Onkvisit S., Shaw J. International Marketing: Analysis and Strategy

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MARKET RESEARCH AND INFORMATION SYSTEM

Notice: An organization must inform individuals

about the purposes for which it collects and uses

information about them, how to contact the organi-

zation with any inquiries or complaints, the types of

third parties to which it discloses the information, and

the choices and means the organization offers indi-

viduals for limiting its use and disclosure. This notice

must be provided in clear and conspicuous language

when individuals are ﬁrst asked to provide personal

information to the organization or as soon thereafter

as is practicable, but in any event before the organi-

zation uses such information for a purpose other than

that for which it was originally collected or processed

by the transferring organization or discloses it for the

ﬁrst time to a third party.

Choice: An organization must offer individuals the

opportunity to choose (opt out) whether their per-

sonal information is (a) to be disclosed to a third

party or (b) to be used for a purpose that is incom-

patible with the purpose(s) for which it was originally

collected or subsequently authorized by the individual.

Individuals must be provided with clear and conspic-

uous, readily available, and affordable mechanisms to

exercise choice.

Safe harbor sensitive information principle:For

sensitive information (i.e. personal information spec-

ifying medical or health conditions, racial or ethnic

origin, political opinions, religious or philosophical

beliefs, trade union membership or information spec-

ifying the sex life of the individual), they must be given

afﬁrmative or explicit (opt in) choice if the informa-

tion is to be disclosed to a third party or used for a

purpose other than those for which it was originally

collected or subsequently authorized by the individual

through the exercise of opt in choice. In any case, an

organization should treat as sensitive any information

received from a third party where the third party

treats and identiﬁes it as sensitive.

Onward transfer:To disclose information to a third

party, organizations must apply the Notice and Choice

Principles. Where an organization wishes to transfer

information to a third party that is acting as an agent,

it may do so if it ﬁrst either ascertains that the third

party subscribes to the Principles or is subject to the

Directive or another adequacy ﬁnding or enters into

a written agreement with such third party requiring

that the third party provide at least the same level of

privacy protection as is required by the relevant

Principles. If the organization complies with these

requirements, it shall not be held responsible (unless

the organization agrees otherwise) when a third party

to which it transfers such information processes it in

a way contrary to any restrictions or representations,

unless the organization knew or should have known

the third party would process it in such a contrary way

and the organization has not taken reasonable steps

to prevent or stop such processing.

Security: Organizations creating, maintaining,

using or disseminating personal information must take

reasonable precautions to protect it from loss, misuse

and unauthorized access, disclosure, alteration and

destruction.

Data integrity: Consistent with the Principles, per-

sonal information must be relevant for the purposes

for which it is to be used. An organization may not

process personal information in a way that is incom-

patible with the purposes for which it has been

collected or subsequently authorized by the individual.

To the extent necessary for those purposes, an orga-

nization should take reasonable steps to ensure

that data is reliable for its intended use, accurate,

complete, and current.

Access: Individuals must have access to personal

information about them that an organization holds

and be able to correct, amend, or delete that infor-

mation where it is inaccurate, except where the burden

or expense of providing access would be dispropor-

tionate to the risks to the individual’s privacy in the

case in question, or where the rights of persons other

than the individual would be violated.

Enforcement: Effective privacy protection must

include mechanisms for assuring compliance with the

Principles, recourse for individuals to whom the data

relate affected by non-compliance with the Principles,

IT’S THE LAW 8.1 THE SAFE HARBOR PRINCIPLES

236

CONCLUSION

This chapter has discussed the need for information

on the one hand and the difﬁculty of managing

information on the other. The primary goal is to

provide a basic understanding of the research

process and the use of information. Special atten-

tion has been given to the information collection

process and the use of marketing information.This

coverage is far from being exhaustive, and the reader

should consult marketing research textbooks for

speciﬁc details related to particular research topics.

Regardless of where the intended market is, a

company must understand the market and its con-

sumers. Japan and Western Europe are successful

abroad because of their adoption of the marketing

concept. Basically, the marketing concept requires

companies to understand consumer needs, and mar-

keting research is a necessary undertaking in making

that determination. Although it may be true that

foreign market information is frequently lacking or

of poor quality, this general problem can be a bless-

ing in disguise, because competitors do not have

either adequate or reliable information.A company

that does a better job in acquiring information can

gain a competitive advantage.

A marketer should initiate research by searching

ﬁrst for any relevant secondary data. There is a

great deal of information readily available, and the

researcher needs to know how to identify and locate

the various sources of secondary information both

at home and abroad. Private sources of information

are provided by general reference publications,

trade journals from trade and business associations,

syndicated services, and marketing research agen-

cies. Government sources also have many kinds of

information available in various forms for free or at

reasonable cost.

When it is necessary to gather primary data, the

marketer should not approach its collection from a

perspective of the home country.A marketer should

be aware of numerous extra constraints that exist

overseas, since such constraints can affect virtually

all steps of the research process. Because of these

constraints, the process of data collection in the

international context is anything but simple. One

cannot simply replicate the methodology used in

one country and apply it in all countries.The mar-

keter should expect to encounter problems unique

to a particular country, and some adaptation in

research strategies may be necessary. In order to

make certain that a study is reliable and internally

and externally valid, it is important to have con-

ceptual, instrumental, and linguistic equivalence.

A company should set up an MIS to handle the

information efﬁciently and effectively. The system

should integrate all information inputs from

the various sources or departments within the

company. For a multinational operation, this means

the integration and coordination of all the informa-

tion generated by the overseas operations as well.

The system should be capable of being more than a

compilation of data. It should routinely make mean-

ingful outputs available in the desired format for

its users in a timely fashion. With the advanced

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and consequences for the organization when the

Principles are not followed. At a minimum, such

mechanisms must include (a) readily available and

affordable independent recourse mechanisms by

which each individual’s complaints and disputes

are investigated and resolved by reference to the

Principles and damages awarded where the applica-

ble law or private sector initiatives so provide; (b)

follow up procedures for verifying that the attesta-

tions and assertions businesses make about their

privacy practices are true and that privacy practices

have been implemented as presented; and (c) obliga-

tions to remedy problems arising out of failure to

comply with the Principles by organizations announc-

ing their adherence to them and consequences for

such organizations. Sanctions must be sufﬁciently rig-

orous to ensure compliance by organizations.

Source:

“The Safe Harbor Principles,”

Export America

January 2001, 25.

development of artiﬁcial intelligence, it may be pos-

sible in the near future for a computer to perform

all necessary functions, including making recom-

mendations for marketing strategies. However, in

the ﬁnal analysis, every marketer must keep in mind

that information can never replace judgment.

Remember, it is useless to have “data, data every-

where, and not a thought to think.”

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MARKET RESEARCH AND INFORMATION SYSTEM

CASE 8.1 B&R BANK: DEVELOPING A NEW MARKET

Lan T. Huong, National Economics University, and Gary Oddou, California State University,

San Marcos

Since October 1990, when the new banking decrees were established, Vietnam’s banking system has undergone a

restructuring process. While the state bank is responsible for managing the whole system, local commercial banks

now have the freedom to carry out currency trading, banking services, and ﬁnancial services. Foreign banks have

come to Vietnam in increasing numbers due to the banking system reforms which Vietnam’s government has

recently instituted. B&R Bank is one of those banks in Vietnam. B&R Bank supplies retail banking services and

is interested in developing credit card service in Vietnam, especially corporate credit card service.

Today, there are three banks issuing individual and corporate credit cards in Vietnam. These are Vietcombank

(Vietnam foreign trade bank), Asian Commercial Bank and Firstvina Bank, the latter two being foreign banks.

Currently, commercial banks in Vietnam accept ﬁve types of credit card including MasterCard, Visa, Amex, JCB

and Diners Club.

However, most credit cards are used by foreigners who travel to Vietnam for business or tourism and by some

corporations including Vietnamese companies, joint-venture companies, foreign companies and representative

ofﬁces in Vietnam.

The banking industry in Vietnam

Vietnam’s economy is growing and developing relatively quickly after more than a decade of “doi moi” policy

(“Doi moi” refers to the economic reforms the Vietnamese government instituted to create more competitive and

open markets in Vietnam). Vietnam in general and the banking industry in particular has overcome the ﬁnancial

crisis that hit Asia in the late 1990s.

Vietnam has four large state-owned banks including Vietcombank, VBARD (Vietnam Bank for Agriculture and

Rural Development), BIDV (Bank for Investment and Development of Vietnam), and Industrial and Commercial

Bank; there are also forty-six joint-stock banks, more than twenty foreign banks with branches in Vietnam; more

than forty foreign banks with representative agents in Vietnam; ﬁve joint-venture banks with Malaysia, Indonesia,

Thailand, South Korea, and Laos, and two ﬁnancial companies.

It is the transition to a market economy that has affected the development of the banking system in Vietnam.

Over the past years, there have been basic changes in local banking activities. Banks have expanded the scope of

their operations to cover all economic sectors to meet the needs of businesses for new equipment purchases,

modern technology transfers, import and export activities, and for mobilizing capital.

Banking industry in Hanoi

In Hanoi, the banking sector has made outstanding achievements in providing good and high-quality services to

attract more customers. The Hanoi banking system includes over twenty branches of state-owned commercial

banks, more than thirteen joint-stock banks, ten branches of overseas banks, and four joint-venture banks.

The mechanism of payment in the banking system has been readjusted, step by step, to meet the demands of

businesses in the multi-sector economy. All of the banks provide different services, such as opening individual

banking and savings accounts; giving short-term, medium-, and long-term loans; and participating in ﬁnancing

leasing programs.

B&R Bank

B&R is a foreign bank and was established in 1835. Its name has changed three times, the last time in 1970

when the name B&R Bank was adopted. B&R Bank is one of the largest corporations and is ranked among

the 100 largest banks throughout the world. B&R operates in forty-one countries and maintains correspondent

relationships with over 6000 banks in 157 countries.

The business strategy of B&R is to focus on the Middle East, South and East Asia, and the Paciﬁc area.These

regions are of greatest potential and economic relevance to B&R because they represent much of the economi-

cally developing regions.

General operations

: Operations in B&R are centralized. All the main functions have been brought together in

one head ofﬁce. All the investment banking activities are the responsibility of one business unit.

Operations in Vietnam

: In 1994, B&R established its branch in Hanoi and opened another branch in Ho Chi

Minh City in 1995. B&R is one of few foreign banks having two branches in Vietnam. B&R offers a wide range

of banking services in both Hanoi and Ho Chi Minh City.

Most of the foreign banks in Vietnam (except joint-venture banks) are only involved in wholesaling banking

services. B&R is one of a few foreign banks providing retail and wholesale banking services.This is a competitive

advantage for B&R compared to other foreign banks. In Vietnam, B&R is the ﬁrst bank providing credit card

services and issuing credit cards. Users of the credit card service in Vietnam are mostly foreign customers but

there are also individual Vietnamese customers. The Vietnamese customers tend to be internationally experienced

businesspeople and some government personnel.

B&R plans to expand its activities in Vietnam and would like to begin issuing corporate credit cards with the

eventual hope of entering the consumer credit card business as time proceeds. B&R is currently researching

whether it should invest in corporate credit cards in Vietnam, especially in Hanoi and Ho Chi Minh City. Issues

it needs to consider include the level of current and future competition in the corporate credit card sector,

how issuing corporate credit cards might affect B&R’s reputation, the lack of tradition in using credit cards, and

so on.

Credit card environment in Vietnam

In Vietnam, the ﬁve accepted cards are MasterCard, Visa, American Express (Amex card), Diners Club and JCB.

Credit cards are still a new kind of payment instrument.The Vietnamese are accustomed to cash transactions and

bank transfers both at the business-to-consumer level and the business-to-business level. The habit of using cash

for purchases is a signiﬁcant obstacle for card issuers. However, because credit cards can facilitate purchases,

there is a clear motivation toward providing credit card services to as many business sectors and markets as pos-

sible.

Many commercial banks of Vietnam have become agents for international credit card issuers. In addition, three

Vietnamese banks and one joint-venture bank (Vietcombank, ACB Bank, Exim Bank and Firstvina Bank) have

also begun issuing credit cards. In April 1996,Vietcombank issued its international credit card (VCB-MasterCard)

in Hanoi and Ho Chi Minh City for foreign and high-income Vietnamese. Then, VCB Bank received a license

to issue another kind of credit card, VCB-Visa. VCB bank has issued about 2000 VCB-Visa cards and 1500

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MARKET RESEARCH AND INFORMATION SYSTEM

VCB-MasterCard cards. Seventy percent of them represent individual credit card users and the remainder repre-

sent the corporate credit card market.

In 1996, Asia Commercial Bank (ACB) also issued ACB-MasterCard cards, targeting businessmen and trav-

elers as its customers.

In general, individual credit cards and corporate credit cards are not yet popular in Vietnam. Credit cards are

accepted only in large cities such as Hanoi and Ho Chi Minh City and only in limited “high-class” establishments,

such as very high-end department stores (of which there are only a few) and higher end hotels. Besides the advan-

tages of using credit cards, there are some disadvantages, such as more complex banking procedures, and current

limitations in accepting credit cards as an alternative to cash purchases. However, credit cards are seen to hold

a huge potential in the future, especially for the corporate credit card market.

From interviewing and sending questionnaires to thirteen banks and twenty joint-venture and foreign com-

panies in Vietnam, B&R has gathered some data on supply and demand, and about the current and future prospects

of the corporate credit card market (see appendices).

Points to consider

1 Do you think B&R should issue corporate credit cards in Vietnam? Why or why not?

2 What additional type of market research should B&R conduct? What are the sources of information for that

research?

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MARKET RESEARCH AND INFORMATION SYSTEM

Appendix 1 Banks issuing corporate credit cards and banks planning to issue corporate credit card

Type of banks Number Issuing credit cards Plan to issue

State-owned banks 4 1 1

Joint-stock banks 3 1 2

Joint-venture banks 1 0 0

Foreign banks 5 0 1

Appendix 2 Number of companies using corporate credit cards and the national origin of banks issuing the

credit cards

Type of Total Using corporate credit card Issuing banks

companies

Number % Banks in other Banks in

countries Vietnam

Joint venture 13 5 38 5

Foreign 7 2 29 1 1

Appendix 3 Interest level in using corporate credit cards by thirteen companies that still do not use them

(Scale: 1–7; 1: not interested in using corporate credit card, 7: very interested in using corporate credit

cards in the future)

Type of Number Interest level Time frame for using

companies

6–7 3–5 1–2 No response

Joint venture 8 25 25 12.5 37.5

Foreign 5 20 60 20 20 percent interested in using

companies corporate credit cards in

next two years

QUESTIONS

1 What are the difﬁculties in using and comparing secondary data from a number of countries?

2 Why is it difﬁcult to employ probability sampling techniques in developing countries?

3 Distinguish among: back translation, parallel-blind translation, committee approach, random probe, and

decentering.

4 Distinguish between internal and external validity. What are the implications of external validity for inter-

national marketers?

5 What are the desirable characteristics of the MIS and IMIS?

DISCUSSION ASSIGNMENTS AND MINICASES

1 Would Tokyo be a good test market? Why or why not?

2 Do you prefer observation or questioning in collecting overseas data?

3 Cite certain kinds of behavior so common in the USA that they are often taken for granted by Americans –

but not by foreign observers.

4 Discuss the reliability and validity problems in conducting a cross-national comparison study with the use of

a standardized questionnaire.

5 Dieting and jogging are concepts which Americans can easily relate to. Are they understood by non-

Americans?

6 Do demographic variables have universal meanings? Is there a likelihood that they may be interpreted

differently in different cultures?

7 After learning of no import barriers to its product, a US processed food manufacturer conducted market

research in Japan to determine the degree of interest in cake mixes. The results were encouraging: the

Japanese enjoy eating cakes. Concluding that there was no reason why Japanese consumers would not want

to buy ready-made cake mixes, the company proceeded to persuade Japanese supermarkets to carry its

product. The sales were extremely disappointing. Did the Japanese interviewed mislead the manufacturer?

Or did the manufacturer fail to ask enough or the right questions?

8 As a researcher, you have just been asked to do market research in order to make recommendations on how

to market coffee in a number of Asian, European, and South American countries. What questions do

you need to ask in order to understand the varying buying motives, consumption habits, and uses of this

particular product?

NOTES

1 Jack Honomichl, “Global Growth Forges Ahead at a Steady Pace,”

Marketing News

, August 19, 2002, H3.

2 “Transition Economies’ Progress in Structural Reform Helps Determine Trade Patterns,”

IMF Survey

, April

6, 1998, 110–11.

3 “World Bank Launches Website for Country Analytic Information,”

IMF Survey

, November 18, 2002, 358.

4 “Ask the TIC,”

Export America

, 14–15.

5 “Government Offers One-Stop Data Site,”

San José Mercury News

, September 24, 2000.

6 “Asian Demographics: Stages of Life,”

Asian Wall Street Journal

, July 24, 2001.

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7 K. Sivakumar and Cheryl Nakata,“The Stampede Toward Hofstede’s Framework: Avoiding the Sample Design

Pit in Cross-Cultural Research,”

Journal of International Business Studies

32 (third quarter 2001): 555–74.

8 “Tailoring Cars to US Tastes,”

Asian Wall Street Journal

, January 16, 2001.

9 “US Research Firms Must Put Time,Thought into European Studies,”

Marketing News

, September 11, 2000.

10 “European Studies.”

11 “Measuring Poverty: Pitfalls, Prescriptions, and Policy Implications,”

IMF Survey

, March 17, 2003, 76–7.

12 Richard G. Netemeyer, Srinivas Durvasula, and Donald R. Lichtenstein, “A Cross-National Assessment of the

Reliability and Validity of the CETSCALE,”

Journal of Marketing Research

28 (August 1991): 320–7.

13 Erdener Kaynak and Ali Kara,“Consumer Perceptions of Foreign Products: An Analysis of Product-Country

Images and Ethnocentrism,”

European Journal of Marketing

36 (No. 7, 2002): 928–49.

14 Teodoro Luque-Martinez, Jose-Angel Ibanez-Zapata, and Salvador del Barrio-Garcia, “Consumer

Ethonocentricism Measurement – An Assessment of the Reliability and Validity of the CETSCALE in Spain,”

European Journal of Marketing

34 (No. 11, 2000): 1353–74.

15 Julie H. Yu, Charles F. Keown, and Laurence W. Jacobs, “Attitude Scale Methodology: Cross-Cultural

Implications,”

Journal of International Consumer Marketing

6 (No. 2, 1993): 45.

16 Michael R. Mullen, “Diagnosing Measurement Equivalence in Cross-National Research,”

Journal of

International Business Studies

26 (No. 3, 1995): 573–96.

17 Swee Hoon Ang, “The Power of Money: A Cross-Cultural Analysis of Business-Related Beliefs,”

Journal of

World Business

, 35 (No. 1, 2000): 43.

18 Uma Sekaran, “Methodological and Theoretical Issues and Advancements in Cross-Cultural Research,”

Journal of International Business Studies

14 (fall 1983): 61–72.

19 Masaaki Kotabe

et al

., “Strategic Alliances in Emerging Latin America: A View from Brazilian, Chilean, and

Mexican Companies,”

Journal of World Business

35 (No. 2, 2000): 114–32.

20 Charles S. Mayer, “Multinational Marketing Research: The Magnifying Glass of Methodological Problems,”

European Research

6 (March 1978): 77–83.

21 “Rising,”

PROMO

(April 2001): 53ff.

22 Hans Baumgartner and Jan-Benedict E.M. Steenkamp, “Response Styles in Marketing Research: A Cross-

National Investigation,”

Journal of Marketing Research

38 (May 2001): 143–56.

23 Cynthia Webster, “Hispanic and Anglo Interviewer and Respondent Ethnicity and Gender: The Impact on

Survey Response Quality,”

Journal of Marketing Research

33 (February 1996): 62–72.

24 Richard A. Spreng and Jyh-shen Chiou, “A Cross-Cultural Assessment of the Satisfaction Formation

Process,”

European Journal of Marketing

36 (No. 7, 2002): 829–39.

25 Don Y. Lee, “Retail Bargaining Behaviour of American and Chinese Customers,”

European Journal of

Marketing

34 (No. 1, 2000): 190–206.

26 Graham Hooley

et al

., “Market Orientation in the Service Sector of the Transition Economies of Central

Europe,”

European Journal of Marketing

37 (No. 1, 2003): 86–106.

27 Craig Conway, President and CEO, Peoplesoft, Keynote address, Digital Economy Conference, December

2001.

28 “Worldwide-Friendly Sites Draws Returns,”

Marketing News

, September 2, 2002, 24.

29 “Quick Studies,”

Business Week

, November 18, 2002, 48–9.

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MARKET RESEARCH AND INFORMATION SYSTEM

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A merchant, it has been said very properly, is not necessarily the citizen of any particular country.

It is in great measure indifferent to him from what places he carries on his trade; and a very sti-

ﬂing disgust will make him move his capital, and together with the industry which it supports,

from one country to another.

Adam Smith

CHAPTER OUTLINE

■ Foreign direct investment (FDI)

■ Exporting

■ Licensing

■ Management contract

■ Joint venture

■ Manufacturing

■ Assembly operations

■ Turnkey operations

■ Acquisition

■ Strategic alliances

■ Analysis of entry strategies

■ Foreign trade zones (FTZs)

■ Conclusion

■ CASE 9.1 How to export houses

Foreign market entry

strategies

Chapter 9

244

FOREIGN MARKET ENTRY STRATEGIES

PURPOSE OF CHAPTER

Red Bull has demonstrated a practical way to enter foreign markets. Likewise, Heineken has not entered

all markets with a one-track mind and a single-entry method. Even a large multinational corporation, with

all its power, still has to adapt its operating methods and formulate multiple entry strategies.The dynamic

nature of many overseas markets makes it impossible for a single method to work effectively in all markets.

This chapter is devoted to a coverage of the various market entry strategies. Some of these techniques

– such as exporting, licensing, and management contracts – are indirect in the sense that they require no

investment overseas. Other techniques, however, require varying degrees of foreign direct investment.These

foreign direct investment methods range from joint venture to complete overseas manufacturing facilities,

with such strategies as assembly operations, turnkey operations, and acquisitions falling somewhere in

between.These strategies do not operate in sequence, and any one of them can be appropriate at any time.

Further, the use of one strategy in one market does not rule out the use of the other strategies elsewhere.

The methods vary in terms of risk accepted and, to a certain extent, the degree of commitment to the foreign

market.

Another purpose of this chapter is to discuss the advantages and disadvantages associated with each

method of market penetration. Factors that have an impact on the appropriateness of entry methods are

covered in order to provide guidelines for the selection of market entry strategies. The chapter ends with

an examination of foreign trade zones, which may be used to complement most entry strategies.

Chaleo Yoovidhya, the founder of T.C. Pharmaceutical

Co. in Thailand, developed several decades ago a

formula for Krating Daeng,an energy drink.The brand

is a huge success in Thailand, predominantly among

blue-collar workers (e.g., truckers, laborers).

Then came Dietrich Mateschitz, an Austrian sales-

man from a cosmetics company that was represented

in Thailand by the Yoovidhya family.The salesman was

intrigued by Krating Daeng and obtained a license to

make it in Austria. Krating Daeng became Red Bull,

a literal translation.Yoovidhya and Mateschitz formed

Red Bull GmbH, each taking a 49 percent stake.

Yoovidhya’s son got the other 2 percent. Red Bull was

marketed in Austria in 1987 before charging into

Hungary, its ﬁrst foreign market, in 1992.

Unlike the way it is marketed in its motherland

(Thailand), Red Bull is promoted aggressively as a

trendy product associated with extreme sports. It has

become a global success.With a sales volume of more

than one billion cans a year in eighty-three countries,

Red Bull commands 70 percent of the world’s energy

drink market.That is enough to propel Yoovidhya into

the ranks of the world’s billionaires. According to

Forbes magazine,Yoovidhya ranks No. 383 out of 476

billionaires.

Sources:

“Red Bull Tycoon Joins Elite Club,”

Bangkok Post

March 1, 2003; and “Red Bull Takes Flight,”

PROMO

(February 2004): 18–19.

MARKETING ILLUSTRATION RAGING BULL

FOREIGN DIRECT INVESTMENT (FDI)

Economists usually advocate a free ﬂow of capital

across national borders because capital can then

seek out the highest rate of return. Owners

of capital can diversify their investment, while

governments will be less able to pursue bad eco-

nomic policies. In addition, a global integration of

capital markets spreads best practices in corporate

governance, accounting rules, and legal traditions.

However, some critics point out that free capital

ﬂows are driven by speculative and short-term con-

siderations. For some reason, one noticeable feature

of FDI ﬂows is that their share in total inﬂows is

higher in countries where the quality of institutions

is lower. In other words, a high share of FDI in a

country’s total capital inﬂows may reﬂect its insti-

tutions’ weakness instead of its strengths. However,

empirical evidence indicates that FDI beneﬁts devel-

oping host countries.

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FOREIGN MARKET ENTRY STRATEGIES

To take advantage of the global economy, companies

have been cutting costs by moving jobs to lower-cost

areas.The ﬁrst wave involved an exodus of jobs mak-

ing shoes, cheap electronics, and toys. Next came sim-

ple service work (e.g., processing credit card receipts).

Now the high-end sophisticated jobs can also be

exported.The jobs that are moving offshore include life

sciences, legal, art/design, business operations, com-

puter, architecture, sales, and ofﬁce support. Invest-

ment banks wonder why they should pay an analyst in

London when they can employ an analyst in India to do

the same kind of job at a much lower salary. Not sur-

prisingly, British banks (e.g., HSBC Securities Inc.)

have large back ofﬁces in China and India. French

companies have call centers in Mauritius. German

multinationals have turned to Russia, the Baltics, and

Eastern Europe.

The loss of jobs in the USA and Western Europe

is often Asia’s gain. American Express, Intel,

Microsoft, and others like the Philippines because of

its low wages, generous tax breaks, and English-lan-

guage speakers. Accenture has 5000 workers there,

while Procter & Gamble has 650.

One big beneﬁciary is India. Infosys Technologies

has 250 engineers to develop IT applications for Bank

of America., and its staffers process home loans for

Greenpoint Mortgage of California. At Wipro Ltd., its

ﬁve radiologists work to interpret thirty CT scans a

day for Massachusetts General Hospital. At midnight,

Wipro Spectramind Ltd. has 2500 college graduates

process claims for a major insurance company and

provide help-desk support for a big US Internet

service provider – for up to 70 percent lower than the

cost in the USA. The company also has seven staff

members with Ph.D.s in molecular biology who go

through scientiﬁc research for Western pharmaceuti-

cal companies.

While 35,000 mechanical engineers a year gradu-

ate from American universities, China is producing

twice as many. Bangalore is India’s Silicon Valley,

and it alone produces 25,000 software and computer

science engineers, almost as many as the entire USA.

Because the average wage of $12,000 is only about

one-ﬁfth of that in the USA, Cisco, SAP, and the

others have shifted their research work to India.

General Electric, Intel, and Delta Air Lines have

20,000, 3000, and 6000 workers respectively in

India. SAP’s 500-engineer facility in Bangalore devel-

ops new applications for notebook PCs.

Since capital will constantly chase cheaper labor,

does it beneﬁt a society when companies race in

search of the bottom of international labor prices?

While consumers should beneﬁt from this phenome-

non, one has to wonder about workers – especially in

the high-cost countries.

Sources:

“Is Your Job Next?”

Business Week

, February 3,

2003, 50ff.; “The Way, Way Back Ofﬁce,”

Business Week

February 3, 2003, 60; “Calling Bangalore,”

Business Week

November 25, 2002, 52–3.

MARKETING ETHICS 9.1 WHITE-COLLAR GLOBALIZATION