Bancassurance history

The first countries to venture into the field were Spain and France. In the early 70s, ACM (Assurances du Crédit Mutuel) Vie et IARD (life and general insurance) were officially authorized to start operations, a watershed event in the history of insurance. It was their idea to bypass the middleman for loan protection insurance and to insure their own banking customers themselves. They thus became the precursors of what – 15 years later – would become “bancassurance”. For their part, the Spanish began their adventure in the early 1980s, when the BANCO DE BILBAO Group acquired a majority stake in EUROSEGUROS SA (originally LA VASCA ASEGURADORA SA, incorporated in 1968). However, their control was initially only financial, since Spanish law prohibited banks from selling life insurance. This legal barrier was removed in 1991. Today, the top five Spanish bancassurance companies control one third of the market (Vida Caixa, BBVA, SHC Seguros, Aseval, Mapfre Vida) However, from a purely historical point of view, the real pioneers were the British with the creation of Barclays Life in September 1965. This subsidiary was not a great success in the UK, and nor, for that matter, was the concept of bancassurance. On the other hand, the bancassurance concept attracted more than one bank on the continent and the big players very quickly began to set up subsidiaries or joint ventures, thereby introducing the model into their respective countries:
France: in 1971, Crédit Lyonnais acquired the Médicale de France Group and in 1993 signed an agreement giving the Union des Assurances Fédérales Group exclusive rights to sell life insurance through the Crédit Lyonnais network;
Spain: in 1981, the Banco de Bilbao Group acquired a majority interest in EUROSEGUROS SA, an Insurance and Reinsurance company;

Belgium: in 1989, AG – Belgium’s leading insurance company – and Générale de Banque, created Alpha Life. One year later, the big Dutch insurance company AMEV N.V., and VSB, a Dutch bank, went into business together. In the same year, they were joined in the first cross-border merger by AG Group, thereby creating the Fortis Group.
In Europe, Germany and Italy took much longer to get involved, as did Asia, where bancassurance only really began to attract existing Korean banks after government authorization in 2003. In 2004, Fortis signed a contract in Thailand with Muang Thai Group for life and non-life policies, in the process taking a 25% stake in Muang Thai Life Insurance. Fortis, which was seeking to extend the bancassurance model to Asia, already had partnerships in Malaysia and China. On markets where bancassurance is sufficiently developed, like France or Belgium, companies are now moving into a new phase of development:
Countries where bancassurance is only just beginning to emerge: Fortis is a good example, as is Cardif, which is now present in 28 countries (including 6 in Asia);
Consortiums of big companies such as Crédit Agricole and Crédit Lyonnais in France, which makes the new bancassurance operator a front-ranking player, with premium income in excess of €13 billion (special 2004 Argus de l’Assurance ranking, source Predica).
These examples can only become more common with time as companies build on other operators’ experience to introduce the concept of bancassurance into their own countries. However, exporting the bancassurance concept is no easy matter. Setting up in places where markets are already fairly mature and highly competitive calls for significant competitive advantage. Apart from this difficulty, potential exporters will need to be highly adaptable to adjust to local regulatory conditions and consumer habits. Not forgetting, of course, that all the bancassurance tools, e.g. its management systems, will need to be adjusted in line with local realities: IT harmonization can be complex when the newcomer is a company at the cutting edge of Customer Relation Management (CRM) while the local partner is only in possession of the most basic data (surname, first name, date of birth). “The system for selling insurance products in Korea, for example, produces very high wastage levels compared to European countries”, explains Denis Wallerich, Head of Marketing and Development in the World Savings Department at BNP Paribas Assurance. Knowledge of local conditions is essential when starting operations in a foreign country.

Definition of Bancassurance

Bancassurance in French means the selling of insurance products by banks through their own distribution channels. The word is a combination of "banque or bank" and "assurance" signifying that both banking and insurance is provided by the same corporate entity. According to Wikipedia, Bancassurance is the term used to describe the sale of insurance products in a bank. A great many people have tried to come up with a comprehensive definition of the term "Bancassurance". It is often defined as the distribution of insurance products by banks but, in fact, it is much more than that, especially if we consider the history and practices of all the different Bancassurance operators around the world. Bancassurance is ordinary insurance with a more powerful distribution network that has a strong affinity with its private and business customers. Florido (2002) suggested that Bancassurance is defined as, any level of cooperation between banks and life insurance companies in selling their products to their target customers. The executive director of ING Group, Huizinga (1993) observed, “Bancassurance is the distribution”. A number of insurance and financial institutions have researched the spread of banks selling insurance and defined Bancassurance. According to a periodical issued by the Swiss Reinsurance Company (Swiss Re No.7/2002), Bancassurance is defined as the distribution of insurance products by banks. Munich Re (2001) points out that Bancassurance is the provision of insurance and banking products and services through a common distribution channel and/ or to the same client base. The usage of the word picked up as banks and insurance companies merged and banks sought to provide insurance, especially in markets that have been recently liberalized. It is a controversial idea, and many feel it gives banks too great a control over the financial industry.

Financial Service Industry In Saudi Arabia

(BIS Papers No 28, 2006), Foreign banks’ presence in Saudi Arabia can be traced back to 1926, when the Netherlands Trading Company, later to become Algemene Bank Nederland (ABN) began operations. It enjoyed a virtual monopoly until the late 1940s. In 1947, Banque Indo Chine opened a branch, followed by the Arab Bank Limited (1949), the British Bank of the Middle East (1950) and the National Bank of Pakistan (1950). In October 1952, SAMA was established by the Saudi government with primary responsibility for monetary stability. Following SAMA’s creation, the government followed an open and liberal policy and permitted the opening of new foreign bank branches, including Banque de Caire, Banque du Liban et d’Outremer and First National City Bank of New York. This first wave of foreign banks linked Saudi Arabia firmly with the global financial markets and encouraged a competitive domestic environment. During this period, three domestic banks were also licensed. The National Commercial Bank was licensed in 1953; Riyad Bank started operations in 1957 and Al-Watany Bank in January 1958.

By 1975, 10 international banks with 29 branches were present in the Kingdom. These institutions operated as branches of their parent companies but, in 1976, a decision was taken by the Saudi government that these should become incorporated as local banks with majority Saudi shareholdings. The major reason for this important policy decision was that with the boom in oil revenues in the mid-1970s, the Saudi economy expanded and grew very rapidly. This led to sharp rise in demand for banking products and services, which the existing banks found difficult to cope with. The government quickly recognized the need for larger and more sophisticated banks. It also observed that capital invested in the banking sector was insufficient and inhibited banks from investing in branch networks, implementing new technology and training human resources. While the government encouraged all foreign banks to invest more capital, it realized their constraints and also noted that many local investors were ready to make large capital investments for developing the banking system. Consequently, in 1976 the Council of Ministers (the final legislative authority) offered foreign banks operating in the Kingdom a chance to form joint venture banks with Saudi shareholders. This decision required foreign banks to convert their branch operations to Saudi joint stock companies in which they could retain up to a 40% shareholding. In subsequent years, all foreign banks accepted these proposals and formed joint ventures, as there were a number of incentives offered, including the following:

The new joint venture banks were accorded full national treatment at par with fully owned Saudi banks. They were permitted to rapidly expand their branch networks and to access all the benefits and privileges available to local banks.

The foreign partners were offered and encouraged to take on Technical Management Agreements for the operation of joint venture banks. Thus, they exercised considerable management influence over the banks’ affairs and continued to provide human, technical and other expertise and resources.

All joint venture banks were given a tax-free holiday period of five years from the dates of their conversion. These tax-free periods were subsequently extended for an additional five years.
The creation of joint stock Saudi banks whose shares were held by a large number of investors also contributed to the development of the Saudi shares market as bank shares quickly became popular among investors. This further contributed to the increase in value of investments owned by foreign shareholders.

The conversion of foreign bank branches into joint venture banks also had prudential implications as the move permitted all banks to substantially increase their capital base. This helped banks to stay liquid and creditworthy despite the subsequent domestic and international economic turbulences they faced in the 1980s and 1990s.

Following these changes, during the period from 1982 to 2000, no new foreign or domestic banks except one were granted a license, as the government believed that the country was adequately served by the existing branch network. During the 1990s, the banking system made large investments in the payment systems infrastructure and in technology-based customer products and services. These include automated teller machines, point of sales terminals, telephone and internet banking, electronic share trading, etc. Consequently, while the banking system expanded greatly in size and scope of its activities, there was only limited expansion in the banks’ branch network. Nevertheless, the Saudi banking system currently has a presence of more than a dozen foreign bank shareholders from many parts of the world. Their shareholdings range from less than 1% to 40% of a bank’s total capital. In addition, there are international banks with full branch operations.

The Saudi Arabian financial system has always been open to foreign presence. The government has encouraged this policy to promote trade, investment and economic relations, and to attract expertise and technology. It already has considerable foreign investor presence as eight of the eleven banks have substantial foreign ownership. Many of the foreign partners in Saudi joint venture banks have technical management agreements. In past five years, Saudi Arabia has licensed a number of GCC (Gulf Cooperation Council) banking institutions, as a result of a decision of the GCC Summit to permit reciprocal opening of their banking markets. In this connection, Gulf International Bank of Bahrain was granted a license in September 2000 to open a branch in Saudi Arabia. This was followed by the grant of branch licenses to the Emirates Bank International, the National Bank of Kuwait, the National Bank of Bahrain and Bank Muscat. Two of these banks are already operational, while the other three are planning to commence operations over the next 12 months. The government has also decided to allow major international banks from different parts of the world to obtain banking licenses. To this end, branch-banking licenses have been granted to three major international banks: BNP Paribas, Deutsche Bank and JPMorgan Chase. These banks are now in the process of opening their branches. More recently, in August 2005, Saudi Arabia granted branch licenses to two regional banks: National Bank of Pakistan and State Bank of India, which are expected to become operational in 2006. It should be noted that with the opening of the branches of these new foreign banks by end-2006, the number of licensed banks in the Kingdom would have doubled since 2000. The entrance of these institutions into the Saudi banking market should enhance competition, support the transfer of technology, improve financial services in all sectors and create employment opportunities. This is part of the Saudi government’s vision for a dynamic financial sector, which will also benefit from the participation of non-bank investment and brokerage companies under the recent Capital Market Law, and the participation of insurance companies under the new Cooperative Insurance Law.

Saudi Arabia is believed to first know insurance during the 1920s through foreign agencies operating in the eastern and western provinces. In 1931, the government devised a regulation governing insurance on imported goods. Gradually, insurance had increased in the Kingdom during the 1950s, which was mainly driven by the need to have optional insurance to cover risks related to governmental construction projects, however the economic prosperity during the 1970s owing to the soar of oil prices had given solid grounds for the insurance industry to develop. The massive infrastructure projects essentially attracted insurance agencies to the market and the number of insurance providers had multiplied. The insurance industry in the late 1980s and 1990s was affected by the steadiness of government projects, (NCCI, 2002).

(Swiss Re No.7/2006),The Saudi insurance market is emerging with USD 1.4 billion market in 2005 and it projected by many experts to grow to USD 4 billion by 2010. According to a survey conducted by the Institute of Banking on the Saudi insurance market in 2003, the largest share comes from motor insurance, which accounts to 32% in 2003 followed by medical insurance with a share of 22% and property insurance with a share of 17% (Institute of Banking, 2003).

The cooperative insurance is an accepted Islamic concept form of insurance. Essentially, it is founded on mutual-like approach where a group of societal (Maysami and Kwon, 1999). Insurance companies operating in Saudi Arabia is required under the new regulations of 2004 to adhere to this approach. Out of the 70 insurance companies working in the Saudi market, only 15 companies are officially to operate.

While it ranks second in amongst Arab insurance industries, the Saudi insurance market represents 0.5% of the GDP, which is low compared to some regional countries (Arig, 2003). The insurance industry directly employs more than 2,500 employees out of which Saudi nationals represent 36% (IOB, 2003). Generally, the market in KSA is considered underinsured, the fact that attracts many foreign insurers to this market.

Different distribution channels are existent in the Saudi insurance market, which are direct sales, independent brokers, agents, franchise and Bancassurance. Low awareness of insurance and religious beliefs undermines the insurance business in KSA. Consumers tend to buy insurance to comply with regulation necessity by in large.

The Saudi Arabian Monetary Agency introduced the long awaited insurance regulations in 2004. The Cooperative Insurance Companies Control Law establishes a new legal structure for regulation of the insurance industry in Saudi Arabia. Under the Insurance Law, insurance business must be undertaken through a registered insurance company operating in a cooperative manner. The regulation permits foreign insurance companies to enter the Saudi market with shareholder ownership limited to 49%. There was no official framework prior to the regulation that governed insurance operations, except general company law of the Ministry of Commerce and a committee for dispute resolution through arbitration.

Corporate Culture

Many articles and books have been written in recent years about culture in organizations, usually referred to as "Corporate Culture." The dictionary defines culture as "the act of developing intellectual and moral faculties, especially through education." This writing will use a slightly different definition of culture: "the moral, social, and behavioral norms of an organization based on the beliefs, attitudes, and priorities of its members." The terms "advanced culture" or "primitive culture" could apply to the first definition, but not the latter. Every organization has its own unique culture or value set. Most organizations don't consciously try to create a certain culture. The culture of the organization is typically created unconsciously, based on the values of the top management or the founders of an organization. Hewlett-Packard is a company that has, for a long time, been conscious of its culture (The HP Way) and has worked hard to maintain it over the years. Hewlett-Packard's corporate culture is based on 1) respect for others, 2) a sense of community, and 3) plain hard work (Fortune Magazine, May 15, 1995). It has been developed and maintained through extensive training of managers and employees. HP's growth and success over the years has been due in large part to its culture. Another successful company that expends a lot of energy in maintaining its workplace culture is Southwest Airlines. Southwest is the only major airline in the U.S. that has been profitable in each of the last five years. It also has a good reputation as an employer. In an article written in the ACA (American Compensation Association) Journal, Winter 1995 issue, Herb Kelleher, Southwest's CEO, indicated how Southwest maintained its culture:

"Well, first of all, it starts with hiring. We are zealous about hiring. We are looking for a particular type of person, regardless of which job category it is. We are looking for attitudes that are positive and for people who can lend themselves to causes. We want folks who have a good sense of humor and people who are interested in performing as a team and take joy in team results instead of individual accomplishments. "If you start with the type of person you want to hire, presumably you can build a work force that is prepared for the culture you desire...
"Another important thing is to spend a lot of time with your people and to communicate with them in a variety of ways. And a large part of it is demeanor. Sometimes we tend to lose sight of the fact that demeanor - the way you appear and the way you act - is a form of communication. We want our people to feel fulfilled and to be happy, and we want our management to radiate the demeanor that we are proud of our people, we are interested in them as individuals and we are interested in them outside the work force, including the good and bad things that happen to them as individuals."
In both of these examples, the top management of the companies were vigilant about maintaining their cultures. The behavior rules and boundaries are relatively clear and communicated often . However, this is not typical. I believe most organizations operate with a diversity of cultures. This is especially true considering the increasing worldwide mobility of people and cultures and values. There have been some recent models created to attempt to study and classify cultural diversity. One model, the Hofstede Cultural Orientation Model, as reported in the Spring 1995 issue of the ACA Journal, classifies cultures based on where they fall on five continuums.
1. Individual vs. Collective Orientation
The level at which behavior is appropriately regulated
2. Power-Distance Orientation
The extent to which less powerful parties accept the existing distribution of power and the degree to which adherence to formal channels is maintained.
3. Uncertainty-Avoidance Orientation
The degree to which employees are threatened by ambiguity, and the relative importance to employees of rules, long-term employment and steady progression through well defined career ladders.
4. Dominant-Values Orientation
The nature of the dominant values - e.g., assertiveness, monetary focus, well-defined gender roles, formal structure - vs. concern for others, focus on quality of relationships and job satisfaction, and flexibility
5. Short-Term vs. Long-Term Orientation
The time frame used: short-term (involving more inclination toward consumption, saving face by keeping up) vs. long-term (involving preserving status-based relationships, thrift, deferred gratifications).
There's some debate over whether companies should design their personnel policies and reward systems around cultural values. Currently companies tend not to, because of the concern about stereotyping certain cultures.
A popular trend is for companies to "reengineer" themselves, which involves an attempt to change their culture, usually to a team orientation.
As reported in the ACA News (September 1995), studies indicate that the following are necessary for a company to change to a "team culture:"
# Common and consistent goals
# Organizational commitment
# Role clarity among team members
# Team leadership
# Mutual accountability with the team
# Complementary knowledge and skills
# Reinforcement of required behavioral competencies

# Power (real and perceived)
# Shared rewards
The importance of corporate culture is growing as the result of several recent developments. Companies are encouraging employees to be more responsible and act and think like owners. In exchange for more flexible work schedules, employees are expected to always be "on-call." With the demise of more traditional communities (e.g. neighborhoods, etc.), companies are filling employees' need to belong to a community. At the same time companies are encouraging teamwork and the formation of teams. Therefore, organizational leaders shouldn't ignore corporate culture. Rather, it should be addressed in the organization's mission, vision, and goal statements, and emphasized in company sponsored training and company communication . The statements should include the following:
*To be financially successful, etc. (employees want to belong to a successful organization)
*To be accepting of cultural (ethnic) diversity
*To encourage employees to "have a life" outside the company (provide sufficient paid time-off benefits and encourage employees to take the time)

Optimal Marketing By Marcel Corstjens; Jeffrey Merrihue

Marcel Corstjens; Jeffrey Merrihue
Insead; Accenture
3,769 words
1 October 2003
Harvard Business Review
114
0017-8012
English
Copyright (c) 2003 by the President and Fellows of Harvard College. All rights reserved.
When Eric Kim, executive vice president of global marketing operations for Samsung Electronics, joined the company in 1999, he accepted a daunting challenge: build the Korean manufacturer’s brand into a force that would rival industry leader Sony in revenue, profit, and prestige—within five years.
It wasn’t going to be easy. At that point, Samsung was arguably the biggest consumer electronics maker that consumers had never heard about. The company had competed for three decades mainly as a behind-the-scenes supplier of computer monitors and semiconductors to more powerful multinationals. Even as it increasingly went to market with its own branded PDAs, mobile phones, and DVD players, Samsung was considered a low-cost provider, with low visibility to match. Kim needed to make Samsung a household word, and one synonymous with innovation and quality.
He was given a marketing budget of a billion dollars—a great deal of money but, considering how many regions and product categories that sum had to support, not an endless supply. Kim and his team would have to ensure that the company’s budget allocation would reap maximum returns on each dollar spent, which would mean devoting relatively more marketing resources to opportunities that offered significant near- and long-term potential return on investment, and less to opportunities that were bound to generate lower ROI.
But that’s an extremely difficult feat in a global-scale company. For example, one typical multinational consumer-products manufacturer, Johnson & Johnson, currently sells products in 180 categories in 250 countries. To understand where it’s wasting marketing money and where its resources could be put to better use, Johnson & Johnson would have to gather critical data on some 45,000 different product category-country combinations (for instance, pain relievers in Germany and shampoo in the United Kingdom). On a smaller scale, confectioner Mars sells products in 12 different categories in 138 countries, and networking-equipment manufacturer Cisco Systems sells products in 11 categories in 125 countries.
Samsung faced a similarly complex challenge. Selling 14 product categories in more than 200 countries, the company had to optimize its marketing investment across 476 category-country combinations.
This is the story of how Samsung solved that problem. Undertaking an intensive 18-month project, the company gained the ability to determine accurately which markets should receive precious resources and which shouldn’t. It created the processes and achieved the organizational buy-in to act swiftly on that determination. In short, it began earning maximum return on its marketing investment.
Sizing Things Up
As Samsung began the process of evaluating where its marketing resources should be invested worldwide, the first barrier it faced was an information deficit. Management needed to compare not just the growth prospects of diverse categories in diverse countries, but also the growth prospects of the countries themselves, a Herculean task. Samsung would need to analyze critical country-specific statistics—like population level, GDP per capita, and growth forecasts—as well as category data like penetration rates, market share, profitability, media costs, and competitor dynamics.
In most companies, information like this can be found only by searching across many departments, categories, and countries. In some companies, critical pieces of data can’t be found at all. That was the case at Samsung. Data were collected sporadically and analyzed either exclusively within a country to compare categories or exclusively within a category to compare countries. Kim had significant influence in determining product categories’ and countries’ marketing budgets, but 14 Seoul-based category managers made the specific decisions about how category funds would be distributed to individual regions—and each region had its own methods of collecting and analyzing data.
With little, if any, standardization of data, Samsung couldn’t make valid comparisons across regions. There was no way to determine, for instance, how potential sales of DVD players in the United States stacked up against potential sales of camcorders in Japan. It had information for fewer than 30% of the category-country combinations—and even this information was diffuse. Getting to the point where the company could make “apples to apples” comparisons across categories and countries required a systematic—and aggressive—effort to collect, cleanse, and harmonize data.
Samsung’s goal was to place all the data for making informed allocation decisions in a single easy-to-access site: an innovative marketing repository called M-Net. The company gathered critical data for each region in which it operated (for single large countries, such as Austria and Switzerland, or regions that consisted of smaller, related countries, such as the Baltic countries of Latvia, Estonia, and Lithuania). The data included:
Overall population and population of target buyers;
Spending power per capita;
Per capita spending on product categories;
Category penetration rates;
Overall growth of categories;
Share of each of the company’s brands;
Media costs;
Previous marketing expenditures;
Category profitability; and
Competitor metrics.

Samsung also collected benchmark data, which would help the company compare its spending with minimum industry investment thresholds in each country and for each type of media (television, print, radio). Finally, Samsung tapped its internal experts—brand managers, category managers, and the like—and found ways to represent and catalog the knowledge they had accumulated over the years.
Simply gathering all this information was a formidable task, and that was only the beginning of the process. Samsung still had to make sense of it—a tall order given the sheer volume of data, the relationships that had to be accounted for, and the number of variables involved. And the company had not undertaken this data collection simply to get a snapshot of its current opportunities and allocations. It wanted to be able to evaluate all potential allocation scenarios that might yield a higher return on investment.
Clearly, the complexity of the task was beyond the computational powers of the human brain. The next step, then, was for the company to build reallocation technology into M-Net to facilitate managers’ analysis of the data. Using analytic engines—which could draw relevant historical data from Samsung’s corporate systems, including past sales volumes and revenues by product and by country for the past five years—Samsung’s marketing executives were able to conduct comprehensive, in-depth analyses of the results of their recent global marketing investments. Even more important, they could build predictive models that would help identify where and how today’s marketing investments would yield the highest future returns. And, because M-Net included a simulation capability to answer what-if questions, Samsung could test a variety of scenarios by changing any combination of variables. (See the exhibit “Misallocations Revealed” for a sample of M-Net’s output.)
All the category-country combinations Samsung considered to have high potential—some 60% of the total possibilities—were subjected to such analysis. (The lower-priority 40% of category-country combinations were also analyzed, but for these the company relied on informed assumptions to fill in the data fields). Four months into the project, the benefit of undertaking it was quite clear.
Computer-Generated Truths
The analysis revealed that there were serious mismatches between the amount of marketing support some products and regions were receiving and the relative growth and profit potential of those products and markets. Samsung made three critical discoveries:
1. It was significantly overinvesting in two regions that offered relatively low growth potential. North America and Russia, between them, were receiving 45% of Samsung’s global marketing budget. Yet, in considering the product and regional factors mentioned earlier, Samsung determined that those markets’ profit potential merited only 35% of the budget. These markets were important, but their profit potential simply didn’t justify their getting the lion’s share of scarce marketing funds.
2. Samsung was significantly underinvesting in two regions that offered higher growth potential. While Samsung was funneling more money than necessary in support of marketing in Russia and North America, it was underinvesting in two regions that showed more promise: Europe and China. Together, they were receiving 31% of Samsung’s global marketing budget. But, based on profit potential, the optimal marketing allocation for Europe and China was 42%. That would mean a significant increase in the size of their budgets.
3. Three of its categories were siphoning precious marketing funds from several other categories that were important to future growth. Samsung discovered it was devoting more than half of its
total marketing budget to just three categories worldwide—mobile phones, vacuum cleaners, and air-conditioning units. As important as these categories were, that meant that other categories—including camcorders, DVD players and recorders, televisions, color PC monitors, refrigerators, and VCRs—were being starved of the support they needed to realize their significant growth potential. The M-Net analysis revealed that, for optimum results, combined marketing funding for mobile phones, vacuum cleaners, and air-conditioning units should be reduced by approximately 22%, and the bulk of that reduction should be reallocated to support emerging products.
All told, the analysis revealed a stark truth: Serious imbalances in marketing funding were threatening tens of millions of dollars in future profit growth. To correct these imbalances, Samsung would have to reallocate approximately $150 million of its marketing budget from more mature categories and regions to those that offered significant untapped potential. Of course, such a reallocation would not be simple; trade-offs would be necessary. But the analysis gave top managers the confidence to do something they might not have decided to do on their own: reduce the investment in Samsung’s largest market (the United States) to free up the investment necessary to achieve higher European returns. Company executives, who made no secret of their quest to close the gap between Samsung and Sony, had to admit that the existing allocation of marketing funds was not advancing that goal, and Samsung’s largest market no longer offered the greatest growth potential. “It was clear from our analyses that we could no longer allocate marketing resources the way we had in the past,” Kim noted. “There was no way that we could continue to grow without a methodical approach to ensuring that marketing investments were targeted at the highest return opportunities.”
Organizational and Political Hurdles
The results of the analysis gave Samsung executives valuable insight into where they should and shouldn’t spend on marketing. But making change in a complex and far-flung organization is rarely as simple as determining the best logical course of action. To understand Kim’s remaining challenge, consider how marketing resources are usually allocated.
In a typical multinational, there are countries or categories that historically have contributed a large proportion of the company’s total revenues but now are essentially “tapped out” because growth has stagnated or the market has become saturated. Yet, because of the size and past success of the domain, the manager of that business still wields considerable power—and often exercises that power to secure more marketing resources than the domain merits. It’s difficult for senior executives to counter those demands because they almost always lack the objective data to show that the company as a whole would be better served by moving some resources to other areas. The fallback position is usually “bigger gets more”—regardless of future potential.
Fueling the problem is the fact that most companies’ compensation systems reward category and country managers based on local gains, not systemwide optimization. It’s a deeply rooted practice. In many companies, the traditional approach to entering a new market has been to send an executive to a country to build a successful business—and to measure that success by the executive’s profit and loss. After years of this practice, companies find themselves hobbled by dozens of semiautonomous businesses around the world, the leaders of which care little about companywide revenue growth because they continue to be evaluated and compensated only on the performance of their own units. For most companies, the trend has been to move from a geographic model toward one comprising global category teams. But this hasn’t solved the problem; it has simply shifted it. Now, the basis for self-serving internal competition is not the country but the category.
In Samsung’s case, the company did not have to contend with autonomous business units to the

extent that a Procter & Gamble or Unilever does. Samsung adheres to the highly centralized, command-and-control model that is traditional in Asian companies. Nevertheless, the company did have a measurement and rewards system that encouraged category managers to grow their own businesses without regard for others. That, Kim knew, would make it politically difficult to reallocate the marketing budgets in the ways suggested by his team’s computer-aided analysis. Any attempt to reduce a particular category’s budget would surely spark resistance from the category manager, who—under the existing rewards structure—would rightly argue that headquarters was undermining his ability to succeed.
Samsung executives soon discovered that this phase of changing the budget allocation would rely far less on technology and much more on communication, old-fashioned leadership, and people skills. It was absolutely essential to get the business-unit marketing executives to buy into the findings and the prospective changes.
It helped that Kim’s team was more than respectful of these leaders’ knowledge and opinions and was willing to be flexible, to a degree. Despite emphasizing facts, Samsung recognized that it was impractical—and potentially dangerous—to rely on “robot reallocation.” With M-Net, managers for the first time were able to make comparisons that they couldn’t on their own—such as the marketing support for televisions in Brazil versus support for DVD players in France, instead of simply televisions globally versus DVD players globally (which would obscure dozens of lower-level optimization opportunities). But those insights were only a starting point and not the last word. Kim knew that adjustments to conclusions might have to be made, so he provided plenty of room for experience, insight, and intuition to be considered before any changes would be implemented. Samsung conducted 121 meetings and workshops with marketing executives around the company to test and hone its findings. The marketing executives considered the senior team’s fact-based recommendations for the reallocation process and offered their feedback at these events. The workshops also helped the team gain the support of business-unit marketing executives by involving them in the decision-making process.
Once the findings were validated and the changes identified, it was time to roll out the new allocations to the field. Kim knew he was still bound to meet with resistance; after all, the changes would involve taking money from one manager and giving it to another. Most people would perceive a budget reduction as a vote of no confidence, no matter how clear the logic behind it. Therefore, Kim decided that he and his team would personally meet with all those affected to present the case for the companywide benefits of reallocating marketing resources (in terms of overall profitable revenue growth, margin boosts, market share increases, and share price improvement).
“In a project such as this, there’s no substitute for effective communication when it comes to implementing change,” Kim told us. “We knew that it would be difficult, if not impossible, to get people to accept our new approach unless we sat down with all the key individuals to thoroughly explain what we were doing, why we were doing it, and how it was critical to the future success of Samsung globally. It was also important to gain input and make improvements based on the considerable knowledge and experience of the regional and category managers.”
Indeed, Kim’s road show proved to be instrumental in implementing the allocation changes smoothly. The field managers appreciated upper management’s honesty and willingness to take the time to explain what was being done and why, as well as the opportunity to ask questions and make recommendations. Given Samsung’s command-and-control culture, it would not have seemed out of place if the corporate office had simply mandated the changes and expected compliance. Perhaps that’s why a more personal touch was so effective in making the category and country managers part of the process; by enlisting their support Samsung minimized their resistance.

Samsung also helped its cause by recognizing that it had to develop new ways of evaluating, compensating, and developing employees affected by the changes. How would the North America manager be rewarded if his budget were cut in half? The company certainly couldn’t expect the same rate of growth in that market. Samsung executives recognized the changes by setting lower targets for those managers who would be losing funds and higher targets for those gaining resources. And, finally, to ensure that people losing resources did not view the change as a criticism of their performance, the company encouraged the rotation of marketing executives through a variety of jobs—giving key executives the chance to work in different market situations, including lower- and higher-growth markets of various sizes.
The World’s Fastest-Growing Brand
The marketing allocation project, combined with the launch of a new global branding campaign in 2001 and the introduction of attractive new products, has generated considerable benefits for Samsung—not the least of which are continued growth in key countries and categories and enhancement of the Samsung brand. Samsung is among the top five leaders in the global market for mobile phone handsets. It has also made significant gains in the markets for camcorders, flat-panel computer monitors, DVD players and recorders, and digital TVs—all categories that Sony currently leads. In categories not dominated by Sony, Samsung’s market share performance is equally, if not more, impressive: from tenth to third in digital music players, from eighth to second in LCD monitors and TVs, and from unranked to eighth in portable DVD players.
Samsung also has experienced marked increases in its global brand equity. According to a recent study by marketing consultancy Interbrand, Samsung now has the fastest-growing global brand. Between 2001 and 2002, the company’s brand value increased 30% to $8.3 billion, moving from 42nd to 34th place worldwide. As reported by BusinessWeek, during that period, Sony’s brand value dropped 7%, from $15 billion to $13.9 billion—good enough for 21st place but clearly affected by Samsung’s efforts.
Annual sales at Samsung rose 25% between 2001 and 2002, from $27.7 billion to $34.7 billion. Net income also increased sharply during that period, from $2.5 billion to $5.9 billion.
But are such results sustainable? Samsung thinks so; the company is committed to institutionalizing its new approach to marketing. It has invested in the people and systems necessary to ensure that analytic rigor is part of all future marketing-allocation decisions, so that the company can continuously upgrade current and expected profit returns on its various marketing investments around the world. This means that Samsung can make real-time adjustments to its plans as opportunities evolve—rather than investing the same money year after year in stagnant categories or countries or overinvesting in promising young countries and categories at the expense of cash cows.
Marketing Science Applied
Misallocation of marketing resources is endemic to many large companies—particularly those producing branded consumer products. In interviews with senior executives at more than 20 leading global companies, we found widespread frustration on the matter. Many complained that determining where and how marketing budgets should be allocated—let alone making the necessary changes—seemed virtually impossible.
It’s not impossible. Samsung’s experience shows that a company willing to take a more rigorous and analytical approach can pinpoint its most promising opportunities to sell specific product categories in specific countries—and determine how best to allocate scarce marketing resources to support them. It also shows that the inevitable organizational and political issues that come

with budget reallocations need not derail such an approach. A company must anticipate the impact of the changes, then effectively eliminate the organizational barriers and help those affected understand the reasons for the changes and gain their support for the program.
Finally, Samsung’s results underscore the value of aiming high with any attempt to optimize marketing investments. Some companies have deployed strong systems at the country level, where a country manager can easily move funds from one category to another. This typically has resulted in local improvements—but too often at the expense of company growth. Samsung not only performed its analysis globally, it also was successful in moving funds to the highest-opportunity countries and categories. This wouldn’t have been possible without the involvement of the team led by Eric Kim; as the company’s top marketing executive, he had the ability to wield influence across category, region, and country boundaries. As a result, Samsung’s benefits were much greater than they would have been had the effort been limited to a single region or a handful of categories.
Not long after Kim took the reins as Samsung’s global marketing chief, the company’s chief financial officer challenged him to prove the value of its $1 billion marketing investment. With his analytical approach to marketing allocation, Kim met that challenge. But more important, Kim’s fact-based marketing initiatives are helping to guide Samsung’s future marketing investment to build on the progress the company has already made. If Sony isn’t looking over its shoulder yet, it should be.
Misallocations Revealed
Samsung’s M-Net system produces graphical depictions of the company’s allocation challenges. In this chart, we see the total marketing budget for “Product 1.” The horizontal axis shows how Samsung had planned to divide its investment in that product category across the countries in which it is sold. For example, 15% was to be devoted to marketing it in Italy. The vertical axis represents M-Net’s recommendations—for instance, that 22% of these dollars should go to the Italian market. (Bubble size reflects M-Net calculations of a market’s relative profit potential.) Every bubble above the dotted line, like the one for Italy, represents an area where Samsung should devote more resources than it planned to. Opportunities below the line should have their budgets cut. Charts like this one helped Samsung discover misallocations—and, just as important, convince affected managers to accept change.

Business Process Reengineering (BPR)

BPR was first introduced to the business world by Frederick Taylor when he published his article The Principles of Scientific Management in the 1900s. Following on from the earlier ideas of Time and Motion Studies pioneered by Frank and Lillian Gilbreth, Scientific Management was the first step to the introduction of BPR which turned out to be unsuccessful due to the many issues which were not resolved[1].Michael Hammer and James Champy introduced their book "Reengineering the Corporation", which gave the birth to the term business process reengineering.

Business Process Reengineering (BPR), also know as Business Process Redesign[2], Core Process Redesign[3], Process Innovation[4], or Business Engineering[5], is a concept within the field of change management. Numerous definitions of BPR are found in the literature. However, all definitions agree that the processes start with the customer and their satisfaction. The most cited definition of a business process is probably Hammer & Champy definition. They defined BPR as "'the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance such as cost, quality, service and speed..."[6]. They have characterised the tree driving forces behind reengineering as the three Cs, which are Customer, Competition and Change. However, Johansson et al added three more, which are Cost, Technology and Shareholders[7].

Organizations benefit from BPR in three ways: cost savings, time savings, and reductions in defects. The two cornerstones of any organization are the people and the processes. BPR is the key to transforming how people work. What appear to be minor changes in processes can have dramatic effects on cash flow, service delivery and customer satisfaction. The following organizations are an example[8]:
1.Citibank increased profits by over 750 percent by reengineering a credit analysis system.
A reengineering effort at CIGNA RE sped up document processing, even though the number of employees was reduced almost by half.
2.Kodak reduced the time required to develop a camera by more than half. Given the compelling benefits of a successful reengineering effort.
It is not difficult to understand why so many companies are pushing reengineering efforts.

The overriding objective is to achieve a step change in performance. Performance improvement relates to internal efficiency and competitive advantage. Internal efficiency is achieved by examining how we can run the business with fewer hand-offs, barriers, formal communications and less waiting time. Competitive advantage often involves working with the customers on assisting them with their business so that you can both be more effective. BPR has three key target categories[9]:
● Customer Friendly: One of the main goals of introducing BPR is to get a competitive edge and that can only be gained by providing the customers more than what the others in the market are asking for.
● Effectiveness: Whatever product or service the business might be providing to the customer is successful, and then the customers would automatically want to buy that product or service again.
● Efficiency: How efficient is the company that is manufacturing the product before introducing it to the market to minimise costs? This is one of the key categories that are believed to be more important than any others.

There are two approaches to BPR that can be found in the literature. The methodology originally prescribed by Hammer and Champy is a top-down approach[10], which suggests that the BPR team should focus on determining how the strategic objectives of the organization can be met without letting its thinking be constrained by the existing process. The other approach outlined by Harrington is a bottom-up approach which advocates modelling the existing process to gain understanding of it, and then streamlining it appropriately to meet the strategic objectives[11]. The focus is on changing the as-is process by identifying opportunities for improving it. In practice, a BPR team will ordinarily need to adopt a mixed approach. If the top-down methodology is used as the basis, there is still a need to understand the current functionality and to define carefully the transition path from the current to the preferred future process. With a bottom-up methodology, BPR teams can spend too much time on detailing the current process and lose innovative thinking. A mixed approach would encourage the team to consider high-level changes without being cluttered by the details of the current process.


According to Hammer and Champy, BPR is about beginning again with a clean sheet of paper[12]. In other words, that in implementing BPR the history should be ignored and we should concentrate only on the future. However, the ‘past’ must be forgotten but a particular framing of the ‘past’ is to live on in the memory of an infinitely superior reengineered present/future. Furthermore, Hammer and Champy’s prescriptions are replete with such contradictions and as the language of ‘one dimensional thought and behaviour’[13], reengineering ‘closes itself against any other discourse’ and seeks to ‘assimilate all other terms to its own’[14]. Therefore, is it assumed that after the implementation of BPR both corporate and individual identity will be as one and interests will be the same? By looking to the proposition, we will find that the work of Hammer and Champy support the proposition, which based on partially remembering the past to form the present as success. However, McCabe proved in his work that such subjugation is unlikely because employees do not passively imbibe representations of the past/present. The human factor should be taken seriously in consideration to implement a successful BPR. According to McCabe, Memory is to be selectively wiped. The memory of antagonism and inequality is to be rubbed out whilst the memory of inefficiency and inflexibility is to be retained so that the new will seem all the better. Yet the intense disciplinary control over work, large scale redundancies, and temporary and insecure forms of employment, contradict and undermine such a partial memory loss. According to McCabe, these conditions fan the flames of memory just as the reproduction of antagonistic and bureaucratic relations compound the sense in which the past lives on. Therefore, BPR presents a big problem than some managers and gurus seem to assume. This should take us to the proposition that seems to ignore this problem.

According to Knights and Willmott, analysts have generally failed to expose relations of power and domination that underpin the construction and reproduction of what may appear to be a "shared system of norms and values" within work organizations. Whether the focus has been upon the organization as a whole or upon occupational' 'communities" located within it[15], understanding has generally been limited to perceiving corporate cultures as founded upon mutuality and consensus, not upon coercion and compliance. The tendency to overlook (or naturalize) asymmetries of power in organizations has been most transparent among writers who have promoted "culture" as the most recent panacea for the managerially defined problems of commitment and competitiveness. The studies of organizational culture and symbolism might usefully attend to forms of power that categorize or differentiate individuals, mark out their identity (e.g., as managers), and generally subject them to "a law of truth" that those in power recognize and others are obliged to recognize in them[16] . From this perspective culture is as lifeless and mechanical as the concept of reengineering itself – subject to the dictates of clock time, precision and schedules. It reflects a belief that boundaries can be drawn whereby staff will forget the past and even their everyday life experiences. However, people can not forget their past and life experience. Therefore, we should not adopt any thing that incompatible with lived experience in implementing a BPR programme. As proved in McCabe work, within such simplistic prescriptions lie the seeds, if not the bloom, of continuity, diversity and dissent; for culture is a creative living process rather than a programmable destination to be arrived at. According to Knights and Willmott, culture is explored in terms of how it emerges from constant processes of contest and struggle whilst recognizing that ‘unity and division’ may exist ‘in tandem’[17]. The approach rejects an understanding of culture as stasis whereby change is seen as a shift from one discrete end-state to another (i.e. past, present, future)[18]. Of course, gurus and practitioners prefer end-states because they are easier to communicate, extol and understand. Employees, and culture, are not objects that can be switched from one state to another but are continually in process. Davenport offers more pragmatic approach towards BPR as he is stressing that the management should take human ‘enablers’ into account[19]. More recently, Davenport and Stoddard have revised their position and have questioned whether a ‘clean slate’ approach towards reengineering can be adopted[20]. The problem according to them is the cost of designing an entirely new approach. For these gurus, ‘cost’ is the only limitation, what is not in question is whether management is capable of exercising power over others, so as to deliver intended outcomes. Change is seen as the transitory phase between two discrete domains, of a manufactured past and present, but this fails to grasp the interconnectedness of culture as lived experience. Their understanding of time ‘does not live or breathe’ or recognize that people live in such a way that ‘encompasses memories in the present of the past as well as expectations and desires in the present of the future’[21]. Reengineering then, traffics in a mechanical view of the world, where memories can be re-written or replaced like so much water or oil. Therefore, studying the organizational culture is something important to have a proper implementation to any BPR programme. The proposition that we are discussing should take this factor in consideration.

However, the most serious problem in reengineering business processes is resistance to change. Many people will go to great lengths to avoid adapting to new ideas and ways of doing things. Hammer and Champy see poor management and unclear objectives as the main problems to Business Reengineering success. Only just recently they acknowledge people’s resistance as a major obstacle to Business Reengineering`s successful implementation[22]. According to Wellis and Rick, It is argued that management have ‘concentrated on processes’ when introducing BPR and have ‘ignored the people who make them work’[23].The prescriptive reengineering literature is replete with ‘cultural’ messages, however, its approach towards, and understanding of culture, is poorly theorized and inadequately developed.

To summarized, Hammer and Champy supported the proposition, which based on partially remembering the past to form the present as success. However, McCabe proved in his work that such subjugation is unlikely because employees do not passively imbibe representations of the past/present. The human factor was ignored on the work of Hammer and Champy. However, Davenport did offer more pragmatic approach towards BPR as he stressed that the management should take human ‘enablers’ into account. More recently, Davenport and Stoddard have revised their position and have questioned whether a ‘clean slate’ approach towards reengineering can be adopted, which was adopted by Hammer and Champy. This should take us tot that human factor should be taken seriously in consideration to implement a successful BPR. The approach of clean sheet of paper is really questioned because people can not forget their past and life experience. The memory is not just the reproduction of antagonistic and bureaucratic relations compound the sense in which the past lives on. Therefore, BPR presents a big problem than some managers and gurus seem to assume. Also, we have found out that analysts have generally failed to expose relations of power and domination that underpin the construction and reproduction of what may appear to be a "shared system of norms and values" within work organizations. The proposition failed to grasp the interconnectedness of culture as lived experience. We should not adopt any thing that incompatible with lived experience in implementing a BPR programme. The human factor and the studying of organizational culture are something important that should be taken in consideration in the implementation of a BPR programme.
[1] http://www.answers.com/topic/business-process-reengineering
[2] Davenport, T.H. & Short, J.E. (1990). The New Industrial Engineering: Information Technology and Business Process Reengineering. Sloan Management Review, 31(4), Summer, 11- 27.
[3] Kaplan, R.B. & Murdock, L. (1991). Core Process Redesign. The McKinsey Quarterly, 2, 27-43.
[4] Davenport, T.H. (1993). Process Innovation. Harvard Business Press, Boston, MA.
[5] Meel, J.W. Van & Bots, P.W.G. and Sol, H.G. (1994). Towards a Research Framework for Business Engineering. In Classon (1994).
[6] Hammer, Michael & James Champy (1993), Reengineering the Corporation: A manifesto for business Revolution, Harper Business, New York.
[7] Johansson, H.J., McHugh, P., Pendlebury, A.J., and W.A. Wheeler III. 1993. Business process
reengineering: breakpoint strategies for market dominance. Chickster, UK: Wiley.
[8] http://www.findarticles.com/p/articles/mi_m4153/is_n3_v52/ai_17178856/print
[9] http://en.wikipedia.org/wiki/Business_process_reengineering
[10] Hammer, Michael & James Champy (1993), Reengineering the Corporation: A manifesto for business Revolution, Harper Business, New York
[11] Harrington, H.J.; Business Process Improvement, McGraw-Hill, USA, 1991
[12] Hammer, Michael & James Champy (1993), Reengineering the Corporation: A manifesto for business Revolution, Harper Business, New York
[13] Marcuse, H. (1964). One-Dimensional Man. Boston, MA: Beacon Press.
[14] McCabe, D. (2004) 'A Land of Milk and Honey'? Reengineering the 'Past' and 'Present' in a Call Centre' Journal of Management Studies 41:5,827-856.
[15] Van Maanen, J., and Barley, S. (1984) "Occupational Communities: Culture and Control in Organisations." Research in Organisational Behaviour, 6,287-365.
[16] Foucault, M. (1982) "The Subject and Power." Critical Inquiry, 8, 777-95.
[17] Young, E. (1989). ‘On the naming of the rose: interests and multiple meanings as an element of
organizational culture’. Organization Studies, 10, 187–206.
[18] McCabe, D. (2004) 'A Land of Milk and Honey'? Reengineering the 'Past' and 'Present' in a Call Centre' Journal of Management Studies 41:5,827-856.
[19] Davenport, T. H. (1993). Process Innovation: Reengineering Work through Information Technology. Boston, MA:Harvard Business School Press.
[20] Davenport, T. H. and Stoddard, D. B. (1994). ‘Reengineering: business change of mythic proportions’. MIS Quarterly, June, 121–7.
[21] Jaques, E. (1990). ‘The enigma of time’. In Hassard, J. (Ed.), The Sociology of Time. London:
Macmillan.
[22] Davenport, T.H., 1996. Business Process Reengineering: The Fad that Forgot the People. In: Fastcompany Magazine World Wide Web
[23] Wellis, R. and Rick, S. (1995). ‘Taking account of the human factor’. People Management, October,
30–4.

Culture is pivotal to effective international marketing

Whether a firm is pursuing a national-market or global-market strategy, culture analysis is interested in increasing the effectiveness and efficiency of its marketing programs within and across foreign markets. It must therefore know to what degree it can use the same product, pricing, promotion, and distribution strategies in more than one market. Unfortunately, there is a conflict in implementing such activity effectiveness and efficiency. Market effectiveness is achieved by adapting marketing programs to the local culture, while doing so will add additional marketing and production costs. Efficiency, on the other hand, is achieved by minimizing marketing program changes across markets. Therefore, the firm minimizes marketing and production costs and strengthens its competitiveness with its competitors. The economic and competitive implications of both goals need to be taken into account when making program adaptation decisions. Both goals depend on understanding the cultural context of each market and the degree to which they are culturally similar. Therefore, global companies need to develop a capability to conduct cross-cultural analysis. Such a capability can help these companies optimally balance the competitive benefits to be derived from effectiveness and efficiency.
To question the usefulness of what has been written to date by academics on the impact of culture on international marketing appear unfair after this review. There is obviously little firm ground on which to stand, and little way, for example, to tell an inquiring business person what she or he should do with her/his price or her/his packaging should she/he attempt to enter the Ruritanian market[1]. Yet, what has so far been done is far from useless since at least it sensitibilizes the interested party to the relevance of the cultural dimension, and points to some areas of concern in terms of specific cultural variables and their likely incidence on marketing variables.
There is no doubt that the international marketing process do faces a large set of variables as it take place over different countries and it does act in different environments. One of the most determinant environments to the success of the international marketing process is Culture, which hold the reason for many human acts and behaviour. Reaching to that point international marketer should study deeply culture treaties of a country the company is planning to act in. so that special amendments in the organization overall plans and actions is made to act in accordance with the new market variables.
[1] Jean-Emile Denis,” Culture and International Marketing Mix Decisions”, University of Geneva

Culture Dimensions

Cultural dimensions are the mostly psychological dimensions, or value constructs, which can be used to describe a specific culture[1].More precisely:
Cultural dimensions are sometimes not specified. Culture refers to a broad category of variables which are not defined
Culture is sometimes presented as being the factor responsible for cross-national differences which are otherwise unexplained.
Cultural dimensions are only loosely identified. For instance, some authors will use almost interchangeably terms like values, attitudes or norms.

In turn, marketing dimensions may not be defined precisely enough. For instance, an assessment of the cultural impact on distribution cannot be performed meaningfully in broad terms. Even if these concerns were properly addressed, a key issue would remain: how to identify commonly shared traits in societies before attempting to investigate their impact on marketing variables? Existing studies presume that the differences observed in the measurement of cultural variables between countries reflect real differences in commonly shared attributes in each country[2]. This may not necessarily be the case. It should first be established that commonly shared traits of each country have been isolated. As a matter of fact, Inkeles and Levinson in their discussion of national character warn that "...it appears unlikely that any specific personality characteristic or any character type will be found in as much as 60-70 percent of any modern national population[3]." One would suspect that the same would hold true with respect to cultural traits relevant to consumption behaviour. Unfortunately, the dangerous road to national stereotyping is paved with plenty of statistically significant yet irrelevant findings.
[1] http://en.wikipedia.org/wiki/Cultural_dimensions
[2] Jean-Emile Denis,” Culture and International Marketing Mix Decisions”, University of Geneva.
[3] Inkeles, Alex, and Daniel J. Levinson (1969), "National Character: The Study of Modal Personality and Sociocultural Systems", in G. Lindsay and E. Aronson (Eds.), The Handbook of Social Psychology, Vol. 4, Addison-Wesley, Reading, MA.

The impact of Culture on International Marketing Strategy

There is culture influence on marketing strategies and this could be observed from many examples. Standardization or adaptation, these are the two extreme of the international marketing strategies. In the following, I will try to give examples of the culture impact on the main component for the marketing strategy:
1 Product
According to Dubois[1], marketers designing product strategies have to take the impact of culture into account mostly in the area of positioning, product presentation, and packaging. How marketing efforts interact with a culture determines the success or failure of a product. This strategy could be impacted by the material culture of the host country. For example, General Foods squandered millions trying to introduce packaged cake mixes to Japanese consumers but they failed because they have not considered the culture differences. The company failed to note that only 3% of the Japanese homes were equipped with ovens[2]. Anther example, Campbell Soups lost $30 million in Europe before it accepted the idea that British and U.S. soup consumers were different in three important ways[3]:
1. British soups consumers have different taste preferences. Campbell soups made no attempt to modify the taste of their soups for the British palate
2. British soup consumers had not been educated to the condensed soup product concept. Because of the smaller can size.
3. British soup consumers did not respond the same way to U.S. advertisement as U.S. consumer did.
If we talk about a religion like Islam for example, we will notice that it is forbidden to eat ham or drink alcohol. This should be known by any international company before they start to offer such products in any Moslem country. Therefore, standardisation of the marketing strategy can not works all time and the culture influence should be taking seriously in consideration
2 Promotion
Advertising and promotion require special attention because the play a key role in communicating product concepts and benefits to the target segment. Culture is subjective people in different cultures often have different ideas about the same object. What is acceptable in one culture may not necessarily be so in another. Companies can run the same advertising and promotion campaigns used in their home market or change them for each local market, a process called communication adoption. However, if the adoption will cover the product and the communication it is called dual adoption. Communication could be impacted by:
· Language
Procter & Gamble’s Crest toothpaste initially failed in Mexico when it used the U.S. campaign[4]. Mexicans did not care as much for the decay-prevention benefit, nor did scientifically oriented advertising appeal to them. Also, A U.S. toothpaste manufacturer promised its customers that they would be more “interesting” if they used the firm’s toothpaste. What the advertising coordinators did not realize, however, was that in Latin American Countries “interesting” is another euphemism for “pregnant”. Anther example from Spain, Chevrolet’s Nova translated as “it doesn’t go.” A laundry soap ad claiming to wash “really dirty parts” was translated in French-speaking Quebec to read “A soap for washing private parts[5].”
· Food
Chase and Sanborn met resistance when it tried to introduce its instant coffee in France. In the home, the consumption of coffee plays more of a ceremonial role than in the English home. The preparation of “real” coffee is a touchstone in the life of the French housewife, so she will generally reject instant coffee because its causal characteristics do not “fit” into the French eating habits[6].
· Values
In 1963, Dow Breweries introduced a new beer in Quebec, Canada; called “kebec” the promotion incorporated the Canadian flag and attempted to evoke nationalistic pride[7]. The strategy backfired when major local groups protested the “profane” use of “sacred” symbols.
· Religion
England’s East India Company once caused a revolt when it did not modify a product[8]. In 1857, bullets were often encased in pig wax, and the tops had to be bitten off before the bullets could be fired. The Indian soldiers revolted since it was against their religion to eat pork. Hundreds of people were killed before order was restored. In Saudi Arabia, there are no advertising for contraceptive products because of the religion[9].
· Social Norms and time
A telephone company tried to incorporate a Latin flavour in its commercials by employing Puerto Rican actors. In the ad, the wife said to her husband, “run and phone Mary. Tell her we will be a little late.” This commercial has two major cultural errors. Latin wives seldom dare order their husband around, and almost no Latin would feel it necessary to phone to warm of tardiness since it is expected
3 Price
With regard to pricing, Buzzell argues that three dimensions of culture are at work[10]:
1. Values which affect the propensity to bargain
2. The legal framework which determines the extent to which fixed resale prices are to be allowed
3. Customs which command margins taken by trade intermediaries
These dimensions affect the overall price level of a product. A Gucci handbag may sell for $120 in Italy and $240 in USA. Why? Gucci has to add the cost of transportation, tariffs, importer margin, wholesaler margin, and retailer margin to its factory price. The acceptance of the price is impacted by the culture as you can’t sell a can of Coca-Cola for 75 cents on poor countries.

4 Place
Distribution channels within countries vary considerably[11]. Selling soap in Japan is different than Africa because of the local distribution systems. The size and the character of the retail units are different from country to anther.

The Development of Global Culture Rapid changes in technology in the last several decades have changed the nature of culture and cultural exchange. Local culture and social structure are now shaped by large and powerful commercial interests in ways that earlier anthropologists could not have imagined. Early anthropologists thought of societies and their cultures as fully independent systems. But today, many nations are multicultural societies, composed of numerous smaller subcultures. The impact is there and it is pivotal.

[1] Dubois, Bernard (1987), "Culture et marketing", Recherché et Applications en Marketing, 11-1, 47-64.
[2] Sally A. Martin Egge,” Creating an environment of mutual respect within the multicultural workplace both at home and globally” Journal of Management Decision , Vol. 37, No. 1 ( Feb., 1999), pp. 24 – 28.
[3] http://www.foodcontamination.ca/fsnet/1996/9-1996/fs-09-23-96-01.txt
[4] Kotler, Marketing Management, The Eleventh Edition p385, Prentice Hall Publications
[5] Richard P. Carpenter and the Globe Staff. “What they Meant to say was….,”Boston Globe, August 2, 1998, p.M6.
[6] Hugh Dauncey (2003),” French Popular Culture: An Introduction”, US: Oxford University Press.
[7] Frederick Elkin, “Advertising Themes and Quiet Revolutions: Dilemmas in French Canada”, American Journal of Sociology, Vol. 75, No. 1 (Jul., 1969), pp. 112-122
[8]http://www-scf.usc.edu/~efinnega/hist.html
[9] Ira M. Wasserman and Chikako Usui, “Indicators of contraceptive policy for nations at three levels of development”, Journal of Social Indicators Research, Volume 12, Number 2 / February, 1983, pp. 153-168.
[10] Buzzell, Robert D. (1968), "Can You Standardize Multinational Marketing?", Harvard Business Review, November-December, 102-113.
[11] Kotler, Marketing Management, The Eleventh Edition p400, Prentice Hall Publications

Characteristics of culture

Anthropologists commonly use the term culture to refer to a society or group in which many or all people live and think in the same ways. Likewise, any group of people who share a common culture—and in particular, common rules of behaviour and a basic form of social organization—constitutes a society. Thus, the terms culture and society are somewhat interchangeable[1].

However, the main characteristics of culture are:

1. Culture is prescriptive: It prescribes that kinds of behaviour considered acceptable in the society. Same of these characteristics create problems for those products not in acceptable within the consumer’s cultural beliefs.
2. Culture is socially shared: Culture cannot exist by itself as all the members of a society must share it.
3. Culture is learned: Culture is something that can not be inherited genetically but it must be learned and acquired.
4. Culture facilitates communication: Culture is one useful function to facilitate communication. However, culture may also impede communication across groups because of a lack of shared common culture values. This is one reason why a standardized advertisement may have difficulty communicating with consumers in foreign countries.
5. Culture is enduring: because culture is shared and passed along from generation to generation, it is relatively stable and somewhat permanent. Old habits are hard to break, and people and people tend to maintain its own heritage in spite of continuously changing world.

Culture is based on hundreds or even thousands of years of accumulated circumstances. Each generation adds something of its own of culture before passing the heritage on to the next generation. However, culture is constantly changing it adapts itself to new situations and new sources of knowledge.The work of Hofstede (1994) and Trompenaars and Hampden-Turner (1997), although criticised in terms of methodology and recency, does illustrate major cultural differences between emerging and developed markets[2]. Schutte and Ciarlante compared Hofstede’s and Trompenaars dimensions between Asian and Western markets and found that of Hofstede’s dimensions, Asian markets reflected higher power distance, and greater collectivism than in western markets[3]. They found with Trompenaars dimensions that Asian markets reflected more focus on relationships, on group rights, on the indirect expression of emotions and a view of status being due to position rather than to individual efforts. Subsequently Hofstede and Bond came up with an Asian cultural dimension of Confucian Dynamism[4]. These findings were supported by another study that compared the fourteen least developed with the fourteen most developed countries by Fletcher and Melewar[5].

[1]http://www.wowessays.com/dbase/ad3/ler19.shtml
[2] Richard Fletcher, The Impact of Culture and Relationships on International Marketing at the Bottom of the Pyramid, University of Western Sydney
[3] Schutte, H. and Ciarlante, D., 1998. Consumer Behaviour in Asia. Macmillan Business Press, London
[4] Hofstede, G. 2001. Culture’s Consequences, Comparing Values, behaviours, Institutions and Organizations Across Nations, 2nd edition, Sage Publications, Thousand Oaks, CA.
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