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Important international business organizations and their influences—Part-ii

Benefits and Challenges at the same time

Join IBOs could bring different effects to businesses and member countries. From one hand, IBOs give business a good platform that would allow them to match resources globally. From another hand, Join IBOs could also put more constraints and extreme competition to developing businesses and member countries. The best example to explain this conflicts will be China, as a member, in the WTO organization. Since China got the membership of WTO in the early 2000s, it has been a big boost to the country’s economy. WTO built bridges for products from all over the world to China, at the same time, China also traded with many international markets. Because of China’s relatively low labor cost and less authorization cost, its products are cheaper, various and widely accepted by the global market. After China joining the WTO, the amount of its export amount has been consistently growing, until 2013, it surpassed the US became the biggest trading economy. However, China has also been criticizing violating rules of WTO. “No complete legal protection for labor; Protectionism for specific industries; disrespect to foreign intellectual properties.” These all are complaints that from other WTO members. The tax adjustment started by the US recently, clearly put pressure on China and other businesses or countries which supply chain has China involved. Importantly, all the complaints and appeals are submitted under the rule of WTO, from a broad perspective, an understanding of what is fair activities under the WTO’s system.

  Internal politics and interest representation

   Who is the biggest influencer of IBOs? What are guidelines for the interest allocation of IBOs? The answer is, there are always battles ongoing, IBOs are working on balancing different interests between different groups all the time. Let’s still use China as an example. Since joining the WTO, China’s attitude shifted from a senior member to an important role. China participated in appeal solving procedure for more than 80 times. What does this number mean? It means China contributed its opinion for its own or someone else’ interest for more than 80 times. Even there is no direct payback from the member that China supported. However, participation increased China’s influence in WTO. Later on, China became a leading force in global trade and cooperation. More and more members start to choose China as their partner, the group surrounding China started to get more interest. This phenomenon shows that IBOs aren’t only permanent rules or sets of bureaucracy, but also a good communication channel that allows economies and businesses to find their common interest then maximize it.

 

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Global Marketing

Important international business organizations and their influences–Part I

Globalization brought great opportunities to developing countries and businesses. Among the infrastructure of globalization, International business organizations played a very important role in the process of globalization and the communication between businesses. Moreover, these organizations have also become essential tools for dealing conflicts and developments between their members. As an international marketer, understand these IBOs’ functions and terms is necessary. We are going to introduce some IBOs and logic behind them briefly.

WTO (World Trade Organization)

The World Trade Organization (WTO) is an intergovernmental organization that regulates international trade. The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. It is the largest international economic organization in the world. The WTO deals with regulation of trade in goods, services, and intellectual property between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements, which are signed by representatives of member governments and ratified by their parliaments. Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round (1986–1994).

IMF (International Monetary Fund)

The International Monetary Fund (IMF) is an international organization headquartered in Washington, D.C., of “189 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.” Formed in 1945 at the Bretton Woods Conference primarily by the ideas of Harry Dexter White and John Maynard Keynes, it came into formal existence in 1945 with 29 member countries and the goal of reconstructing the international payment system. It now plays a central role in the management of balance of payments difficulties and international financial crises.  Countries contribute funds to a pool through a quota system from which countries are experiencing balance of payments problems can borrow money. As of 2016, the fund had SDR477 billion (about $668 billion).

Through the fund, and other activities such as the gathering of statistics and analysis, surveillance of its members' economies and the demand for particular policies, the IMF works to improve the economies of its member countries. The organization's objectives stated in the Articles of Agreement are: to promote international monetary co-operation, international trade, high employment, exchange-rate stability, sustainable economic growth, and making resources available to member countries in financial difficulty.

OPEC (Organization of the Petroleum Exporting Countries)

The Organization of the Petroleum Exporting Countries (OPEC) is an intergovernmental organization of 14 nations as of February 2018, founded in 1960 in Baghdad by the first five members (Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela), and headquartered since 1965 in Vienna, Austria. As of 2016, the 14 countries accounted for an estimated 44 percent of global oil production and 73 percent of the world's “proven” oil reserves, giving OPEC a major influence on global oil prices that were previously determined by American -dominated multinational oil companies.

G-20 (The group of twenty)

The G20 (or G-20 or Group of Twenty) is an international forum for the governments and central bank governors from Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, the Republic of Korea, the Russian Federation, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union, (plus Spain as a permanent guest member). Founded in 1999, the G20 aims to discuss policy pertaining to the promotion of international financial stability. It seeks to address issues that go beyond the responsibilities of any one organization. The G20 heads of government or heads of state have periodically conferred at summits since their initial meeting in 2008, and the group also hosts separate meetings of finance ministers and foreign ministers due to the expansion of its agenda in recent years.

Membership of the G20 consists of 19 individual countries plus the European Union (EU). The EU is represented by the European Commission and by the European Central Bank. Collectively, the G20 economies account for around 85% of the gross world product (GWP), 80% of world trade (or, if excluding EU intra-trade, 75%), two-thirds of the world population, and approximately half of the world land area.

Overall, as an international business manager, we should notice that different organizations actually represent different interests and associated parties. There is some obvious one side benefiting settings, moreover, combined with frequently changing relationships within IBOs. To corporations that who involved in the international market, be familiar with rules and backgrounds of IBOs will help them keep their advantage in the market, also have good resources to help them perform better in the market.

 

(All introduction of IBOs are from Public resources)

 

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Global Marketing

The Consumer Goods Forum

In London, some of the globe’s largest firms back a new initiative to improve global supply chains. Led by The Consumer Goods Forum (CGF), “which represents about 400 leading retailers and manufacturers across 70 countries – said it is creating a benchmark to support the development of more socially and environmentally responsible supply chains.” The Consumer Goods Forum has partnered with major retailers and food companies like Kellogg, Walmart, and Nestle to advise companies on more efficient sustainability sourcing and auditing. The Consumer Goods Forum will achieve this goal through the Sustainable Supply Chain Initiative (SSCI), which will align buyers and suppliers on third-party on diverging industry expectations for auditing and certificate schemes. The result will aim of boosting sustainable sourcing and reducing audit duplication and complexity in current sustainability certifications.

 

Using social benchmark criteria based on International Labour Organizations and the United Nations address the following elements:

  • Management System
  • Compliance with international labor standards and national legislation
  • Forced, bonded and prison labor
  • Child labor
  • Freedom of association and effective recognition of the right to collective bargaining
  • Discrimination, harassment and abuse
  • Health and Safety
  • Wages, benefits and terms of employment
  • Working hours
  • Grievance mechanism

A critical aspect of such an audacious plan is the organizations and implementation criteria. “The scheme management criteria are based on the Global Food Safety Initiative (GFSI) scheme management criteria, the Global Sustainable Seafood Initiative (GSSI) governance.” The SSCI will supported by a tough and robust Governance plan, with a clear scope and objective, strict criteria for the use of Logos and claims, and setting and maintaining strict standards. The Consumer Good Forum is planning to achieve this through use accreditation and oversight mechanisms, building relationships with audit firms, follow up action, and data management. A key component of the plan calls for building strong relationships with third party auditing firms and verifying the auditor’s competence, audit protocol, and audit reporting. These areas will become critical as consumers start to look more into sustainability practices to differentiate products and companies. There is an increasing effort by retailers and food manufactures to establish sustainability and other certifications, because government intervention in this area can be differ widely from region to region. By standardizing and control more of the third party auditing and certifications these companies can insure that they maintain control over their industry oversight and prevent stricter measure being imposed by outside forces. It will become increasing important for companies to invest in certification and auditing to protect their brand from external agencies that hold different standards.

 

 

 

https://www.reuters.com/article/us-global-business-supplychains/big-brands-from-nestle-to-walmart-back-sustainable-supply-chain-drive-idUSKBN1HW2LQ

World’s Biggest Retail Brands Back Sustainable Supply Chain Initiative

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Global Marketing

Anheuser-Busch BETTER WORLD, PR Stunt or Corporate Strategy?

Over the past few decades sustainability has become a key focus for many companies; but the term is board and has different meaning from industry to industry. For many companies sustainability focuses on material and packaging of a product, and factors like education, environment, water, or power are not addressed by these sustainability programs.

Recently Anheuser-Busch InBev (AB InBev) launched a program called BETTER WORLD, “Our Dream is to Bring People Together for a Better World. We are building a company to last, brewing beer and building brands that will continue to bring people together for the next 100 years and beyond.” The key component of this strategy is companies view on the environments effects on its product. AB InBEV is reliant on high quality ingredients, which rely heavily on a healthy environment.

To accomplish this task, AB InBev has set rather significant sustainability goals by 2025. For water stewardship, they’ve pledged to have 100% improved water availability and quality. For packaging, they want to have 100% of their products packaging to be returnable or made from recycled content. For the environment and power, they want to purchase 100% of their electricity from renewable sources and reduce 25% their CO2 emission across their value change.[1]

Anheuser-Busch InBev is the world largest beer brewing company and has a 30% global market share, with location in every major market. In 2017, AB InBev produced 612.6 million hectoliters of beer worldwide. [2] When putting that into prospective that’s more water than the two largest man-made lakes in the United States combined, Lake Powell and Lake Mead. When such a large company makes sustainability pledges on such a level, the impacts will be immense. Especially when you factor how they need to accomplish these goals in underdeveloped markets that don’t have well developed infrastructure.

Water will be one of the biggest sustainability issues in future with the first major city, Cape Town, South Africa, on the verge of running out of tap water at some point in 2018. In 2015, AB InBev and SAB Miller had a 98% market share which equivalent to approximately 3 billion liters of beer.[3]  Even the most minor water efficiency gains on production could conserve millions of liters of water per year.

AB InBev sustainability programs covers much more than most typical corporate sustainability program. AB InBev seems to be committed to major issue that will be a major problem in their field in the coming decades. AB InBev is focused on the next 100 year of growth, and tackling these issues will allow the company to remain an industry leader.

[1] http://www.ab-inbev.com/better-world.html

[2] https://www.statista.com/statistics/269114/production-volume-of-anheuser-busch-inbev-by-region/

[3] https://www.drinkstuff-sa.co.za/heineken-grabs-market-share-sabs-nose/

 

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Global Marketing

Bike Sharing

In recent years one of the largest and fast growing trends in urban transportation service has been bike sharing. The bike sharing concepts has seen drastic growth in China and Asia, as a viable alternative to automobiles or public transit. In 2016, there were over 750,000 shared bikes in China; just two years earlier there were fewer than 140,000 worldwide.[1] Bike sharing programs in China have offered a solution to massive growth and expansion of urban communities, and a clean alternative to automobiles.  Original bike sharing platforms have used a physical bike racks or docks for users to pick up and drop of bikes. Today’s proliferation of smart phones has shifted the industry away from docks to virtual drop off and pick up locations. This allows customers to pick up and drop off bikes without the need for docks. The companies benefit from not having to build expensive docking stations at several points across a major city.

 

In recent years as the expansion of the bike service have expand outside of Asian markets into markets like Australia and United States. The culture difference between western and eastern market has resulted in some interesting market dynamics not seen in Asia.   The author Conor Wynn of “ Three reasons why share-bikes don’t fit Australian culture” used the Hofstede Model to identify the difference between Asian, specifically Singapore, and Australian markets. The three main model differences between the culture he identifies were power distance, individualism, and uncertainty avoidance.[2]

Power distance dimension as defined by The Hofstede Model our “‘the extent to which less powerful members of a society accept and expect that power is distributed unequally’.” The higher the power distance the more defined culture hierarchy is in the society and respect for authority. Australia comparatively low power distance; and results in most Australians viewing rules, like drop off locations, as guidelines or suggestions. [3]

 

Individualism as defined by The Hofstede Model our “people looking after themselves and their immediate family only, versus people belonging to in-groups that look after them in exchange for loyalty.” The research shows Australians as considerably more individualistic than Singaporeans; which is common in Asian culture. Asian cultures are more concerned about the society and the long term impacts of their actions. Australians will focus on what benefits them in the short term, resulting in leaving bikes in non-designated areas.

 

Uncertainty avoidance as defined by the Hofstede Model, “can be defined as ‘the extent to which people feel threatened by uncertainty and ambiguity and try to avoid these situations’.” Singapore has one of the lowest uncertainty avoidance and the result is that Singaporeans are much more open to change. The open mindedness of Singaporeans has allowed bike sharing to gain wide acceptance and flourish.

 

The major culture difference between these two markets will have a major impact of the success of the bike sharing. Bike sharing companies will need to look at different ways to modify the behaviors of it western customers to develop good bike sharing habits. In the Wynn article, he suggests making it clear that the user is being monitored and that a penalty could be enforced if the rues are not followed. These problems will only grow larger as the bike share market increase in the West.

[1] “Factors influencing the choice of shared bicycles and shared electric bikes in Beijing” by Andrew A. Campbell, Christopher R. Cherry, Megan S. Ryerson, Xinmiao Yang

[2]Three reasons why share-bikes don’t fit Australian culture” by Conor Wynn

[3] “The Hofstede model Applications to global branding and advertising strategy and research” by Marieke de Mooij and Geert Hofstede

 

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Global Marketing

What’re the differences of business culture behind the “Trade War”?

Recently, the “trade war” between the US and China has become the biggest influencer to the market. From the political perspective, a trade war is a good way to balance both external and internal economic environment for the US. Moreover, the conflicts between the US and China in business isn’t just about the surplus that simple. There are also factors that are deeply driving two countries for their decisions and logic behind the business.

Onion Concept

Geert Hofstede, a well-known cross-cultural and management expert, compares culture to the onion and divides it into four levels. The outermost layer is the layer of physical culture or Symbols, which is the concrete and practical things that people can see and touch, such as clothing, food, housing, and transportation of people; the second layer is heroes. Heroes, in a culture, the character of the heroes that people worship represents the character of most people in the culture. Therefore, understanding the hero's character will, to a large extent, also understand the national character of the hero's culture. The third level is the behavioral culture layer or Rituals. Etiquette is the habit and method of people in the social interaction. It is the unique expression of people and nature in each culture. The innermost layer is the cultural layer of the mind. Including values, aesthetic interests, thinking modes, etc., this is the core part of the culture, and it is also the most profound and difficult part to understand in a culture.

Difference Between Eastern and Western Social Cultural

The traditional Chinese culture admires the collective spirit and selfless dedication. The understanding of individualism in Chinese culture is egoism, and it is a derogatory term as opposed to collectivism. American culture emphasizes individuals. Individual independence, freedom, and equality constitute the basic connotation of American individualism. China is the national standard, and the United States is the human standard. Chinese culture is, by its very nature, a kind of affection culture. It focuses on the collective interests and honors. It cannot tolerate the individual's disengagement from the collective. This determines that the Chinese people attach great importance to “face” and pay attention to dignity. If you express your strong disagreement with Chinese business partners, make them embarrassed, criticize them publicly or show disrespect for them, all these can make them lose face. Allowing the other party to lose face can completely destroy an otherwise promising business negotiation. For this, American culture is different. Between “face” and “interests,” Americans will not hesitate to choose “interests.”

Overall, after knowing differences between these two countries will help us to analyze the implementation of their strategies better. Meanwhile, for the public to better understand the situation, the administration should also explain the situation under different cultures to avoid misunderstanding.

 

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Global Marketing

How to maintain business value under different culture?

 As the globalization goes on, some international businesses received different feedback from their customer in their foreign markets. Few businesses can exactly copy their original business model at their new market. Usually, they have to make changes or give explanations in the new market to fit in the local culture. In some cases, some businesses seemed pointless at their first entrance to a new foreign market. Or the process of fitting the new market takes a long time to complete.

A new idea of medicine

 Recently, many body therapies in the US started to use new methods to treat their patients. Like acupuncture, cupping jar and acupressure. These methods are all traditional Chinese medical treatments with hundreds of years history. Obviously, there is a new market started growing in the US for Traditional Chinese medicine. However, either people hoping to use these ancient methods to treat their conditions or just looking for some unique experience there had no standardization work has been done by Chinese medicine associations or American authorities, which means there is no protection for either business or customers if conflicts happen. Who is going to initiate the standardizing work for the industry and at what level, will eventually influence the future growth of the new medical solution?

A Hollywood movie’s trip to China

  According to public information, China will soon become the biggest movie market in the world. However, China is not the biggest movie producing country, and the place is Hollywood in the American. There is a strong motivation for Hollywood to stay in good connection with China. Unfortunately, China isn’t a pure paradise for Hollywood movies. There are strict culture censorship and high barrel for IP products to export to China. Almost all the Hollywood movie will be edited to a new version to be publicly played in China. Meanwhile, movie companies can’t use their American business model to guide the business in the market. Under the need to fix the gap and maximize their profit, American movie studios formed ventures with Chinese businesses. Either production companies or theater chain management, American movie studios ensured that their resources be fully utilized in the new market, and making their profit out of the market from all possible ways.

To sum up, culture is the guidelines how a foreign market will respond to a product from a different culture. There are social cultures, business cultures, and political cultures, etc. For a business to enter a foreign market, learn and respect the foreign culture should be the priority. Under the same culture agreement and recognition, business will have a chance to explore the new market in a fair way.

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Global Marketing

Sustainability?

Sustainability?

One of the larges and most sought after goals by major brands in todays market is be know for using  “Sustainable Materials.” In todays complex global business environment that is easier said than done. The idea of being label a sustainable brand is fluid in modern culture and few rules regulate the companies from using sustainable in their marketing campaigns. Sustainable practices in today’s business market can range from third-part certificates to training for suppliers. This leaves companies with a wide range of practices that can be deemed sustainable, but have limited positive environmental impacts.

A recent article published by Stanford University, Companies’ Contribution to Sustainability Through Global Supply Chains by Thorlakson, de Zegher and Lambin, ”researchers analyzed 449 publicly listed companies in the food, textile and wood-products sectors,” their conclusions were the following. A majority of sustainable sourcing practices cover only a subcategory of input materials for products. Companies have limited sourcing practices dedicated to health, energy, infrastructure, climate change, education, gender or poverty. Sustainability practice address one part of the supply chain and can neglect the remaining process. An example used in the article was textile factories that produce t-shirts, the remaining processes, from dying the cloth to growing the cotton, remain unchanged. Companies will due to the minimum necessary to use the label of sustainable sourcing, such as Fair Trade certification for only one type of chocolate bar among many that it sells.

 

 

What does this mean in the development of sustain business in the future?

 

The marketing for sustainable business practice must shift in the future. The average consumer is becoming more discerning with their education of a brands actually sustainability. The better sustainable brand will start to work hard in educating the consumer about the amount and quality of sustainability their products offer. The increase in education will result in a more refined and differentiated sustainable product marketing.

 

 

How will this effect international market communication?

 

The sustainable brands that are actively involved in marketing the sustainability of their brands to local markets will have to expand their message to international markets that are less familiar with sustainable brand practices. The other key areas of sustainability missed by major brands, health, energy, infrastructure, climate change, education, gender or poverty, will probably become a larger focus. Developing market or different cultures might prioritize aspects of sustainability differently than developed or western consumers. The major question for sustainable brands will be the decision between standardization or adaptation for its sustainable aspects of its products internationally.

Sustainability internationally will become a critical topic as the world battle effects of pollution, limited resources, and climate change. Brands on the cutting edge of these initiatives will see a larger acceptance into markets and consumers will start to demand more sustainable products from different industries.

 

Sources:

Companies’ Contribution To Sustainability Through Global Supply Chains By: Tannis Thorlakson, Joann F. de Zegher and Eric F. Lambin

Stanford Researchers Reveal Limited Scope Of Corporate Approaches To Social And Environmental Issues By ROB JORDAN