GLOBAL STRATEGIC MARKETING MANAGEMENT

satisfac-This book is about marketing management, its role and portance to the supply chain management in a global scale.. Chapter I INTRODUCTION TO GLOBAL MARKETING Objectives: Defi

NGUYEN HOANG TIEN DINH BA HUNG ANH

GLOBAL STRATEGIC MARKETING MANAGEMENT

NGUYEN HOANG TIEN DINH BA HUNG ANH

GLOBAL STRATEGIC MARKETING MANAGEMENT

Warsaw 2017

Dr Nguyen Hoang Tien wrote chapters: I, III, IV, V and VI

Dr Dinh Ba Hung Anh wrote chapter II

© Copyright 2017 by Wydawnictwo EMENTON

Issue I, Warsaw 2017

All rights reserved

Any fragment of this book may not be reproduced, copied or saved in processing systems or any other form using mechanical and electronic devices or others with-

out permission of the publisher

Printing and binding:

Drukarnia cyfrowa ELPIL

ul Artyleryjska 11, 08-110 Siedlce

tel.: (25) 643-50-42, fax: (25) 643-43-46

e-mail: info@elpil.com.pl

www.elpil.com.pl

THIS BOOK IS DEDICATED TO

NGUYEN THANH VINH

BORN IN 04.02.2016

Table of contents

Foreword 11

Chapter I INTRODUCTION TO GLOBAL MARKETING 13

I.1 MARKETING AND MARKETING CONCEPT 13

I.1.1 Defining Marketing 13

I.1.1.1 Marketing 13

I.1.1.2 Marketing Management 18

I.1.2 The Marketing Concept 20

I.2 MARKETING STRATEGY AND MARKETING MIX 24

I.2.1 Marketing Strategy 24

I.2.1.1 Internal Factors 26

I.2.1.2 External Factors 27

I.2.2 Target Markets and Marketing Mix 46

I.2.2.1 Target Market 46

I.2.2.2 Marketing Mix 47

I.3 MANAGEMENT ORIENTATION TO GLOBAL MARKETING 52

I.4 GLOBAL MARKET AND GLOBAL MARKETING 54

I.4.1 Global Market 54

I.4.2 Global Marketing 57

I.4.2.1 Global Marketing Issues 58

I.4.2.2 Global Marketing Practices 62

I.5 GLOBAL MARKETING IN SUPPLY CHAIN MANAGEMENT 64

Chapter II MARKET RESEARCH METHODS 71

II.1 MARKET RESEARCH PROCESS 71

II.1.1 Market Research and Marketing Research 71

II.1.2 Market Research Process 75

II.2 PRIMARY AND SECONDARY RESEARCH 81

II.2.1 Primary or Secondary Research 81

II 2.2 Sources of Data for Research 83

II.2.3 Primary Research Techniques 83

II.3 SAMPLING AND INCREASING RESPONSE RATES 90

II.4 RELIABILITY AND VALIDITY OF RESEARCH 94

II.5 ETHICAL ISSUES OF RESEARCH 95

Chapter III MARKET ENTRY STRATEGIES 98

III.1 BARRIERS OF MARKET ENTRY 98

III.2 INDUSTRY ANALYSIS 106

III.3 MARKET ENTRY STRATEGIES 114

Chapter IV STRATEGIC MARKETING MANAGEMENT 124

IV.1 STRATEGIC PLANNING 124

IV.1.1 Strategic Management 124

IV.1.2 Strategic Planning 126

IV.1.3 Different Levels of Strategy 129

IV.2 KEY CONCEPTS OF STRATEGIC PLANNING 132

IV.3 PROCESS OF STRATEGIC PLANNING 138

IV.4 STRATEGY IMPLEMENTATION AND CONTROL 151

Chapter V SEGMENTING, TARGETING, POSITIONING 155

V.1 CONSUMER MARKET AND ORGANIZATION MARKET 155

V.1.1 Consumer Market and Organization Market 155

V.1.2 Consumer Demand and Organization Demand 158

V.2 CONSUMER BEHABIOR AND BUYING DECISION 159

V.2.1 Consumer Buying Behavior 160

V.2.2 Consumer Buying Decision Process 160

V.2.3 Factors Affecting Consumer Buying Decision Process Motives 162

V.3 ORGANIZATION BEHAVIOR AND BUYING DECISION 167

V.3.1 Organization Buying Behavior 167

V.3.2 Organization Buying Decision Process 168

V.3.3 Factors Affecting Organization Buying Behavior 170

V.4 SEGMENTATION, TARGETING, POSITIONING 170

V.4.1 Market Segmentation 170

V.4.2 Market Segments Targeting 180

V.4.3 Positioning on Targeted Market Segments 182

V.4.4 Marketing Mix and Positioning 184

Chapter VI SERVICE MARKETING 188

VI.1 CHARACTER OF SERVICE MARKETING 188

VI.2 SERVICE MARKETING MIX 193

VI.2.1 Product 193

VI.2.1.1 Product Life Cycle 195

VI.2.1.2 Role of Product in Service Marketing 195

VI.2.1.3 Product Strategy 196

VI.2.1.4 Branding 198

VI.2.2 Price 200

VI.2.2.1 Pricing Techniques 201

VI.2.2.2 Market Entry Pricing Strategies 202

VI.2.3 Place 204

VI.2.4 Promotion 206

VI.2.4.1 AIDA Model 207

VI.2.4.2 Promotion mix 210

VI.2.5 Physical Evidence 217

VI.2.6 Process 217

VI.2.6.1 Pre-service Process 219

VI.2.6.2 In-service Process 221

VI.2.6.3 Post-service Process 222

VI.2.7 People 222

VI.2.7.1 People Strategy Mix 224

REFERENCE 237

LIST OF ILLUSTRATIONS 241

LIST OF TABLES 243

satisfac-This book is about marketing management, its role and portance to the supply chain management in a global scale Second book published simultaneously is about supply chain management on which marketing and marketing management have great impact As

im-marketing and supply chain are interrelated research areas, both of these books could be useful for university students to study the “Mar-keting Management” and “Supply Chain Management” courses at both graduate and postgraduate levels

Dr Nguyen Hoang Tien

Chapter I

INTRODUCTION TO GLOBAL MARKETING

Objectives:

Define marketing, principles of marketing and marketing management

Define the marketing strategy and marketing mix

Define global market and global marketing

Global marketing in supply chain management

MARKETING AND MARKETING CONCEPT

MARKETING STRATEGY AND MARKETING MIX

GLOBAL MARKET AND GLOBAL MARKETING

GLOBAL MARKETING IN SUPPLY CHAIN MENT

MANAGE-I.1 MARKETING AND MARKETING CONCEPT

I.1.1 Defining Marketing

in a dynamic environment through the creation, distribution, tion and pricing of goods, services and ideas So, marketing consists

promo-of many activities which are aimed at facilitating and expediting changes Marketing facilitates the satisfying exchange relationships and for an exchange to occur, four following conditions must exist:

ex- Two or more individuals, groups or organizations must ticipate;

par- Each party must possess something-of-value that the other party desires;

 Each party must be willing to give up something-of-value

to receive something of value that the other party holds;

 The parties must be able to communicate with each other to make their something-of-value available

Illustration 1 Marketing concept

Source: Own development

Table 1 Exchange relationship

SELLER wants BUYER wants

High price (profit) High quality (reliability)

Continuing cooperation After sales services and warranty

Source: Own development

A (seller)

Values Values

B (buyer)

There is one thing to be remembered that the exchange must be satisfying to both buyer and seller Satisfaction for the buyer may re-sult from being satisfied with the product and service or with the transaction itself, whereas satisfaction for the seller is derived from making a profit through a particular exchange relationship, or from achieving another organizational objective Although it is mentioned that there is no single definition of marketing, the concepts of ex-change and customer satisfaction are the two most popular compo-nents of a definition of marketing

Philip Kotler (1988, p3) defines marketing as: “….as a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others” Before, that is in 1972, he proposed that the es-sence of marketing is the transaction (exchange of values actually made between parties) and, thus, marketing is specifically concerned with how transactions are created, stimulated, facilitated, and valued

According to P Drucker, marketing is about understanding and properly responding to (fulfilling) the needs of customers

American Marketing Association (1985) defines marketing as:

“…the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods and services to create ex-changes that satisfy individual and organizational needs” In other words, the objective of marketing is creating exchanges, and the out-put of it is customer satisfaction

Kotler (1997) and Churchill and Peter (1995) defined an change as a process in which two or more parties voluntarily provide something of value to each other According to Kotler (1997), a trans-action takes place when an agreement is reached, whereas exchange is the process to execute an agreement Exchange takes place within

ex-a mex-arket, defined ex-as ex-a collection of buyers ex-and sellers thex-at interex-act with each other (Pindyck and Rubinfeld, 1992) In this context, Churchill and Peter (1995) proposed various parties who are involved

in the marketing effort: firms that produce goods or services, salers and resellers of goods and services (such as stores), and cus-tomers or clients and after-sales service operators

whole-In an express recapitulation we agree that those above tioned definitions of marketing rest on the following core concepts:

men- Needs – the state of lacking something, both materially and spiritually;

 Wants – the expressions of needs;

 Demands – the expression of needs in certain economic conditions;

 Products – instruments to fulfill the needs of customers;

 Utility – how products effectively fulfill the needs of tomers;

cus- Value – customers benefits brought about by products compared to the price they have to pay;

 Satisfaction – an emotional state to be achieved by ing real benefits brought about by products and prior ex-pectation;

compar- Exchange – a voluntary behavior to give up something for something in return;

 Transaction – the exchange expressed in detail by terms of agreement such as price, place and time of a deal;

 Relationship – relation between the buyers and the sellers which could be transactional (one-off) or based on long term mutual benefits and interests;

 Market – a place or space where the buyers and the sellers meet to carry out transactions;

 Marketer – market maker, marketing staff

It must be clear that marketers do not create needs Needs exist marketers and hence marketers do influence wants and demands Defining customer’s wants and demands is not easy Marketers may need to teach customers to learn what they want Consider high tech-nology products such as iPhone and Nokia as examples

pre-Marketing occurs in a dynamic environment It exists in an vironment of changing forces such as laws, regulations, political ori-entations, social pressures, economic issues and competitive condi-tions and technological changes which will be discussed later in this chapter These factors influence the effectiveness of marketing in fa-cilitating and expediting changes

en-Marketing involves product, place, promotion and pricing tivities It involves designing and developing a product, communi-cating and making the product available to the right people at the right time at an acceptable price

ac-Marketing activities are important to businesses and the whole economy A business organization must sell products or services or ideas to survive and remain healthy financially and marketing activi-ties, whether directly or indirectly, help sell the organization’s prod-ucts Marketing ultimately helps to keep the economy alive and healthy As technology develops, it drives down the cost of globaliza-tion and as a result, global competitors are penetrating more markets and this has increased competition tremendously in all major markets The increase in competition is expected to continue to a level that has never been experienced before Hence, marketers must think globally, strategically and creatively to maintain their own competitive position

Being offered with more choices and the freedom to choose, ers will become more demanding, making it difficult for marketer to satisfy them and maintain long-term relationships Mass customization and relationship management are some of strategies that can be adopt-

custom-ed in creating better value for customers Hopefully, through this, tomers can appreciate their suppliers better and continue working them

cus-I.1.1.2 Marketing Management

After understanding marketing as such, it is now necessary to consider the key role of marketing management in enterprises Mar-keting management is defined as a process of planning, organizing, implementing and controlling marketing activities to facilitate and expedite exchanges effectively and efficiently Planning should be

a systematic and continual process that focuses on assessing external opportunities and internal resources Organizing marketing activities must involve developing the internal structure of the marketing unit to direct them (marketing activities) Implementing the marketing plan should involve all-out co-ordination of marketing activities, employee motivation and effective communication within the marketing unit Marketing managers must control this by establishing performance standards and evaluating actual performance by comparing it with these standards to reduce differences

Global marketing management means the marketing ment of an enterprise in a broader world complex and fast changing context To understand global marketing management one should be familiar with marketing management and global marketing, both of them will be discussed in detail further

manage-Illustration 2 Global marketing management

Source: Own development

Table 2 Global marketing context

Global marketing context – trends and challenges

Non-profit

marketing

Interested by central and local government and many non-profit organizations to achieve social and public goals

Information

Technology

IT impacts the way businesses carry out marketing activities: market research; product design, production and distribution; communication with target segments

of customers; customer relationship management; the way products are informed and acquired

busi-Source: Own development

GLOBAL MARKETING MANAGEMENT

I.1.2 The Marketing Concept

The marketing concept is certainly not simply another tion of marketing; it is a sophisticated way of thinking or a manage-ment philosophy about an organization’s entire range of activities The marketing concept suggests that an organization should try to satisfy customers' needs through a co-ordinated set of activities that also al-lows the organization to achieve its goals Consequently, satisfying customers is the major goal of the marketing concept The marketing concept stresses that a business organization can best achieve its goals

defini-by providing customer satisfaction through well co-ordinated ties However, a business must consider not only short-run, immediate needs but also broad, long-term desires and needs of the customers All departments must work together to meet customers’ (consumers') short and long-term desires and needs, and a lack of co-ordination may lessen customer satisfaction or even cause intense dissatisfaction

activi-in a strongly competitive busactivi-iness environment

The marketing concept is essentially a business philosophy (Barksdale and Darden, 1971; McNamara, 1972), and the philosophi-cal foundation for a market orientation (Jaworski and Kohli, 1993) Kohli and Jaworski (1990) conceptualized a market orientation as the implementation of the marketing concept They argued the marketing concept consists of three pillars:

 Customer focus;

 Co-ordinated marketing;

 Profitability

Evolution of Marketing Concept

First came the production era (production focus) During the

second half of the XIX century, the Industrial Revolution came into

being and started impact all spheres of business world As a result of new technology and new ways of using labor, products streamed out

of factories into the market place, where consumers’ demand for the new manufactured goods was strong

The next period was the sales era (profit focus) Between the

mid of 1920s and early 1950s, businesses viewed sales as the major means of increasing profits, and business people believed that the ma-jor marketing activities were personal selling and advertising

The marketing era (customers’ needs focus) arrived in the early

1950s, when businesses found that they had to first determine what customers wanted, and then produce it, rather than simply make prod-ucts and then try to change customers' needs to fit what they had pro-duced Today, marketing is acquiring a global perspective, and as

a result, marketing either standardizes products for customers around the world or customizes (differentiates) products for customers in spe-cific markets The selling and marketing concepts are contrasted below

Illustration 3 Selling (seller) and marketing (buyer) concept

Source: Own development

Seller’s

needs focus

Buyer’s needs focus

1 Learn about customers’ needs

2 Create satisfying products/

Table 3 Characteristics of customers’ needs focused marketing

for profit organization

Non business marketing –

for none profit organization

Traditional marketing Online, virtual marketing

Marketing rules

Concentra-tion

All-out effort to serve targeted market segments

Coordination All departments should engage to create perfect values for

customers’ preferences, advantages and values created for them may be obsolete tomorrow

Objectives of marketing

Maximum of

consumption

Leads to maximum of production to respond to the needs

of customers; so the economy is growing and society is developing as well

Functions of marketing

 Market research and needs discovery

 Respond to the market needs by adapting 4 marketing struments (4P)

in- Leading market needs by innovatively creating new ucts and their functionality

prod- Profit making

 Satisfying customers’ needs and achieving own goals in coordination with other functional activities

Source: Own development

It is now important to consider implementing the latest ing concept (marketing era, focus on customers’ needs) We have al-ready established that the marketing concept affects all types of busi-ness activities Therefore, the top management of an organization must incorporate the marketing concept so completely that it becomes the basis for all the decisions and goals set for their firm Management staff must implement the marketing concept by establishing an infor-mation system that will enable the firm to learn about customers' needs and use the information internally to create satisfying products Next, it is necessary to restructure the firm to co-ordinate all activities However, there is a limit to a firm's ability to satisfy customers' needs for a particular product, so the company must determine customers' product needs accurately Sometimes, by satisfying one segment of the society, a firm creates dissatisfaction within other segments Dur-ing the implementation the marketing concept, a firm may encounter difficulty in maintaining employee morale during any restructuring required to co-ordinate the activities of various departments and care must be taken to minimize organizational problems

market-I.2 MARKETING STRATEGY AND MARKETING MIX

I.2.1 Marketing Strategy

Companies get into serious trouble because they believe they can duplicate a product of competitors and can easily produce the same products at lower price A glaring example is the economies of scale that a Chinese company in China can exploit While one may argue about the lower production cost and lower labor cost, eventual-

ly, Chinese labor cost will rise Marketing strategy involves selecting and analyzing a target market and creating and maintaining an appro-priate marketing mix that will satisfy that market, and that is the re-sponsibility of an organization’s marketing managers They should consider two broad sets of variables when developing and managing marketing activities In other words, those sets of variables are shap-ing marketing strategy and marketing activities of an organization First, marketing mix decision variables are internal factors impacting directly and frequently (the micro-external environment) or indirectly and infrequently (the macro-external environment) on enterprise’s marketing activities over which an organization has control Second, marketing environmental variables, the external factors related to poli-

cy and strategies of enterprise, which are subject to less control by an organization Internal and external factors/variables contribute to the marketing environment which, according to P Kotler, impact on the capacity of marketing management toward successful transactions for and with target customers In light of current trends of globalization, both external and internal group of factors are becoming:

 More complex – as they impact heavily and in different way on efforts and marketing decisions of enterprises;

 More changeable – as they impact on the results of prises’ marketing programs causing them to be necessarily readjusted;

enter- Less predictable – as they are more and more uneasy to control

Illustration 4 Marketing strategy and shaping factors

Source: Own development

To ensure growth and survival as products diminish, an zation must find itself new products and markets Managers must con-sider modifying existing products, introducing new ones, or deleting undesirable ones as ways to ensure survival Also, managers should market the products to a greater number of individuals in the existing market, convince current customers to use their product more fre-quently, and expand geographic boundaries of the market to improve organizational financial security and developmental stability

organi-MARKETING STRATEGY Internal factors External factors

Illustration 5 Market and product development

Source: Own development

I.2.1.1 Internal Factors

We should now consider internal organizational factors that sist marketing managers in achieving their aims Organizational objec-tives, financial resources, managerial skills, organizational strengths and weaknesses and cost structure are the primary internal factors to consider when analyzing market opportunities and organizational ob-jectives It is vitally important that the organization should pursue ex-ternal opportunities that are consistent with its objectives and re-source For example, financial resources restrict the types of opportu-nities the organization can pursue Financial resources are needed to operate marketing plan in terms of, for instance, paying salary for hired marketing staff, leaflets designing and distributing Also man-agement's skills and experience can limit the types of opportunities pursued as they will put forward general directions for enterprise and execute related goals, to which all marketing plans and programs must conform Strengths and weaknesses of the firm may involve many factors and could include specialized skills and technology Infor-

as-New market

Current product New market New product

Current market New product

mation and production technology are strictly associated with quality and price, the two of four marketing instruments, of products and ser-vices The organization’s cost structure can be affected by many things such as geographic location, employee skill mix, access to raw materials and equipment and facilities All the previous points should

be considered and evaluated in pursuing the enterprise's objectives

Illustration 6 Internal factor analysis

Source: Own development

I.2.1.2 External Factors

The business environment is changing erratically with much changes taking place in all aspects of the global environment Market-ers need to constantly assess the business environment in anticipation

of these changes so as to be able to react quickly and take advantage

Managerial Skills

Human

Resources

General Weakness and Strength

MARKETING STRATEGY

of them For example, being in the business of supply chain ment, a supporting industry that can ride on the growth of many other industries, marketers must consistently look outward for developments that can provide new growth opportunities for the organization Listed below are some issues that are impacting supply chain businesses around the world, and they are either happening now or will be in the near future It is now necessary to consider environmental forces; there are seven major forces in the marketing environment: (1) politi-cal forces, (2) legal forces, (3) regulatory forces, (4) social forces, (5) economic forces, (6) technological forces and (7) ecological forces These forces affect the marketer's ability to facilitate and expedite ex-changes in several ways They affect customers' lifestyles, living standards and product preferences Moreover, they influence whether and how marketing managers can perform marketing activities, and may affect buyers' reactions to the firm's marketing mix The fluctua-tion of the various forces and their speed of change present many chal-lenges to marketing managers The marketing mix components to-gether with the above mentioned external factors affect greatly the organization

manage-The environment in which a marketer competes can be broadly categorized into two major categories; they are macro-environment and micro-environment The macro-environment refers to the broad environment in which a business exists and this generally refers to the country in which the business is being conducted Forces of this nature affect all kinds of businesses The micro-environment is more specific

to the business and this makes reference to the specific industry in which the business is competing and the forces in this environment will be examined in the later Situational factors in this environment affect the performance of an organization, and more importantly, they

are changing with time Therefore, it is imperative that marketers are kept abreast of these changes so as to be able to take the necessary measures when the need arises

In the macro-environment, the common model used in this analysis is the PEST model This is the acronym for:

 Political forces – forces in the political and legal frameworks;

 Economic forces – the driving economic factors affecting the well-being of a country;

 Social forces – this encompass the social and cultural tors that can affect the organization;

fac- Technological forces – technological advancement varies with countries and regions and this also play a role in the way a business is being conducted

Illustration 7 PEST model – external factors analysis

Source: Own development

P olitical

forces

S ocial forces

forces

MARKETING

STRATEGY

 Political forces

Political changes around the world can either offer new tunities or threaten existing businesses in the countries where the changes are being conducted Countries in the Asian region are still experiencing changes in this aspect These include Cambodia, Vi-etnam, Indonesia and the Philippines as these countries are still in the process of forming a stable government Businesses that are operating

oppor-in there must be attuned to the political situation and oppor-in the event of violent changes they may consider to withdrawing their business out

of the region For those businesses that are not there yet, they can sider investing into these countries when the political environment stabilizes The main reason is that these markets tend to experience high growth after political situation stabilizes Political situation that deserve attention is the development between China and Taiwan The fact that China is currently the world’s biggest growing economy, many businesses has invested in China in pursuit of the opportunities

con-it presents and any confrontation will defincon-itely affect the stabilcon-ity of the region, increasing the financial and social risks that businesses face As for unstable countries like Iraq, North Korea and some other countries in the Middle East, South America and the African region,

as soon as they stabilize, they present great opportunities and ers can immediately capitalize on its growth potential Another issue that arises from politics is the impending threat of terrorism However, the real danger is not just in the destruction it can cause, but also in the unpredictability of this kind of threat It is almost impossible to com-pletely identify and track these terrorists and this gives them the abil-ity to strike at almost anywhere and anytime In the business sense, terrorism has driven up the cost of insurance, thus increased the cost

market-of business operations too For countries in regions that are perceived

to be high in this risk, businesses not only bear the high cost of ance, they must also risk the loss of its employees Act of terrorism

insur-is increasing and as long as they prevail, businesses run thinsur-is rinsur-isk and need to manage it There are no fail-safe method to completely elimi-nate this risk, however, taking steps in security measures will at least, help to reduce this risk Politics play a pivotal role in the macro-environment as it has the ability to influence many of the other forces

of the environment For example, the economy of a country is closely linked to the policies of the government and very often, the economic performance of a country is a result of these policies

In the study of political forces, 3 main areas that deserve tion are:

atten- Types of government (a);

 Stability of government (b);

 Role of government in business (c)

Through the study of the types and stability and role of the government, managers can speculate on the risks it is subjected to This form of risk is known as political risk Based on the assessment

of this risk, organizations can decide on the amount of investment it is willing to invest in the country

Illustration 8 Political forces

Source: Own development

(political turmoil or power change)

Role of government in business

(strategic industries, development priorities)

Ad (a) In general, most countries adopt the capitalist form of ideology; however, there are still the limited few that employ the communist or socialist way of running a country This is not entirely bad for businesses, as China has shown that it is still capable of providing a channel for global trade However, with a single party government, there is no balancing force in its policy-making; no one

to question and challenge the decision makers, hence this may result

in some bad decisions Another issue of this form of government is the concentration of power, it is common that power within the party is concentrated to a single person or a group of elites and this may pro-vide them the opportunity to corrupt as there is no challenger to stand

up to them As for the capitalist form of government, they usually vocate free entrepreneurship and can provide a favorable environment for businesses to grow

ad-Ad (b) Businesses need to operate in a stable environment to thrive and stability of a business environment is much dependent on the political situation in a country Changes of government bring about much turmoil in a country as demonstrated in many stances over the decades The recent occurrences in countries around the South East Asian region during the economic crisis, has shown that turmoil not only affects the people but businesses as well Businesses in the affected countries lost heavily through riots, poor purchasing power and many other reasons It is through these changes, especially if not executed with care that put the country in chaos The recent change of government in Iraq has caused the entire country and the global econ-omy much difficulty and in addition, terrorism is increasing in there and is disrupting business activities being conducted Another effect

of terrorism is the increased cost of business After the 9-11 incidents, businesses are buying terrorism insurance in a bid to hedge against

potential attacks and losses Even if the transition is smooth between governments, the new government may alter its policy towards trade and business, and this will in turn affect the businesses in the country The change of Prime Ministers of Malaysia has illustrated the differ-ences in which the way each of them governed Immediately after tak-ing over the post of Prime Minister, Mr Abdullah Ahmad Badawi stopped almost all infrastructure projects costing the construction in-dustry millions of dollars in revenue The selection of Donald Trump

as 45th president of USA in 2016 has change the world order cally toward nationalism by putting America first, and has redefined completely external relations with southern neighbor Mexico, with the biggest powers in the world including the EU, Russia and China

dramati-Ad (c) Government plays many roles in the business ment Firstly, it is the role of the planner Government plans for the types of businesses it wishes to control and sometimes, it is also re-quired to plan for businesses it wishes to attract Quite the opposite, there will also be times when it plans for businesses that it wishes to discard In all of these situations, proper planning is conducted, mostly

environ-to protect the economy and sovereignty of the country Planning rects the economy in the direction that the government wishes to de-velop, businesses that are not aligned in the chosen direction, tends to encounter difficulties in their operations and activities For example, when the Singapore government announced its liberalization program

di-of the banking industry in 1999, it started a chain di-of events that

result-ed in the consolidation of local banks This program has openresult-ed doors for foreign banks, putting pressure on local banks for better perfor-mance so as to remain sustainable in a highly competitive market As

a result, consolidation was chosen for the reason of increased sources pooled together and economies of scale so that operating cost

re-can be reduced This decision made by the government has changed the banking environment and businesses in this industry were required

to make painful adjustments to these changes Some governments go

to great length in planning for the protection of selected industries within the national economy Though this kind of plan may impede the development of the industry, it was mostly planned based on non-economic reasons For example, rice industry in Japan is very much protected by the government Tariff for imported rice was raised up to 1,000%, and this was to increase the cost of imported rice In doing

so, the local farmers can still operate a profitable business in a high cost environment Besides playing the role of planner, government also acts as a legislator and regulator of businesses First of all, the government specifies the type of judicial system and set the legal boundary for businesses to operate in The government manages the judicial system so as to maintain fairness and ethics in the business environment Secondly, the government plays the role of regulator and this involves the setting of standards and certification procedures for businesses to operate with legitimacy, failing so, businesses will be penalized Car industry of Singapore has experienced changes in regu-lations, e.g the addition of catalytic converter for cleaner emission and child seat for child safety, and this can result in either a threat or

an opportunity for different businesses Most recently, the Central Government of China attempted to regulate the pace of economic de-velopment and ordered new projects to be scrapped, this resulted

in a standstill of several material industries and these included the steel, cement and aluminum industry Legislation in Asia is impacting

on marketing For example, Indonesian government has launched grams after programs to loosen regulatory and administration controls

pro-on the ecpro-onomy to improve business climate and encourage FDI

Ma-laysia is constantly modifying its investment incentives to encourage foreign and domestic investments In Taiwan, the administration has signed an ECFA with China to encourage investments in Taiwan From here, it is evident that political force is an important force to consider in the analysis of the macro-environment

 Economic forces

In terms of economic development, besides China, India is the next biggest giant Its economic potential lies in the Information Technology market where many multi-national companies (MNCs) had already invested into the country, setting up their offices and manufacturing facilities Freight forwarders and courier agents can stand to benefit by providing the services required by these industries Besides this development, another economic issue that should be not-

ed is the supply of oil and this is because oil has an inevitable effect

on almost all economies in the world Oil, being a major commodity that is used in almost all businesses, will create an inevitable impact

on business when oil supply and price change Oil price has surpassed the expectation of many, reaching the price of more than USD140 in June 2008 This created a rippling effect on all economies and indus-tries, as almost all economies are oil importers, with high dependency and spending on the import of oil For supply chain business, the im-mediate impact will be seen in price surge in transportation and freight forwarding services An increase in oil price will immediately affect the price of fuel that is required in the operation of vehicles, i.e truck, ships and airplanes The fuel surcharge implemented by some airlines

is an example of how oil price can affect its business Businesses must always be prepared for this as the world’s oil reserve is reducing dras-tically On top of that, demand for oil is ever increasing since the entry

of China into the World Trade Organization The result of China’s

entry is the social and economic development of China and this has opened up the 1.3 billion people in China to an uncontrolled consump-tion of oil Consequently, the global supply is unable to match the in-crease in global demand of oil This situation is further aggravated by the volatility of oil supply in Iraq and other oil producing nations In any case, as more economies develop, demand will continue to rise, creating the environment for the increase in oil price Hence, organiza-tions should always be prepared in anticipation of future increase or even decrease in oil price in case of oil substitutes are discovered

Economic forces can be divided into two main categories and they are macroeconomics and microeconomics Macroeconomics re-fers to the general economic situation pertaining to the country as

a whole, while microeconomics addresses issues specific to a lar industry or market

particu-Illustration 9 Economic forces

Source: Own development

 Macroeconomics

Governments formulate its economic policies to provide

a stable economy for the country and its people to grow These policies can be divided into monetary policies and fiscal policies Monetary policies refer to money matters

and this relate to foreign exchange, etc., while fiscal cies govern the tax and expenditures of the government In relation to businesses, the taxation system of the country will have implications on the operating cost of the business

poli-As for the expenditure, it will provide an overview of ernment spending and the industries that can benefit from this spending Monetary policies dictate on how money is managed in and out of the country This can have great im-pact on the businesses especially if the currency is con-trolled The Yuan was perceived to be greatly undervalued and was giving an advantage to China exports; in addition, this would also mean less profit when repatriated back to the foreign investor after exchanging into foreign currency Finally, with both monetary and fiscal policies, the govern-ment reveals its position on international trade

gov-Though some countries are still resistant to this, most tries around the world are recognizing the dynamism of trade across borders and this is because of the inevitable de-velopment in the environment Besides joining the World Trade Organization (WTO), countries formed their own economic bloc, e.g EU, APEC, etc to facilitate free trade

coun-In addition, there has been a spate of free trade agreements (FTAs) signed between countries to expedite the free trade process Businesses and its supporting industries can ride on this wave of free trade in the expansion of their businesses into foreign markets It has made it easier for a business to enter into foreign market however, on the down side it has also made it easier for competitors to enter into the local market as new players

Apart from economic policies controlled by the ment, general economic performance of a country is

govern-a strong indicgovern-ator of the economic govern-activities govern-and the chase power of its people This is usually measured in per capita income, gross domestic product (GDP) or gross na-tional product (GNP) Purchasing power is determined by the income of an individual hence, if the economy is flour-ishing, the people will enjoy good employment and is likely

pur-to purchase goods and services reflecting their prosperous life Naturally, businesses in such an environment will have

a better chance of survival, however, and if otherwise, ganizations may want to reconsider its entry into the foreign market

or- Microeconomics (micro-environment of enterprise)

This is the study of the specifics of a particular market or industry Organizations usually look at the issues of demand and competition In demand side, organizations must under-stand firstly the need of a product or service, affordability of the people, followed by the willingness to purchase it Some demands are clearly visible while others may require re-search to ascertain This is especially so for new products that no one in the country had seen In a competition side in addition to demand, organizations must understand the competitors and the level of competition in a concrete sector (industry) of the economy; this is to minimize the chance of

an organization of investing into a highly competitive ket, resulting in a loss in the business venture Besides de-mand and competition, there are many other factors affect-ing the industry, this will be discussed in the following us-

mar-ing Porter’s 5 forces model Suppliers deliver input

produc-tion factors such as machines, equipment, materials, energy, etc… Long term relationships should be built with credible and trustworthy suppliers Moreover, managers should di-versify the suppliers with them they cooperate to avoid the risk of being too much dependent on one or several of them

The intermediary embraces marketing brokers (delivering

diverse marketing services such as market information, partner and customer finding); whole-sellers or retailers (who help in products and services distribution in a profes-sional way with reasonable price and lower risk); transport-ers, insurers and clearers (delivering supporting services for

intermediaries) The end-customers are diverse in terms of

purchase behavior and purchase power and their preferences

are changing over time The competitors can appear within

one branch (sector, industry; using railways service instead

of air transport), between branches (due to limited financial resource, customers can choose product of one branch – spend summer vacation abroad, on the expense of other branch – investment in training courses), between brands (within one product customers can choose different brands,

i.e Coca-Cola and Pepsi) Public opinion is any of the

stakeholders groups interested in and having impact, tive or negative on enterprise’s marketing activities They are identified such as: financial circle, news reporters circle, state and local government organs, non-governmental or-ganizations and associations

posi-Illustration 10 Modified Porter’s five forces model

Source: (Porter 1985)

 Socio-cultural forces

As businesses go global, management must adapt itself to age employees of different cultures Each different culture has their unique characteristics and managers must understand them well enough so as to be able to manage work teams comprising people from all over the world In the study of social forces, demographics can generally provide a good summary of the social behavior of the people in the country Demographics like education level, income lev-

man-el, and median age of population, class structure and culture can offer organizations an insight of what to expect in the foreign environment Every country is different and acknowledging this social difference is important to global marketers as this not only shapes the preferences and acceptance of a product or service in a foreign country, it directs the way business is being conducted so as to be deemed acceptable by the natives in the country

STRATEGY