International Marketing Models - Essay Example

? Diverse political, social and economic conditions in different countries compel international businesses to apply the three models of international marketing mix, namely; ethnocentrism, polycentrism and geo-centrism. Ethnocentrism is based on the notion of the parent country being superior to the host countries. Polycentrism considers the different tastes and preferences across cultures worldwide while geo-centrism attempts to give a globalised perspective. Ethnocentrism bases concepts on ethnicity; polycentrism bases its concepts on political orientation while geo-centrism gives a worldwide conception. The three models can however not be applied independently. There is an overlap in their application with the business organizations currently leaning towards the polycentric model. International Business Part One Legal Issues Relating To Global Commerce International business involves trading within and without national boundaries. The fact that business spreads across different jurisdictions gives rise to legal issues especially because many times the laws across countries are not the same. There is therefore, the need to harmonize the laws. Some of the legal considerations in international trade include the following: Tariffs (Customs) and Quotas A tariff is a tax imposed on imports and exports within a jurisdiction. The amounts of tariffs charged by the government in-charge determine whether the investors would be able to invest in a particular jurisdiction or not. Many jurisdictions use the tariff rates as the bait to either attract or chase away investors. Charging high rates would effectively discourage investment (Schaffer, Agusti, & Earle, 2010). Quotas refer to the restriction of quantities to be imported or exported in a particular jurisdiction. Governments impose maximum limits of imports to protect their domestic industry mainly from inflation caused by unfavorable balance of trade. The governments may impose exports to caution the country from scarcity of commodities which would shoot demand high and consequently occasion inflation within the economies. The use of tariffs and quotas affect businesses as they have to toil within the agenda of a particular jurisdiction (Schaffer, Agusti, & Earle, 2010). Antidumping and Transfer Pricing Laws Antidumping refers to rules against dumping. Dumping essentially refers to a situation where multinationals import goods of lesser quality and value into foreign jurisdictions. Governments have come out strongly against dumping as it defeats the ideals of trade and erodes the standards by perpetuating mediocrity (Schaffer, Agusti, & Earle, 2010). Transfer pricing is a concept of taxation that concerns multinationals. Owing to the different taxation rates by different jurisdictions, multinationals exploit transfer pricing so as to tax their products within the lower taxation rates jurisdictions. Governments have come up with laws to prevent cases of tax avoidance and evasion under the guise of transfer pricing. Intellectual Property Rights International business recognizes intellectual property rights although the rights are granted within individual jurisdictions. These include copyrights, patents and trade secrets. Governments have been considerate enough to provide laws to enable innovators enjoy the fruits of their work through the intellectual property rights (Schaffer, Agusti, & Earle, 2010). Sources and Forms of Political Risks Political risks refer to the effects the politics of the day in a particular jurisdiction has on the businesses within that jurisdiction. Political risks could be caused by the government, the people or the activities of competitors and non-governmental organizations. Governments mainly expropriate or nationalize companies in effect taking over the share ownership of the companies. The people may be at war creating un-conducive environments detrimental for business. Activists in the guise of protection of the environment or societal interests may render the business working environment un-conducive. An economic boycott of a company’s product is a good example of a form of risk that is political in nature (Schaffer, Agusti, & Earle, 2010). Part Two Introduction International business by the multinational companies cuts across different countries with diverse political, social and economic conditions. The multinationals therefore inevitably have to decide on the model of international marketing to apply. The three main options are ethnocentrism, polycentrism and geo-centrism. Ethnocentrism, Polycentrism and Geo-Centrism Ethnocentric model is based on the notion of the superiority of the parent country against the countries hosting the subsidiaries. The organization set up considers the culture of the parent company. It is this culture that is replicated with the assumption that being supreme and workable; it definitely would apply in other jurisdictions as well. Being morally superior, it is considered to be trustworthy and reliable. This concept enables the application of mass production hence enjoyment of economies of scale. The research and decision making is done in the headquarter country. The products designed for the parent country market are similarly churned out to the foreign subsidiaries. It is perceived that the market is universal and accommodative. The model embraces the concept of propagating ethnic superiority. Although the foreign jurisdictions are considered to have different tastes, their tastes are suppressible in favor of the parent country’s tastes (Thomas, 2010). Polycentrism considers the fact that markets are inevitably dynamic and different. The cultures across the global divide essentially means the tastes and preferences would vary. Therefore, the products within particular subsidiaries need not be the same as the products in another. Under this model, research from the parent company does not necessarily apply to the conditions of the countries hosting subsidiaries. The individual subsidiaries make their own decisions based on the tastes and preferences within the countries. Consequently, the model does not facilitate mass production. No economies of scale accrue. Although the administratively the subsidiaries are controlled by the parent company, managerially, the decision making process is highly delegated since the different subsidiaries apply different formula in tandem with the needs of the customers within their jurisdiction. Polycentrism pays much attention to local market conditions. The company interest is to cater for the market needs. Therefore, the research is localized. The subsidiaries collect their own data within their market and tailor their decisions to address the market needs. Among the benefits that accrue under this model is that the companies is culturally tolerant. This contributes to the high retention ratios. They are able to retain both customers and the employees. This is since the customer changing tastes and preferences in the dynamic society that is today, is captured and fully catered for. In addition, the employees absorbed locally need not embrace the concepts of the foreign parent company but simply tailor the subsidiary operations to local knowledge application (Briscoe & Schuller, 2011). Geo-centrism refers to the third model which takes a global approach in international marketing. Under this model, the organization generalizes the world, rather than the individual dissimilarities. The model involves a delicate attempt to unite the headquarters with the subsidiaries. The model does not conceive either the host or parent as being the supreme but rather attempts to strike a balance between the two. This it does through the concept of product differentiation. Essentially, the products produced by all the outlets are the same but highly differentiated to meet the different tastes of the many subsidiaries. Therefore, decision making is centralized with a degree of autonomy granted to the subsidiaries to effect changes to the production process. One of the costs incurred in an organization that embraces this model is the huge travel and communication costs. This is because the organization needs to build consensus out of genuine negotiations and agreement between the headquarters and the subsidiaries. By embracing the non ethnocentrism, the concept appreciates the need to accommodate all perspectives to come up with a globalized or world oriented product. The result is that power is highly distributed considering no one faction calls the shots. Incidentally, under this model, personnel problems still occur especially because there is no specific centre of power (Thomas, 2010). Company Marketing Products/Services Product or service marketing definitely influences the choice of model to apply in the organization. The substantial origin of the product to a large extent would determine the model. If for instance, the product being marketed was designed in the parent country and it has performed favorably within that jurisdiction, its introduction into other jurisdiction based on its previous performance may call for the use of ethnocentrism. Under this approach, the company would assume that the results obtained in the parent country would be reflected again. This could be attributed to the cultural superiority of the parent country or the trustworthiness and reliability placed on its products worldwide. However, if the company is out to popularize a modified product designed to address specific interests of customers within a particular subsidiary’s jurisdiction, the polycentric model could be applicable. The main aim would be to market the product within that jurisdiction and it would pay more if the company forfeited the cultural superiority of their parent country and concentrated on satisfying the customer needs. A geo-centric model would be justified if the endeavor of the company is to get the tastes and preferences of the entire globe. The marketing of the product would consider the tastes and preferences across the globe and differentiate the marketing differently according to the different jurisdictions (Thomas, 2010). Effect of Cultural Differences Indeed culture plays a fundamental role in the choice of model that the organization applies. This depends on a number of factors being the nature of the product service, the degree of diversification in terms of flexibility and the knowledge of the consumers. If the products are industrial in nature, ethnocentric model applies majorly because the industry concept is largely based on the western industry and therefore, the product would find utility. The cultural superiority would be facilitated by the fact that industrially, the west leads the pack and other countries merely replicate their production methods. However, if the products are consumables, the different cultures in different locations play a big role in determining the tastes and preferences. It would be wise to apply the polycentric approach to conveniently cater for the different tastes and preferences (Briscoe & Schuller, 2011). In addition, some commodities are rigid to the extent of failing to accommodate different tastes and preferences. These commodities would not be affected by cultural differences. However, for the highly flexible commodities, culture plays a big role. The polycentric model would be favored as it facilitates tailoring of the product to fit the different cultural practices within jurisdictions (Briscoe & Schuller, 2011). Conclusion The world has become dynamic. Consequently, the people have become more expressive and determined to obtain more utility in commodities. This has lured the international businesses to embrace polycentrism. Cultural practices have never been universal and although the geo-centric model attempts to harmonize local production with headquarter recommendations, the best way to satisfy customer has remained the application of the polycentric model. The customer appreciates the company that addresses his wants and desires in production. However, this has also proved costly to the business due to the costs involved in diversification efforts. Striking a balance acceptable by both parties still remains the toughest challenge. Bibliography Briscoe, D. R., & Schuller, R. S. (2011). International human resource management:policy and practice for the global enterprise (2 ed.). New York: Routledge. Schaffer, R., Agusti, F., & Earle, B. (2010). International Business Law and Its Environment (2 ed.). New York: Cengage Learning. Thomas, D. C. (2010). Readings and cases in international management:a cross-cultural perspective (3 ed.). New York: SAGE. Read More