Review and Discussion Questions

Enhance your understanding further with the following review and discussion questions.

Review questions

1. Describe the three main legal systems: common law, civil law, and theocratic law.

Answer: 

a. Common law – The common law system relies on legal precedents and usage traditions to form the basis of law. It can be found in the United Kingdom and in former British colonies. The written law applies; however, the interpretation by the judicial system coupled with the implementation of the law gives the written law meaning.

b. Civil law – The most prevalent legal system, civil law, utilizes statutes based on written words or a legal code. It can be traced back to its introduction as the Roman Empire’s Justinian Code. Laws are written to be comprehensive with clear instructions for how to handle exceptions. Precedent or usage plays no role.

c. Theocratic law – Legal systems based on religious writings practice theocratic law. Islamic law provides an example. The written Islamic law is the Sharia. The interpretation of the law or Islamic jurisprudence is called fiqh. Theocratic Law is the least common legal system worldwide.

2. Define intellectual property and name the treaty that seeks to protect intellectual property.

Answer: 

a. Intellectual property consists of creations of the mind or the intangible property that results from thought. Examples include a song by a popular singer, a new type of electrical plug outlet, or a more efficient process for protecting an individual’s identity.

b. Madrid Protocol, is an international treaty that allows a company or trademark owner to seek registration and protection in a number of countries by filing a single application.

3. Describe copyrights, trademarks, and patents.

Answer: 

a. Copyrights are granted to authors of creative works, such as songs and novels.

b. Trademarks apply to the symbols, words, phrases, and logos that are attached to brands. These brandmarks identify products to consumers and can only be used by the companies that own them.

c. Patents apply to inventions, which range from business processes to physical products, or unique improvements to either one.

4. What is counterfeiting?

Answer: Counterfeiting is a close replication of existing products that are branded or protected in some way. Intellectual goods, luxury goods, and electronic goods are often counterfeited.

5. Describe corporate spying and reverse-engineering.

Answer: 

a. Corporate spying or espionage involves a company intentionally stealing the designs or business processes of a competitor.

b. Reverse engineering is when technical experts reverse-engineer a product or create a replica by breaking down the original and deducing how to manufacturer it. They will deconstruct the original product in order to duplicate it.

6. What is the relationship between intellectual property protection and economic development?

Answer: This is a complicated relationship. Many of the world’s emerging markets are known for lax intellectual property protections. Piracy has allowed some nations access to unique assets and has driven innovation within them. On the other hand, a potential link exists between strong intellectual property protection and innovation-driven development.  Some evidence suggests that increased intellectual property protection attracts higher levels of investment from foreign companies and leads to a greater transfer of knowledge between countries. A contrary opinion regarding intellectual property development has emerged. The free culture movement, most strongly associated with Lawrence Lessig, argues that intellectual property protection constrains creativity and limits freedoms.

7. Define jurisdiction and explain how it applies to legal actions.

Answer: Jurisdiction is the first step to dispute resolution. The establishment of jurisdiction defines the power to apply the law or local statutes. The setting or location of the jurisdiction may become a point of contention during negotiations. Each company wants to establish jurisdiction in the legal system that gives it the greatest advantage.

8. Describe conciliation and arbitration.

Answer: 

a. Conciliation applies to the various forms of mediation or conflict resolution companies can pursue before resorting to a more formal arbitration process. A third-party typically mediates between the two companies involved in the dispute. The third-party then collects information, meets with the two parties involved in the dispute, and presents a possible solution. If the two parties agree, the conflict is resolved and business resumes. Many companies prefer conciliation as the first step in resolving a dispute. An important advantage of conciliation is that the proceedings are confidential, which protects intellectual property and the privacy of the parties involved. Instead of conflicts being played out in the business press, little to no attention is paid. Conciliation can be an effective approach in emerging markets where relationships are paramount and where loss of public face can be a major concern.

b. Arbitration is formal conflict resolution process in which both parties agree to abide by the decision of a third-party arbitrator, this often follows conciliation when an agreement is unable to be reached. The process differs from conciliation in that instead of being a suggestion, the arbitrator declares a binding decision.  Arbitration offers many advantages. The proceedings are confidential, protecting industry secrets and keeping the conflict private. The process itself presents both parties with the opportunity to make a case to an impartial third-party, much like a legal proceeding, without the costs associated with going to court. The arbitrator's binding decision will normally be followed by both companies. The one difficulty with arbitration can be that, at its core, the arrangement is still a contractual relationship. When one of the parties disagrees with the arbitrator's finding, the contract can be broken. At that point the only recourse will be litigation.

9. What are the advantages and disadvantages of arbitration?

Answer: 

a. Advantages of arbitration – the decision is binding, the proceedings are confidential, and it is cheaper than going to court.

b. Disadvantages of arbitration – The one difficulty with arbitration can be that, at its core, the arrangement is still a contractual relationship. When one of the parties disagrees with the arbitrator's finding, the contract can be broken. At that point the only recourse will be litigation.

10. What are the disadvantages of litigation?

Answer: The disadvantages of litigation include higher risks and costs. Often what becomes even more important than the costs is that the litigation becomes public. Company secrets and “dirty laundry” may be publicly aired, which can hurt a company’s image and brand.

11. Define standardization and name the primary reasons for its use.

Answer: Standardization is the process of applying the same marketing mix to all markets. A single production process, brand, and appeal are used. While this may seem less responsive to consumer needs in a given country, the primary reasons for its use are that it decreases costs and increases efficiency. By standardizing, the company can focus on perfecting a single approach.

12. Describe economies of scale and economies of scope.

Answer: 

a. Economies of scale refer to a reduction in the cost per unit as the total volume produced increases. A range of efficiencies emerge as a company produces more of a single product. The efficiencies result from increased purchasing power, spreading of fixed costs across a larger volume of units, the potential for managers to be more efficient as they specialize, and the ability to use the same promotional materials for a larger market. For companies that standardize, economies of scale reduce costs, which often lead to greater profits.

b. Economies of scope emerge from producing a variety of similar products. Doing so allows for at least parts of the production process and management activities to apply across the product line.

13. Define cultural convergence.

Answer: Cultural convergence is the growing similarities between consumers globally and may be a result of standardization.

14. Define adaptation.

Answer: Adaptation is changing of any component of the marketing mix to better meet the needs of a local market.

15. Explain how laws affect adaptation and the product areas affected by regulations.

Answer: 

a. Laws often govern marketing activities. Adaptations can be adjusting the information about the product to meet local labeling requirements. 

b. Marketing communications – Many countries enforce legal restrictions on advertising to children or for advertising of potentially unhealthy or addictive substances. False advertising and medicines are also often regulated or prohibited.

c. Product attributes – These laws frequently focus on safety and children again are a primary group to be protected. In some cases, product attributes are allowed but claims about those attributes may be limited. In other cases, products that are accepted in one country are forbidden in others. In strict Islamic countries, this includes a prohibition on alcohol. Brazil has taken an aggressive approach to tobacco regulation. The country has limited the tar, nicotine, and carbon monoxide levels allowed in cigarettes, added more severe warning on packages, and became the first country in the world to outlaw the use of “descriptors that may induce complacency in consumers regarding the consumption of tobacco products.” These include the words “light,” “ultra-light,” and “mild.”

d. Organizational structure – Governments often have concerns regarding the degree of influence multinational corporations can exert. In these cases, local partners may be required or limits on ownership for foreign companies may be in place. The requirements often target specific industries, especially those deemed important and in need of protection. The other main effect on organizational structure from governmental activity is antitrust regulation. Antitrust laws prevent companies from becoming monopolies. Most countries limit the size of a business to restrain monopolies and preserve competition.

e. Packaging and labels – It is rare for a product to enter a new, foreign market without changes being made to packaging. Many of these alterations are in response to the legal requirements present in a country. There may be legal requirements regarding product size, materials used, and other components. Products are consumed differently in other cultures, necessitating changes to the packaging. Various shapes or materials may be typical in different countries. Legal stipulations affect product labels. Each country enacts its own labeling requirements. Often these can be complicated and require significant adaptation. Warranties are an additional component of product labeling that differs substantially from one country to another. Cultural and aesthetic factors will be adapted as packages and labels are developed for individual countries. Colors, shapes, and sizes are designed fit local circumstances.

f. Green marketing and labels – governments are now starting to regulate green marketing claims on labels.

16. How is packaging adapted?

Answer: Packaging is often adapted to meet legal requirements regarding product size, materials used, and other components. Products are consumed differently in other cultures, necessitating changes to the packaging. Packaging is also often adapted by using local colors, shapes and sizes.

17. How are labels adapted?

Answer: Labels are adapted to meet legal stipulations. Each country enacts its own labeling requirements. Often these can be complicated and require significant adaptation.  Many countries regulate the words that are allowed to be used on labels regarding certain products.  Warranties are an additional component of product labeling that differs substantially from one country to another.  And governments are now starting to regulate green marketing claims on labels.

18. Describe the contingency approach with regard to standardization and adaptation.

Answer: The contingency approach suggests that marketers should do what is appropriate for each market, which typically leads to a combination of both standardized and adapted components.  The default will be standardization because it offers cost savings; although some degree of adaptation is often necessary to generate product demand. The conflicting objectives of saving costs versus creating product acceptance are balanced, and the most effective marketing mix will be deployed.

19. What are the four different approaches to the product and communication adaptation or extension model?

Answer: 

a. Product and communication extension, or a dual extension, is the strategy in which the same product and communications are extended into the new market. Standardization of everything possible becomes the marketing goal.

b. Product extension-communication adaptation – When marketers keep the same product but make changes to the communication, a product extension-communication adaptation approach has been utilized. The product remains the same, other than possibly locally-sourced ingredients, but the communication changes.

c. Product adaptation-communication extension involves adapting the product but retaining the same communications program. This often includes keeping the same basic theme for the advertising, such as testimonials or humor, but changing the product's brand name or adding an additional attribute to the product.

d. Product-communication adaptation – The final approach involves adapting the product and communications, the product-communication adaptation or dual adaptation strategy. The product and communication strategies are changed. 

20. Define new product development and name the different types.

Answer: 

a. New product development is the process of creating a new product.

b. New-to-the-world products are the inventions or discoveries most strongly associated with the term new product development. The light bulb, the computer, and the digital music player are all types of new-to-the-world products.

c. New category products are new products for an existing product category. Microsoft’s introduction of the Xbox 360 was a new category product, it was a new product in the existing category of personal gaming devices.

d. Addition to the product line are made to protect a lead brand in the product category from competitors or to fill a gap in the product line. When Samsung introduced two top-of-the-line, “beyond-smart mobile phones” capable of running thousands of different applications, this was an addition to the product line.

e. Product improvements may be considered a type of new product development. In many cases, especially when entering new markets, small changes to an existing product are made. For example, in China, Sprite sells a ginger flavored version called Sprite on Fire, in reference to the burning sensation from the ginger in the soda.

f. Repositioning refers to finding a new use or application for an existing product. This increasingly occurs as companies that sell existing products to bottom-of-the-pyramid consumers offer the items in developed countries. Nestle repositioned its Maggi brand of dried noodles, which was a top seller in rural India and Pakistan, as cheap, healthy food in Australia and New Zealand.

21. How can adopters of new products be categorized?

Answer: 

a. Innovators

b. Early adopters

c. Early majority

d. Late majority

e. Laggards

22. Define diffusion and explain the factors influence the speed of diffusion.

Answer: 

a. Diffusion is process by which an innovation slowly spreads through a culture or group. 

b. The innovation itself. The marketing team identifies how similar it is to existing products or processes. The larger the disconnect with existing consumer behaviors, the slower the rate of diffusion.

c. The effectiveness of communications about the innovation. The best mouse-trap ever invented will not sell without effective promotion. Consumers have to be exposed to the communication, understand the message, and the communications should encourage trial purchases.

d. Time – All innovations take time to spread within a culture. Appropriate marketing mix activities can speed this up. Poor marketing activity leads to slower diffusion.

e. The members of the society within which the product is introduced. Effectively marketing to them will be particularly challenging in foreign markets. A lack of deep understanding of consumers and how the product might be used hinders efforts to introduce a new product.

 

Discussion questions

1. Explain the differences between the three primary legal systems—common law, civil law, and theocratic law. Is one of these systems more conducive to marketing activity than another? Explain your answer.

Answer: 

  • The common law system relies on legal precedents and usage traditions to form the basis of law. It can be found in the United Kingdom and in former British colonies. The written law applies; however, the interpretation by the judicial system coupled with the implementation of the law gives the written law meaning. The advantages of common law are that you can find previous examples of court cases that support your marketing activities, it is hard to overturn precedents. The disadvantages are that courts interpret the laws, thus giving them room to rule against you no matter what the written law states. 
  • The most prevalent legal system, civil law, utilizes statutes based on written words or a legal code. It can be traced back to its introduction as the Roman Empire’s Justinian Code. Laws are written to be comprehensive with clear instructions for how to handle exceptions. Precedent or usage plays no role. The advantages are that the laws are written and are made to be clear. The disadvantages are also that the laws are written and made to be clear, there is no wiggle room with this type of law.
  • Legal systems based on religious writings practice theocratic law. Islamic law provides an example. The written Islamic law is the Sharia. The interpretation of the law or Islamic jurisprudence is called fiqh. The advantages with this type of law are that the religious values and morals are protected. The disadvantages is that they may be difficult to understand, if you are not familiar with the religion, and they are often very strict.
  • I would say that common law is more conducive to marketing activities. In common law you can find past cases to support your behaviors and the law is open to interpretation, thus giving you a chance to fight what you think is right.

2. Many individuals in both developed and developing countries have violated intellectual property protections. Choose a side and make a case as to whether violating intellectual property is either wrong or right.

Answer: Violating intellectual property is wrong. These individuals know they are using intellectual property that they haven’t paid for. If everyone did this then there would be incentive for companies to spend all of the time and effort it takes to create these products – they would never get paid.

3. Litigation is often the least attractive of the conflict resolution choices. Create a table listing the advantages and disadvantages of conciliation, arbitration, and litigation, then pick the best possible resolution option for a business seeking to protect a patent. Defend your choice.

Answer: 

Conciliation

  • Proceedings are confidential
  • No business press
  • Maintains face
  • Cheap
  • The companies may not be able to come to an agreement
  • There is no binding decision

Arbitration

  • Proceedings are confidential
  • No business press
  • Maintains face
  • Impartial third party
  • Cheap
  • Binding decision
  • It’s still a contract, one party can still violate the contract

Litigation

  • Binding decision by a court of law
  • Higher risks
  • Higher costs
  • Company secrets can be exposed
  • Tarnish brand image

This would depend on what country the company was trying to protect the patent in. If it is a developed country they might have more success. There is a lot of unknown information in this question. But if costs are a concern, start with conciliation. If you need a legal binding decision and it is very important to protect this patent go to litigation.

4. Whether to standardize or adapt a product will be one of the central decisions an international marketer makes. Consider a global product that you recently purchased. What was standardized or adapted? Why did the marketing team make these choices? What was legally required?

Answer: I recently purchased Nutella. I believe that the product is standardized across countries, but the packaging and labeling is modified for the United States. The product is very successful and does not need to be modified – in fact, I’m sure there would be complaints if they tried to change the product in the United States. The nutrition facts were legally required to be on the labels and in a certain form.

5. New products fail at an increasingly high rate. How can the graph of new product adaptation be applied to ensure higher acceptance of a new product?

Answer: A company needs to market a new innovation clearly and efficiently. They need to tell consumers about the new benefits and why they should adopt this new product. The more similar the product is to existing product, the quicker it is usually adopted. The faster you can get to the third group of consumers purchasing the product, the early majority, the more likely the product will succeed. Have a successful marketing campaign to increase your chances of success.

6. Think of a new product you recently purchased. What factors influenced your decision to purchase the product? Does the product seem to be one that diffuses quickly or slowly across a target market?

Answer: I recently purchased an Apple iPhone. Their marketing campaign, being able to try the product, and seeing how it worked better than my old phone. This product diffused quickly and deeply throughout the United States.