Economic Status
- Technology Level
- Personal Motives
- Culture
- Social Factors
8
Q
The ability to purchase goods and services is strongly influenced by…
A
Income level
9
Q
Why do emerging markets represent promising market opportunities?
A
Because emerging markets have rapidly rising incomes
10
Q
What are income levels related to?
A
The size of the middle class.
11
Q
What is the economic status also related to?
A
To the occupation
12
Q
Technology
A
Refers to knowledge and usage of tools, machines, techniques, or methods of an organization applied to solving problems or performing particular functions.
13
Q
What is the technology level influenced by?
A
The nature of education systems in individual countries.
14
Q
The hierarchy of needs (from bottom to tip)
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- Psychological needs
- Safety needs
- Love and belonging needs
- Esteem needs
- Self-actualization needs
15
Q
How is the hierarchy of needs relevant to international marketing?
A
- Need levels vary worldwide as a function of economic status, technology level, and other factors
Worldwide, people do not consistently follow Maslow’s hierarchy of needs
16
Q
Culture
A
Integrated system of learned behavior patterns that distinguish members of a society
17
Q
Norms
A
Accepted behaviors within a society or group.
They may be explicit or implicit and define the rules of behavior regarding interactions with others.
18
Q
How do norms vary substantially from country to country?
A
E.g., Luxury goods market in China and Japan
E.g., emphasis on sustainability in Europe
19
Q
What influences consumer behavior?
A
Family and social groups
- In Asia, family members exert considerable influence on the consumption patterns of individuals
20
Q
Situational factors
A
Environmental or locational conditions that affect how consumers behave
21
Q
What is an example of situational factors?
A
Physical surroundings
22
Q
Physical surroundings
A
Include geographical location and climate.
- E.g., store locations in North America are influenced by the tendency of consumers to drive to shopping destinations, while in Europe and Japan stores are more often located at sites well served by public transportation
23
Q
Individual-difference psychological factors
A
- Country of origin
- Consumer ethnocentrism
- World mindedness
- National identity strength
- Animosity
24
Q
The industrial buyer
A
- Purchases raw materials, parts, components, and supplies in order to produce other products or run a business.
- Buying is performed by professional purchasing managers who may buy enormous quantities of goods
- Strongly influenced by globalization
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Two important concepts of the industrial buyer
- Derived demand
- Cost-performance
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Derived demand
Demand for raw materials, parts, and other inputs that depend on demand for some other good
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Cost-performance
Expected performance of a product relative to the cost to buy and use it
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The government buyer
Governments are important targets for sales of goods and services
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Government expenditure
15% of GDP in advanced economies, and 20% of GDP in the developing economies.
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The government buyer: Challenges
negotiations, regulations limiting purchases to domestic producers.
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COO challenges
- Marketing research
- When COO image is negative, try to conceal the national origin or position the offerings as made in the targeted country.
- Offer products with superior quality.
- Offer products at a relatively low price.
- Have products distributed by well-respected channels.
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What is increasingly harder to determine about a product?
Where a product is made
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What are the three levels of the global consumer?
- Individual-level characteristics
- Nation level factors
- Supranational factors
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Nation level factors
- Technology and infrastructure
- Political and legal environment
- Cultural environment
- Economic environment
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Supranational factors
- Trade institutions and policy
- Information and communications technologies
- Globalization
36
What does the emergence of the global consumer coincide with?
Two important driving trends:
- globalization
- advancing information and communications technologies
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Globalization (2)
Refers to the growing interconnectedness of nations, the organization of life on a global scale, and the consolidation of world society.
38
"World culture"
Is marked by the growing interconnectedness of varied local cultures or the appearance of a relatively homogeneous, global culture
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What has played a major role in the emergence of the global consumer?
International mass media (primarily television, movies, and the Internet)
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Various product categories have become signs of global cosmopolitanism and modernity, such as...
Air conditioners, automobiles, consumer electronics, and hamburgers.
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How do many firms cut costs?
By minimizing the variety of parts, components, and other inputs used to produce finished products and services.
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What does using standardized parts for a product result in?
Economies of scale and the ability to minimize variety in factory inventories.
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What do global customers seek to do in business-to-business markets?
Centralize and standardize their purchasing of raw materials, parts, components, and finished goods.
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In each country, the existence of a consumer culture is characterized by:
1) emphasis on marketing-based exchange relationships
2) a large proportion of the population achieving an improved standard of living
3) a perception of consumption as an acceptable, and even desirable, activity
4) level and quality of consumption as an important criterion for judging others.
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In international marketing, demand for certain product categories remains...
relatively specialized, requiring adaptation to nation-level needs and tastes.
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Goods and services that depend on language tend to...
remain relatively local
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What are some standardized items?
- Automobiles
- Consumer electronics
- Furniture
- Home appliance
- Office supplies and furnishing
- Industrial and scientific equipment
- Most types of products and services purchased by firms and governments.
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How does the emergence of global consumers facilitate companies?
Facilitates companies’ ability to target buyers worldwide with very similar products and services.
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Economic status
The ability to purchase goods and services is strongly influenced by income level.
Comparisons can be based on the level of each nation’s per-capita gross domestic product (GDP).
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How much do people earn per year in the highest, middle, and lowest income categories?
- Highest income category: $34,000
- Middle income category: $13,000
- Lowest income category: $5,000
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Why do firms normally devise novel business strategies in developing markets?
infrastructure is often very poor in developing markets. Consequently, firms usually must devise novel business strategies, which usually include offering low-cost products via innovative marketing communications and distribution approaches.
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What does high income at the individual and corporate level imply?
A superior ability to purchase products and services.
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What does the size of the middle class reflect?
Reflects how wealth is distributed.
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Growing convergence of income levels has coincided with...
the emergence of consumers with similar tastes around the world.
As consumers attain higher levels of affluence, they want to buy more, and they increasingly aspire for the same types of products and services. Mass media expose consumers in less developed economies to the lifestyles of people in Europe, North America, and other advanced economies. Such exposure triggers growing desire for many of the same types of goods and promote the emergence of a consumer class with similar needs and tastes.
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Advanced technologies are characteristic of...
economically developed nations.
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What happens in the absence of advanced technologies?
A nation’s productivity level and living standards are relatively limited. People in poor countries usually have little access to advanced technologies or knowledge of how to use such tools. Many are employed in subsistence farming or other
low-value-adding activities. Their ability to work in most industrial fields, and resultant prospects for earning a good living, is limited.
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Motive
An internal force that orients a person’s activities toward satisfying a need or achieving a goal.
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What does Maslow's hierarchy of needs suggest?
That people are motivated to fulfill basic needs before moving on to other needs, all of which motivate ultimate behavior.
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Who came up with the hierarchy of needs?
Abraham Maslow
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Physiological needs
describe the needs vital to survival, such as the need for food, water, and sleep. All subsequent needs are secondary until physiological needs are met.
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Safety needs
refer to people’s need for safety and security. They include the desire for steady employment, health care, safe neighborhoods, and shelter from the environment.
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Love and belonging needs
are basic to everyone and represent the desire for friendships, romantic attachments, and families, fulfilling a need for acceptance and companionship.
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Esteem needs
are sought once the first three needs have been met. Esteem needs describe the desire for objects and activities that enhance self-esteem, personal worth, social recognition, and accomplishment.
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Self-actualization needs
represent the highest level in the hierarchy of needs and refer to the desire for personal growth and the ability to achieve one’s full potential. Most people worldwide tend to neglect self-actualization because they are so occupied with achieving the four prior needs.
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Two points about the hierarchy of needs are especially relevant to international marketing.
First, need levels vary worldwide as a function of economic status, technology level, and other factors. Most countries are characterized by substantial poverty, in which the focus is on satisfying physiological and safety needs.
Second, worldwide, people do not consistently follow Maslow’s hierarchy of needs. In developing economies, for example, people may forgo meeting some physiological needs (such as eating three meals a day) or safety needs (such as living in a safe neighborhood) in order to purchase higher-level products such as cell phones and automobiles.
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What does emergent research suggest about esteem and self-actualization needs?
They vary by country.
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What does culture represent?
Basic beliefs, values, and behavioral tendencies that are learned from family and other important institutions.
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Why are norms especially important in cultures with a strong collectivist orientation?
Because they determine one's acceptance and popularity within particular groups.
Countries such as Asia
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What are other cultural norms that affect consumers and their purchase behaviors?
- Conservatism
- Materialism
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Conservatism
the tendency to prefer traditions and choices that have stood the test of time
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Materialism
a belief about the importance of possessions in one’s life.
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What is a characteristic of conservative consumers? What is a challenge of this characteristic?
They tend to remain loyal to existing brands and product types.
Thus, markets with numerous conservative consumers can be difficult to enter.
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How do materialistic consumers typically behave?
Are relatively anxious to purchase products that demonstrate their affluence, including many new and differentiated goods.
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Subcultures
groups of people with shared value systems based on common life experiences and situations.
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How may subcultures be distinguished?
Subcultures may be distinguished by differences in nationality, religion, racial group, or geographic region.
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What is the major dimension of culture known to affect consumer behavior?
Religion
For example, in Islamic countries, consumers may go on shopping sprees to buy new clothes and specialty foods following the fasting phase in the holy month of Ramadan. Also, A kosher diet
implies one should avoid pork and follow dietary rules described in Jewish scripture.
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Social factors
Family and social groups strongly influence consumer behavior. In many countries, the family is the center of social life.
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What are the secondary groups in social factors?
Friends, neighbors, and coworkers.
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Reference groups
People develop beliefs and attitudes based on the norms of reference groups.
These include religious groups, professional associations, and trade unions.
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The effect of reference groups is particularly strong on which type of purchases?
Purchases that are “public” or conspicuous—such as clothing and
automobiles
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Institutional environment
refers to the public organizations and constraints that societies create to give structure to human interactions.
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What do institutions include?
Government and legal systems.
Laws, regulations, and other formal institutions determine the structure and efficiency of marketing systems.
83
What kind of institutions characterize developing economies and how are they impacted by them?
Most developing economies are characterized by weak institutions, which deters many multinational enterprises (MNEs) from entering such countries. In nations with weak institutional guidelines, corruption is often a factor that affects the purchase behavior of organizational buyers. By contrast, extensive rules and regulations may constrain consumer behavior.
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What is COO?
Country of origin
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What does COO refer to?
Refers to the nation where a product is produced or branded.
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How does COO impact buyer behavior?
Buyer behavior is affected by the national origin of products and services. Many consumers are relatively indifferent to where a product is made. Other consumers favor goods produced in their home country.
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COO stereotypes vary depending on...
the origin of the judge and on the category of the product being judged.
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Consumer ethnocentrism
the tendency to view domestically produced goods as superior to those produced in other countries.
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World mindedness
refers to a consumer’s interest in, and openness to, acquiring goods from other countries.
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How are consumers more likely to adopt world-minded tendencies?
The more consumers are exposed to products, services, and ideas from abroad, the more likely they may to adopt world-minded tendencies.
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Cosmopolitan
someone who maintains a network of links and personal contacts with those outside the immediate community and is willing to venture into other cultures.
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Who are cosmopolitans especially attractive to?
MNEs launching new products.
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Some industrial buyers function as...
wholesalers or retailers who purchase unfinished or finished goods to sell and distribute to other industrial buyers or to retail consumers.
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What is the relationship like between industrial buyers and their vendors/suppliers?
Industrial buyers may have substantial face-to-face contact with vendors, with whom they often develop long-term relationships.
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What are industrial buyers influenced by?
Various factors, especially culture, stage of economic development, and national situational factors
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How does culture influence industrial buyers?
Cultural influences occur at the level of the nation, the industry, and the firm.
97
How do negotiations impact business-to-business deals for industrial buyers?
In business-to-business deals, negotiations are common, placing much importance on the quality of relations between buyers and sellers. In such settings, cultural attitudes and values can play a major role.
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How do industrial buyers vary in terms of risk?
Industrial buyers vary based on their attitude toward risk, which differs cross-nationally.
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Uncertainty avoidance
refers to the capacity of people in different countries to tolerate risk.
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High uncertainty-avoidance countries
are risk averse and favor rules, regulations, and control mechanisms to minimize risk taking.
In such countries, marketers often must work harder to convince purchasing managers to accept proposals from new vendors. Purchase decisions may be driven by consensus, and projects are carefully planned.
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Low uncertainty avoidance cultures
are usually more innovative and open to new approaches. In such countries, industrial buyers are more willing to try new offerings or goods from new market entrants.
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What determines the buying task for the industrial buyer?
The buying task is determined by the structure and size of the firm, structure of the organization, and technology available and relevant to purchasing.
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What does the level of development determine?
to a large extent, the nature and quantity of demand for industrial products.
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Stages of economic development
1. Traditional society
2. Transitional stage
3. Take-off
4. Drive to maturity
5. Mass consumption
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Traditional society
At the most basic level, many countries are characterized by subsistence activity in which output is consumed by producers rather than traded. The stage is most associated with subsistence farming, the most common economic activity in the world’s poorest countries. Example regions include South Asia and sub- Saharan Africa.
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Transitional stage
Countries evolve beyond dependence on agriculture and begin to engage in simple manufacturing of value-added goods. The stage coincides with development of infrastructure in transportation, communications, and other areas. Entrepreneurs emerge who launch small firms that require basic inputs and trade in natural resources and other primary products. Many late-stage developing economies—for example, Honduras, Vietnam, and Zimbabwe—are in the transitional phase.
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Take-off stage
Here workers progress from agriculture to manufacturing. Producers specialize and begin to mass produce goods that can be exchanged with trading partners worldwide. Most emerging market countries—such as Brazil, China, and Russia—have attained this stage. Rising incomes stimulates investment and development of a thriving consumer economy.
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Drive to maturity stage
In this stage, countries emphasize the production of high-technology products and development of a strong services sector. Late-stage emerging markets such as Poland, Saudi Arabia, and South Korea are examples.
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Mass consumption stage
Most countries have not reached this stage, which is characterized by a thriving consumer and industrial economy with a substantial services sector. Numerous advanced economies are in this category.
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Why must a firm investigate each nation's specific circumstances?
To determine what types of products and services are in most demand.
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National situational factors
Numerous situational factors influence industrial buying.
- Technological development
- Economic variables
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National situational factors: Technological development
The technology acceptance model describes how individuals and firms accept and use given technologies. A firm may be reluctant to embrace an innovation or advanced technological product if the offering exceeds the firm’s level of relevant experience or knowledge.
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What does acceptance of technological innovation in a firm or nation depend on?
The level of economic or social development in the firm or nation.
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National situational factors: Economic variables
most countries use a currency that is different from the currency of the selling firm. Fluctuating exchange rates affect the attractiveness of foreign goods, either making them relatively costly or inexpensive from the industrial buyer’s perspective. Inflation may cause prices to rise over time.
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What do governments purchase?
Governments at both federal and local levels purchase nearly every kind of good, from aircraft to thumbtacks, from construction services to training services.
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Where are state-owned enterprises a norm?
They are found in all countries but are the norm in developing economies.
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What is the aim of competitive bidding for the government buyer?
The aim of competitive bidding is to ensure the government pays a competitive price, receives quality goods, and avoids the corruption that may accompany choosing suppliers based on personal relationships.
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What is the GPA?
The Agreement on Government Procurement
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What is the main goal of the GPA?
The GPA’s main goal is to open government procurement to international competition. It also aims to ensure procurement laws, regulations, and procedures are transparent and do not protect domestic products or suppliers nor discriminate against foreign products or suppliers.
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What has happened to market needs thanks to globalization and related trends?
Today, thanks to globalization and related trends, market needs worldwide have grown similar in most industries.
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How do marketers target global market segments?
Marketers target these buyers with relatively standardized marketing programs.
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Global positioning strategy
A strategy in which the offering is positioned similarly in the minds of buyers across an entire region or worldwide.
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How does the global positioning strategy reduce international marketing costs?
The strategy reduces international marketing costs by minimizing the need to adapt elements of the marketing program for individual markets.
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What is GAM
Global account management
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What do firms use Global Account management (GAM) for?
Many firms organize dealings with key global industrial buyers through global account management
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How does GAM benefit customers?
- First, by sourcing the same products and services for its worldwide operations, the customer gains economies of scale and scope that translate into lower costs and more efficiencies.
- Second, GAM ensures the supplier speaks to the customer with one voice, reducing the possibility for miscommunication or mishap.
- Third, the customer need deal only with a single contact point, a global account executive or team focused on its specific needs, who knows best how to provide consistent worldwide support.
127
How can multinational firms overcome consumer ethnocentrism and the COO phenomenon?
The firms employ various strategies to overcome them.
First, when contemplating a new marketing venture in a given foreign country, management should conduct market research to learn about the presence and nature of any COO effects. Research also should aim to ascertain the presence of any potentially moderating variables, such as product quality or price, whose manipulation can serve to reduce the impact of a negative COO effect. When management knows that consumers hold a positive image of a given COO, the national origin should be emphasized in marketing efforts.
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What may a firm do in the event the COO image is negative?
the firm may attempt to conceal the national origin or position the offering as made in the targeted country.
129
What is the best approach to overcoming negative stereotypes?
Perhaps the best approach to overcoming negative stereotypes is to offer products of such superior quality that consumers take little notice of the goods’ national origin
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What is a third strategy for minimizing the impact of a negative COO?
To offer the product at a relatively low price.
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What is a fourth way a firm might overcome a negative COO?
By having its product distributed through a well-respected intermediary in the target market.
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Relationship marketing
Seeks to build long-term relationships with key customers.
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How is relationship marketing typically achieved?
by emphasizing activities that ensure consistent customer satisfaction.
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Why is relationship marketing especially important in industrial sales?
Relationship marketing is especially important in industrial sales because of the tendency of large-scale buyers to source goods from sellers whom they trust and with whom they have built up a record of ongoing purchases.
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Why is relationship marketing important in international marketing?
Because the firm often finds itself particularly dependent on partners and facilitators located abroad.
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What is CRM?
Consumer relationship management
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Consumer relationship management
refers to collecting, storing, and analyzing customer data to develop and maintain two-way relations between the firm and key customers.
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What is Customer Relationship management (CRM)'s ultimate goal?
to maximize value to the firm’s most important customers so they remain customers indefinitely.
CRM is also related to providing superior customer service.
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What does customer service include?
activities such as training (e.g., teaching customers how to use a product), repair of damaged or malfunctioning products, financing to assist customers in purchasing products, and complaint resolution.
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What is one of the most lucrative market opportunities when selling to foreign governments?
Infrastructure development
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What are important factors to ensure success in selling to foreign governments?
- First, it is essential to know one’s strengths and weaknesses.
- Second, it is critical for the firm to develop the right resources to secure sales and fulfill orders.
- Third, it is important to develop the appropriate relationships.
- Fourth, it is essential to engage in planning to help ensure success.
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What kind of knowledge is important to ensure companies are not taken off guard in negotiations and in the preparation of bids and proposals?
Knowledge about the political and economic background of target countries—their history, current national affairs, and perceptions about other cultures—is very useful.
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What are the two types of global consumers?
B2B and B2C
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What is the characteristic of global consumers?
They exhibit similar tastes and wants. For example, even though you don't know a person in China, you both like TikTok and iPhones.
145
What is material culture?
You are not paying necessarily for the product, but you are paying for the American brand name.
146
For "economic status" what are the first two factors you would want to look at?
The first factor you look at is GDP and the second factor is the size of the middle class.
147
What are the four factors that determine a consumer's social status?
- Income
- Occupation
- Education
- Neighbourhood
148
Which factors of the consumer social status should you look at when looking at consumer behavior?
All of them. When you are looking at consumer behavior you cannot only focus on one factor, but you have to look at all four factors.
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What are the two limitations of Masllow's hierarchy model?
1. It can't be completely verified and has not been successfully verified.
2. In certain situations you skip a level. So you could be satisfying esteem, but not safety.
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What is the connection between values and attitudes?
You act based on your values.
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What are the two differences between norms and values?
1. The first difference is that norms are external and values are internal.
2. The second difference is that norms are fast changing but values are not.
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What does it mean that culture is dynamic?
It means that culture is changing very fast.
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Why does business like culture and is happy with it?
Because culture is money and culture is business profit. This is why there are Mother's Day and Father's Day.
If you are following the culture changes then you can make money.
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Why is culture money in international marketing?
Because cultural norms are changing every day.
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What is WOM?
Word of mouth
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Why is word of mouth more effective in the Philippines than in the US?
Because the Philippines is a more collectivist country and the US has a more individualistic culture.
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What makes cosmopolitanism?
World mindedness + Open-mindedness = Cosmopolitanism
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What does openmindedness mean?
It means that yes, we are from different countries, but I don't care about the differences.
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What happens when a consumer has a higher cosmopolitanism level?
Their consumer ethnocentrism is lower.
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What are the two types of animosity?
1. War
2. Economic
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What is animosity?
Animosity is "I just don't like products from China because they are from China, but I am okay with products from anywhere else.
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What is the difference between cultural ethnocentrism and animosity?
Cultural ethnocentrism only likes the products from its own country. Animosity only dislikes the products from a specific country.
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What do COM and COD mean?
COM: Country of manufacturing
COD: COuntry of design
COM is Canada and COD is Mexico because it is manufactured in Canada and designed in Mexico.
