Developments in International Advertising Regulation and Impact on International Marketing Practice - Essay Example

Running head: Analysis of the Current Developments IN International Advertising RegulationS Name) (Instructor’s Name) (Course Name) 7th March 2012 Introduction The need to increase revenue and generate more sales has forced many local companies to go global. Through participation of many organizations in international marketing, stiff competition has been experienced especially in the emerging markets. International marketing entails making marketing mix decisions outside national boundaries. For example, global companies have established production and distribution facilities in various countries in order to meet the high demand of their products in the international market. In their efforts to be competitive, international firms have emulated various strategies. Some of the notable marketing aspects include e-marketing, social media marketing, product diversification, repositioning of brands among others. In order to enhance product awareness and customer’s loyalty, global companies such as Coca-Cola, Toyota, General motors, Honda, Apple Incorporation, Pepsi among others have taken wide range of advertisements through satellite television, newspapers, internet and other avenues. This paper gives the analysis of the current developments in international advertising regulations and the impact on international marketing practise and consumption. International advertising International advertising involves spreading of messages that are related to a product or a service with an aim of propelling the demand from the existing customers or with the purpose of attracting new consumers. It is important to note that due to the cultural diversity and social aspects in various countries, the way customers perceive or react to an advertisement campaign differs. In this regard, international advertising entails the communicating process that takes into consideration the consumption patterns of the audience, multiple cultures and forms of communication. In the same way, international advertisement has been recognized by international agencies as a profitable business in terms of creating adverts on behalf of organizations. Development of international advertising One of the major causes of heated discussion among the advertising managers and academics is advertising standardization. According to the advertising managers, establishment of a comprehensive advertisement campaign entails the identification of local, intrinsic and firm factors that manipulate global advertising. In order to effectively serve the firms that were aimed at operating at an international level, advertising agencies established themselves in various countries. This was based on the high returns that they anticipated by treating the advertising campaigns as business practices. One of the major aspects that led to development of international marketing was the end of the communist regimes in 1990’s. As a result, companies who were eager to provide new products and attract large number of consumers positioned themselves in the Eastern Europe market. Based on the high number of firms that were scrambling for the available consumers, the global advertising became a priority. According to Grein and Ducoffe (1998), most organizations especially those from US emulated the services of advertising agencies leading to high advertising revenues. For instance, in 1991 the top ten advertising agencies in US earned more than 60% of their income from international billings. To find the solutions and share the plight that hindered advertising in the global market, companies that were focused at international advertising formed organizations such as United Kingdom Institute of Practitioners and US Association of National Advertisers. As companies progressed in their advertisement strategies, innovations in the information technology led to the enhancement of international marketing practice through the introduction of internet. This ensured that international companies targeting customers from various place in the world could now advertise their products via their websites as well as in the social sites such as face book and twitter. Global advertising as a communication process As a communication process, international advertising is a complex aspect based on the multiple cultures that exist globally. In addition, lack or adequate effectiveness of media in terms of giving the valuable and reliable information, language and literacy differences makes it more complex (De Mooij, 1998). For example, due to the high level of illiteracy especially in the poor countries, the advertisement messages may be misunderstood thus resulting to poor performance of products in such countries. Lack of adequate education and low households incomes are also key factors that results to low purchases of the advertised products and services. In addition, legal restrictions may jeopardize the responsibilities of media thus affecting the communication intended to reach large number of consumers who are targeted by a particular advert. In order to develop international advertising as a communication process, companies emulate three notable stages that are legally acceptable. First, companies under the assistance of the marketing managers must come up with appropriate message that is reliable and ethical to the audience being targeted. As mentioned earlier, the advertisement message should be comprehensible by all consumers regardless of their cultural background or language. This means that as the second stage the advertisers should encode the message to make easier to understand. The third stage involves sending the advertisement message to the media channels followed by the decoding of the message by the audience. It is important to note that a miscommunication within the three stages may hamper effective transmission of the advertising message. In this regard, Peebles and Ryans (1984) argues that caution should be taken by all the parties concerned to ensure that the message reach the targeted consumers as it was deemed by the advertisers. In the contemporary business world, some organizations have failed to regulate the communication aspect during advertisement thus leading to manipulative and bad language. To have immunity from allegations of bad advertising, organizations such as Canadian-based Adbusters Media Foundation have emulated the aspect of subvertising. This entails revealing the actual intention of the advertisement (Rijkens, 1992). It is vital to note that failure to uphold social responsibility and ethics during advertisements, the concepts of quality advertisement and sustainable customer relationships are compromised. Ethics in international advertising In the field of international advertising, ethics is exhibited by taking into consideration four aspects that include legal, honesty, truthfulness and decency. To ensure that adverts are ethical in nature, Hall and Edward (1976) stipulates that companies should view ethics from two perspectives. First, it is important for government authorities to ensure the compliancy of organizations with the set laws of international advertisement. Secondly, all industries must come up with their own standards that must be followed by firms in a particular industry. The concept of social acceptability is another key aspect that concerns the international advertisement. Based on the adoption of interactive TV and internet, it has become more challenging to set out effective rules to control communication. In this regard, it is vital for companies to apply rules related to ethics and those that are concerned with social responsibility in order to attain a balance between reducing likely widespread offence and freedom of information and choice. According to Hall and Edward (1976), ethics that govern the contents of advertisement undertaken by companies in the international market must cover three key aspects. These include consumer sovereignty, nature of the products as well as individual autonomy. Individual autonomy is concerned with the implications of advertising on children. On the other hand, consumer sovereignty is concerned with knowledge of the audience targeted by firms while nature of the product covers the usefulness or harmfulness of the products being advertised. Regulations dealing with children advertisement Advertising to children entails the process of marketing products and services to the children with an aim of influencing their consumption thus increasing the company’s sales. Even though children are also consumers, advisements that are directed to them if not regulated have negative implications that affect their behaviours. First, flashy advertisements portrayed by newspapers and televisions results to impulse buying by their parents thus causing households financial problems. Secondly, the advertisements that are currently adopted by international firms depict dangerous stunts that can only be performed by skilled individuals. Regardless of the warnings indicated by such advertisements, children tend to imitate the individuals participating in the advert leading to injuries and other forms of sickness. Thirdly, there has been an increase on the number of adverts that portray frozen dinners which contain high levels of sodium and fats. As a result of the advertisements, children have resulted to consumption of fatty food leading to an increased level of obesity across the world. Other negativities of international advertisement that have affected the consumption behaviour of children include preferring products which are not useful to them, concentrating on the expensive brands which their parents are unable to purchase among others. Based on the above repercussions of advertisements on children, various countries have initiated regulations that are focused at mitigating the advertisement negativities. Some of the major countries that have strict regulations on child advertisements include United Kingdom, Denmark, Belgium and Norway. European Union has put in place EU Audiovisual Media Services Directive that lays down regulations on advertising and children that the member states must confirm with. According to the regulations, all adverts shall not directly force children to buy products by exploiting their inability to make purchasing decisions. Secondly, the rules specify that advertisements shall not encourage young children to force their parents to purchase the products displayed by the adverts. Thirdly, companies are not supposed to exploit the trust that children place on their parents. Fourthly, food producing companies should follow a specified code of conducts when advertising food products favoured by children. Rijkens (1992) maintains that a key implication of the EU Audiovisual Media Services Directive on the international marketing practice is that it has changed the advertising strategies of foreign companies entering EU market to comply with EU advertising regulations. Office of communications (Ofcom) Office of communications (Ofcom) is a notable regulatory authority that the UK government initiated in 2002 to regulate rules of advertising food products to children. According to Peter Bourton, Ofcom Head of Commercial Policy, poor diet among the children is a major cause of the increased costs of treatments. Chris (2009) argues that an assessment done on Ofcom showed that long-term benefits of regulating the advertisements would offset the costs incurred in addressing the health challenges faced in UK. The table1. Rules set by Ofcom and their objectives Restricted products Unrestricted products Objectives Products with high amount of fat or salt or sugar (HFSS) (Chris, 2009). Products with low amount of sugar or fat or sugar. These include fish, fruits and vegetables. To reduce the exposure of children to the HFSS advertisements and control their consumption behavior. To control the use of advertising strategies appealing to minors. Source- (Chris, 2009) As a result of the Ofcom control, UK based firms have emulated effective marketing policies that have made them to acquire a competitive position in the international market. In the same way, regulations related to food advertisement have positively impacted on the consumption habits of UK households and foreign consumers. Regulations governing internet advertising As mentioned earlier, use of information technology is a major marketing tool that local and international companies are using to advertise their products. The information that is passed through internet is highly relied upon by customers especially those who deal with international business transactions. Even though the consumers and the suppliers equally rely on each other as far as business transactions are concerned, there exists a difference of interest between the two parties in advertising. This means that as the customers significantly rely on the information portrayed by the advertisement during making of purchase decisions, the supplier has a major role of determining the relevancy, accuracy, placement of the advert as well as the styles adopted by their adverts. To instigate equality and address the imbalance between the consumers and the suppliers, government authorities have initiated various laws and regulations that regulate internet advertisement. For example, Australia has adopted the Commonwealth Trade Practises Act as well as the Fair Trading Acts to offer advertising guidelines. Rose & Feldman (2010) argues that through such regulations, consumers have the freedom to demand for compensation if the adverts are decisive or have unethical implication. In the same way, the acts ensure that Australian Competition and Consumer Commission (ACCC) experiences fair competition in the market (The Australian Competition and Consumer Commission, 1997). In the recent past, local firms have concentrated in advertising through local magazines. This implies that various governments regulate the advertisement strategies adopted by local companies within their jurisdiction. However, Leonard, Leong and Scott (1998) depicts that the concept of globalization has triggered the use of avenues such as CNN, satellite television among other in advertising. In the same way, the development of internet has ensured that information can be disseminated in speed to the customers. Additionally, internet offers ample opportunities for organizations targeting young consumers. In this regard there is need to streamline and regulate internet advertisements. Since internet is a recent advertisement avenue that companies have started to emulate in their international business operations, many governments are in the process of initiating laws that regulate internet advertising. Even though laws governing advertisement are based on moral ethics, accuracy, reliability among other vices, a significant difference exist between various countries. For instance, while comparative advertising is illegal in Germany, Douglas and Craig (1995) argues that it is not prohibited in Australia and US. In the same way, some countries are reluctant in regulating the use of the language in advertisement but others such as France, language is strictly regulated. Another example of the difference treatment of internets advertisement is depicted by Pacific Rim countries where religious and racists have no strong legal implication while in Australia the government has initiated adequate and strict laws that prohibit discrimination on the bases of religion and race. Federal Trade Commission One of the key organization that is keen at scrutinising the use of internet as an advertising avenue is Federal Trade Commission (FTC), a United States Government agency. In its effort to ensure that companies do not misuse internet during their advertisement campaigns, FTC emulates legal procedure to protect consumers from deceiving messages. For example, in 1996 FTC took a legal action on nine firms due to untrue and unsubstantiated information through the internet. According to Jodie Bernstein the FTC director, internet marketing will not achieve its objectives if the frauds are not curbed. He insisted that laws that govern traditional forms of marketing are equally applicable in on-line transactions. The formation of FTC was triggered by the need to protect consumers and the rising number of cross-border marketing transactions that involved US and other countries. A case of deceptive advertising was exhibited by the Virgin Atlantic Airways, an international company based in UK. According to the advertisement, passengers travelling from Newark to London were supposed to pay $499. To check whether there was taxes involved, Virgin Atlantic advised its customers to confirm with local agencies. However, the US government took a legal action against the company. The company was fined $14,000 for its failure to give a clear disclosure of $38.91 tax that was supposed to be paid by the travellers. This impacted international marketing in terms of the necessity to provide true and reliable information so as to attain strong customer loyalty and trust resulting into repeated purchases (De Zwart, 1997). Challenges facing regulations related to internet advertising One of the major problems facing the internet regulations is to determine which law covers a particular transaction between the consumer and the supplier. This is based on the fact that countries have different laws as mentioned earlier in the paper. In this case, courts have the power of choosing the legal system that is more connected to the transaction. A good example is depicted by a case that involved T and C. Providores versus Mendelson-Zeller Company. This case involved the selling of fruits by a company in California to another company in New South Wales. According to the New South Wales Supreme Court, the legal system of California was in a better position to be applied in solving the conflict. Anther example of a case was The Assunzione. Under this case, Italian Law and the French legal system were equally applicable. However, after some legal analysis by the courts it was held that Italian law was applicable based on the fact that the transaction between the parties involved Italian currency. Assessment of compliancy of advertising campaign with FTC regulations Government regulations related to international policies of advertising has continued to advocate that firms should seek the assistance of personnel who are experienced in advertising law before initiating an advertisement campaign. Before the release of any advert the advertising managers can eradicate their legal liability by ensuring that the advertisements are familiar with FTC Policy Statement on Deception. In addition, the managers or their agencies should be familiar with some key section of the Federal Trade Commission Act. These include section 5 that declares deceptive acts as unlawful, Section 12 that prohibits untrue advertisements that may propagate purchasing of drugs, cosmetics among other personal items. This is in addition to section 15 that specifies untrue adverts as those misleading the consumers in a material respect. Companies are also advised to follow the rules set by National Advertising Division. This is a system adopted by advertising industry to instigate the concepts of truth and accuracy during marketing strategies. It is worth to note that since the advertisement is undertaken by competitors, managers must ensure clarity of their messages and it is imperative to include disclosures. This is based on the fact that some competitors may use other company’s deceptive adverts as tools to fight them in the market or use them in the court as evidence. Conclusion From the above discussion, it clear that international advertising is a vital marketing tool that calls for proper government regulations to protect consumers. Having developed from the traditional forms of advertisement such as television and newspaper, contemporary global advertisement is advanced due to the use of internet and satellite televisions. In their efforts to acquire large market segments, international firms have used advertisement as a form of communication. This has led to a number of implications on international marketing and consumption as firms seek to create strong positive relationship with their consumers. In addition, advertising agencies have treated the advertising as a business thus attracting the attention of various legal legislations to safeguard customers and children from being exploited by profit minded business community. Major authorities that have been put in place to control children advertisement include EU Audiovisual Media Services Directive and UK Office of communications. The regulations institute directives on how companies should undertake their advertisement campaigns without compromising the health and behavioral change of the minor. Internet advertisements are also under strict regulations by notable legislations such as Commonwealth Trade Practices Act, Fair Trading Acts. Federal Trade Commission (FTC) is US based agency that is focused at protecting consumers against the negativities of deceiving and unethical advertisements. In the same way, FTC guides the advertising managers and agencies and legal personnel on various aspects that they need to emulate to avoid deceptive, unreliable and inaccurate advertisements. References Chris W.2009. Ofcom top of Tory deathlist - Quangogeddon. Music and Media. The Register. 3(5) pp 54-65. De Mooij, M. 1998. 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The Australian Competition and Consumer Commission.1997. The global enforcement challenge - The enforcement of consumer protection laws in a global marketplace. Discussion Paper, 1997. Read More