University Notes - Senior Year, 1st Semester

Table of Contents
Keith Parker’s Notes from USC

Volume 4 of 5
Senior Year, First Semester

Page Content
BUAD-302: Communication Strategy in Business
1 Syllabus
9 Guidelines for Planning an Effective
Presentation
10 Assignment #1
11 Assignment #2
17 Assignment #4
21 Final Project
BUAD-351: Economics for Business

51 Syllabus
55 Class Notes
IR-439: Political Economy of Eurasia

61 Syllabus
66 Class Notes
111 Exam Prompts
113 Study Notes for Final
166 Final Paper
MRKT-465: Global Marketing Management

184 Syllabus
193 Course Documents
245 Assignments
284 Class Notes
339 Study Notes for Final
OWEO Group
403 Mission Statement
405 Constitution
409 Group Application Form
410 Facebook Picture
411 Group Members, as of 11 November 2006
428 Website
BUAD-302: Syllabus
Page 1
SYLLABUS
BUAD 302: Communication Strategy in Business
Fall 2006
Section 14652 M/W 8:00-9:40
HOH 306
Instructor: Ken Robidoux

Office: OHE-106
Office Hours: M-W 10:00-10:45 & 1:00-1:45 and by appointment
E-mail: robidoux@usc.edu
Telephone: (213) 821-5832
Fax: (213) 821-1328
You are working in an increasingly complex world characterized by explosive growth in

access to quality of information—and your professional life will likely revolve around
how you generate, organize, evaluate, and manage the communication of this
information. Almost without exception, today’s business professionals attribute their
success largely to their ability to write well, to speak dynamically, and to cultivate
business relationships through strong interpersonal communication skills.
Whether making a presentation, performing a communication audit, or creating and

executing an integrated persuasive appeal (e.g. successfully landing a job)—you should
be able to convey ideas and feelings to your audience clearly, accurately, and
persuasively. This course is designed to sharpen your existing skills as a strategic thinker,
writer, and speaker and to employ those skills to realize an actionable understanding of
strategic communication.
The class is structured to emphasize experiential learning so that our study of managerial
communication theory can be applied to exercises and activities mirroring real-world
challenges you will face in your professional lives.
RESOURCES
Required reading includes the text cited below as well as articles and cases distributed in
class or otherwise assigned for out-of-class work.
Lehman/DuFrane. Business Communication. University of Southern California

Edition.
BUAD 302 OBJECTIVES
At the end of this course, you will be a more articulate and influential business
communicator. You will understand the rhetorical reasoning that supports the strategies
you learn such that you can successfully meet all types of new communication
challenges.
Keith Parker, University of Southern California

BUAD-302: Syllabus
Page 2
Business Communication Strategy – Theory

Demonstrate understanding of the elements of business communication theory and apply
this understanding to communications in a wide range of business contexts.
Business Communication Strategy – Application

Apply communication theory to develop business communication strategies, including
evaluation of purpose, audience, context, and channel choice. Demonstrate the ability to
analyze, compare and critique these strategies, and effectively communicate this
assessment.
By the end of your BUAD 302 experience, you should have acquired knowledge and
skills in the following areas:
Business Presentations
• Analyze a communicative situation and develop a strategy to create effective
persuasive business presentations.
• Demonstrate understanding of and apply the principles of effective business
presentations, including managing question-and-answer sessions and
employing visuals.
Interpersonal Communication
• Demonstrate understanding of the elements of nonverbal communication and
apply them in interpersonal communication situations.
• Demonstrate understanding of the principles and processes of effective
listening and apply them in interpersonal communication situations.
• Demonstrate understanding of the principles of effective feedback and apply
them to provide effective and appropriate feedback.
Organizational Communication
• Demonstrate understanding of organizational communication practices—
external and internal—and apply this knowledge in various communication
contexts.
• Demonstrate awareness of intercultural factors that affect communication and
apply this knowledge in intercultural communication situations.
• Demonstrate understanding of the principles of small group communication,
including problem solving and decision making, and apply them to create
effective teams.
After only fifteen weeks, you probably will not reach a level of professional excellence in
all business communication areas; mastery sometimes takes years and always takes
dedication. You will, however, clearly understand the strategic objectives toward which
you are working, understand the necessary processes involved in meeting those
objectives (and helping others meet them), appreciate your strengths and challenges, and
feel increased confidence in your communication decisions and in the execution of those
decisions.

BUAD-302: Syllabus
Page 3
Attendance
I anticipate that you will be present in every class, and ready to begin work at the time
class is scheduled to start. Should you need to be absent, either because of an illness or
because you believe that there is something you must do that is more important than
attending class, I will expect to receive an email message from you prior to the start
of that class. Keep in mind that an email in advance of class does not excuse your
absence, it simply shows me that you are taking responsibility for choosing to do
something else during class time. Multiple absences, even when accompanied by
conscientious notification, may be viewed as unprofessional behavior.
If you miss a class session, you still need to come to the next class fully prepared.
Please contact a classmate before the next class meeting. Ask them for
announcements, lecture notes, readings, assignments, etc. Please feel free to contact me if
you still need further clarification or interpretation as to what you missed. (What I cannot
do is recreate lectures/discussions for individual absences—telling you everything we did
in class would take an hour and fifty minutes!). Of course, if a major illness or emergency
arises, I will work with you to accommodate the situation.
Again, remember that absence from class, a pattern of lateness, or lack of participation
will adversely affect your grade (in the same way that such behavior would adversely
affect your performance evaluations in a professional setting.
Listening/Respect for Colleagues

Please recognize that BUAD 302 is a difficult and intimidating course for many students.
I expect the class to operate as a learning community. Please have respect and offer
support to your colleagues as they work to develop their individual skill levels.
You learn as much from observing and critiquing presentations as you do from making
presentations. Be an attentive, active listener when others are making presentations. You
will be asked to critically evaluate the performance of your classmates. My assessment of
your level of overall professionalism in class will be influenced by the thoughtfulness
with which you listen to and evaluate the work of others.
Assignments
In this class, as in business, you’re expected to compete your projects on time.
Assignments are due at the beginning of the class period on the date assigned. Any
assignment turned in late may receive half-credit as a starting point.
All written assignments and graded presentations must be completed; failing to complete
even a single assignment may result in an “F” in the course.
Please check your USC email account regularly in case I send any assignment
clarifications. You should know how to send and receive attachments.
PLEASE indicate your full name and class meeting time on all submitted documents
(and emails).

BUAD-302: Syllabus
Page 4
Oral Assignments Reminders

I am particularly interested in your developing an ability to connect with your audience.
It is extremely difficult, if not impossible, to make this connection when you are reading
your presentation or reciting it word-for-word. Reading verbatim—or even appearing to
read—a presentation will lower your grade significantly.
It is permissible to use notes (when indicated by assignment), of course, but our task is to
wean you from the temptation to write out your presentation in complete sentences and
memorize it. Doing this is virtually guaranteed to deal a death blow to your effectiveness
as a presenter.
Written Assignment Reminders

Where a bibliography, reference notes, or other stylistic requirements are used, the
information must conform to a standard style manual (MLA).
Your written assignments should be free of spelling, punctuation, or grammar errors. Any
errors in mechanics reduces the effectiveness of written communication and will
dramatically lower your grade.
If you are unable to attend class on the day a written assignment is due, make
arrangements for it to be delivered to the classroom or to my mailbox in OHE 106 by the
start of class. Please ask my permission before submitting a written assignment via email
if you miss class on the day work is due.
Written Assignment Preparation

The Marshall School of Business computing environment supports the Microsoft Office
bundle of productivity tools. All assignments must be prepared with these tools—or tools
that produce compatible files—and printed on a laser or inkjet printer.
All assignments should be prepared on an 8 ½” X 11” paper. I expect all your written
work to be formatted with 1” margins, and using 12-point Times New Roman font. All
parts of a multi-page assignment must be stapled together in the upper left corner. Please
do not enclose any of your work in binders or folders. Again, please indicate your full
name and the time your class meets on all documents (adding your class time to email
correspondence helps as well).
Additional Activities
Meetings in the ELC
Many oral presentations, both graded and not, will be videotaped in the Experiential
Learning Centers (ELC) in the basement of Bridge Hall. Please note that we will meet in
the ELC on the dates listed on the class calendar page.
You will also be videotaped while participating in exercises and simulations in the
Center. Because our time in the ELC is precious, punctual ELC attendance is crucial.

BUAD-302: Syllabus
Page 5
Professional dress is required whenever our class meets in the ELC—unless I change the
code for the occasion. What an audience sees when you speak influences what it hears
and thinks.
Mock Interviews
Mock interviews will be scheduled for the ELC in Popovich Hall on a Saturday and
Sunday, early in the semester—we’ll know the dates by the end of the first week of the
semester. You must complete this exercise to receive credit for the class. Sign-ups for the
half-hour time slots and further details of this assignment will be discussed in class.
Career Planning and Placement Center Information Session

A class session will meet in the CPPC for a discussion of strategies for approaching the
interview process, landing an internship or job, networking, and using the career planning
resources available to you at USC.
PowerPoint Workshop
A class session will be devoted to a PowerPoint workshop in one of Marshall’s computer
labs. Using visuals effectively in your presentations is an important part of your grade.
This session will help beginners learn PowerPoint basics, but will also present new
techniques to more advanced users.
GRADING
The Marshall School of Business grading policy is rather explicit:
In order to avoid substantial disparities across courses, instructors in the School of

Business Administration courses are required to adhere to specific target grade
point averages for each course they teach. The target average GPA for an
undergraduate required course is 2.85. Instructors are not permitted to have their
average GPA in a single course deviate by more then 0.1 above the target.
Because of the Marshall School’s targeted mean, your ultimate grade in the course is
determined by both the absolute quality of your performance and your standing in the
overall class (i.e., your ranking) at the end of the course. Striving for excellence will
yield maximum learning and an enhanced opportunity to achieve the final grade you
desire. But the influence of the Marshall grading averages is ineluctable. Most
students who work hard will achieve a final grade of either a “B-” or a “B” in the
course.
• The grade on any individual assignment will be determined by its overall

impact on its specific audience. Content, and expression of content, cannot be
separated.
• In the interest of equality to all students, grades are determined by the work
product you deliver. Effort, time invested, and improvement—although
important factors in your development—do not form the basis of individual or
final grades.

BUAD-302: Syllabus
Page 6
A Working Definition of “A” Quality Work

Outstanding or exceptional work will receive an “A”.
“A” work reflects mastery of course concepts, tools, and techniques, plus a solid
understanding of implications, applications, or interrelationships, as may be appropriate.
“A” work also reflects your ability to apply and express that understanding with
meaningful language. In business, this would mean your manager would accept the work
with no revision, be willing to put his/her name on it, and send it forward.
To put it another way, an “A” on a written or oral communication signifies that the
communication:
• Contains a clear, early statement of purpose, main idea, and the key
supporting arguments
• Demonstrates strategic development and organization based on careful
audience and situational analysis
• Recognizes and addresses complexities through thoughtful analysis;
incorporates and discusses necessary counter arguments
• Includes influential supportive details; makes evidence “speak” for the
audience
• Employs a style and tone appropriate to the audience and context
• Utilizes articulate language and memorability devices
• Maximizes symbiosis between content and expression of content
• Achieves the desired impact on the audience while maintaining a positive
relationship with them (i.e., employs the dialogic model of communication
Review of Grades
If an assignment is returned to you and you believe that some error has occurred in the
grading, you can, within one week of the date the assignment is returned, request—using
a memo—that I re-evaluate the assignment. If necessary, I am glad to clarify my
commentary on returned assignments, but if you wish to discuss your grade, you must
initiate the discussion with a memo. Any reference and discussion of grades (written or
otherwise) must be initiated and conducted with diplomacy and thoughtfulness.
If you are requesting a grade review, the original assignment or presentation evaluation
form should be attached to your memo. The memo should fully and carefully explain
why you think the assignment should be re-evaluated. Arguing that “I worked hard and
put in a lot of time” or simply saying “I don’t understand why I received this grade” are
neither full nor careful explanations. Remember that the re-evaluation process can result
in three types of grade adjustments: positive, none, and negative.
Reporting of Grades
I will not post final grades, and they will not be given out by the department or by me. I
cannot provide your final grades before they are available by Touchtone (213-740-9088).

BUAD-302: Syllabus
Page 7
Administrative Matters
Academic Integrity:
Plagiarism is the unacknowledged and inappropriate use of the ideas or wording

of another writer and can result in sever penalties including an “F” in the course.
The best way to avoid plagiarism is to carefully document your sources, even
when you are only making use of data or ideas rather than an actual quotation.
To avoid having your writing marked by illegitimate assistance, ask yourself

whether you would be able, on your own and without further assistance, to revise
and improve the writing in question. If the answer is ‘No’—if you would not be
able to maintain the same conceptual and stylistic quality without outside
assistance—then you should not submit the writing as your own work. (Student
Guide to the Freshman Writing Program)
Students with Disabilities: Any student requesting academic accommodations based on a

disability is required to register with Disability Services and Programs (DSP) each
semester (this includes any type of disability for which accommodation is requested). A
letter of verification for approved accommodations can be obtained from DSP. Please be
sure the letter is delivered to me as early in the semester as possible. DSP is located in
STU 301 and is open 8:30 a.m. – 5:00 p.m., Monday through Friday. The phone number
for DSP is (213) 740-0776.
Retention of Graded Papers: Returned paperwork, unclaimed by a student, may be

discarded four weeks after the grades are posted by the University and, hence, will not be
available should a grade appeal be pursued by a student following receipt of his/her
course grade.
Class Cancellation: Only official notices written on Management Communication

letterhead, dated and signed by the Chair (Professor Paul Frommer), will constitute a
notice of cancellation for a class session. I will try to notify you in advance (via email) of
an unexpected class cancellation.
Services: Other facilities within the Marshall School of Business offer a broad range of
informational, software, and hardware support and services. Schedules for and additional
information about these facilities can be found on the Marshall School homepage:
www.marshall.usc.edu .
IMPORTANT NOTE: Please silence all electronic devices before class. Unless you
have an emergency situation, please do not check your electronic messages (etc.) in
class.
And lastly…WELCOME!

BUAD-302: Syllabus
Page 8
Class Schedule
Subject to Change at Any Time to Fit Needs of the Class
Assignments & Special Activities* Date
Career Center Orientation Wednesday 9/6
Presentation # 1 (ELC) Monday - 9/11
Mock Interview (takes place on Saturday/Sunday) 9/23-24; 9/30-31
ELC – Hi-Fly Wednesday 9/27
Résumé Monday - 10/2
PowerPoint Training (HOH 401) Monday - 10/23
Q&A (ELC) Wednesday - 11/08
Written Communications
Complementary writing assignments based on presentations and other in-class activities.
* Professionalism and participation is required throughout the semester. They can only
negatively affect your final grade if you do not attend class on a regular basis, come to
class unprepared, or fail to participate and finish on-time all in-class and scheduled
assignments and activities.

BUAD-302: Planning an Effective Presentation
Page 9
BUAD 302 – Fall 06 – Robidoux
Guidelines for Planning an Effective Presentation (notes for Chapter 12 section 1-2
reading)
• Select a topic of interest to you and the audience

• Determine the purpose (what you want the audience to gain)
• Identify major points and locate supporting information
• Develop a strong opening and closing
• Arrange for a proper introduction
Structure of a Presentation
• Introduction “Tell them what you are going to tell them…”
• Body “…then tell them…”
• Conclusion “…and then tell them what you have told them.”
Elements of an Effective Introduction

• Captures attention and involves the audience
• Establishes rapport with the audience
• Presents the purpose statement
• Previews the main points to be covered
Techniques for gaining Audience Attention and Interest

• Shocking statement or startling statistic
• Quotation by an expert or well-known person
• Appropriate joke or humor
• Demonstration or dramatic visual
• Related story or anecdote
• Personal reference, compliment to the audience, or reference to the occasion
of the speech
Use Transitional Sign Posts

• Forecast next idea
• Readjust expectations
• Emphasize relationships
• Give audience time to digest material covered
• Give speaker time to think about next point
Elements of an Effective Summary

• Lets audience know you are summarizing
• Leaves audience with a clear, motivating, and memorable statement
• Summarizes the primary points and/or makes a call for action
• Is tied to the introduction to create unity
• Does not end with “thank you” or “that’s the end”

BUAD-302: Assignment #1
Page 10
To: BUAD 302 Students

From: Professor Robidoux
Date: 9/11/06
Subject: Presentation #1 Evaluations
In addition to your presentation responsibilities for this assignment, you are given the
opportunity to evaluate your presentation. Additionally, you have the added opportunity
to evaluate the presentation of one of your peers.
Evaluating yourself and your peers will greatly benefit you in your quest for becoming a
strong speaker. Seeing what someone had done well and emulating it, and in contrast,
seeing what someone had done poorly and avoiding it, will give you the needed context
to improve your own understanding of good oral presentation work.
Consider the following: All speakers use stance, body movement, gestures, facial
expressions and eye contact to illustrate and enhance every message. Each should be
smooth and natural. Your body language enhances and clarifies your words and helps the
audience “visualize” your point and overall message. In other words, the message your
audience sees should be the same one they hear. Additionally, your speech must have a
clear purpose and appropriate organization.
Then: Write a reaction to your interview. Include a paragraph that discusses your
weaknesses, one that discusses your strengths, and perhaps a few thoughts as to what you
gained from the experience.
Finally: Watch and write a short evaluation of the person interviewed before or after you
(found on the same tape as your interview). In this peer evaluation, discuss strengths and
areas in which you think your colleague could improve and how.
Be specific in these evaluations. Use memo format. Address the memos to me; no one
else will read them. This is an opportunity to objectively view yourself and a peer in one
of the most challenging interpersonal communication situations. The memos are due
Monday, September 18.
If you have any questions, please feel free to contact me at robidoux@marshall.usc.edu

Page 11
To: BUAD 302 Students

From: Ken Robidoux
Date: 9/18/06
Subject: Assignment # 2
DUE: Wednesday 10/18/06

TASK: Prepare and deliver a 5-7 minute persuasive presentation to the
university’s board of regents.
Preliminary work
You’ll need an outline to begin organizing your speech. Write a business letter first to
focus your recommendation and then get your presentation in order.
Situation
This is a three-part assignment that includes an outline, a written letter, and an oral
presentation. All materials are due on the day of your presentation and will be collected
before you begin.
Assume that you are an active member of a campus student organization or professional
campus society. Each student organization or professional society has been asked to write
a letter to the student government to describe what your organization considers the
biggest problem students face on campus. It seems that the university’s board of regents
is interested in hearing the perspective of several student groups. Provide me with a one
page letter that describes the situation to student government and discusses the impact
that students would derive as a result of this change. Be sure to adhere to the principles of
letter writing.
Congratulation on your letter! It seems that after the student government committee read
your letter, they passed it on to the university’s board of regents, and now they want to
hear you present your case. The board may take action to correct the problem that your
organization had identified, but first you must persuade them.
Instructions
Aim for a 5-7 minute persuasive presentation. Six minutes is perfect but coming in at
seven minutes is fine, too. Provide a good introduction that serves to give your audience
some background information; elaborate on it; conclude with some recommendations. Be
sure that your audience knows who you are and that you ask for questions at the end.
You’ll want an appropriate attention getter at the introduction and a take-away statement
at the conclusion.
Protocol for this Presentation

• You’ll speak from the front of the room, standing up.
• You may rely on notes but sparingly since you want good eye contact
• No lectern or podium. However, there is a small table available to you
• No use of visual aids like PowerPoint slides or dry-erase markers
• Presentation time limit must be observed. Range: 5-7 minutes.
• Dress code: Business. You want to look your best for the regents

Keith Parker Page 12
USC Student Transportation Group
Los Angeles, CA 90007
October 18, 2006
USC Student Government

3601 Trousdale Parkway, STU106
Los Angeles, CA 90089-4896
Dear USC Student Government,
In my fourth and final year at the University of Southern California, I have found the transportation
opportunities for students to be more than helpful. Providing convenient transportation services,
such as the university trams and campus cruiser, we at the USC Student Transportation Group
realize that the university has clearly shown an interest in transporting the student body safely and
effectively.
As a student living on 28th St for over two years, every day I’ve seen the heavy student traffic
moving from the area Northeast of the university to the university campus. This area to the
Northeast consists largely of student housing and apartments, whose occupants’ main course of
transport to the university campus includes the crosswalk from the University Walkway. This
crosswalk runs from 28th St. to Jefferson Blvd., crossing Jefferson Blvd. to Gavin Herbert Plaza.
These students often walk, skateboard or ride bicycles as their means of transportation along this
corridor.
The aforementioned crosswalk over Jefferson Blvd. onto campus is routinely overcrowded during
the day. The hundreds of students crossing Jefferson daily come across many problems with the
current crosswalk, among them the congestion of motor traffic, motorists hitting students at the fault
of oblivious students and drivers, and long wait times on both sides of the street before the walk
signal lights up. A buildup of pedestrians on either side of the crosswalk vis-à-vis long wait times
causes pedestrian congestion when both of these masses meet in the middle of the street while
crossing the crosswalk. As a group advocating student satisfaction, we would like to request the
construction of a pedestrian underpass that allows for the continuous flow of pedestrians under both
Jefferson and Hoover.
Naturally, the high cost of such structures will cause resistance to such a proposal. Nonetheless, for
the large number of students living in this area, the benefits of such a structure would result in a
much safer and more pleasurable means of getting to and from campus. Further, the extension of the
underpass to include the crossing of Hoover would bring direct benefit to the interests of the
University. USC owns the University Village complex (the UV), the collection of retail, dining, and
service businesses to the north of campus and across Hoover from the University Walkway. A more
convenient crossing under Jefferson and Hoover would eliminate the road barrier from campus to the
UV, which would further naturally integrate the UV with campus and bring more customers to the
complex.
After you have reviewed this proposal, please call us at 213.281.2242 to discuss this option of
increasing overall student satisfaction and easing pedestrian access to the University Village.
Sincerely,
Keith Parker, Student

Keith Parker, University President,
of USC StudentCalifornia
Southern Transportation Group
Page 13
Outline for Presentation #2
Introduction
• Hi, my name is… I represent USC Student Transportation Group…
• Attention-getter – Does anybody here live to the northeast of campus (that is,
around the row or in that area)?
• The pedestrian crosswalk from University Walkway to Campus is overcrowded,
puts students in unneeded danger, is inefficient, and is a barrier to increased
business to the UV
• Main Points
o This crosswalk is used by a large number of students
o There are few alternative route for students to go to and from campus
o The crosswalk in place is inadequate
o Location requires few modifications for underpass
o Benefits students would gain from an underpass
o Benefits university would gain from an underpass
Body
• As a student living on 28th St I use crosswalk daily
o Crosswalk is used my most people living to the northeast of campus
o This area is largely student housing, apartments, fraternities and sororities
o University Walkway, which connects this crosswalk to the area northeast
of campus, runs all of the way from Jefferson to University
• Lack of alternatives
o Students must cross this street to get from that area to campus
o Other intersections are far away – Figueroa or McClintock
o Jefferson is too busy of a street for a standard crosswalk
• Intersection is too crowded
o Wait time causes student buildup on both sides of intersection
o When light turns green, these two crowds congest in the middle of the
intersection
o People run into each other, end up getting stuck in intersection after light
turns red
• Moving from current problems with the crosswalk, I’ll be moving on to the
solution that the USC Student Transportation group has found to be most
adequate
• An underpass would require few modifications to the area on both sides of
crosswalk
o There is already a large area on both sides of current crosswalk in which to
build ramp leading down to underpass
o Underpass, as opposed to overpass, would allow for the easy use of bikes,
skateboards and other methods students use to get to campus
o Underpass could be made wide enough in this area to appear inviting and
open, along with allowing for the heavy traffic of pedestrians
• With a solution to the problem, let’s look at the benefits that it would provide in
exchange for the costs of the structure

Page 14
• Benefits For Students

o Convenience, no more waiting at the light for long periods of time
o Safety, eliminates dangers of crossing the road
o Creates a more permanent connection between campus and the area to the
northeast of campus, makes this area seem more included with campus
• While these benefits to the students provide the university with good reason to
make this expansion, the benefits to the university should also be considered, as
the university might argue that it is too expensive to build such a structure without
any direct benefits
• Benefits For University
o University has full ownership of University village, shopping center
(location)
o An extension of this underpass under Hoover would provide easy access
to the UV from campus
o This would build a stronger connection between campus and the UV,
providing students with a stronger sense of being part of campus, and thus
becoming more inviting
o This inclusiveness with campus would increase profits for UV stores,
directly benefiting the University
Conclusion
• In covering these points, we at the USC Student Transportation Group strongly
advise the university to consider building an underpass connecting the campus
with the University walkway as an alternative to the current crosswalk on
Jefferson
• This is needed because there’re are a high number of students living in the area to
the northeast of campus, and this is they have few alternatives in getting to
campus other than this crosswalk
• The crosswalk becomes too crowded during the day, and creates a dangerous
situation for both pedestrians and drivers
• The location allows for few modifications to the surrounding area in order for an
underpass to be built
• Student Satisfaction would increase as a result of this expansion
• The universities’ UV shopping complex could gain financially if the underpass
were extended to include a crossing under Hoover
• Although the costs of building an underpass under the Jefferson-Hoover
intersection would be costly, the members of the USC Student
Transportation Group have found that the university would be more than
compensated in increased student safety and satisfaction, as well as a
bolstering of profits at the University-owned UV shopping Complex
Thank you, are there any questions?

Page 15
Page 15
Good Example of a Persuasive Request
Down-Home
Restaurants
89 S o u t h P a ss R o a d • C h a tt a n oog a , T N 37416 - 2729 • ( 423 ) 555 - 5110
March 15, 2004
Mrs. Joyce Smith

976 Thompson Road
Crossville, TN 38555-0976
Dear Mrs. Smith:

Opens with a compliment Meeting you and touring the building on your property last week was a
that introduces an pleasure. That little building provided me with a fascinating glimpse of the
appeal to the owner’s past. You must have found it convenient using the building as a big “attic,”
pride in the old property. storing all your canned goods and old farm implements over the years.
As the manager of the Down-Home Barbeque in Mena, I am constantly look-

ing for items to build and display in our restaurants. Our restaurants are con-
structed of weathered wood to create a genuine rustic atmosphere, which we
think complements our “down-home” menu.
Introduces the writer’s As I toured your building, I couldn’t help but notice some of the unique items
interest in acquiring inside and the old weathered boards hanging outside. The wood from the
property and continues building and its contents would enable us to build and furnish a new restau-
the primary appeal rant in Clarksville and refurbish our Jackson location. Marc Lane, owner of
(desire to preserve the
Down-Home Restaurants, has asked me to extend you the offer explained in
past).
the enclosed proposal.
Offsets reluctance to sell Naturally, no amount of money can compensate you for a building that holds
by acknowledging the so many memories for you. However, we would be happy to purchase the
sentimental value and entire contents of the building, excluding any special items of sentimental
suggesting options. value that you may want to keep.
Format Pointers
• Illustrates modified block format—the date and closing lines (complimentary close and
signature block) begin at the horizontal center.
• Uses mixed punctuation—a colon follows the salutation, and a comma follows the
complimentary close.
• Uses an enclosure notation to alert the reader that something is included.
Business Communication, 14th Edition by Lehman and DuFrene Copyright 2005 South-Western

Page 16
Good Example of a Persuasive Request, continued
Page 16
Mrs. Joyce Smith

Page 2
March 15, 2004
Stresses benefits of sell- Although the thought of selling the building may sadden you, think of the
ing property in terms of “second life” that the old farm equipment, dishes, washboards, seed bags, and
the primary appeal. weathered boards would have in our restaurants. People who would other-
wise never see such Americana will have the opportunity to learn a little
about its rich past.
Connects the specific After you have reviewed the proposal, please call me at 555-3253 to discuss
request for action with our offer to display your treasures in our restaurants.
the reward for saying
“Yes.” Sincerely,
Karla Ash, Manager

Chattanooga Store
Enclosure
Business Communication, 14th Edition by Lehman and DuFrene Copyright 2005 South-Western

Page 17
To: BUAD 302 students

From: Ken Robidoux
Date: 11/08/06
Subject: Assignment # 4: Request for Proposal
Learning Objectives:
 Analyze and develop effective persuasive messages for business audiences.
 Improve and apply persuasive techniques in a written sales proposal and oral team
presentation.
 Practice and improve researching skills.
 Improve oral presentation skills.
 Develop visual aids aimed at meeting the expectations of business audiences.
 Learn and practice effective group communication techniques.
A Request for Proposal (RFP) is a business document sent out by organizations that are
seeking proposals for the completion of a variety of jobs or needed services. In other words,
an RFP requests bids from other organizations that can potentially provide these sought-for
services. In this particular instance, your team will generate a proposal in response to a RFP
issued by Global Entertainment Ventures, Inc. (GEV), a company that provides venture
capital to start-up businesses in the entertainment industry.
GEV is interested in providing capital to any start-up in the business of entertainment. This
includes companies in the video game, television, film, sports, radio, publishing, and travel
industries. Furthermore, these companies can specialize in a variety of aspects of each of
these industries. For example, companies that propose financial support from GEV can
further specialize in
 Marketing programs for sports or other types of entertainment products or services
 Advertising for companies involved in the entertainment industry
 Accounting and auditing services for companies involved in the entertainment
industry
 Legal or other representation for companies involved in the entertainment industry
The CEO and president of GEV is Ken Robidoux. Mr. Robidoux is the person to whom your
proposal will be presented and who will select the company that will receive funding based
upon the quality of its proposal.
Each step of this project will require specific information from your team. First, your team
will need to select the type of entertainment service or product that your company will
provide and for which you are seeking venture capital. You will then need to research that
industry, primarily using the internet as your source of information, and create a strategy to
sell your company, its products and/or services to GEV.
Remember that a proposal is a competitive document; that is, you will be competing with
other entertainment companies to demonstrate that your organization is the best choice for
GEV’s investment. In order to demonstrate that your organization is the best choice, you will
need to convince GEV’s CEO that your company provides the best product or service in its
industry. Factors to consider when making this argument are price, features or services,

Page 18
support (if appropriate), quality, financial potential, company or product longevity, and your
competition. Analysis of this information should result in your proposal strategy. After this
information is generated and analyzed, your team will use it to complete the proposal and
prepare a presentation to sell your company as a potential investment to GEV.
Assignments
Two major assignments are associated with the RFP: a team sales presentation and a
written sales proposal.
Team Sales Presentation
Your presentation will be graded for task fulfillment, audience focus, content, organization,
persuasiveness, delivery, and visual aids (PowerPoint slides). Your teams will have 20
minutes to present with an additional 5 minutes for questions and answers.
Topic Coverage
To prepare for this assignment, you will need to identify an entertainment product or service
that you believe would be an excellent focus for your team project. You will then simulate
the creation of a company that is preparing to ask for funding from a venture capital firm
(GEV) in order for you to start up your business.
In your presentation, you should cover the following topics:
• Description of the company and its product or service. You should briefly describe
your company—its location and number of employees—as well as your product or s
service and how it will be produced, delivered, and priced.
• Market for the product or service. This section of your presentation should discuss
the market for your product or service, demonstrating that there is sales potential.
This information should be based upon research about similar products and/or
services and/or at least clearly stated assumptions.
• Market plan for the product or service. This section should provide a marketing plan
for your product or service. This information should be based upon research about
similar products and/or services and should be realistic in terms of the amount of
money that will be available for this purpose. Essentially, this section will describe
how you plan to market your product or service and why this plan will be successful.
• Your competition. This section should provide a thorough analysis of your
competition for your identified market and explain the measures you will take to
gain an advantage over that competition.
• Your funding request. This section should detail the amount of funds you are asking
for and how it will be spent. You should also show the kind of return on investment
you plan to provide GEV. This information should be based on research about
similar products or companies or at least clearly stated, realistic assumptions about
financial issues. Since this is not a finance or accounting course, you will just be
expected to estimate the large capital costs, such as equipment and land purchases,
and rent, labor, marketing, and distribution costs. You don’t need to worry about
insurance, supplies, utilities, etc.

Page 19
One of the assumptions of persuasive speaking is that you pay considerable attention to
building credibility through establishment of your expertise and knowledge about your topic,
demonstration of the quality of your thought (logic and organization), and focus on your
audience’s interests and concerns. You will be expected to demonstrate all of these aspects of
credibility in order to be judged adequately persuasive in your presentation. An additional
aspect of credibility that you will be expected to achieve is your ability to convey a
professional image through your dress, confidence, and the correctness of your language
usage. You will also need to provide relevant, high quality evidence to ensure that your
presentation is the most persuasive.
Sections of Your Presentation
Your presentation should consist of the following parts:
• An introduction that includes an attention-getter, an introduction of all of your team

members, and an overview of the presentation.
• A body that explains each of the assigned topics clearly and persuasively.
• A conclusion that states as strongly as possible why your proposed product or service
is the best choice for investment by the venture capital firm. It should focus on the
benefits to the various stakeholders.
NOTE: Each team member should be assigned an equitable share of the performance.
In addition to your presentation, you should turn in a paper version of your PowerPoint
slides. Your PowerPoint slides will be graded for the following:
• Serving as an appropriate visual aid to the presentation, i.e., providing an overview of

the structure of the presentation and presenting information best shown in visual form
(using graphics, visual elements, tables, etc.).
• Providing a strong sales conclusion.
• Utilizing color, fonts, and graphics in a highly professional, readable manner.
NOTE: The PowerPoint slides should not be used to deliver the text of your presentation. It is
important that you remember the difference between information that is best presented in
written form versus oral form. Generally, speaking detailed information should be presented
in written form while “the big picture” is presented in a presentation situation.
Team Proposal Assignment

In addition to your sales presentation, your team should prepare a written proposal in
response to the Request for Proposal (RFP) issued by Global Entertainment Ventures, Inc.
(GEV), a company that provides venture capital to start-up businesses in the entertainment
industry. Remember that a proposal is a competitive document; that is, your team will be
competing with other entertainment companies to demonstrate that your organization is the
best choice for GEV’s investment. In order to demonstrate that your organization is the best
choice, you will need to convince GEV’s CEO that your company provides the best product
or service in its industry and generally shows the most promise as an investment choice.

Page 20
Your written proposal should include the following sections:
• Description of the company and its product or service. You should briefly discuss
your organization—its location and the number of employees—as well as your
product or service and how it will be produced, delivered, and priced.
• Market for the product or service. This section should discuss the market for your
product or service, demonstrating its sales potential. This information should be
based upon research about similar products and/or services and/or at least clearly
stated assumptions.
• Market plan for the product or service. This section should provide a marketing plan
for your product or service. This information should be based upon research about
similar products and/or services and should be realistic in terms of the amount of
money that will be available for this purpose.
• Your competition. This section should provide a thorough analysis of your
competition for your identified market and explain the measures you will take to
gain an advantage over that competition.
• Your funding request. This section should detail the amount of funds you are asking
for and how it will be spent. You should also address the return on investment that
GEV might expect. This information should be based on research about similar
products or companies or at least clearly stated, realistic assumptions about financial
data. Since this is not a finance or accounting course, you will just be expected to
estimate the large capital costs, such as equipment and land purchases, and rent,
labor, marketing, and distribution costs. You don’t need to worry about insurance,
supplies, utilities, etc.
Just like your oral presentation, you should ensure that your written proposal is well
organized, which means that you should include
• An introduction that sets the tone for your proposal, states the purpose of the
proposal, and provides a brief yet informative overview of the topics your
proposal will cover.
• Paragraphs that are focused on a single topic and begin with an accurate topic
sentence.
• Headings, if deemed appropriate.
• A strong and effective sales conclusion.
You should also pay attention to providing the evidence necessary to persuade your
audience that your proposed service or product is the best choice for GEV’s investment.

BUAD-302: Final Project
Page 21
• Advertising for the channel, aimed at consumers

o Getting venues to allow recording
 Advertise for the channel at venues being recorded at, and possibly
even others
 Celebrity endorsements
 How do you convince these venues and celebrities to endorse
ConcertTV?
 Just like more exposure of music through online distribution
networks has increased interest in music, and how radio did the
same years before and still today, increased exposure to the concert
world will increase concert ticket sales and awareness
• There are fewer indifferent music listeners now than a few
years go, and more music enthusiasts and casual listeners1
 Concert revenue is important to recording artists, with only four of
the top 35 recording artist income earners making more from
recording than from live showings, and among these top 35, the
ratio of touring income to record sales is 7.5 to 12
 Much of our programming will be from less-popular artists, so
while the big-name artists might not need these increased concert
sales and promotion, less recognized artists would benefit
enormously from increased exposure. In an industry where the top
5% of income earners bring in 84% of ticket sales3
o Who will advertising be done through?
 Clear Channel controls 41% of concert promotion, so deals with
them will be essential4
 Recent studies have shown that most people in our target age
group go to the Internet or their friends to find out about new
music. To this effect, we will stress advertisement online, offer
content online for purchase (possibly through an iTunes-like store)
(People who enjoy live showings also tend to use the internet for
music downloading, meaning they are likely to be willing to
download live footage online)5 in order to increase hype and
knowledge of our channel online, and further through universities
in the LA area, as our age group can be contacted easily in this
way, and physical presence on a university campus increases word-
of-mouth knowledge6
o What angle will advertising be?
1
Powerpoint
2
Rockonomics
3
Rockonomics
4
Rockonomics
5
PC Pitstop
6
PC Pitstop

Page 22
 HD is the new wave of Cable TV, so it will be essential to

advertise this new service as an HD channel, in order to show that
our company is on the leading edge of the industry
 While MTV appeals to those interested in trendier music, we will
promote the image of a more independent channel, for those more
deicated to out-of-the-spotlight music and discovering new artists.
After all, more people are becoming enthusiastic and casual music
listeners rather than indifferent listeners, and are more interested
than ever in discovering new music.7
• Appealing to advertisers themselves, and types of advertising
o Similar channel, MTV, almost 3 times as likely as the general 12-34 year
old population to live in household with incomes over $75,0008
o MTV’s median age is exactly when many young adults begin to form
brand loyalty, this is a great age range to influence their choices, research
shows that 69% of consumers make choices based on brand names9
o The 12-43 age group represents 41% of all retail shopping dollars spent10
o By appealing to an older age group during the day, with a different type of
music, the channel can advertise alcohol and stay away from the problems
that MTV have with marketing alcohol because of the young age of their
viewer (although this would have to be different during the night when
more trendy music is on). While younger people (in the under 20 age
group) are the main audience for MTV, most concert-goers are above the
age of 20 (graph on source PDF)11
o Over the age of 35, fewer people are music enthusiasts or devoted music
fans, so those under this age will be focused on in advertising12
o As mentioned earlier, this channel will spark people’s interest in the
concert world, and thus venue operators and ticket sellers (such as Clear
Channel and Ticketmaster), a deal might even be done with Clear
Channel, so we could advertise the channel at their venues
o
7
Powerpoint
8
Value to
9
Value to
10
Value to
11
PC Pitstop
12
Powerpoint

Page 23
As the ConcertTV channel will originally only be released in the greater Los
Angeles area, our strategy for marketing this channel will be very specific to the Los
Angeles environment. The marketing segment of this paper will be split into two
components, the first examining the way in which we will be marketing the ConcertTV
channel to our potential viewers and the second taking a look at how we will be
positioning the product as a desirable advertising venue for advertisers and venues alike.
With the advertising plan set forth in the following paragraphs, we are sure that
ConcertTV will be successful in promoting its image to viewers and appealing to
advertisers.
The audience we will be reaching towards for viewers will be slightly different
from what other channels of similar genre have targeted. For example, while MTV, the
famous Music Television network, targets a trendy audience between the ages of 14-34
(although most of their viewers are under 22), we will be targeting a slightly older, less
trendy market. ConcertTV will position itself as a channel unlike any of the others, with
music outside of the mainstream for viewers who don’t want to be seen as trendy. Our
marketing team will begin its campaign with advertisements at concert venues around the
greater Los Angeles area. In doing this we will be reaching our target audience, i.e. those
who enjoy watching concerts. More importantly, our adverts at will be placed in venues
at which we are recording or where viewer-submitted videos were taped. With this
strategy, we will reach devoted music listeners who are interested in the material we will
be airing. For those who don’t attend concerts regularly, and are less devoted to music,
we will be using endorsements by recording artists, most of whom will be known in the
music scene but probably not in the widespread media.

Page 24
In order to gain these celebrity endorsements and advertising possibilities at
concert venues, our team will make it clear that this advertising strategy works in favor of
both parties. Just like radio spurred more interest in the music industry, and later music
trading online spurred an increase in committed music fans with more knowledge of less-
known artists, a television channel featuring concerts will increase awareness of the Los
Angeles area concert scene and increase ticket sales of lesser-known concerts. Research
has shown that in recent years there has been a significant increase in the number of
music enthusiasts and casual listeners, and an overall decrease in the number of people
indifferent to the music world (see Figure 1).1 This increase comes at a time when the
US has seen a significant increase in the amount of music downloaded online. This
concept alone will convince concert venue operators, who receive a cut of ticket sales, to
sponsor ConcertTV with venue advertisements in order to increase the presence of our
channel and increase ticket sales for their venue in return. Furthermore, recording artists
should be more than happy to develop the presence of ConcertTV. Increased concert
sales will boost the income of recording artists outside of the top five percent of artists in
the industry. Concert sales are very important to recording artists. In fact, only four of
the top 35 earning recording artists make more from recording than from live shows.
Among these top 35, the ratio of live earnings to earnings from recordings is 7.5 to 1.
Nonetheless, while live shows are essential to recording artists, the top five percent of
artists earn 84% of the total ticket sales for concerts (see Figure 2).2 Stratification in this
industry being so strong, lesser-known recording artists would more than welcome the
1
Fero, Richard, comp. Project Phoenix. 2006. Emap Advertising. 22 Nov. 2006
<http://www.emapadvertising.com/>.
2
Connolly, Marie, and Alan B. Krueger. Rockonomics: the Economics of Popular Music.
Pinceton University. Princeton UP.

Page 25
opportunity to increase awareness of a TV channel that will potentially increase
attendance at their concerts.
With this advertising strategy in mind, the venue through which artists-promoted
advertising will be pushed through will be discussed. The media giant Clear Channel
controls 41% of concert promotion, so deals through them will be essential.3 In
proposing advertising for ConcertTV to Clear Channel, our team will make clear that, as
mentioned earlier, our channel will increase general interest in music. For Clear Channel,
who owns thousands of radio stations coast-to-coast, increase in music interest holds
clear value. Further, studies have recently shown that most people in our target age
group go to the Internet or their friends for information about the music world (see Figure
3).4 Therefore, advertisement online will be stressed, as well as advertisement directly to
our target audience. Direct advertisement to our audience will likely be done on college
campuses, where much of our target audience resides. With a small group of
representatives on college campuses all over the greater Los Angeles area, we will be
able to spread the word about the offerings of ConcertTV and increase credibility be
creating a ‘buzz’ on college campuses about the listings on our channel. In addition,
similar studies have shown that those who regularly attend concerts are considerably
more likely to download music online (see Figure 4).5 As our audience seems to be more
tech-savvy than others, we will be catering to their online abilities by offering concerts
available for download on either a site dedicated to ConcertTV or an existing service
3
4
Digital Music Survey. PC Pitstop. PC Pitstop, 2006.
5

Page 26
such as iTunes. Using a service such as iTunes would also further increase awareness of
our offerings to existing music listeners, so this choice will be preferred.
As already mentioned, we will be targeting the more independent music listeners
from the 20 to 40 age group. Even so, our team will be marketing this channel as a state-
of-the-art service. To begin, our offerings will be presented in full-HD, which is
considered by many to be the new wave of Cable television. Our offerings, unlike
traditional music channels such as MTV, will highlight lesser-known artists in order to
increase awareness of these smaller artists and appeal to our viewers. After all, music
listeners are becoming more involved in music6 and would like to be more involved in
the music world; In order to become more involved in music, these listeners must
discover new artists, which is exactly what ConcertTV is giving them the ability to do.
In the next segment of the marketing portion of this paper, our appeal to
advertisers themselves must be analyzed. While there are few exact substitutes for our
TV offering, analysis of a similar service, MTV, will provide statistical information in
regards to our appeal to advertisers that are likely to reflect our own appeal. One of the
more striking statistics is that viewers of MTV are 3 times more likely than the general
population to have household incomes over $75,000. For advertisers, this means that
advertising on MTV, or ConcertTV for that matter, will result in knowledge of your
product or service among those more likely to have the funds for purchasing the
advertiser’s product or service. Furthermore, those who are the median age of MTV
viewers, 20 years of age, are at the age most likely to form brand loyalties. This is very
important to advertisers wishing to establish brand loyalty, as 69% of consumers make
6

Page 27
decisions based on brand names. Even more, the 12 to 43 age group, which is slightly
broader than ConcertTV’s target audience, represents 41% of all retail shopping dollars.7
While appealing to a slightly narrower age group may seem to be a disadvantage to our
appeal to advertisers, the older ages of our target age group is actually an advantage for
some advertisers. MTV has tried in the past to advertise alcohol products to its audience,
but has run into many problems as a result of the under-21 age group most likely to watch
MTV. ConcertTV eliminates this problem by appealing to an older, above-21 age group
that is more likely to attend concerts of the genre promoted by our channel. Without the
problem of hosting an underage audience, ConcertTV appeals to alcohol advertisers as a
venue through which they can reach this audience without dealing with the issues that
MTV has had. On the other end of the age spectrum, we have topped off our target
audience at age 40 because, although those over 35 are less likely to attend concerts, they
are likely to still watch concerts on TV (see Figure 5).8
7
"MTV Music Television Profile." Cable TV Ad Buraeu. Cable Network Information. 22
Nov. 2006 <http://www.cabletvadburaeu.com>.
8

Page 28
Figure 1:
Figure 2:

Page 29
Figure 3:
Figure 4:

Page 30
Figure 5:

Page 31
REQUEST FOR PROPOSAL
Prepared for Global Entertainment

Ventures (GEV)
November 29, 2006
Prepared By:
Jaspaul Kapoor
Keith Parker
Jeffrey Urlich

Page 32
Overview
TV Channel
We are planning to finance and establish a TV Channel, ConcertTV, which will
exclusively feature live music footage. Concert TV (or The Channel) will air a range of
video, ranging from amateur to high quality productions, covering a wide spectrum of
artists. The Channel will target a young, media savvy audience and focus heavily on this
key demographic. The Channel will rotate playtime between youth-oriented music
including:
• Hip-hop
• Rap
• Alternative rock
• Classic rock
• Jazz
• Reggae
It will be available only in high definition through HDNet and will be distributed by
Time Warner in the Greater Los Angeles Area.
Website
The Channel will be implemented with an ancillary website, ConcertTV.com, which will
supplement the programming while also providing an outlet to watch and download
concert footage on a 24 hour, on-demand basis. Selected programming on The Channel
will available to consumers through the website and can be downloaded onto an iPOD or
other media device. The website and television channel will actively promote each other
using a virtuous cycle of cross promotion to maximize total viewer ship.

Page 33
Location
Los Angeles
Initially, The Channel will only be available in the Los Angeles area but will eventually
expand nationally. We are focusing on the Los Angeles market due to the relatively lower
start-up costs compared to a national approach. By focusing on a strong market such as
Los Angeles, we feel that we can solidify a business model that will allow for expansion
at an optimal and efficient level. Los Angeles is an ideal market for The Channel for two
primary reasons:
• The city has a large, young population
• It is a major center for recording labels, artists, etc.
Demographics
The city’s demographics fit into our business model well as a result of its large, young
population. It is the second most populous city in the United States with over 13 million
people living in the Greater Los Angeles Area. Furthermore, we believe that it is
paramount to focus on a location with a relatively young population. Statistics prove that
Los Angeles has a young population compared with other major US cities. According to
Census 2000, 37.7% of the population is under 24 years of age. For comparison, New
York City’s percentage of people under 24 is 34.2%. While the median age in New York
is 34, it is 32 in Los Angeles. The youth driven culture of Los Angeles is essential to the
success of our product, as we are targeting an age demographic of 14-24 years old.

Page 34
Industry Exposure
The second driver affecting our decision to focus on Los Angeles is the city’s status as
the entertainment capital of the United States. Symbolically, the city is renowned for
iconic entertainment symbols including Universal Studios, Sunset Boulevard, and
Hollywood.
In practice, the city is a melting pot of aspiring artists and record labels. Thousands of
young musicians flock to LA from around the country creating a rich culture of new
musical styles and millions of eager fans. Furthermore, the majority of major record
labels have either headquarters or major offices in Los Angeles. It is essential for The
Channel to surround itself with key players in the music industry in order to form
beneficial relationships and establish proximity to decision makers. We believe that Los
Angeles is an ideal location because we strongly value the city’s rich musical landscape
and the presence of the recording industry in general.

Page 35
Employees
Initially, the Channel will operate with a very limited staff to reduce start-up costs. The
Channel will serve to obtain, edit, and broadcast live musical performances but will not
be directly involved with production. In this respect, The Channel will follow the
successful business model of MTV. The Channel will contact record labels, artists, and
promoters to obtain video footage free of charge. In exchange for receiving the rights to
broadcast footage, artists will benefit from additional exposure and promotion. This
mutually beneficial relationship allows The Channel to avoid programming and
production costs that other networks experience. The Channel will maintain the right to
edit video footage so will require a broadcasting/editing staff of approximately five
people.
Following the initial launch of The Channel, we will use retained earnings to expand our
production capabilities. The Channel will eventually sponsor and film its own concerts;
however, this will occur later in the business plan and will not be financed by venture
capital.
In addition to our small broadcasting team, we will require fully staffed marketing,
accounting, and managerial teams. The Channel’s overall staff will not be more than 20
people although this will increase rapidly during the latter stages of expansion. This
number does not include expenses related to our “grass roots” marketing campaigns
because these are part-time/volunteer employees (see section: Marketing Plan).

Page 36
Product
Overview
The Channel’s live feed will be controlled directly by our team of broadcasting
specialists. It will be available in 1080i HD, the best quality of high definition. We will
broadcast using the platform of Time Warner Cable in Los Angeles. Although not
everyone has access to HD technology, we firmly believe that our network’s success is
tied to the utilization of the newest technologies available. Young consumers are hungry
for the latest technological innovations, especially concerning media and entertainment.
Due to the fact that our target audience is heavily engaged in music and emerging
technologies, we believe it is essential to offer the highest quality, most innovative
product.
Distribution
We will use HDNet technology and Time Warner Distribution to broadcast The Channel.
HDNet is the first national network to broadcast exclusively in high definition. It
produces more hours of HD sports, news and entertainment programming than any other
network. In line with estimates at Standard & Poor’s, we believe that high definition is a
quickly growing market that will soon become the standard for all cable broadcasts. S&P
estimates that within 5 years, the majority of broadcasting will be done exclusively in
high definition. In fact, DirecTV plans to make high definition available to 76% of its
customer base by the end of
2006!1
Broadcast
The Channel will broadcast with
a 24-hour live feed from our
studio. The programming will be
controlled by our
broadcasting/editing team. It will
be scheduled with a framework
of consistency but can be altered
at our discretion. For example,
we will broadcast an hour of
classic rock concerts everyday at
4:00 PM but maintain the
1
Anobi, Tuna. Industry Surveys: Broadcasting, Cable, & Satellite. Standard & Poors.
June 15, 2006.

Page 37
flexibility to broadcast a live concert if possible. We will broadcast different types of

music at different times throughout the day in a random fashion. For example, we will
have hip-hop programming between classic rock and reggae.
Production
Initially, we will not produce any of The Channel’s programming. We will obtain footage
from artists and record labels to assemble daily play lists. The relationship between The
Channel and record labels will be mutually beneficial like the MTV business model.
Record labels will provide us with concert footage and will receive exposure and
publicity through our broadcasts.
Price
The price of our product to consumers is free. We will generate revenue through
advertisements and sponsors just like all cable television channels. Time Warner
customers will receive The Channel through their regular cable subscription at no extra
cost to the consumer. The Channel’s most significant cost will be to access the Time
Warner/HDNet platform which we have estimated to cost around $5 million (see section:
Funding Request).

Page 38
The Market
Young Target Market
The Channel will be available to every cable subscriber in the Greater Los Angeles Area;
however, we are specifically marketing to teenagers and young adults between the ages
of 12 and 24, although younger adults between 24 and 40 will be targeted as well.
There are 13 million people living in the Los Angeles Area. According to Census 2000,
37.7% of this population is 24 or under. We can accurately assume that approximately
half of this falls into our target demographic of ages 12-24. Therefore, we can estimate
our target market to be about 1.82 million people. It should be noted that while be are
targeting this market, The Channel will also be available to millions of other consumers.
Our customer base is very large and attractive to sponsors due to the high potential for
advertising.
We must be realistic and understand that not all young people in Los Angeles will watch
The Channel or even care about music. However, we can maintain a steady audience of
almost 200,000 viewers assuming that we appeal to 10% of our target demographic. This
is still a huge pool of viewers presenting enormous value to advertisers and sponsors.
MTV Comparison
MTV Networks, a subsidiary of Viacom, initially targeted a similar demographic;
however, much has changed over its 25 year history. The network now primarily airs
self-produced shows with a goal to retain mature audiences through content that lessens
the importance of music and emphasizes drama. The channel will seek to attract
audiences that have grown weary of the overly produced and corporate stigma of MTV.
We will accomplish this goal by emphasizing the importance of the actual music and by
providing exposure to genres not heard on MTV. We are seeking to attract a young, anti-
MTV audience that places value on original music instead of contrived entertainment.

Page 39
Marketing Plan
Overview
As The Channel will originally be released in Los Angeles, our strategy for marketing
this channel will be very specific to the Los Angeles environment. The marketing
segment of this paper will be split into two components:
• Examining how we will market The Channel to viewers
• Positioning of The Channel as a desirable advertising venue for advertisers and
venues alike.
With the advertising plan set forth in the following paragraphs, we are sure that The
Channel will be successful in promoting its image to viewers and appealing to
advertisers.
Marketing to Viewing Audience

The viewing audience that we will target will be slightly different from what other
channels of similar genre. While MTV targets a trendy audience between the ages of 14-
34 (although most of their viewers are under 22), we will target a slightly older, less
trendy market. The Channel will position itself unlike any of our competitors using
music outside of the mainstream for viewers who don’t want to be seen as trendy. Our
marketing team will begin its campaign with advertisements at concert venues around the
greater Los Angeles area. In doing this we will be reaching our target audience, i.e. those
who enjoy watching concerts. More importantly, our adverts at will be placed in venues
at which we are recording or where viewer-submitted videos were taped. With this
strategy, we will reach devoted music listeners who are interested in the material we will
be airing.
For those who don’t attend concerts regularly, we will be using endorsements by
recording artists, most of who will be known in the music scene but probably not in the
widespread media. In order to gain these celebrity endorsements and advertising
possibilities at concert venues, our team will make it clear that this advertising strategy
favors both parties. The Channel will increase awareness of the Los Angeles area concert
scene and increase ticket sales, just like how online music has spurred an increase in
available music, especially for lesser known bands.

Page 40
Research shows that there has been a significant increase in the number of music
enthusiasts and casual listeners in recent years, and decrease in the number of people
indifferent to the music world.2 This increase comes at a time when the US has seen a
significant increase in
music downloaded online.
This concept will convince
venue operators, who
receive a cut of ticket sales,
to sponsor The Channel
with advertisements in
order to increase ticket
sales. Furthermore, artists
will want to develop the
presence of The Channel.

Increased concert sales will
boost the income of recording artists outside of the top five percent of artists in the
industry. Concert sales are very important to recording artists. In fact, only four of the
top 35 earning recording artists earn more from recording than performing. Among these
35, the ratio of live earnings to
earnings from recordings is 7.5
to 1. Nonetheless, while live
shows are essential to artists,
the top five percent of artists
earn 84% of the total ticket
sales for concerts.3 This high
stratification will cause lesser-
known recording artists to
welcome the opportunity to
increase awareness of a TV
channel that will potentially
increase attendance at their concerts.
2
3

Page 41
The media giant Clear Channel controls 41% of concert promotion, so it will be essential
to work deals through them to gain exposure.4
In proposing advertisements to Clear Channel,
we will make clear that our channel will
increase general interest in music. Clear
Channel, which who owns thousands of radio
stations coast-to-coast, benefits
from increased interest in
music.
Further, studies show that most

people in our target age group
go to the Internet or their
friends for information about
music.5 Therefore, online
advertising will be stressed, as
well as advertisement directly
to our target audience. Direct
advertisement to our audience
will be done on college
campuses, where much of our target audience resides. With a small group of
representatives on college campuses in the Los Angeles area, we will spread the word
about The Channel and increase credibility be creating a ‘buzz’ on college campuses. In
addition, studies show that concert attendees are considerably more likely to download
music online.6 As our audience is more tech-savvy, we will cater to their online
experience by offering concerts available for download on our website. Using a service
such as iTunes would further increase awareness of The Channel to the public. We will
aggressively pursue this option.
4
5
6

Page 42
Marketing to Advertisers
While we have few direct competitors, analysis of MTV will provide statistical
information in regards to our appeal to advertisers. One of the more striking statistics is
that viewers of MTV are 3 times more likely than the general population to have
household incomes over $75,000. This means that advertising on MTV, or The Channel,
will result in knowledge of a product or service among wealthy consumers. Furthermore,
those who are the median age of MTV viewers, 20, are at the age most likely to form
brand loyalties. This is very important to advertisers wishing to establish brand loyalty,
as 69% of consumers make decisions based on brand names. Even more, the 12 to 43
age group, which is slightly broader than The Channel’s target audience, represents 41%
of all retail shopping dollars.7
While appealing to a slightly

narrower age group may seem to
be a disadvantage to our appeal
to advertisers, the ages of our
target age group is actually an
advantage for some advertisers.
MTV has tried in the past to
advertise alcohol products to its
audience, but has run into many
problems as a result of the under-
21 age group most likely to
watch MTV. The Channel
eliminates this problem by
appealing to a narrow age group
that is more likely to attend
concerts. Without the problem of hosting an underage audience, The Channel appeals to
alcohol advertisers as a venue through which they can reach this audience without
dealing with the issues that MTV has had. On the other end of the age spectrum,
advertisers will appreciate that older people will The Channel. Despite the fact that older
people tend to attend fewer concerts, they are likely to still watch concerts on TV (see
Figure 5).8
7
"MTV Music Television Profile." Cable TV Ad Buraeu. Cable Network Information. 22
Nov. 2006 <http://www.cabletvadburaeu.com>.
8

Page 43
Competition
A business plan like Concert TV is not entirely unprecedented, other television stations,
like MTV and VH1 (both now owned by Viacom), tried similar ideas in earlier stages to
successfully supplement their viewing audiences. What offers us a competitive edge is
that no one is offering this sort of service or product because the nature of our business is
so unique. We will attract a myriad of performers from a variety of different genres at
their respective venues, as well as places like schools where a high number of young
people will learn about Concert TV.
Not only will we allow up and coming artists and bands to send in footage of their
performances to potentially be played during a designated time slot, we will send camera
crews to record footage of already established artists to air at a later time. Our closest
form of competition would fit loosely under the umbrella of various video music outlets
like MTV, VH1, YouTube and MySpace.

Page 44
Funding Request
Overview
In our society, businesses have the ability to produce sizeable cash flows if they can do
one of two things: offering a useful product or service or improving upon someone else’s
idea. The Channel is an innovative idea that will appeal to the massive demographic of
teenaged to middle aged Americans. Starting with the greater Los Angeles area, we will
cater to a market that is disproportionately saturated with younger people, who also tend
to spend the most money, especially for entertainment related purchases.
We have developed an idea that will produce sizeable and steadily increasing cash flows,
while requiring only minimal levels of capital investment and overhead costs. Most of
our costs in the preliminary stages will involve producing a high definition channel and
purchasing the rights to air certain videos and other costs involved with avoiding
copyright infringement. We will only require funding to maintain liquidity for a few
months after which we will be able to successfully capture our targeted demographic in
Los Angeles and will use that momentum to help us grow in other areas. Eventually this
plan will become lucrative enough to be attractive to other telecom and media giants like
Viacom.
Comparable Transactions
Though information about acquisition costs for mature television businesses is rather
limited, recent television channel sales have ranged from $160 MM to $600 MM;
however, these were from a variety of different countries where the viewing audience
was probably much smaller. Thus, one must conservatively analyze these figures because
they might have similar margins and returns but the rates of growth will ultimately be
lower. The Channel has much greater potential for growth than many of these other
channels, so we would gauge our value significantly higher.
Acquisition Costs for Recent Television Companies:
• Doughty Hanson & Co.- Private Equity

-Irish TV Channel, TV3: $338 MM
• Bonnier & Bonnier AB- Investment Fund

-Finnish TV Channel, MTV3: $600 MM

Page 45
• Suez SA- Company

-French TV Channel, Paris Premiere TV- $420 MM
• Israel 10 ltd.- Private Equity

-Israeli Men’s Channel- Channel 10: $160 MM
In the end, one must also bring into account that no other television company is really
offering a product/service like ConcertTV’s. Whether we try to grow independently and
capture a piece of the television and media market share or seek to be acquired by a
larger company, we are confident that we will be able to produce value with this
company in the next few years.
Funding Required
The costs associated with production of an HD channel, purchase of rights, and coverage
of any extraneous legal fees is a very dynamic set of variables, and it is difficult to arrive
at a safe estimate. We spoke with Collette Carey, Director of Media and PR at HDNet,
and she said that given our circumstances and strategy, the launch of an HD channel of
this sort in the greater Los Angeles area could cost up to or around $5 million. Although
we have low levels of overhead, we will also need some additional cash for initial capital
investments and some liquidity to help fuel our growth more rapidly. An additional $5
million would easily cover our overhead, capital expenditures, and employee salaries for
a couple years until we have more momentum. We are requesting a net investment of $10
million, and after a time horizon between 5 and 10 years we believe we will become
viable acquisition candidates in this industry. Regardless, The Channel will provide
lucrative cash flow generation for the company and increase shareholder value
significantly.

Page 46
Jeffrey Urlich
Keith Parker
Jaspaul Kapoor
Company Overview Location

 Broadcast Concert Footage  Greater Los Angeles Area (low initial costs)
 Variety of Music (hip-hop, rap, indie rock,  Exposure to 13 Million People
classic rock, alternative, jazz)  Long Term Plan of Expansion (5 years)
 Ancillary Website
Employees Product
 No Production Staff = Low Start-up Costs  Broadcast in 1080i High Definition
 Staff of 20 (broadcasting, marketing,  Use HDNet Technology & Time Warner
accounting, management) Distribution
 Highest Quality, Most Used Hi-Def Platform
1
Page 47
Product Price
 24-hour Live Feed  Free to Consumers!
 Part of Basic Cable Plan
The Market
 Young Audience
 1.82 Million in Los Angeles Area
 Anti-MTV
Marketing
Marketing ConcertTV Marketing Campaign

 Greater Los Angeles Area Focus  Concert Venues In The Area
 Two sections  Reach Our Target Audience
 Marketing to Viewers  Reaching More Devoted & Enthusiastic
 Marketing to Advertisers Potential Viewers
 Positioning: For Viewers Who Don’t  Endorsements By Recording Artists
Want To Be Trendy  Less-Known But Recognizable Artists
2
Page 48
Building Relations Artist and Venue Relation

 Marketing Strategy Will Increase Concert  Our Channel Will Promote Concert
Attendance Attendance For These Smaller Artists
 What File-Sharing Did For Music
 Artists and Venues Will Be Willing
 Need For Higher Concert Attendance
Among Smaller Artists
 Our Channel Will Increase Awareness in The

Concert Scene
Advertising
 Clear Channel
 Controls 41% of Concert Promotion
 Internet and Word-of-Mouth
 Stress Online Advertisements
 College Campuses
Online Sales Positioning

 Digital Content Available Online  Appealing To The Un-Trendy Audience
 Broadcasting in HD
 Giving Viewers The Chance to
Discover New Artists
3
Page 49
Appeal To Advertisers
 MTV For Statistical Information
 High Income Of Viewers
 Age For Developing Brand Loyalty
Competition and
 12-43 Age Group Represents 41% Of
Retail Dollars
Funding Request
Competition BLS Consumption Data

 MTV/VH1 Average Numbers in Consumer Unit
 Persons: 2.5
 MySpace/YouTube
 Children under 18: .6
 Persons 65 and Over: .3
 Earners: 1.3
Consumption by Income Bracket Entertainment Spending

Audio and Visual Other services &
Entertainment Consumption Levels Equipment and Equipment
Services
Lowest 20% : 3.1 Under 25 years: 2.3 Under 25 years: 1.2
Second 20% : 3.0 25-34 Years: 2.1 25-34 Years: 1.3
Third 20% : 2.7 34-44 Years: 1.9 34-44 Years: .9
Fourth 20% : 3.0 44-54 Years: 1.9 44-54 Years: 1.2
Highest 20% : 2.8 54-64 Years: 1.7 54-64 Years: .8
4
Page 50
Total Investment Needs TV Channel Acquisition Costs

 $5 million- Purchasing Rights for Broadcast  Doughty Hanson & Co.- Private Equity
and Launch of an HD Channel -Irish TV Channel, TV3: $338 MM
 $5 million- Capital Expenditures, Salaries,  Bonnier & Bonnier AB- Investment Fund
and Meeting Liquidity Requirements -Finnish TV Channel, MTV3: $600 MM
 Suez SA- Company
-French TV Channel, Paris Premiere TV- $420 MM
 Israel 10 ltd.- Private Equity
-Israeli Men’s Channel- Channel 10: $160 MM
Funding Request
 Steady Cash Flow Growth
 Viable Acquisition Candidate and
Potential to Go Public within a five to
ten year Horizon
 Appeal to a Large and Quickly Growing
Thank You
Demographic
5
GSBA 511 http://www-rcf.usc.edu/~amarino/buad351.htm
BUAD-351: Syllabus
Page 51
BUAD 351: Fall 2006

Professor Anthony M. Marino
Department of Finance and
Business Economics, Marshall School of Business
Course Information
Textbook: Pindyck, R. and D. Rubinfeld, Microeconomics, Macmillan, 2005 (Sixth Edition).
The lecture notes for the course will be available as a course reader and on my web page in
pdf form.
Grading Scheme:
1. Your grade will be based on the following point scheme
two midterm worth 50 points each..

two discussion questions sets worth 25 points each.
a final exam worth 100 points.
total course points = 250.
2. Office Hours: Tuesday and Thursday 3:40-5PM.
602F Hoffman Hall

(213) 740-6525
(213) 740-6650 FAX
e-mail: amarino@marshall.usc.edu
web page: http://www-rcf.usc.edu/~amarino/ or http://www-rcf.usc.edu/~amarino/main.html (the
second version has no frames)
Topics and Readings
1. Introduction.
a. Models and Economic Theory - Ch 1 and Lecture Notes LN 1.
b. Supply and Demand Analysis - Ch 2. and LN 1.
c. Mathematics Review - LN 2.
2. Consumer Choice and Demand.
a. The Consumer's Choice Problem and the Derivation of an Individual's Demand - Ch 3 and LN 3.
b. Individual and Market Demand - Ch 4 and LN 3.
c. Two Topics in Consumer Theory- Ch 4 and LN 4.
d. Choice Under Uncertainty - Ch 5 and LN 5.
3. Production and Cost
1 of 4 10/21/06 5:38 PM
BUAD-351: Syllabus
Page 52
a. Production Theory- Ch 6 and LN 6.
b. Cost Theory-Ch 7 and LN 7.
4. Perfect Competition
a. The Competitive Firm - Ch 8, Ch14 and LN 8.
b. Applications of Perfect Competition - Ch 9 and LN 8.
5. Imperfect Competition
a. The Profit Maximizing Monopoly and Monopsony - Ch10, Ch14 and LN 9
b. Pricing Strategy with Market Power - Ch 11 and LN 10.
c. Oligopoly - Ch 12 and LN 11.
d. Game Theory and Competitive Strategy - Ch 13 and LN 12.
7. Markets with Asymmetric Information and Public Goods
a. Asymmetric Information - Ch17 and LN 13.
b. Externalities and Public Goods - Ch 18 and LN 14.
Tentative Schedule
Session Date Topic P&R Marino

1T 8/22 Methodology, The Market System, Ch1,2 LN1
Supply and Demand, 1.a,1.b
2 Th 8/24 Supply and Demand, 1.b, and Math Ch1,2 LN1, LN2
Review, 1.c
3T 8/29 Math Review, 1.c, Demand, 2.a Ch3 LN2, LN3
4 Th 8/31 Demand 2.a, 2.b Ch3,Ch4 LN3
5T 9/5 Demand, 2.b Ch4 LN3
6 Th 9/7 Consumer Theory Topics, 2.c Ch4 LN4
7T 9/12 Uncertainty, 2.d Ch5 LN5
8 Th 9/14 Uncertainty, 2.d Ch5 LN5
9T 9/19 Review and DQ 1 Due ****** ****** ******
10 Th 9/21 Midterm 1****** ****** ******
11 T 9/26 Production, 3.a Ch6 LN6
12 Th 9/28 Production, 3.a, Cost, 3.b Ch6, Ch7 LN6, LN7
13 T 10/3 Cost, 3.b Ch7 LN7
14 Th 10/5 Perfect Competition, 3.a C8 LN8
15 T 10/10 Perfect Competition,3.a, 3.b Ch8,Ch9,Ch14 LN8
16 Th 10/12 Perfect Competition, 3.b Ch9 LN8
2 of 4 10/21/06 5:38 PM
BUAD-351: Syllabus
Page 53
17 T 10/17 Monopoly, 5.a Ch10 LN9
18 Th 10/19 Monopoly, 5.a Ch10 LN9
19 T 10/24 Review and DQ 2 Due ****** ****** ******
20 Th 10/26 Midterm 2****** ****** ******
21 T 10/31 Monopsony, 5.a and Pricing, 5.b Ch10,Ch11,Ch14 LN9, LN10
22 Th 11/2 Pricing, 5.b Ch11 LN10

23 T 11/7 Oligopoly Ch12 LN11
24 Th 11/9 Oligopoly Ch12 LN11
25 T 11/14 Games and Competitive Strategy Ch13 LN12
26 Th 11/16 Auctions Ch13 LN12
27 T 11/21 Asymmetric Information Ch17 LN13
28 T 11/28 Externalities and Public Goods Ch18 LN14
29 Th 11/30 Review ****** ****** ******
******Final Exam for 10 AM Section: 12/12, 8-10 AM******
******Final Exam for 2 PM Section: 12/7, 2-4PM******
Other Course Information.
1. The goal of this course is to provide the student with an understanding of the operation of a system of
prices and markets in determining an allocation of resources in a market economy. We will discuss the
properties of such an allocation and the circumstances under which a market system can not provide an
efficient allocation.
2. In our description of the market economy, various sectors or decision making units will be modeled.
For example, we will describe the derivation of market demand through a theory of consumer behavior
and choice. We will describe the production technology and cost structure of the firm in an effort to
characterize the market supply schedule. We will discuss market supply under different market
organizations, pricing strategy and the economics of competitive strategy. Finally, we will provide a
complete discussion of decision making, demand and supply in input or resource markets. We will also
discuss asymmetric information and public goods.
3. The above decision making problems will provide the student with a foundation for the study of
choice in many areas of business. For example, the economics of consumer choice underlies much of
modern marketing strategy, including pricing, segmentation and advertising. The theory of the firm
contributes to a sound understanding of cost accounting as well as production and location decisions.
Economic analysis of intertemporal decisions and behavior in a risky environment form the foundation
of finance. Finally, the study of market failure and industrial structure is necessary for an understanding
of government's role in a market economy and the political environment for business..
4. This course is designed to examine all of the areas in which microeconomic reasoning is a necessary
basis for making informed business decisions. With this course you should be able to apply
microeconomic analysis to issues of real world interest both within and beyond the area of business.
3 of 4 10/21/06 5:38 PM
BUAD-351: Syllabus
Page 54
Discussion Questions
1. Discussion Questions 1 for 10 AM Section. Answers DQ1 10 AM. Discussion Questions 1 for 2
PM Section. Answers DQ1 2 PM. Due on or before Tuesday, 9/19 at the beginning of class.
2. Discussion Questions 2 for 10 AM Section. Discussion Questions 2 for 2PM Section. Due on or
before Thursday, 10/24 at the beginning of class.
Grade for the Course
1. 2 PM Section
2. 10 AM Section
Formulas
4 of 4 10/21/06 5:38 PM
BUAD-351: Notes
Page 55
BUAD-351 8/24/06 2:06 PM
Notes are available on Blackboard
Individual Supply and Market supply

• Deriving the Market supply curve from the Individual supply curve
Going over basic market equilibrium theories
Changes cause shifts in the supply and demand in market equilibrium
Do 11 questions for next Tuesday
Comparative statics of S and D shifts

• Demand goes up, supply fixed; price goes up and quantity goes up
and conversely
• And so on…
Companies respond to a growing Latino population: increase demand

• Firms are responding to the tastes of a growing Latino population.
Some Home Depot stores, for example, include signs in both
English and Spanish. This results in an increase in demand.
Estimating the demand for printers at Hewlett-Packard

• Inaccurate forecasts in 2001 caused Hewlett-Packard to produce
more printers than they could sell. This resulted in excess supply
and eventually falling prices.
High demand and low prices in the lobster market?

• Supply and demand are both at their highest in the summer, and
lowest in the winter. The increase in supply in the summer
outstrips the increase in demand in the summer, so prices are
lower.
End of Chapter 1
On to Math review Chapter 2
• Marginal functions
• Marginal principle

BUAD-351: Notes
Page 56
• Average functions
• ...
Introduction
• Strategy variables
Extensions to n choice variables

• Marginal function of the x-th strategy variable is denoted as pi
Elasticity
• The most important measure in empirical work
• The elasticity is the ratio of the % change in the dependent variable
to the % change in the independent variable
• Elasticity has no units, it's a ratio of percentages
•

BUAD-351: Notes
Page 57
BUAD-351 8/29/06 2:11 PM
Arc elasticity:
Delta-Q: Change in Quantity; Delta-P: Change in Price
On the bottom: Average Price and Average Quantity
The cost minimization problem

• Iso-quant: hold the quantity fixed
The MRS represents the absolute value of the slope of the iso-quant at a
point
Marginal benefit of the good on the horizontal axis (divided by) marginal
benefit of the good on the vertical axis (equals) MRS
C=P1X1 + P2X2
• C=Cost; P=Price; X=Good used (i.e. Capital or Labor)
Chapter #3: Consumer Behavior Theory
Choice and preferences

• A single consumer is assumed to be able to rank order alternative
commodity bundles in terms of either preference of difference
• A commodity bundle can be represented by an ordered tuple of the
amounts of each product the consumer can consume. For example
x=(x1,x2)
The Key Assumptions

• A.1 The consumer can rank order any two bundles (Completeness)
• A.2 For any three bundles, must be consistent
Representation of R
• Definition: A utility function represents a consumer’s preferences if
for any commodity bundles x and y, xPy implies u(x) > u(y) and
x|y implies u(x) = u(y)
• Representation Theorem: If the preference relation R satisfies A.1
and A.2, then there exists a utility function representing
preferences

BUAD-351: Notes
Page 58
The Key Point

• The ability to represent R with a u function allows us to use
powerful optimization techniques to characterize demand
• If there are two commodities, we can use indifference curves (iso-
contours of u) to illustrate preferences and gain insight into
consumption choice and the relevant trade offs
Example: Nickels and dimes

• Any (N,D) is ordered according to its total monetary value. (Extra
coins do not lead to disutility)
• A utility function representing the consumer’s preferences is
U=2D+1N
The MRS
• Definition: The MRS between good one and two is defined as the
amount of good two the consumer is willing to give up for one more
unit of good one along an indifference curve. It is given by a
formula that should be in the notes
Additional assumptions on preferences

• A.3 More is better
• A.4 Diminishing MRS
Extreme cases: perfect substitutes and perfect complements

• The nickels and dimes example illustrates perfect substitutes. The
MRS is a constant
• With perfect complements, the MRS is infinity, undefined, or zero.
There is no flexibility in substitution. For example, coffee and milk
Questions 1-11 in Chapter 1

• 1.1: Right in the notes
• 1.2:

BUAD-351: Notes
Page 59
BUAD-351 8/31/06 2:08 PM
Cases excluded: perfect substitutes, perfect complements, and satiation

MRS is a constant
• With perfect compliments, the MRS is infinity, undefined, or zero
• More on slides…
The budget constraint

• I = p1x1 + p2x2
• Solving for x2 we have x2 = I/p2 – (p1/p2)x1
o Where x2 will be placed on the vertical axis. This is a linear
equation with intercept I/p2 and slope – (p1/p2).
Demands
• Solve (1) and (2) for x1 and we have Marshallian demands
• For either I, fix all other prices and income and vary own price.
This gives us simple demand.
Many commodities: composite good
Application: Employee housing subsidy

• Utility: u = u(H,M)
• Budget: I=pH+M
Price subsidy
• New budget: I=(p-s)H+M
• New equilibrium: (Hs, Ms)
• Cost to the firm: Ms-A=(I-A)-(I-Ms) = [pHs-(p-s)Hs]=sHs
Cash grant: lump-sum

• Give the employee the cash that the firm would spend on the price
subsidy = sHs
• The new equilibrium is shown at (Hm,Mm)
• Yields higher utility than price subsidy
In-kind subsidy

BUAD-351: Notes
Page 60
• Use expenditure on the subsidy sHs to purchase housing at the

price p. Give this amount of housing to the employee directly
• This amount of housing is given by sHs/p=Hd
• Equilibrium: (Hd,I)
• In figure 8, this performs worst

Page 61
IR 439: Political Economy of

Eurasia (Fall 2006)
Prof. Robert English office: VKC 305

Phone: 821-3090 hours: Wed 11:00-1:00
e-mail: renglish@usc.edu Thurs 1:00-2:00
Course Objectives: Since the end of the Cold War, and the collapse of state socialism, a dramatic
international experiment has been underway: the attempted transition of some two dozen countries from
centrally planned, one-party systems to free-market democracy. The West’s stake in their success is
great—whether they will become stable, prosperous neighbors and trade partners, or languish in poverty
and corruption while exporting only refugees, criminals, drugs, and perhaps chemical or nuclear weapons.
The questions we will be addressing include: Have the prescriptions of the IMF and other international
lending agencies helped or hurt? Has Russia finally found the path to steady growth? Why have some
Central European and Baltic countries done so much better? Can regional integration, or new oil wealth,
save the failing states of Central Asia and the Caucasus? And in what political, cultural, and historical
circumstances is democratization a help—or a hindrance—to building a market economy?
Course Format: This is primarily a lecture course, though there will also be a significant discussion
component. In addition, these will be punctuated by occasional guest speakers or video presentations.
The general pattern will be lecture for the first 45-50 minutes of each meeting, followed by a discussion
and Q & A period. There will also be two exams and a research paper (see below for details).
Course Requirements: One is to be an active participant, not only in discussions and assigned
presentations but first and foremost by timely completion of the reading assignments; without this,
successful engagement with the ideas and information vital to understanding post-communist political
economy is impossible. The assignments are from several books (available at the University bookstore),
an instructor-compiled reader (available for sale) and electronically (on Blackboard or by e-mail, as noted).
Anders Aslund, Building Capitalitsm: The Transformation of the Former Soviet

Bloc (Cambridge University Press, 2002).
Daniel Gros and Alfred Steinherr, Economic Transition in Central and Eastern Europe:
Planting the Seeds (Cambridge University Press, 2004)
Dale Herspring, ed., Putin’s Russia: Past Imperfect, Future Uncertain (Rowman &
Littlefield, 2005)
Juliet Johnson, A Fistful of Rubles: The Rise and Fall of the Russian Banking System
(Cornell University Press, 2000)
IR 439: Readings on the Political Economy of Eurasia
In addition to the assigned readings, there will be occasional instructor-supplied handouts (available only
in class on one day—if you miss class, it is your responsibility to copy or borrow these articles from
colleagues) as the fast-changing nature of post-Soviet and East European political economy dictates.
Finally, your attention will occasionally be directed to various websites and on-line sources of news and
information. These will be particularly helpful in preparing your research papers, and a number of the most
respected websites on post-Soviet and East European affairs are listed on the next page.

Page 62
There will also be two exams—one in-class, one final—that together will make up a large portion of your
final grade. Finally, the single most important assignment is a 15-20 page research paper. This presents an
opportunity to explore in detail one or another issue of interest (see below) as well as giving you a product
that can be helpful in future internship, job, or graduate school applications. Needless to say, in all these
assignments strict adherence to the honor code is expected and violations will be dealt with harshly.
Class Participation: Ideally, our discussion periods will be spontaneous and free-flowing, an opportunity to
raise questions and debate interpretations of issues that come up in readings and lectures. But owing to a
common tendency toward procrastination in reading, as well as to variations in students’ volubility and prior
experience, such discussions are often dominated by a small number of voices. To counter this tendency,
each student will be required no later than 10:00 am each Tuesday to e-mail the instructor a paragraph that
critiques one or more of the readings, or raises a question relating the readings to some issue mentioned in
lecture. This practice is meant both to encourage timely reading and to serve as a basis for our discussions
(meaning that I may call on students to elaborate on their written critiques in order to stimulate a larger
conversation). Together these two elements—weekly e-mail critiques, and contributions to class
discussions—will comprise the “participation” portion of your grade.
Research Papers: Here you are expected to produce a serious work of political-economic analysis, based on
research that includes at least 15 sources—books, journal and other periodical articles, reputable websites,
etc. Many will choose to do a “country study,” analyzing the political-economic performance of any one
post-communist country. Others may decide to compare two states, or focus on a regional issue such as
Caspian Sea oil or Baltic economic integration. Topics will be chosen in consultation with the instructor, and
deadlines for proposals, outlines, etc. are noted in the course schedule. Extensions will be granted only in
cases of genuine emergency; coincidence with other academic deadlines or extracurricular events does not
constitute such an emergency.
Final grades will be determined according to these weights:
first exam: 20 %
class participation, discussion: 15 %
research paper: 35 %
final exam: 30 %
Finally, on keeping up with changes in Russia, the former USSR, and Eastern Europe. As noted, I will
assign additional readings as events dictate. But you are also expected to stay abreast of major
developments, ideally by perusing such periodicals as Foreign Affairs and The Economist. For the more
ambitious, those with a special interest or simply seeking to get a jump on their research projects, I suggest
looking over such specialized journals as Post-Soviet Affairs, Europe-Asia Studies, Problems of Post-
Communism, World Politics and Journal of Comparative Economics.
I also recommend the websites of: Radio Free Europe-Radio Liberty (www.rferl.org); Transitions On-Line
(www.tol.cz); Eurasia Foundation (www.eurasia.org); Central European Review (www.ce-review.org); and
Johnson’s Russia List (www.cdi.org/russia/johnson). Most of these contain links to additional sources, and
some also include subscription instructions that enable you to receive daily or weekly bulletins of useful
material. For the latest studies and statistics, especially as you begin work on your research papers, the
websites of the World Bank (www.worldbank.org) and the International Monetary Fund (www.imf.org) are
also valuable.

Page 63
Course Schedule
Date Topic Reading Assignments
Aug 22, 24 Russia and Eastern Europe Westwood, “On the Eve,” from Endurance
Before Communism and Endeavor (Oxford, 1987)
Rothschild, “The Interwar Background,” from
Return to Diversity (Oxford, 1993)
Excerpts from Ransel, Mothers of Misery
and Troyant, Daily Life in Russia
Gros & Steinherr, Planting the Seeds, chap. 1
Aug 29, 31 The Origins and Evolution of the Aslund, Building Capitalism, chap. 1
“Command-Administrative System Tucker, “The Five-Year Plan in Four!” and “The
Making of a Rural Upheaval” from Stalin in
Power (Norton, 1990)
Rothschild, “A Precarious Stalemate”
Sept 5, 7 Crisis, Reform, and the Collapse Aslund, Building Capitalism, chap. 2
of Soviet-style Economies Remnick, “Party Men” and “Poor Folk,” from
Lenin’s Tomb (Vintage, 1994)
Rothschild, “The Various Endgames”
Sept 12, 14 “Shock Therapy” and Efforts Toward Aslund, Building Capitalism, chaps. 3, 5, 6
Macroeconomic Stabilization; Theory Gros & Steinherr, Planting the Seeds, chap. 3
of Market-Democratic Transition Haggard and Kaufman, “Comparing Democratic
Transitions,” in The Political Economy of
Democratic Transitions (Princeton, 1995)
Stephen Cohen, “Russia-Watching Without
Russia,” in Failed Crusade (Norton, 2001)
Sept 19, 21 Privatization, Property, and the Rise Aslund, Building Capitalism, chap. 7
of the Russian “Oligarchs” Hoffmann, “Unlocking the Treasure,” from The
Oligarchs (Public Affairs, 2002)
Freeland, “Who Gets the Loot?”, “The Oligarchs:
Outsider, Apparatchik, Blueblood.” and “The
Nomad and the Impresario,” from Sale of the
Century (Crown, 2000)
Wedel, “Tainted Transactions,” Ermarth, “Seeing
Russia Plain,” The National Interest, 1999-2000
Sept 26, 28 The Yugoslav and Czecho-Slovak Doder, “Searching for Identity,” The Yugoslavs
Break-ups; German Reunification (Vintage, 1980)
Brown, “The First Yugoslav War,” The Grooves
of Change (Duke University Press, 2001)
Kraus and Stanger, eds., “Inevitability, Problems,
Possibilities” and “Assessing Economic
Performance,” chapters in Irreconcilable
Differences? Explaining Czechoslovakia’s
Dissolution (Rowman and Littlefield, 2000)

Page 64
Oct 3, 5 Differences (and Similarities) in Brown, “Economics 1945-2000: Behemoth,”

East-Central Europe and the Baltics and “Country Profiles: Facing the Future,”
in The Grooves of Change
Amsden, Kochanowicz, Taylor, “The Black
Box of State-Owned Enterprises,” in The
Market Meets its Match (Harvard, 1995)
Oct 10, 12 Ukraine, Central Asia, the Caucasus; Selections from Transition on Ukraine, Moldova,
Crime, Corruption, Capital Flight Central Asia and the Caucasus
Handelman, “The Russian Mafiya,” Foreign
Affairs, March-April 1994
Glinkina, Rutland and Kogan, et al., “The Ominous
Landscape of Russian Corruption” and other
selections from Transitions, March 1998
http://www.transparency.com (corruption reports)
Oct. 17 Factory and Farm; Labor and Welfare Aslund, Building Capitalism, chap. 8
Selections on agriculture from Transitions
Kubicek, “Organized Labor in Postcommunist
* NB: Midterm October 19 * States,” Comparative Politics, 1999
Herspring, ed., Putin’s Russia: Past Imperfect,
Future Uncertain, chaps. 6, 8
Oct 24, 26 Banking and Payments, Financial and Johnson, A Fistful of Rubles, chaps. 1-4, 6
Legal Structures; Democracy and the Gustafson, “Toward the Rule of Law,” from
Rule of Law Capitalism, Russian-Style (Cambridge, 1999)
Hellman, “Winners Take All,” World Politics,1998
Guriev, “The Role of Oligarchs,” Journal of
Economic Perspectives, Winter 2005
* NB: paper proposals due by Monday, October 31 *
Oct 31, Nov 2 Center-Regional Ties and the Erosion Aslund, Building Capitalism, chap. 9
of State Authority; Drug Barons and Kirkow, “Regional Warlordism in Russia,”
Warlords Europe-Asia Studies, 1995
Johnson, A Fistful of Rubles, chap. 5
Selections from Transitions on regional barons
Herspring, ed., Putin’s Russia, chap. 12
Nov 7, 9 The August 1998 Ruble Collapse and Johnson, A Fistful of Rubles, chaps. 7, 8
Aftermath; Putin’s Political-Economic “Surviving the Apocalypse,” from Transitions
Reforms “What Went Wrong in Russia?”, symposium in
Journal of Democracy, 1999
Herspring, ed., Putin’s Russia , chaps 2-4, 7, 9

Page 65
Nov 14, 16 Central Europe and the European Garnett, “Europe’s Crossroads,” in Mandelbaum,
Union; Postwar Reconstruction in ed., The New Russian Foreign Policy
The Balkans Selections on EU enlargement from Transitions,
Central European Review, et al.
Gross & Steinher, Planting the Seeds, chaps 5, 9-10
Smolansky, “Fuel, Credit, and Trade: Ukraine’s
Economic Dependence on Russia,” Problems
of Post-Communism, 1999
http://www.europa.eu.int/comm/enlargement/report2005
“Transnational Crime and Conflict in the Balkans,”
* NB: Nov 17—prelim. bibliography due* excerpts from special issue of Problems of Post-
Communism (June 2005)
On postwar issues and the Balkan Stability Pact see
www.crisisweb.org and www.stabilitypact.org
Nov 21 The New Geopolitics of Caspian Oil; Collection on Oil, Central Asia and the Caucasus
from Transitions
Rutland, “Paradigms for Russian Policy” in Ebel &
Menon, eds., Energy and Conflict in Central Asia
* Nov 23 – Thanksgiving Holiday * and the Caucasus (Lanham, 2000)
Cummings, ed., Oil, Transition and Security in
Central Asia (Routledge, 2003), parts 1, 3-4
Excerpts from Transition on-Line, re Uzbekistan,
Kyrgyzstan, pipelines and military bases
Nov 28, 30 Transition States in the Global Aslund, Building Capitalism, chaps. 10, 11
Political Economy Brown, “Looking Outward and Inward,” in The
Grooves of Change
Amsden et al., “Pseudo-Privatization and the World
Bank,” in The Market Meets its Match
Herspring, ed., Putin’s Russia, chaps 13, 14
Desai, “Russian Retrospectives on Reform” and
Schleifer & Triesman, “A Normal Country,” in
Journal of Economic Perspectives, Winter 2005
Stiglitz, “Who Lost Russia?” in Globalization and
its Discontents (Norton, 2003)
* NB, papers due by COB Monday, December 11 *
Dec 12 Final Examination on Tuesday, 8:00-10:00 a.m.

IR-439: Class Notes
Page 66
IR-439 8/24/06 11:09 AM
Serfdom
• One bad harvest could mean starvation
• Vast area very susceptible to invasions and raids
Boyar – a member of the highest rank in Russian feudal society
Serf/ Peasant agriculture

• Becomes serf agriculture as the government expands from the 16th
century to the 19th century
• Government needs these peasants to farm the land of the nobles
• About 80% of peasants became enserfed, couldn’t leave and had to
work the noble’s land
• Kiev period – from 9th century
• Between 1240 and 1380, the Mongol occupation, the Mongols take
over all of European Russia
• This creates a new state that centers around Moscow
• Russia becomes very autocratic, one person rules with an Iron Fist
• Highly centralized, highly secretive, ‘Ivan the terrible’ invents the
Russian secret police
• Ivan IV (Ivan the terrible) crushes the nobility, only leaves five
alive, and later regrets even that
• Ivan’s period of tsardom around 1530-1584
• No longer permit liberties to different regions, had to become
completely unified and come together to defeat a unified enemy
• Ivan’s largest imperial conquest was to the southeast, (northwest of
the Black sea)
• Ivan commissions a cathedral, thought it was so beautiful that he
had the architect's eyes put out so that nobody else could hire him
Peter the Great – ruled 1964-1725

• Very tall person, very smart, in his childhood (born in nobility) he
was very ambitious, aspired to be many things
• Peter was interested with the skill and craftsmanship of westerners
• Capitol moves to St. Petersburg, makes it a very European city
• Very strong emphasis on the move to the west by Peter

IR-439: Class Notes
Page 67
• Nonetheless, in order to pay for the new wars and all of the
ambitions of the government, the money would come from the
peasants in serfdom. Any time more money was needed, they
squeezed more out of the peasant
o More land is given to the nobles, tax burden increases
o For the lower classes, over 80% or Russians, this is a step
backwards, even less freedom than they had before
Catherine the Great - 1762-1796

• Russia expands greatly, becomes a major European empire
o This is largely due to Catherine the Great and Peter the Great
• Russia defeated the great Swedish empire under Peter
• Takes control of the Baltic’s
• Poland shrinks, gradually being taken over by Russia
• Much of Ukraine was taken back by Russia
• The parts of Poland taken over by Russia, the people there still
resent Russia’s takeover and are very restless
• Finally, in 1795, Poland disappears from the map and there is no
longer a Poland for people in the area to rebel against Russia for
• Pockets of westernization and development in European Russia
• Why has there always been so much dispute between the Serbs and
the Croats? One was under the Russian empire for 250 years, the
other under the Ottoman empire
• When the empires collapse, it becomes clear the ethnic and religous
differences in Eastern Europe
• For Poland, once a free state, disappeared under Russia
• The fall of Poland owes much to Poland's enlightenment
o Poland had a constitution, gave enormous authority to the
nobility
o Had a parliament
 Individual members of the Parliament had the ability to
veto any important decision
o This was a recipe for weakness, against determined, unified
neighbors being ruled with an iron fist
o Beginning of the 1600s, Poland invades and occupies Moscow

IR-439: Class Notes
Page 68
Russia’sindustrial revolution, economic take-off

• It was costing more to expand than it was worth
• Peasant rebellions were becoming more frequent
• Under Catherine the Great, a peasant rebellion was almost
successful
• Samoderzhavie – Autocracy
State of Russian military

• Russians were fairly primitive, slower on the battlefield
• Very weak commanders, ideas from below were unwelcome and
unacceptable, while European commanders were thinking on their
own
• Wasn't very militarily innovative
• The Crimean war shows that Russia is politically backed up
• The nobility, even though they depended on the serfs, understood
that the serfdom thing couldn’t go on
• Alexander II takes over right after the Crimean defeat, decides that
Russia must reform its ways now, or it won’t make it
• Europeans created the reserve system, because they couldn't afford
a massive standing army
o People will serve temporarily
o There will be some standing, but the far majority will go back
to civilian life when there is no crisis
o Russians envied this European system, it was cheaper and
you could have a larger army when you wanted it
o It didn't make much sense with Russia being a serf based
system – couldn’t train serfs how to kill then put them back in
the villages; there were so many rebellions that this would be
a terrible idea
1830s, 1840s, Marxism is being published

• This ideology sweeps the European nobility world
• Russian’s educated youth (there are now more, though still not very
much, because of Catherine and Peter the greats’ universities) start
adopting these Marxist ideas
• Ideology for the working class, fully adopted industrialism

IR-439: Class Notes
Page 69
• Why did it attract more adherents in Russia than in Europe?

• In Russia, the backwards-ness was so intense that the
revolutionary idea of Marxism was more attractive, Europe didn't
feel so revolutionary because they weren't so backwards
• Marxism's anti-nationalism idea
• In Central Europe, countries were just finding their nationalism,
were becoming proud to be states, and wanted that strong
nationalism
• Marxism was seen as a Jewish ideology, and anti-Semitism was
becoming strong in central Europe

IR-439: Class Notes
Page 70
IR-439 8/29/06 10:59 AM
Overview
• Russia & East-Central Europe on the Eve
• World War I
• The Bolshevik Revolution
• Civil War: Reds & Whites
• N.E.P.: Progress & Problems
• Stalin’s Triumph
Russia & East-Central Europe on the Eve

• Predominately peasants
• In north and south eastern Europe, progress was being made in the
industrial revolution
• Connecting west to east Russia was a new railway, but this only
benefited the very few that had wealth
• Grinding poverty for the mass majority of the population, aside
from a tiny elite
• Witte – Prime minister of Russia 1900-1905
• Stolypin – 1906 – 1911
• These two leaders are largely responsible for the development of
Russia
• Witte raised the money and set the plans for building the railroads
• Stolypin began agricultural reform (There weren’t enough workers,
everybody was tied to serfdom)
o “Wager on the strong” forced peasants off of the land and into
the cities
o Made it easier for farmers to buy up land, and expand their
farms – more capitalist ideas
o Great industrial progress, but with much social distress at bad
working conditions in the cities and having to leave their land
when one of the ‘strong’ peasants takes it over
• Nationalism
• Now because many empires are weaker inside, and the nationalist
ideology that every people deserves their own state, things begin to
weaken further
• Poles rebelling against Russian rule, other groups rebel against their
holders

IR-439: Class Notes
Page 71
o These people used to be peasants, now they are becoming

more educated and more able to rebel
• “Westernizers” – Looked at Russia and said that we need more
reforms along western lines, both economically and politically
• "Slavophiles" – Pointed towards Russia’s traditional culture, sense
of sharing and helping the poor among the peasants, we are
different from westerners and should remain this way, we will never
make good capitalists
• Both of these groups couldn’t directly criticize the Russian Czar,
there was strict censorship throughout Russia
o The aforementioned nationalists in other empires could run
for office and get involved, these other two groups could only
argue amongst themselves, hoping that the Czar would make
changes from above
• Slovophile thinking: The first Rome fell, the second Rome
(Constantinople) fell to the Ottomans, Moscow is the only Christian
capital remaining that hasn’t been taken over
• Late 19th century, early 20th century, Russian nationalism comes to
the surface called ‘Panslavian’
o Becomes more angry with Europe, they want to see
aggressive combat with Europe
o The idea that slovs should all be united under Russia (this
would include Poles and other who didn’t want to be under
Russian control)
• Russia undergoes a revolution in 1905, starts with soldiers and
sailors mutiny
o More troops in rebellion than loyal
o Stolypin advised Witte to be harsh, hang and shoot rebels on
the spot
o Things were given, though, the Duma was created as a
parliament
• Things were moving more western, seemed that the westernizers
had won, but then WWI came along
Bolshevik Revolution

IR-439: Class Notes
Page 72
• Led by Lenin, very small political party, not much power and almost
no respect by other parties
• Lenin was a political genius
• Lenin stood out against the war in the beginning, which was very
dangerous politically because everybody in Russia was rallying
around the flag to kill Germans
• When the line kept being pushed back into Russia by Germany, and
millions were dying, people were staving at home as conditions got
worse and workers were working non-stop; people began seeing
things Lenin’s way
• Lenin recruited Trotsky, who had been a socialist but hadn’t joined
Lenin’s party until the war was happening
• People (workers in the cities, who made up a very small percentage
of Russia’s total population) began forming 'Soviet' parties, or
‘unions’
• Trotsky wins many of these groups over
• The Czar loses support of all of the elite groups in Russia
• Czar agrees to abdicate; leaders of the Duma form a committee
that will rule Russia temporarily until things can get organized and
somebody can be elected
• This committee splits its power between these elite groups and the
Unions (Soviets)
• Anything the Soviets don’t like, they block, they had more power
than the elite groups
• The provisional government didn't stop the war or make any land
reforms
• Lenin took over fairly easily with his followers, it was easy with
everybody still so angry
• Lenin: "Peace, Land, Bread"
• The Bolshevik revolution in October 25th
• The country dissolves into civil war
o Reds and Whites, “Whites” didn’t want the Bolsheviks, they
were a mixed group of people, including anarchists and
everybody else, clashes within this group, its hard to get all of
these kinds of people to work together
o The Whites undercut each other

IR-439: Class Notes
Page 73
o The reds looked weaker in the beginning on paper, but

quickly moved towards having the upper hand
o After a long bitter fight, Russia had been fighting this War for
three years, starting after leaving the first world war
o 1921, war ends, widespread famine, many die from starvation
o Peasant rebellion began to break out, Bolsheviks came in and
took grain after the war, didn’t make it any better for the
peasants. City workers weren’t getting any better either
o N.E.P. – New Economic Policy – Progress and Problems
 “War Communism”
 Peasants will get what we promised, every peasant will
have a tax to pay – other than that, everything belongs
to the peasants to sell themselves, or whatever they
want
 Let people have a private economy, private enterprise
 The Bolsheviks have to hold on to the commanding
height of the economy (Banking, telephones, foreign
trade, military, et cetera)
 In a few years, Russia attains the levels of development
that had existed years before

IR-439: Class Notes
Page 74
IR-439 8/30/06 4:03 PM
6-8 pages of text on the paper, some exhibits on top of that
Will be doing a country in the Middle East
Developing A social/cultural profile

• Unobservable aspects
Implications for marketing
Focus on Japan
Cases:
• Material world: photos
• Industrial production in Latin America
• Barbie
Sources of data
Production or service operations
Customer analysis
• Dec making unit & process
• Usage behavior
• Needs and preferences
Segment, targeting, and policy
• Branding
• Product line
• Production features
• Packaging
• Customer service and support
Promo and communication
• Advertising and promo
• Personal selling
Two major sports in Japan

• Baseball and golf
• Baseball rules are modified to fit Japanese customs
• Golf is played indoors often, not much room
• Golf courses are crowded and expensive
• Hole-in-one insurance for banquets
Norms and Values

IR-439: Class Notes
Page 75
• Support and competitiveness
Group vs. Individually oriented

• Group oriented
• Harmony is valued
• How does one market to a group-oriented culture as opposed to an
individual-oriented culture?
o Computers
 Individual: a way to increase personal productivity
 Group: a way to more easily communicate with others
High vs. Low context culture

• How does a high context culture affect marketing?
o More subtle and roundabout in advertising
o Any customer contact, employees must be trained in the
ways of that country’s subtle communication
Monochronic vs. Polychronic

• Mod Monochronic
• How does this affect marketing?
o Deadlines, more difficult to have targets in the customer
service department
o Advertising
Hofstede’s Dimensions of Culture

• Individualism vs. collectivism
o Japan: ML (Moderately Low)
• Power distance
o MH (Moderately High)
• Uncertainty avoidance
o H
• Masculine vs. Feminine cultures
o H
• Long-term orientation vs. short-term orientation
o MH

IR-439: Class Notes
Page 76
IR-439 8/31/06 11:05 AM
Stalinism and the “Command-Administrative” (or Centrally Planned) system
Bolshevik wanted to change things to socialism, but they were still taking all
of the surpluses and much more from the peasant
• They had won the war, but were losing peace at home
Crisis of N.E.P.
• Developmental lag
• Ideological and social distaste
N.E.P. allowed for (basically) free trade, while peasants paid a simple tax
and could do whatever they wanted with any surplus
• Industrial growth got up to 500% annually
N.E.P.
• Developmental lag
o Those growth rates were made possible by taking factories
out of production, spicing them up, and re-opening them
o After a couple of years of re-opening these factories, growth
stopped
• Ideological and social distaste
o In the foreseeable future, it would still be a backwards
peasant country
o If the Bolsheviks raised taxes, total receipts went down –
hated the idea that they were at the mercy of the peasants
when it comes to tax receipt income
• Numbers showed industrial growth, but wealth was being
concentrated in the hands of a few
o The N.E.P. man – small business owners were importing cars
from abroad, eating caviar, et cetera; while other peasants
were struggling to get by
“Heroic-revolutionary” generation
• Many protested the whole N.E.P. thing, detested these new artists,
the wealth of many of these people
• By 1925, Bolsheviks numbered 7 or 8 million

IR-439: Class Notes
Page 77
o These new members were of the lower classes, most of the

members were ordinary Russian peasants
o Attracted by the ambition of it all
o Representatives of the old system were terrorized
Lenin’s Death, Stalin’s Triumph; early 1920s

• When Lenin died, N.E.P. went on
• Stalin won power
• “General Secretary” – Stalin’s official title
o Would check through files
• Others were better known than Stalin
o Trotsky, Bukharin, Zinoviev, Kamenev, et al.
• Stalin sided with Bukharin, led to the downfall of the other three
candidates, then turned on Bukharin and won himself
• Stalin had, through being in control of promotions in the
government, gained many favors, many people owed him for their
positions
• “War Scare”, Grain crisis
• Stalin connected disconnected incidents, and said war was coming
o Stalin creates a general atmosphere of panic
o Says we need to unite and industrialize faster
• Stalin’s regime comes up with many scares
o Blames others, especially the British, for ‘wrecking’ things
o ‘Wrecking’ becomes normal jargon, everything is being
sabotaged
o Conspiracy theories
• Stalin has Trotsky killed in Mexico
• Stalin used the power to kill and imprison many people, other
people in the party didn’t expect Stalin to use his power in these
ways
Stalin’s “Revolution from above”

• 5-Year plan
• Collectivization (agriculture)
o Land is taken away from the peasants (they used to have
paper rights to the land – they owned the land outright)

IR-439: Class Notes
Page 78
 Used terrorism, Stalin would kill entire villages that

were known to have some anti-collectivization
sentiments, to scare the other villages into conforming
• Kulaks – those who were making a better living then the rest of the
peasants – any of those who resisted were considered Kulaks
o How do they resist?
o They slaughter animals, gorge, live up the day, burn fields of
grain
 In 1929, there were 68 million head of cattle
 177 million sheep and goat
 In 1933, there were 38 million cattle
 50 million sheep and goat
• Stalin is harshest on the Ukrainian population
o Kept taking more and more grain, until there was almost
none left
o There followed famine in Ukraine, killing millions
• The 5-year plan
o The centralization of all farming and industry
o Military has priority
o It was a chaotic system, bottlenecks everywhere, bad
planning
o Many foolish projects, things that cost way to much and didn’t
make any sense
o Industrialization campaign, had mixed results
 An enormous amount of waste
 The average worker is subjected to an almost military
regime – people were thrown in jail for being late 2
days in a row
 Nonetheless, much is built in a short amount of time
 Electricity reaches almost everywhere, along with
running water
 Schools are built, literacy improves
The Great Terror (1937-39)

• Launched show trials of supposed enemies

IR-439: Class Notes
Page 79
• 10s of thousands of officers are killed or imprisoned under false

conspiracy theories
• His military wasn’t ready for war any more
• 1939 pact with Hitler
• Stalin tries to take over finland

IR-439: Class Notes
Page 80
IR-439 9/29/06 9:07 PM
Russia
Its rivers all go North and South

• They connect Russia with itself, not with the west (which would be
more beneficial)
• In the west, many rivers, like the Danu, connected the European
countries with each other
Bad soil in Russia
A poor country, not much wealth to be passed around

• Russia developed as a poor country
Wide open indefensible borders

• Has been invaded from every side over the years
Mongols occupied Russia

• Cut the country off from Europe in a critical time
• During the Renaissance, Russia re-orientated to the east
o Capitol moved from Kiev to Moscow
• To survive, Russia had to become more like the Mongols
• In the move to the east, Russia turned more autocratic, more
centralized, with everything being for the benefit of the military
• England is the opposite of Russia at this time
o Had the weakest kings
One more aspect of Russian development

• Serfdom – serf-based agricultural system
• Enormous drain on Russian development
• At one point, 80% of the population were in serfdom
• Mir – village commune – some might call it a primitive system

IR-439: Class Notes
Page 81
IR-439 9/29/06 9:15 PM
1) Brezhnev (64-82) “stagnation era”

2) Politics under Brezhnev
3) Ordinary life
4) The Stagnation Economy
5) Deny and Decline
6) Stalin’s Legacies
7) Stirrings of Reform
The guy who ruled before Brezhnev (Khrushchev)

• Military didn’t like troop cuts
• Secret police didn’t like the opening of the country
• Khrushchev was ousted from office and replaced by Brezhnev in
1964
Brezhnev
• “Stagnation Era” – No more turnover in politics; politics became
very stagnant
• “Gerontocracy” – The aristocracy becomes very old
• Country becomes richer due to the oil boom
• In exchange for arms control, Russia gets things from the west
such as grain and technology
• 1979 Soviets invade unstable Afghanistan
• This ends all links, west puts grain embargo on Soviets
• The military expanded rapidly under Brezhnev, a lot of money going
into nuclear technology
• More and more interest in Russia in becoming a major power in the
world
• “The land of diminishing general secretaries”
• Brezhnev doesn’t lead, he simply moderates. The military pushed
him into policy shifts
• “Nomenklatura” “Officialdom” increase their power under Brezhnev
• Corruption increased, people abused their positions because they
knew they wouldn’t lose their position
• They had many privileges
• MGU (Moscow State University) was the best school in Russia.
Corruption allowed bribes to get kids into this school

IR-439: Class Notes
Page 82
• Massive corruption in the south, especially Uzbekistan

o Always said they exceeded their quota of cotton and got
benefits from Moscow
o Rashidov, the leader of one of these large areas, built himself
a palace; with a dungeon underneath the palace for those
who opposed him
• The system encouraged bribery
o There were always shortages of quality food
o Not many seats in University were set aside for hard-working
ordinary people
Ordinary workers: “They pretend to pay us, so we pretend to work”

• Couldn’t lose their job, so people stopped working hard, alcoholism
increased and work got sloppier
• Most things (Rent, health care, electricity, water, et cetera) were
taken care of by the state, workers were piling up rubles. Paying
people more didn’t work as n incentive, they already had more
money than they could spend. All money was discretionary income
• The flaws of not having a private-incentive-based system
Decay and Decline

• Increase in alcoholism – a sharp rise – and all of the social ills that
come from alcoholism
• Increase in religious interests, with it comes nationalism that makes
people racist against others like the Uzbeks “If we didn’t have
anything to do with them, we’d be fine”
• Dissident movements turn up (The KGB stops them, jails them,
commits them, et cetera)
• Average woman spends 25 hours a week in line waiting for
standard commodities
• Average woman of 18-40 years of age had 5 abortions
Stalin’s legacies
• People don’t work hard or innovate, because there is no incentive or
punishment for work
• The single-state-ownership idea doesn’t work

IR-439: Class Notes
Page 83
IR-439 9/25/06 8:28 PM
Crisis and transition: from Gorbachev to Yeltsin – “3rd World Profile”

• The shooting down of civilian airline 007 by Russia
• International isolation after invasion of Afghanistan
• “Cost of empire” – to keep up with the US in the arms race and
support its belt of satellite states in the Eastern European belt
• Cuba sold fruit to USSR for inflated prices, and in return was given
oil at low prices for all of their energy needs
o Same type of thing in Eastern Europe
o Was considered necessary because economic hardships in
these countries lead to rebellion
o 1981 – ‘Solidarity’ in Poland
• Costs of empire soaring, economy failing, sense of crisis
• “Children of the 20th Party Congress”
o In college when some opening had occurred, allowing
restricted works to be read
March 1985 Gorbachev takes office: first rue post-Stalinist generation

• He was the most senior of these upper level people in this
generation, but there were others as well: Yakovlev, Shevardnadze
• This was the beginning of a generational change
• First move was called ‘Acceleration’
• This plan didn’t really work
• Alcohol campaign: wanted to slow down alcoholism
o Limited alcohol sales and production
o People were furious
o Budget dropped – state made a lot of its money off of alcohol
tax
o People started homebrewing – this resulted in many deaths
and poisonings from home brews – 10,000 deaths or injuries
in the first year
• All of his other reforms met strong resistance
• Chernobyl nuclear disaster: opened Gorbachev’s eyes to how
fundamental (not cosmetic) the problem was. This nuclear plant
was poorly built: there were no real regulations for anything
Perestroika II: Glasnost, democratization and ‘New Thinking’

IR-439: Class Notes
Page 84
• Opening to everything such as new movies, free speech, et cetera

• Wants to reveal corruption
• Begins a new more open type of elections – allows anybody to run
• Parliament: Congress of People’s Deputies
• 1988 – system is approved
• 1989 – first elections: everywhere anti-communist, normal people
were elected
• ‘New Thinking’ – the end of the cold war: Gorbachev announced the
end without any negotiations, that he was decreasing arms to save
money
The genie escapes the bottle

• When given free speech, some parts of the empire want to break
off
• In the south, when they can elect their own deputies, start fighting
against each other because they don’t like each other
Revelations in Eastern Europe

• Poland elects one communist to its parliament and appoints non-
communist Prim minister in 1989
• The dominos fall in 1989 – Hungarians follow Poland’s suit
• Communism collapses in Eastern Europe
Polarization, Paralysis, and the Collapse of the USSR

• In 1991, USR collapses inevitably – with loss of Eastern Europe and
because of many other factors

IR-439: Class Notes
Page 85
IR-439 9/29/06 10:18 PM
Transition overview
• 1) The painful path to a market economy (“Shock Therapy”)
• 2) Winners and losers: policies, leadership, geography, culture;
inheritance = “path dependency”
Most incentives were for raising quality, this usually decreased quality
• There weren’t more supplies for enterprises to allow them to work
extra hours, the weekends, et cetera
• Enterprise directors had to make the workers be more productive
• Factories didn’t close down if they were inefficient, there was no
where else for workers to go (no private sector)
• “Soft Budget Constraints”
• In towns, everything was part of the industrial enterprise in town
(including schools, hospitals, et cetera)
o If the factory was closed, it would also be closing all of these
schools, hospitals, fire stations, and everything else
The Soviet Finale: Preconditions for shock therapy

• Pathologies of command-administrative system
• State had to make all economic decisions: what to produce, how
much of it, and how much it will cost
• Consumer products were shitty – bad toasters, uncomfortable
shoes
• State provided basic goods and services for free – or at low prices –
this caused a lot of waste
• Gorbachev’s final attempts at economic reform
o Legalized cooperative ventures; sort-of private enterprises
o No boss or owner- people get together and shared the profits
o Private restaurants started up
• All Gorbachev had were half-measures that never really worked
• Why didn’t Gorbachev choose the ‘Chinese Model’ (changing the
economic system before the political system)?
o Russia had an economic system very resistant to change
o Gorbachev didn’t have the strong authority with the party to
get this done – he couldn’t just say ‘do it’

IR-439: Class Notes
Page 86
o Had very little regard for the Chinese – also some racism and
long-standing dispute
The ‘Washington Consensus’ model

• Yeltsin, Yavlinsky, Gaidar
• Wanted to institute shock therapy
• The economic system was broken up when the empire was broken
up = there were now borders and tariffs to pay, along with little
wars and uprisings
• IMF and EBRD
• Stabilization, Liberalization, Privatization, Internationalization
• S.O.E: state-owned enterprises- need to break them up
• Need to have ‘hard budget constraints’ – no more taking from
profitable industries o keep alive unprofitable industries
• Internationalization very important, brings in knowledge, money,
and incentive to compete
• Need to have confidence in the Ruble – required the stabilization
mentioned earlier

IR-439: Class Notes
Page 87
IR-439 9/25/06 7:53 PM
Privatization and the rise of oligarchs

• Crisis of ‘Shock Therapy’
• Context of shock therapy
• Privatization plans
Yeltsin, Gaidar, Chubais

1992: 2,400% inflation
1993: over 800%
1994: 200%, started to settle down after this
Need to maintain fiscal order for shock therapy to work
Privatization: getting enterprises into private hands
Internationalization: opening up to foreign markets
Inflation
• “Monetary overhang:” people had a lot of money, people were
holding on to it under the communist regime; when prices were
freed, all of this money came out
• Printing of money: state printed more money than it should have
(printing money to cover its own bills)
Industrial collapse in Russia

• “New Russians” – those who were doing really well for themselves
during this time
• “Capitol flight” – money leaving the country, much of it illegal
between $60 and $100 billion residing abroad
This all lends to a fierce political opposition

• Supreme Soviet – many mini-parliaments in areas throughout
Russia, they now had real power – people in these didn’t reflect the
new era
• Powerful vested interests: large industrial enterprises and farms

IR-439: Class Notes
Page 88
• Power was split between the executive (Yeltsin, Chubais, Gaidar)

and legislative (these mini-parliaments that didn’t want so much
change)
• Central Bank of Russia is subordinate to the Supreme Soviet
• Supreme Soviet gives CBR authority to print way too much money,
further fueling inflation
Context of Shock Therapy

• Yeltsin, Gaidar and Chubais wanted to get these changes through
very quickly, for fear of conservatives turning the clocks back
Privatization plans
• 1990-91: Early ‘Spontaneous’ privatization
o Cooperatives set up under a Gorbachev half-measure
o These companies simply stole from state enterprises, and all
these things became private property
o “Red Directors”
• 1992-93: Voucher Privatization
o Chubais: head of state privatization committee
o Privatization through vouchers, so that everybody within
country individually had opportunity (not just those with
money)
o Investment funds opening up, so people invest their vouchers
and investment companies can invest their money in
enterprises intelligently
o Most of these vouchers were traded for things like vodka or
food
• One of these investments funds, called M.M.M., founded by
Mavrodi, was very corrupt and took everybody’s money
• People’s vouchers ended up going towards these fake investment
funds, consumer goods, or the “Red Directors” who wanted to buy
their entire factory
• “Asset Stripping” – Once these Red Directors had ownership of their
factories, they would sell off the factory in pieces (The piping, the
buildings, et cetera)

IR-439: Class Notes
Page 89
IR-439 9/25/06 8:59 PM
Those countries with the best structural reform indexes ended up having the
highest average annual change in GDP
Smaller countries had an advantage in reform; large countries had many

more issues to deal with – more competing interests and harder to
implement laws across the country
Privatization: Russia’s voucher program Czech Republic did this too, but a
little bit differently: state helped set up the investment funds and regulate
them
Eastern Europe wanted to rejoin the west, rejoin Europe: Russia didn’t have
a deep heritage of ‘belonging to Europe’
• People stuck it out in Eastern Europe for the end goal
• Russia didn’t trust that any of the reforms they were going through
were going to work
Gaidar, Chubais: understanding why they moved so quickly even though

they weren’t prepared
• Felt that they had a limited time to act
• Were afraid of losing the opportunity
• Thought that maybe it wouldn’t be that different in the long run
• With inflation so high, it is tempting to do a little asset stripping and
move cash assets to safe overseas banks
• Tax colletion in Russia was very bad, billions in uncollected taxes
yearly – didn’t have the advanced tax-collecting system set up that
the US does
“Loans for Shares”

• Continuing story of oligarchies and privatization
• 1995-96
• The state traded away about a dozen of its richest assets for the
support of its richest oligarchs
• Only now were some of the state’s largest and most profitable SOEs
(State-Owned Enterprises) going to be sold off

IR-439: Class Notes
Page 90
• Elections, Yeltsin doesn’t have much support, needs money for his
campaign and to pay salaries in arrears
• Oligarchs were very wealthy, billionaires from the years of
confusion in Russia, they came out on top
• Oligarchs: You give us controlling shares in these large SOEs, we’ll
give you money (this plan was rejected at first)
• Yeltsin: We’ll give you these shares temporarily, while you loan us
money
• Auctioned off shares, state never paid anything back, Oligarchs
have never returned the shares of these companies
• Potanin: owns a bank called ‘Oneximbank’; wins ‘Norilsk Nikel’
company at the auction (mining and smelting operations)(owns
1/4th of the world’s nickel and 1/3rd of the Cobalt) for $170 million;
this company in state hands brings in $3 billion a year in profits
• State didn’t get as much money as it should have for these things:
about $2 billion total
• This was enough for Yeltsin: his campaign was enormous, and he
did get re-elected. The loans became permanent purchases in
these industries

IR-439: Class Notes
Page 91
IR-439 9/26/06 10:53 AM
“Y. Experiment”
• Yugoslavia
The Yugoslav Saga
• Balkan
Tito – “self-management”
Slavic history
• Migration of the Slavs came in the 6th or 7th century AD, not as
warriors, but as a group of people who just migrated to the region
• Rise of the ‘South Slavs’
• The name Yugoslavia means ‘land of the south Slavs’
• The region is very mountainous, thus leading to the separation of
cultures, and the development of separate identities
• Religious differences
o In choosing Christianity, the Slovenians, Croats, become
identified with the Roman Catholic church
o Those to the East, Serbs, Bulgarians, became part of the
Eastern Orthodox church
• With the Ottoman empire, these two groups (the east and west)
were living under one radical government
o With this came new educational systems, roads, et cetera
• 1389 – battle of Kosovo, Serbian defeat; Croatia is just a province
at this point, while the Serbs had a genuine state
o The Serbian kingdom falls around this date at the hands of
the advancing Turkish army
• Croatians became satisfied with the Austrian-Hungarian empire,
while the Serbs suffered this occupation and often rebelled
Jumping ahead to the 19th century

• Ottoman empire is militarily weaker, faces various defeats to
European countries
• Greeks rebel, establish autonomy, than independence
• Serbs do the same, but don’t gain full independence until 1870s
• Independence for Bulgaria
• Ottoman empire is crumbling

IR-439: Class Notes
Page 92
• Eve of the first World War, started by the assassination of a Serbian

national
• Bosnia is in dispute, Turks have been pushed back, Bosnia is the
main disputed area
• Serbia has a historic claim: there are many Serbians in Bosnia
o Bosnia: Bosnian Muslims, Serbs, Croats
• Bitterness, trying to drive out Albanians as the tides of WWI turned
• Bulgaria, Serbs, and Greeks fight off the Turks
After the first World War

• The nationalist idea becomes strong, everybody has a right to their
own state
o It was known that states can’t be too small, a balance must
be struck
o All of the south Slavs should become one state
• Serbian dynasty was resurrected, the Serbian king was nominally
the head of state, with a parliament
• This broke down
• The difficulty of starting a democracy from scratch, didn’t have
democratic habits
• The great depression – these were mostly agricultural countries
o In 1918, people were buying their products
• Great depression hits, about the same time as the steam ship
revolution
o It was cheaper to ship things from across the ocean than to
get things across a continent
• The neglect of the west
• Hitler and the Nazis cultivated this market, being farsighted
• Politically, ethnic differences flared up again
• Minorities everywhere, used as scapegoats, et cetera
• Serbian king imposes a royal dictatorship just to get things done
• Rise of Hitler – Ustashe – a small Hitler nationalist group in Serbia
o Serbs and Croats become bitter enemies
• Yugoslavia is carved up, the north by Germany, the southwest by
Italy
• World War II

IR-439: Class Notes
Page 93
• On the ground, nationalism

• Nazi nationalist group in Croatia – Chetniks
• Partisans – communist movement lead by Tito
o Based on a United Yugoslavia based on socialist system
This broad appeal by Tito largely worked

• He was half Croat half Serb in heritage
• Communist led movement did most of the fighting against the
Germans
• Socialist Federated Republic of Yugoslavia
• LCY – League of Communists in Yugoslavia
• Tito launching reforms
o People could work abroad
• Gastarbeiter – guest worker from Yugoslavia in Germany
o Became a large source of income, people sent money back to
Yugoslavia
• Tourism – enjoyed tourism from the 1960s and on
• Croats and Serbs were still a bit separated ideologically
• Tito dies in the 1980s, breakdown starts almost immediately
• Without a strong leader, country was bound to collapse – people
had a strong hatred for each other
• Milosevic – Serbian communist leader
o Begins to inflame the dispute with Croats
• By 1988-89, communism is collapsing everywhere
• Yugoslavia began decentralizing and holding elections
• Milosevic wanted votes, so he played on this nationalist idea
• Tudjman – becomes the leader of the new political party in Croatia
• Yugoslavia owed over $40 billion, after Tito died, in the mid and
late 80s, the west wanted their loan money back
• Living standards start to decline fairly rapidly
• Tourist industry goes down, with instability
o More money is lost
• Everybody felt like the victim of the other nationality
• Serbs have an upper hand – entire Yugoslav army
o Ethnic cleansing
o Croats are fucked

IR-439: Class Notes
Page 94
IR-439 10/3/06 11:10 AM
Georgia shares a large border with Russia, also the same Orthodox Christian
religion, but language very different, as well as culture and history
1922- formally annexed again to Russia
When Russia loosens the reigns, Georgia (they are very nationalist) formed
their own political parties
• Almost every Georgian jumped on the bandwagon for independence
• This was troublesome for Moscow
• Georgia assumed that once they left Russia, they would get a lot of
aid from the west, but it didn’t turn out that way
• Shevardnadze returns to Georgia in 1992, elections had just
finished
• Georgia realized that they had it good under Russia, Georgia
doesn’t get cheap energy anymore, they found out that their
products aren’t very competitive on the market, and the tourist
industry disappeared
• All of the warring parties agree that Shevardnadze would make a
good president, he rules as president from 1992 until 2004
o Each time he runs, he becomes more corrupt in getting office,
stuffing ballot boxes, et cetera
• He proves incapable of settling the economy and organizing things
• Enormous amount of corruption, it was easy for him to work with
the many mafias everywhere
• Osetians and Georgians don’t get along well, or other groups in the
area, Abkhaz
• Gamsakhurdia (second president of Georgia), extreme nationalist,
made Georgians full citizens and other groups minority citizens
• Those two areas turn into no-go zones for Georgia, and even
though they are part of Georgia, they are basically different
countries
• Georgian policies are very pro-western, inviting NATO to have a
base there, et cetera
• Joined every anti Russian western group out there
• Russia supports the two areas, with economic funding and military
to fend off Georgia

IR-439: Class Notes
Page 95
• Saakashvili is the next Georgian president, very western and young

• First move is to take Agaria, pulled off a local coup, and brought
Agaria into Georgia, Agarians are ethnically Georgian, this is a
success
• After this, wants to get back Abkhazia, but his hasn’t materialized
yet
• OSCE and peace groups are still trying to complete talks between
the regions, Russia still supports Abkhazia, there is still fighting
Germany
• In the west, in the mid 90s, 45% of people said that Germany was
a united nation; in the east, only 15% said yes
• Older workers in the east will probably never hold a decent job
again, they don’t have any skills relevant to the high-tech west
Kaliningrad
• This was once German territory
• Became a strategic military point
• Russia maintains its hold here
• There used to be a German minority in the Baltic’s, they are gone
now
• Anybody who came to Estonia under Russia didn’t get passports,
they were second class citizens
• Russians had to pass a very hard language exam to gain full
citizenship, most of them didn’t know the Estonian language
o Also had to pass a background check
o Also had to pass a test in culture, et cetera
Checks didn’t have to worry about the Slovaks idea of slow movement from
Russian plans
• Maciar pushed for Slovak independence, after he lost presidency,
his successor led a faster move to independence
Hungary
• Hungary was once a much larger kingdom, was on the losing side of
two World Wars

IR-439: Class Notes
Page 96
• Over a million ethnic Hungarians live in Slovakia, with 2 million in

Romania
• Close to war with Hungary and Romania
• President of Hungary at the time, made a statement speaking for
the rights “I am the president of 15 million Hungarians” speaking
for Hungarians not in Hungary
A look back at Germany, and German Czech relations

• Large German minority in Czechoslovakia
• Germans are driven back to Germany from Czechoslovakia
• Czech Republic is reestablishing trade relations with Germany
• Czech republic said that anyone had the right to take back property
that was seized under communism, if it can’t be given back, then it
will be paid for; with the exception of Germans
• Czech only recently expressed regret about pushing out the
Germans after the war

IR-439: Class Notes
Page 97
IR-439 10/10/06 11:08 AM
Currencies, Inflation
Organized crime and corruption

• Kholodev ‘93
• Listyev ‘96
• Staravoitova ‘99
• Khlebnikov ‘04
Government intervention in inflation rates and currency stability

• Anchor currency to a country with these ideal traits
• Doing this, government gives up the right to print more money for
emergency reasons
• Currency Boards work best in smaller countries
Corruption and assassinations

• Moscow news reporter: Kholodev
o Star investigative reporter, was on the story of military
corruption
o Particular opportunities for corruption
o Russia was withdrawing its military from Eastern Europe, all
of this military hardware was hardly watched over, very little
accounting
o For every piece of equipment that made it back, one was
being illegally sold
o Pavel (nicknamed Pasha) was an officer who were suddenly
driving expensive cars that couldn’t be afforded on their
salary
• Listyev
• Staraviotova
o Very notable female liberal reformist voice
o Elected from a district in Armenia
o Powerful voice in ethnic issues
o Fame in a range of issues
o Was killed while making it her business to check into
corruption
• Khlebnikov

IR-439: Class Notes
Page 98
o Russian Forbes editor from America

o Was making a list of richest people in Russia, was gunned
down (Russians didn’t like this)
• Kozlov
o Bank reformer killed a couple of weeks ago
Russia: “A superpower of crime”

• Bureaucrats who take bribes, or demand bribes, to do anything
• Over the 90s, more than 200 bankers alone were killed
• Moscow averaged something like 3000 murders in the 90s, about
600 which were contract killings
• Some of these murders are businessmen who invaded somebody’s
turf, or refused to pay for protection
• At the end of the 90s, murder rate was exceeded only by South
Africa
• Russia was second to Nigeria in corruption
• Economic impact is severe
Sources
• Poverty, difficulty of transition
• Low paid officials looking for a way to supplement their salaries
• Culture: Living under a one-party system that lied, made false
promises, et cetera, bred disrespect for the government system
Types
• Asset stripping
• Pyramid schemes going unregulated
Organized crime: Origins of the problem

• “Thieves in the law”
• Mafia structures that existed during the soviet period
• These networks of pre-existing mafia expanded during the opening
• Enormous amount of money underground, in private criminal hands
• Expands under Gorbachev, then more under Yeltsin
• Massive amounts of money spent abroad, trying to start revolution
in the US, et cetera

IR-439: Class Notes
Page 99
• Many suicides among communist officials when the communist

party collapsed
Stats at the end of the 90s

• Organized crime owns or controls a share 0f 50% of all private
business, and up to 60% of government businesses
• Up to 80% of the banks are have links to the mafia
• Up to 20% of all business profits in Russia were being siphoned off
by the mob
• Extortion and protection
• Drugs, many coming from Central Asia and Afghanistan through
Russia
• Prostitution
• Loan Sharking
• Money Laundering
• Illegal energy exports
• Always easy to get something done with bribes
• Murder for hire
• Human trafficking
• Organ harvesting
International Dimensions
• Activities of Russian Mafia are completely international, problem has
spilled abroad
• This kind of criminal activity leaves Russia in a worse state than it
should be
• Dissatisfaction among politics is high
• Structural problems still need to be fixed to correct this corruption
and organized crime
• Russian mafia operates extensively abroad
• Director of FBI before 9/11 said Russia organized crime was
becoming the greatest threat to US security
• Russian mafia abroad exploits Russians living abroad, they are easy
to exploit – usually poor and have family back home in Russia
• There are major Russian organizing centers in 14 states, with
headquarters in major cities

IR-439: Class Notes
Page 100
• Auto theft is big

• Medicare, welfare insurance fraud
• Many fraud operations
• Fuel corruption, pocketing 42 cents a gallon on diesel fuel, in one
year this cost California 2 billion dollars in lost tax revenues
• Telecommunications fraud, cyber crime, stock fraud schemes
• Human trafficking, northern route through Poland

IR-439: Class Notes
Page 101
IR-439 10/12/06 11:06 AM
Midterm
• 7 or so short answer, a few sentence questions, from a list of terms
• Will be scheduling a review to go over the material
• Review 4:30 to 5:30 on Wednesday, Monday 3 to 4:30
Ukraine
• From Black sea to central Europe, trade routes go through Ukraine
• Largest state in Eastern Europe, huge population
• 250,000 square miles
• Resources
• The weakest state, ethnically fragmented
• Politically passive rural population
• Krimean peninsula
• Stalin killed and deported many Ukrainians, ethnic Germans,
Koreans
• Lack of a consistent strategy left Ukraine weak, has been weak for
a long time
• Ukrainians vote for independence at the end of 91, after the fall of
communism
• People recognized the importance of Ukraine’s position
• Ukraine just talked about reform for three years, causing it to lag
• In ’95, only 40% of everything was in population’s hand
• In addition to political and ethnic disputes (Western Ukraine was
orientaed towards Europe and wanted to make a fast transition,
Eastern Ukraine wanted to move slower and had more ties to
Russia)
• Ukraine had a huge coal industry that was unprofitable
o It used to be subsidized by Russia, state could continue
subsidies or cause huge unemployment by letting it shut
down
• Armor production in Ukraine collapsed because there was no longer
much of a demand
• Ongoing legacy of Chernobyl, the nuclear meltdown in Ukraine
Possibility of splitting Ukraine down the middle

IR-439: Class Notes
Page 102
• Reforms starting after three years are even more poorly done than
in Russia
• Mafia and organized crime is even more powerful than Russia’s
• Government was even more riddled with corruption and organized
crime
• Dual exchange rates, central bank of Ukraine set an exchange rate
that was much higher than the market worth
• “Rentier-Patriarch” took advantage of this dual exchange rate to
make a profit
• Results in a period of hyperinflation and stagnation, more prolonged
than Russia, plunges people into huge misery
• About 30% of Ukrainians still live at or below the official exchange
rate
• Kravchuk begins to try and move everything to Ukrainian language
and symbols, et cetera, without Russian ties, a very decisive ethnic
decision
o This backfires in the East, turning the tables towards
conservatism
• Kuchma replaces Kravchuk, modifies this western course of action,
but still doesn’t take effective economic measures
• A half-way reform in Ukraine, half-measures, only means corruption
and organized crime becomes stronger
• Kuchma decides to tilt strongly to the west
• Ukraine is one of the first countries to join the ‘Partnership for
Peace’ and also joins ‘GUUAM’
o GUUAM: a regional organization for cooperation, under the
tutelage of the US, a pro-western Organization
• Ukraine takes part in a PFP exercise in ’98, this infuriated Russia
because it involved NATO landing on some peninsula and taking it
back from the coup
o This of course was aimed towards Russia
• At this time, 97-98, Ukraine’s policies move far to the West
• Economically, Russia is winning the battle for Ukraine’s future
direction

IR-439: Class Notes
Page 103
• Ukraine passes Russia in 98 for rating of corruption and organized

crime, and was awarded the most copyright infringing state,
duplicated everything copy written more than anybody else
• Russia takes over much of the Ukrainian energy institutes
• Ukraine is heavily dependent on Russian energy imports
• Ukraine grew further and further behind in its payments for energy,
up to 4 billion dollars behind in bills
• Russia would take shares in some of the un-privatized energy
companies, tankers, et cetera, in exchange for canceling some of
this bill
• Ukraine is dependent in Russia in other sectors as well, over 50% of
its imports and exports are will Russia
• Ukraine is simply poorer than Russia
• In these disputes, Ukraine was forced to barter bigger and bigger
pieces of its economy in exchange for energy
• A final settlement of the Black Sea Fleet
o Ukraine inherited this whole navy because they controlled the
Crimean peninsula
o Agreed to a 50-50 split symbolically, planning on over the
next decade or so Russia would buy back more, resulting in
about 80% ownership of the navy for Russia
• Another political swing, Yushchenko is temporarily appointed Prime
Minster, very western sided, launches program of long-overdue
reforms
• Program to finally balance the budget, liberalization of the economy
• In 2000, the years end, country shows first sign of economic
growth
• Industrial production went up 12%, light industry went up 9%,
didn’t balance the budget but helped it, took steps to reduce
corruption and encourage foreign investment
• Yushchenko was sacked in 2001, was forced to resign as Prime
Minister
o Was hugely popular among the people, parliament voted him
out for obvious reasons – old connections with Russia among
many of them

IR-439: Class Notes
Page 104
o Also ousted for because he was fighting corruption, which

clashed with the interests of Kuchma
• Gongadze, was ahead of the curve, created a website for news
called ‘The Truth of the Ukraine”
o Disappeared in September of 2000, a little while later a body
with no head was found, later was tentatively identified as
that guy; body was snatched away by federal agents who
later said the body could not be identified
o Another guy goes public with stunning reading of transcripts
and recording showing that Kuchma was huge in corruption
o Kuchma was doing everything corrupt
o A policy of harassing the media and his critics
o Kuchma’s voice was recorded saying “Pick him up and give
him to the Chechens, they’ll know what to do with him”
o Amazingly, he survived this whole scandal
• It supported Russia to have a weak Ukraine, they were the only
country to support Kuchma
• Three Russian companies owned 75% of Ukraine’s refineries, Russia
was now investing in road and rail, power network, media, all of
Ukraine’s infrastructure
• Yushchenko runs for president, Kuchma puts his weight behind
Yanukovych who supports Eastern Ukraine with heavy industry, et
cetera
o Yushchenko is western oriented market capitalism
o Elections are fixed in 2004, electoral commission is also in
Kuchma’s pocket
o Opposition was ready, invited westerners to oversea the
whole thing
o People are pissed when it comes out that Yanukovych wins,
when overseers say that opposition won
o Kuchma backs down after huge protests, and Yushchenko
becomes the new president
• Most people payed less attention to the aftermath of the ‘Orange
Revolution’ as it is called
o Pushed through laws ending special licenses, special credits,
et cetera

IR-439: Class Notes
Page 105
o Economy has seen a huge improvement

o Put down stepping stones for reforms
o Underlying problems, a country who doesn’t produce any
energy
o New elections for parliament earlier this year, produced again
a conservative majority, ousted Yushchenko and brought in
Yanukovych as new president

IR-439: Class Notes
Page 106
IR-439 11/7/06 11:10 AM
Yeltsin
Chechnya I: 1994-96
Major oil pipelines ran from the Caspian Sea through Chechnya
Allowing Chechnya to succeed would result in a loss of this strategic pipeline

and key refineries
The first Chechnya war was a disaster from 94-96

• 60-80 thousands Chechnyans are killed, the far majority of them
civilians
• Over 400,000 citizens are displaced
• Russians took control of many northern parts of Chechnya, while
the higher mountainous parts were controlled by rebels
• War drags on to a stalemate
• A series of other events bring it to a conclusion
• 1995 raid on Budyounnsk, took a half dozen civilian looking trucks,
dressed in civilian clothes heavily armed, set up north into the
north, with $25,000 in their pocket for bribes at checkpoints
o Ceased a hospital, took people hostage
o Yeltsin gives permission to raid the hospital, more patients
are killed than Chechnyans, end up letting the Chechnyans go
and giving in
• Russians are preoccupied with domestic troubles
• Russia, not only abroad, but from domestic critics is faulted for
brutalities committed during this war
• Human rights commissioner Kovalev speaks out against the war
methods
• As the years go towards 96, the possibility of a quick little war is
gone
• Yeltsin is running again, this war is a drag on his popularity
• They enter into negotiations
• They agree to ceasefire, then a more formal peace, and the war is
eventually over in 1996
• Yeltsin diffuses it as an election issue

IR-439: Class Notes
Page 107
• Ceasefire papers over the differences

• Russia does not agree that the Chechnyans will be independent,
while they don’t agree to remain a part of Russia
• Russian troops exit the region altogether
• Semi-independence from 96-99, leaders fighting amongst
themselves, rivals for control politically and economically
• Dusayev’s group was in contact with much more radical Islamism
groups, took a more radical turn
• Maskhadov was moderately radical; general radical transition
• They continue to argue, elections are held for control of Chechnya
• Area is carved up into different groups, organized crime skyrockets,
the region becomes a stronghold for dirty business, hostage-taking,
et cetera
• This radicalizes Moscow; Russia was doing a lot of this too
o Russians turn against Chechnyans, do we really need them?
o Economy starts to settle in Russia, people start to demonize
Chechnya
o People from all darker people, including Georgians and the
such, are criticized by Russians
• In 1998-99 a series of events, kidnappings and terrorist bombings
(In the space of a month over 100 Russians are killed in these
apartment bombings) that lead Russia to launch the second
Chechnyan war
o It isn’t clear that Chechnyans are responsible for all of these
bombings
o Some of these bombings may have been provocations by
Russia to lead to the war
• With the recent war, Putin in Russia has made no public
concessions to terrorist acts in Russia by Chechnyans

IR-439: Class Notes
Page 108
IR-439 11/21/06 11:12 AM
Original oil city was in Azerbaijan in Baku
Deposits in other parts of the world weren’t found yet
Soviet authorities of the 50s and 60s explored under the Caspian for more
oil
Authorities continued to develop resources within the country of Russia

• Focus was on these resources, didn’t want to develop oil in the
unstable Caspian region
During Perestroika, spent most of their time on Central Europe, not too
much of a focus on the Caspian region
By the mid 90s, enormous interest in the region, with partnering countries,
discovering how much oil there might be there, and a similar political shift
At the time of the Soviet collapse, the whole Caspian region might have 7-10
billion barrels of oil, within 5 years it looked like 40 and 50 billion barrels,
today the estimate is around 250 billion barrels or more
• Proven reserves of maybe 12 billion liters of natural gas in the
region
Azerbaijan interest in the mid-90s was quickly followed by interest in

Kazakhstan in the Caspian, BP leading the way in Azerbaijan and Chevron in
Kazakhstan
Soviet and other oil production had historically been on shore, Chevron had
more experience in drilling under water
Western firms trying to operate in this new environment couldn’t do so on

the purely business criteria that they may have hoped for, as one can image
because of the Russian autocracy legacy in the region
Politics reigned over economics in this region during the time of interest in
the mid-90s, with wars the number one issue for many of these countries

IR-439: Class Notes
Page 109
US didn’t support oil pipeline through Iran, although this was the simplest
route for getting the oil out, didn’t want to go through Russia, reduce
Russia’s near monopoly on transport routes
Getting the good to the market

• Chechen factor, instability in the region to the west of the Caspian
• Didn’t want to give more power to Russia by giving them the
transport routes
• Didn’t want to go through Iran because of conflict
• Instability in the Russian Caucus region, could be explosions in this
largely Muslim region
The first big completed post-Russia pipeline was the CPC, runs from
northeast Caspian region, through Kazakhstan and Russia, and into
Novorossiyak on the Black Sea
• Traffic in the Turkish straights, where oil has to be shipped through
to get to western Europe and other places, has more than doubled
in the last five or so years
• With new exploration, this traffic will increase even further
• Increasingly increasing spills and collisions, and even when things
are going good these huge ships clog traffic for hours
• Turkey is making a huge amount of money off of this
Second major pipeline, the BTC

• Runs from Baku, through Georgia, exits from the port of Ceyhan in
Turkey into the Mediterranean Sea
• This had been a decade project, cost of $6 billion to complete, and
has had geopolitical problems all along
• In Georgia, this goes through delicate environmental regions
o These problems were solved with BP
• When oil prices were low, companies didn’t want to invest in this,
only when prices began to rise the companies jumped on board,
began construction in 2000/2001, was built very quickly

IR-439: Class Notes
Page 110
Up through the middle of Yeltsin’s presidency, Russian companies just

wanted these projects to go through so they could make profit, even
projects whose main point was to go around Russia
• Gung-ho development
• Geo-political standpoint was to slow down and strategically keep
influence in this region, i.e. vie for the pipelines to go through
Russia
• After this, the tendency swung towards the geo-political, with
Russia twisting arms, et cetera, in order to gain influence
• The Yukos company Gazprom, Russia’s oil monopoly
• This company turned into a state-run company (still a public
company, but biggest shareholder is the Russian government)
For two decades, only two countries bordered the Caspian, Russia and Iran,
they decided everything in bi-lateral negotiation, drew a line across the
Caspian to divide it
• Now there are three new bordering countries on the Caspian
• Could try to split it up, or adopt the international ‘Law of the Sea’
o Everybody gets a zone outside of their border
Latvia and Lithuania turned their oil companies private

• As these things were sold off, the Russians stopped concluding new
delivery contracts, this didn’t help Ventspill (Latvia oil company)
much in terms of attracting western investors, Russia bought up
most of it then continued the contracts
Russian natural gas

• Main two pipelines go to Eastern Europe through Belarus and
Ukraine
• Gas is sold to Western Europe for a much higher price than to
Eastern Europe transition countries, until very recently (this was to
hold influence- they could raise the artificially low price of oil to
Eastern Europe if they wanted to)

IR-439: Exam Prompts
Page 111
IR 439
Political Economy of Eurasia
13 October 2006
Midterm Examination Review
The midterm will be divided into two sections, equally weighted in grading. The
second is an essay, where you will choose one of two questions to answer. Preparation for
this requires familiarity with the main points of the lectures and readings.
The first section consists of a number of terms/names, so-called “short answer”

questions. You will be asked to select a certain number and, for each, to both identify the
terms and explain its significance in one substantial paragraph. Sample terms to aid in
studying are offered below.
Eurasian plain Prague Spring asset stripping
Five-year plan “gerontocracy” soft budget constraint
collectivization perestroika Anatoly Chubais
Gosplan shock therapy FDI
Solidarity Norilsk Nickel voucher privatization

IR-439: Exam Prompts
Page 112
IR 439
4 December 2006
Final Examination Review
The final exam will be divided into two sections, equally weighted in grading.
The second is the essay portion, where you will be given two questions to answer.
Preparation for this requires familiarity with the main points of course lectures and
readings.
The first section of the final exam consists of a number of terms or names, the
so-called “short answer” questions. You will be asked to pick a certain number and, for
each, to both identify the term and explain its significance in one substantial paragraph.
Sample terms to aid in studying are offered below.
BTC Gazprom Federation Treaty
Niyazov CBR human trafficking
Hague Tribunal Chubais Yukos
Nazarbayev HIID Washington Consensus
GKO Nazdratenko capital flight
Ventspils CAP Yushchenko

IR-439: Study Notes for Final
Page 113
October 17, 2006
Central Asia and the Caucasus
“Arc of Instability”
- region to the south of Russia (central asia and the Caucasus)
- explosive ethnic deivisions (ex: Armenia vs. Azjebaijain; within Georgia, etc)
- region where Russia treats like its backyard, overwhelming economic
control…piece by piece taking over…much worse than the Ukraine
- Russia says its not to be imperialistic but rather as a security issue b/c so close to
Russia (ex: Chechnya)
o Fear of small Islamic revivals and mobilizations (Afghanistan is right
below)
- Many migrant workers from these countries work in Russia
- TONS OF DRUGS come through central Asia
Tsarist Legacies
- weak national identities, weak political development, scattered, nomadic people
- historically had tribal links…didn’t identify as Kazakhs or Uzbeks, etc
- nomadic…didn’t recognize borders
- IMPORTANCE: identity is important in the transition period and it didn’t exist in
central Asia
- Lenin/Stalin see chronic instability (Ottoman Empire was nearby) and didn’t want
these countries to attempt to ally with the Turkish Ottoman Empire…Islamic
o So the borders became IRON
o Stalin imposed the Cyrillic alphabet instead of the Latin or Arabic even
though it didn’t fit with most of their languages…so that they could not
read Turkish or Arabic and could not ally
- Divide and conquer…drew the borders according to loyalty to the
Bolsheviks…bad, uneven borders…angry people
Long term effects:

1) ethnic
a. bad borders…people pitted against each other
2) economic
a. it is the most disadvantaged area in the soviet union
b. designated by the state as the “cotton-producing area”…lost its balance of
a multi-agricultural system and became mono-agricultural
3) environmental
a. diversion of rivers to satiate the demands for the irrigation for the cotton
i. diverted from the Aral Sea and it dries up and exposes pollutants
which destroys the fishing industry and the pollutants are blown by
the wind to the cotton fields and the cotton industry is harmed
b. many nuclear research facilities in the area that just dump wastes and lead
to an environmental disaster!!!

Page 114
Perestroika and the path to independence

- overall the area was mostly quiet during this time…no major revolutions
Kazakhstan
- the one exception …1986…Gorbechev wanted to clean up Kazakhstan and fired
the communist boss and replaced him with one of his own reformer guys
- backfires
o Gorbechev didn’t understand ethnicity at all
o Kazakhs were angry that a Russian was taking the place of a Kazakh to
rule the country (even though the previously leader was corrupt)
o Riots ensue
- Nazarbayev took power and is still in power today
o Highly authoritarian
o But keeps getting reelected
o Kazakhstan is the wealthiest country in central Asia (b/c mostly oil)
o Doing one of the least bad…but still definitely not living up to its
potential…with its high levels of resources
o Moderate policy of dual citizenship
Uzbekistan
- ruled by Karimov…was the former Soviet Union Communist party boss
o despotic
- the poor border drawings left Uzbekistan with large minorities of Tajiks,
Kazakhs, Meskheton Turks, etc
o the most ethnically diverse and fragile
- Karimov is so autocratic…cracked down on Islamic revival
o Islamic fundamentalism is under threat
o IMU (Islamic Movement of Uzbekistan) built a small army, terrorist
attacks, etc
Side note: most central asian Muslims are Sunnis…traditionally less militant than the rest
of the Islamic world…because of their Turkish decent, rather than Persian, etc…not
much sentiment for the middle east
Tajikistan
- civil war when the Soviet Union fell
- clean groups rip the country apart
o Russia comes in to set the war down and puts their guy in power
o Russian troops are still there
- Income: $1100/year
- The worst in all of the post Soviet Union
- The greatest national income is in drugs
Kyrgistan
- lacks any resources besides the source of the rivers
- so poor…has nothing to do with them

Page 115
- sooo much inner turmoil

- Tulip Revolution
Turkmenistan
- Turkmenbashi
o Been the leader since he was the communist party boss there
o ABSOLUTELY autocratic rule
o Real Stalinist…his cult of personality is worse than Stalin’s
o Pursued “neutrality”…kept Turkmenistan out of any of the other
countries’ affairs
- Major petroleum resources but he rules with such a soviet style that he hasn’t
allowed the country to grow to even a bit of its potential (regarding all of its
resources)
Post Mid-Term
Lecture 1 October 24, 2006
“Banking and Payments, Financial and Legal Structures; Democracy and the Rule of
Law”
“Agricultural Reform”
Soviet Legacies- Vast systems of kolkhozy or collective farms from Stalin- large factory
style farms- supposed to be efficient but are remarkably inefficient- unproductive, no
incentive for farmers. High investments in agriculture with little returns. State spent lots
of money providing best equipment and supplies- never provided success because there
was an underlying structural problem linked to Gosplan (central planning agency).
Ruined flexibility. Had to import a lot because so many crops were lost and the farms just
didn’t produce enough to sustain the population. 200 metric tons produced but ¼ lost to
planning problems. Gorbachev’s Half Measures- offered leases but people still didn’t
trust it, agricultural reform failed, bureaucrats resisted change b/c private farming would
disrupt their jobs, blocked/strangled reforms w/ red tape.
Shock Therapy and Agriculture- see above, Soviet legacies continue- method they
decide on to privatize and move to market economy. Do it all quickly, hurry up and
privatize under Chubais. Backlash against Yeltsin from “loans for shares”, land reforms
continually blocked, new land code allowing private farming blocked
Pseudo-privatization of land, collective farmers could attempt to exercise their right to
take pieces of land and farm their private plots, lots of bribery, collective farm bureaucrat
could block privatization, collective farms = joint stock farms. Asset stripping of farms,
collective farm chairmans steal and sell materials.
Private Farming in Russia: Obstacles and Opportunities- Obstacles- asset stripping,

cheaper to buy abroad than nationally, could not get smaller farms, no credit available,
lifeblood of the economy, could not get $ to buy equipment, could not manage through

Page 116
low seasons. Land reform never really took place- even under Gorbachev and other more
liberal leaders- because there were these underlying infrastructure problems. Plus the
beurocracy- all the agencies in charge of farming were against reform- blocked them and
opposed them avidly- never let reforms get implemented because they knew that with
private farming they would lose their jobs. There was a law that permitted private
farming but that was blocked for about 10 years. Laws at end of 90s allowed some
reforms got through and private farming was permitted and many of the blocks were
broken down. However, there was no decent system of credit and farmers more than
anyone else needed credit. No loans- it was very hard for them to get equipment and
supplies to get started. Private farming today like in years under USSR is so much more
productive small private plots still sustain most of the population on its products.
Although today still your land has restrictions on it, or it’s not fully yours, or the title still
as state on it somehow. Foreigners can’t own land and you are not permitted to sell you
land either unless its to another farmer- not to a businessman or factory owner. ¾
completed reforms- still not fully privatized.
“Banking in Russia” a healthy financial sector is critical to the economy especially in a

transition period when one is trying to catch up. Banks pay you to put your money in the
bank (interest) and then they loan it out. They are the lifeblood of the economy- all
innovation and expansion is paid for on credit (agriculture, manufacturing, etc.). When
whole sectors are trying to restructure, like in USSR, then credit is essential. Your surplus
in the banking is working- it is fueling investment, growth, and job expansion, it is
doubling circulation of currency as opposed to being under a mattress and not doing
anything.
Soviet-Era Legacies- no need for this type of credit or borrowing because state took care
of everything and no one owned anything or could start anything buy themselves- state
owned and ran everything- resulted in no infrastructure for market economy Plus people
didn’t put money in banks- because they were distrustful of these institutions- had never
done it before- didn’t allow for there to be money in circulation for loans or credit- didn’t
allow economy to grow because people couldn’t get the money to start their businesses or
farms. Also banks in Soviet era didn’t offer any interest and if they did it was not
incentive enough- there was really no reason for people to put their money there. Hardly
anyone did. Not real banks anyways- Gosplan decided all this too- where loans, went
how much etc…state tells where money goes- not bankers and people schooled in
economics and investments in charge- state beurocrats under Gosplan deciding. State
stole from people- froze money in accounts, change exchange rates whenever they
wanted etc..deep seated mistrust- people didn’t trust banks. New private banks also were
fraudulent.
1. Banking monopolized completely by the state- not
competitive banking
2. Didn’t conform to market supply and demand forces- just
disbursing credits- no real banking activities
3. No accountability- soft budget constraints
4. Distrust of baks because of the deceit and incompetence on
the part of the state

Page 117
Hyperinflation- “Not a lender but a Borrower Be”- 1000% inflation in 1993- the 2nd
year of shock therapy- high inflation is very destructive for normal economy activity-
need to get inflation down as a 1st step to reforming the economy. State printed more
money, gave soft credits, more subsidies- further fueling inflation because they doubled
and tripled the money supply by doing this. Printing too much money causes inflation
and because of unknown rubles that flooded the economy- people had all this money
under mattresses etc..becuase they had nothing to spend it on before. People lost so much
so because of this inflation had to spend every last ruble to stay alive. General economic
collapse, privatization fueling corruption, unemployment, etc…Only sector that was
booming was banking- they took advantage of high inflation- money is losing value day
by day so there are enormous profits to be made if you are a borrower. Good to borrow
for as long as you can. Prices are going up so if you can by something and then wait a
little bit then resell it you will make a profit because prices keep going up – called taking
advantage of inflation. Your money will grow quickly in this environment if you have
money initially to buy some stuff that you can hold on to and then sell when prices have
gone up even more (i.e. raw materials etc…that won’t lose value). Banks who did well in
this illegal business became financial industrial groups (FIGs) they became huge because
there was big money to be made and they were making it. Very complex financial needs-
corrupt people in there were making tons of money- i.e. delaying payment just a little
allowed you to make so much money off this money. Mafia- very involved with banks-
they had lots of money and it was a huge network- banks helping criminals and run by
criminals, paying and receiving bribes etc..had lots of mafia money, sometimes owned by
mafia, and participated in mafia activities (investments, funding, credits, etc). When you
delay what you owe- that way what you eventually have to pay goes down- because
inflation has made your money worth more.
FIGs financing the rich people’s activities- import, export- investments, etc…
By 1993 most enterprises had no access to credit at all- had to scrounge loans from their
friends or skim off their profits in order to put money back into their company or starting
anything new- no banks for commercial loans- little guy suffers the most- too hard to
start a private business- you couldn’t get the money.
Regulatory Vacuum- lack of reserve requirement or any backing for your money in the
bank, no state backing to protect consumers and bank customers. Came up with a
minimal insurance policy finally but millions had already lost everything because of bank
failures. Lack of legal infrastructure behind Russian banking- there was no auditing or
background check system before giving out loans- even banks because of this did not get
repaid on their loans. No credit checks. Lacked database and know how. Banks, because
of this didn’t want to do things for normal people- only wanted to do things for the well
known elite because banks knew they were cash rich and that they would get their money
back.
The Banking Elite- Potanin- Norelsk Nickel, Gusinsky, Khodorkovsky- Menatep

The banks were the perpetrators and the victims of organized crime
Victims- when they had to pay protection tax or where coerced into giving loans even
when they didn’t want to, and subject to many corrupt schemes

Page 118
Perpetrators- money laundering, participated in capital flight, bankers to thugs, tax

evasion, etc.
Formed ARB- Association of Russian bankers- had enormous political influence had lots
of money and contributed to campaigns- often wrote policy because of the weak
government in power- close relationship to oligarchs and FIGs.
Banking elite lobbied hard against foreign banking because they didn’t want the
competition- when it did come in they made sure it was severely restricted. It would have
been good for the state to have foreign banking because it would bring it more money for
loans and such which was badly needed and also it would bring in western know how and
ideas so Russians could learn.
R. Banks under Pressure- 1994- inflation is plummeting now, rubel loses value-
however- this gives them some currency stability- now they can acknowledge the ruble is
weak and keep it more or less at 25:1 1 dollar for 25 rubels. Exchange rate is steady=
Reforms- no money to be made on currency speculation- good for improving banking
operations. Reserve requirements are raised- accounting practices are regulated and
standardized and made more transparent and open, central bank moves to tighten up
procedures for getting a license to even open up a bank. Many banks close= want fewer
banks but stronger ones. Got rid of intermediaries- because they had abused their power.
Central bank is phasing out directed credits- which are forms of subsidies- IMF is telling
them to do so- because it is helping keep decrepit businesses afloat- better form them to
close. Stop printing money over what you have in reserves. Increase your money by
increasing your revenues- taxes.
GKO Pyramid- State credit obligation (equivalent to bonds here). IMF says they need
this- Russian consumers would buy these by auction through banks- investment for
consumers and will be lending state money in the mean time- profit made for banks on
interest. All backed up by government. Makes more money available for loans. Better
than issuing subsidies printing money, and sharing out credits. However has to be done
properly and responsibility. Government can not issue these without knowing for sure it
can pay them back- if they do they default- it’s a government pyramid scheme- because
promising higher rewards and then not being able to pay out. This happened in Russia
causing default of central bank and all others- ordinary depositors lost everything in this
financial crises and collapse in 1998- everyone defaulted- could not pay everything back.
Other “Normal” Operations-
“Veksels” and the “Virtual” Economy- IOUs issued by enterprises- this market
emerges- the buying and selling of these IOUs. Emerging of the “virtual” economy-
enterprises are struggling to survive everything is out of control- everyone is poor, flood
of imports that they can’t compete with, lack of FDI, and healthy banks focused on
wealthy clients. No money for medium and small business- struggling to stay open. What
they do to avoid bankruptcy is reduce salary for employees or delay paying them, dodge
taxes, and pay with goods what they owe instead of with money- workers paid in goods

Page 119
instead of money- pay bills by bartering- energy bill, tax bill, bank bill- companies offer
goods instead. Called arrears crisis- everything is being bartered. Very inefficient-
impossible to actually take delivery of all these goods- they were coming in truck loads
and warehouses full- (i.e. thousands of mirrors in turn for energy bill or whatever)- these
people who were getting these products didn’t have marketing system or transportation
system- what could they do with all this it was a big pain- So these IOUs sprung up- they
have an IOU for 1,000s of mirrors- don’t move goods around now just these pieces of
paper. Venture capitalists see this virtual market emerging now- and start buying these
IOUs and selling them or the products they are worth.
House of Cards- looking at all this- every thing going on= a house of cards. This needs
to be solved- fragile economy. Easily all come crushing down- huge pile up of debt- all
covering up this looming financial crisis- just delaying the eventual collapse- looks like
its okay but its not- all papered over by these schemes. August 1998- all came crushing
down- state ultimately defaults- banking system and enterprises engaging in these
schemes all collapse- not only middle class and poor people hurt but everyone- even the
elite and wealthy foreigners. People lose everything.
Because of this collapse: they got a new fresh start
Banking system suffers a tremendous blow but it clears out the shakiest and most corrupt
banks- allows establishment of healthy banks
Regulation springs up to curb all these illegal practices
Transparency is key- accounting practices become more transparent and standardized.
Rules come into place- introduce western world wide accepted accounting standards.
Banking sector has been made more open to foreign banks and other competition
Consumer bank has made some progress- but very slow and not that great- it is backed by
the state but other services and higher interest is not offered.
Credit and loans being made are still weak still less than 20% of GDP. Total worth of all
Russian banks, the whole sector, is only half of what Citi Bank is worth!!!! One
American bank is worth more than whole Russian banking sector!
Evolution of the Russian Federation
Federalism, Soviet, and Russia- Russia is large, complicated, and diverse. Everyone
thought it would collapse like the rest of these multi ethnic countries (i.e. Yugoslovia,
Czechoslovkia) But it has stayed together...but at what cost? Has it hindered its
democracy and road to capitalism. Federation is something in between- a unitary state
and ???
Soviet federalism- each state under USSR had their own communist party- but they were
all subordinate to Moscow- Russian communist party. Encouraged a separate national
identity amongst people- each ethnicity was allowed their own culture, language, etc…
By the end of the USSR local and regional officials had the power to resist central
directives. So there was a sense of soviet federalism but it wasn’t legal or recognized.
Reforms and new laws were always stopped from the center by regional and local
leaders- tainted it as Russia trying to force them to do something when really by the end

Page 120
they were reforms- these soviet leaders did not want to lose their power so they blocked
central directives that were reformist. Nationalist and separatist movements sprung up.
Many times these soviet regional leaders backed these movements and helped create
them in order to halt these soviet directives from Russia- they just wanted to stay in
power. Russia was the only one who didn’t have their own communist party- theirs was
the main one for the USSR- even Moscow many said wasn’t a Russian capital it was the
capital for the USSR.
From Treaty of the Union to the Federation Treaty-

“Parade sovereignty” local regions start taking as much power as they can under
Yeltsin- making laws for themselves and governing all issues pertaining to them- central
gov was only to oversee. Yeltsin declared that these regions should be as autonomous as
they could- should take as much sovereignty as they could handle. Yeltsin got his
independent Russia- but how to rule Russia and stop the fragmentation that he had
started- problem of Russia’s territorial disintegration.
“Subjects” of the Russian Federation
-89 federal subjects-
-49 oblasts- regions
-21 republics- defined by dominate national or ethnic group)
10- autonomous okrugs- districts ethnically based as well
-6 krais- territories
-2 federal cities- Moscow and St. Petersburg
-1 oblast- Jewish state created by Stalin- he was worried about Jewish nationalism and
wanted an excuse to deport Jews from other major Russian cities.
This main clevage between a territorial distinction and then a national culture creates
problems- two tiered- sowed the seeds for political problems- fighting, inequalities
Politics, Economics, Security- Russian constitution created lots of presidential powers-
has right of arbitration between regions, etc…president has upper hand in determining the
balance of power in the region
Economics- this is very disputed- Moscow retains right to determine all these policies-
taxes- how much goes to center how much stays in regions, decides issuing of federal aid
to different regions- enormous disparities- regions all give different amounts to central
gov and receive different amounts from Moscow. Moscow also controls currency,
borders, and customs- this needs to be decide by the center however, or else chaos.. Many
local areas have defied Moscow and made their own decisions. Deciding on duties and
tariffs on their own- determining foreign economic policies themselves. Deliberately
going against Moscow making all their own decisions- creating imbalances, lack of
control of central gov, and creating a mess. Moscow is unable to enforce all these things-
each region with different laws and policies makes it very un-unified and hard to control,
predict, deters investment, security issues, economic issues, instable, not orderly,
inefficient. Corrupt arrangements between local officials- protect their own interests-
undermine Russian nationalism- every region out for themselves with own policies and
interests.
By mid 90’s regions wanted to reopen negotiations with Moscow- over 40 had special
side deals because of renegotiations- exceptions, amendments, inconsistencies- each
thought they could get a better deal then they had gotten originally.

Page 121
Federalism or Feudalism
Nazdrateuko, Ilyumzhinov, Rakhimov
Russia’s Economic Fragmentation
Lecture 4 November 2, 2006
Efforts to Reassert Central State Authority
Yeltsin Tries to Reign in the Regions: took a harder stance on taxes and issues. Weren’t
clear federal laws on issues with foreigners, raw materials, natural resources,
etc…weren’t federal laws on all these things. The local elites were in deals with big wigs
and there were many corrupt dealings under way to take over big businesses and other
natural resources- very corrupt. All the good stuff gets put in hands of officials friends for
bribes and other illegal ways. Court cases coming out dealing with discrepancies between
federal and local laws. Many laws were conflicting- legal locally but maybe illegal
federally and vice versa. Yeltsin trying to assert federal power- federal laws trumpted
local laws- however, he didn’t have the power to make sure this happened. Local
governments dug in their heels and resisted.
1998: low point of federal Russian government authority. Default of central bank of
Russia. Banks collapse everywhere- everyone impoverished. Fall out of the ruble. This
economic crisis only worsened the authority of the federal government. Gap between the
rich and poor was huge! Economic and political fragmentation. Local governments seized
power and suspended democratic government- declared a state of emergency and leaders
took on a dictator role. Some of this is justified- people were so poor- leaders trying to
help their people- but most just used this as an excuse to get more power. These dictators
continued to rule and did not re-setup city councils-they continued to rule in
autocratically.
Putin’s Rise- came from soviet family and worked for the KGB for 15 years.
Disillusioned by the fall of the USSR. Then worked for his former law professor a very
liberal pro reformist mayor. Became deputy mayor trying to attract foreign investment
and working to make laws more business friendly. 1996- Putin goes to work on Yeltsin’s
reelection campaign. Eventually became head of the monitoring office- trying to
encourage the various regions of Russia to comply with federal laws and directives. This
was the turning point- he was gathering tons of experience and knowledge about this
critical problem- this problem was critical to the success of Russia and would be the
downfall if not solved- he learned the ins and outs of this situation got to know the
leaders, etc. He was trying to keep these local abuses from happening and trying to assert
federal authority. 1999- becomes unexpectedly the prime minister of Russia. At end of
the year Yeltsin decides he is resigning early. Under constitution power goes to prime
minister- so Putin becomes President and then gets officially elected 4 months later.
Putin Takes on the Power Barons- makes this is first priority. Puts a team together-
officials who would work closely every day to Putin- they are representatives from 7

Page 122
districts- Putin divides country into the following: Moscow and Central Russia, St.
Petersburg and North West Russia, Caucuses and Southern Russia, Volga and Central
Russia, Eural mountain regions, Siberia, and the far east. These guys were to make sure
that all laws were in compliance with federal laws, local abuses were stopped, they were
to monitor closely all the goings on of local rulers and report daily to Putin, recommend
what local laws should be thrown out because they violated the constitution, etc. All these
viceroys or federal representatives were former military or KGB officials. Yeltsin had
tried to do this but it backfired because these viceroys were bribed by locals- this way
making 7 district big districts broke the corruption- these men couldn’t get persuaded by
any one because the district were made up of many regions. Plus these were Putin’s
trusted men- very harsh, un-corruptable, no negotiations, no compromise, no bribery.
Putin had unilateral power of the president to implement these changes. Kompromat-
compromising material- making incremenating evidence, to embarrass, imprison, and
oust officials. Legal investigations and economic crack downs. Federation council (like
senate) reformed under Putin- these officials are now full time officials screened by Putin
himself (before had been governors in local regions and automatically on these councils
part time). Federation council- is hand picked and screened by Putin- undemocratic- he
radically transformed how the parliament worked. He did this to stop the corruption and
special privilages these governors were getting- they were abusing their power. Also their
legal immunity while in office was restricted they no longer had this legal protection to
do whatever they wanted- governors and officials had been getting away with everything-
tax evasion, bribery, special privilages, etc… not any more. Police and local officials now
more under federal control. Taxes are more regular and balance has been restored- tax
collecting has improved tremendously. However, Putin had been implementing many of
these reforms illegally, undemocratically, and acting like an autocrat- even though these
reforms were for the better people were still concerned that this was going to hinder
democracy in the long run because he had taken so much presidential power.
Chechnya: ethnically and linguistically diverse region in the world- 19 ethnic groups.
Mountainous region has preserved their cultures- they are isolated from the world and
from each other- very rural and not modern. Live in local clans. Only time this region
united- a temp. unity in 19th century to stop Russian expansion. Divisions and hatred
among all groups here is very strong- not unified. Predominately Muslim- not pro
anything political really- not pro soviet or anything else. All the division among them
makes them easy to divide and conquer- try to pacify them but really all the differences
never went away. Fierce warrior culture- had faced intense suffering under the Russians.
Entire Chechnyan population had bee deported and shipped to war camps under Stalin-
he suspected they were being disloyal. This unites them in an anti-Russian sentiment.
Nationalism takes off everywhere and even in Chechnya they start a Chechnyan
nationalist movement. Appeal to Moscow to be in charge of more local things- more in
charge of their money, laws, etc..under Yeltsin the policy of lots of sovereignty for these
regions fueled all this- regions took whatever they could in the way of power. Chechnyan
leadership is now elected and they begin to move for independence. Dudayev- leader of
Chechnyan national movement- had grown up outside Chechnya because his family had
been exported at end of WW2. He was also a military officer- he was a good compromise
candidate because he didn’t have clan ties and he was well respected in this warrior

Page 123
culture. Russian attempts to support a candidate and economic sanctions backfired- tons
of corruption insued under all these attempts- worst of shock therapy ended in 1994 and
finally Russia wondered what to do about Chechnya….
1994- war of independence- Yeltsin has popularity and Chechnya problem- they are
trying to succeed. Military and political advisors planned a little war to seize all the
leaders easily. Chechnyans united and Russians fumbled- dirty guerrilla war. Ended after
2 years but not really
1999- (2nd war with Russia)- this same war is almost under way again
First Chechny war: 1994-1996. Origins: deep historical grievances- they had not been
treated well before or during the USSR. Felt they had a separate national and ethnic
identity. Leaders of anti-Russian federation, warrior culture. Strong desire to not be a part
of Russia. Fragmentation of control in Moscow- coup in Moscow during Yeltsin’s years-
Chechnya felt this was there chance to declare independence- saw this moment of
weakness. Major oil pipelines ran from the Caspian Sea through Chechnya. Allowing
Chechnya to succeed would result in a loss of this strategic pipeline and key refineries In
Russia there was lots of political and economic unrest- Yeltsin needed a victorious war to
help his politics at home- so he thought go in and easily stop this Chechen rebellion.
Ended up being a disaster- 60-80 thousands Chechnyans are killed, the far majority of
them civilians- estimated 3,000 in one day died- over 400,000 are displaced- refugees.
Capital of republic is leveled- bombed completely by air strikes. Dudayev- Chechen
president. Russians took control of many northern parts of Chechnya, while the higher
mountainous parts were controlled by rebels. War drags on to a stalemate. A series of
other events bring it to a conclusion. 1995 raid on Budyounnsk, took a half dozen civilian
looking trucks, dressed in civilian clothes heavily armed, set up north into the north, with
$25,000 in their pocket for bribes at checkpoints. Ceased a hospital, took people hostage.
Yeltsin gives permission to raid the hospital, more patients are killed than Chechnyans,
end up letting the Chechnyans go and giving in. Russians are preoccupied with domestic
troubles. Russia, not only abroad, but from domestic critics is faulted for brutalities
committed during this war. Human rights commissioner Kovalev speaks out against the
war methods. As the years go towards 96, the possibility of a quick little war is gone.
Yeltsin is running again, this war is a drag on his popularity. They enter into negotiations.
They agree to ceasefire, then a more formal peace, and the war is eventually over in
1996. War ends- Yeltsin defuses it as an election issue for political reasons- cease fire
papers over the differences. Agreement to halt the war but no final resolution- Russia
does not agree that the Chechnyans will be independent, while they don’t agree to remain
a part of Russia- Chechnya has a default independence therefore for the next couple of
years because Russian troops exit the region altogether under cease fire. Semi-
independence from 1996-97-99. Radicalism- and leaders fighting amongst themselves,
rivals for control politically and economically - no one could rule effectively with all this
internal fighting. Islam becomes a major factor. Chaos- Islamic fundamentalist invade
towns. Dusayev’s group was in contact with much more radical Islamism groups, took a
more radical turn. Russia anxious to go back in and fix their first mistakes. Maskhadov
was moderately radical; general radical transition. They continue to argue, elections are

Page 124
held for control of Chechnya. Area is carved up into different groups, organized crime
skyrockets, the region becomes a stronghold for dirty business, hostage-taking, et cetera
This radicalizes Moscow; Russia was doing a lot of this too. Russians turn against
Chechnyans, do we really need them? Economy starts to settle in Russia, people start to
demonize Chechnya. People from all darker people, including Georgians and the such,
are criticized by Russians
1999- 2nd war- Russia vows to restore order and fix this situation using force. Putin vows
it will be quick and decisive. However, war went on for years- many have been killed.
Post 9/11 Russia has said this war in Chechnya is a war on terror. Extremist groups and
rebels have been fighting the Russians- the Chechen’s say they are just finishing their war
for independence. Under Russian control now- Russians say the war is over and it is
stable now under them- but reality is that no one I safe here- check points- bombardments
every night by Russian soldiers. In 1998-99 a series of events, kidnappings and terrorist
bombings (In the space of a month over 100 Russians are killed in these apartment
bombings) that lead Russia to launch the second Chechnyan war. It isn’t clear that
Chechnyans are responsible for all of these bombings. Some of these bombings may have
been provocations by Russia to lead to the war. With the recent war, Putin in Russia has
made no public concessions to terrorist acts in Russia by Chechnyans. Many have been
displaced and live in refugee camps. Russians caused a lot of damage but they didn’t kill
the Chechen leader.
East-Central Europe and the European Union- took in Poland, Hungary, Czech
Republic, Yugoslovia, and four more. Hoping joining would solidify their place in
Europe in military, security, economic, social, and cultural terms. Exclusive member of a
free trade area, no more tariff barriers for imports and exports. Goods and people can
now move freely.
What is the EU? Started in early 50s- to remove barriers in certain industrial sectors
(coal and steel) and to reconcile France and Germany after WW2- so economic and
political reasons- one single open market in Europe. Italy, Belgum, Netherlands,
Luxemburg, France, and Germany- all original members- create a single market for them.
UK, Ireland and Denmark were admitted in 70’s. Then Greece, Spain and Portugal. 1995-
Austria, Sweden, and Finland. This is where it was at until new members from former
USSR were admitted.
Maastricht and Beyond- goal of Maastricht treaty- a single currency for Europe- the
Euro. Coordination of defense and foreign policy as well. Many rules and regulations for
all of Europe (social, labor, environmental protection, banking, communication, etc..)
many social services. Benefits- for member states no barriers, free trade.
Deepening and Broadening- Reason they brought in these former USSR countries- they
were causing lots of violence, refugees, and spill overs- were breeding conflict and
violence.

Page 125
What’s in it for us? So EU felt if they brought them in it would help their problems and
stabilize whole region- east/central Europeans could work abroad and help their
economy- make these countries more safe and secure- help FDI and in turn help all the
economy. Common agricultural plan- subsidies. Huge budget for this sector- east-central
Europe wanted this for their farmers. The EU redistributed funds to help infrastructure.
East-central Europe really needed this help.
The Accession Process- states joining the EU need to be ready to merge their social,
political, and economic sectors with the rest of region. Need to have functioning
democracy and free market. Must conform to Acquis Communitaire- legislative body that
governs EU. Not simple- even for a well established democratic country- because there is
a lot of preparation in order to be ready to be accepted. These are regulations that govern
everything. 1st formal application, then wait for acceptance, then stability and accession
agreement, team is set up for the country- 100s of people broken into different teams- i.e.
environment team- to get country in line with environment code of EU- there are 31 of
these chapters (legal system, infrastructure, labor movement, health, worker security,
pension issue, border controls, agriculture, human health and security, human rights, etc)
P.H.A.R.E- Poland and hungry aid to reconstruct the economy- not just to them but other
former soviet countries to help them build in order to be admitted to EU. Special
programs for agricultural and rural development- candidate countries got tons of aid to
help them with everything you could think of- programs for every sector- airports,
bridges, environment, etc….
Problems and Prospects- these east/central Europeans states were populous, poor, and
perverted. They had been under communism for 40 plus years- corruption, weak
judiciaries, poor, organized crime, ethnic problems inside and between states,
discriminations, etc…how could all this be fixed in time? Infrastructure was easy- put
money and build- these other cultural, political and legal aspects were very difficult.
Must show that theses candidate countries have stable institutions for democracy, respect
for human rights and minorities, abide by rule of law. Economic- need capacity to keep
up with market pressures, free market economy, be able to compete, non market
mechanisms all need to go- away with subsidies and other help for businesses, work
towards a single currency. Former soviet countries in EU still are not on Euro. Problem
of agriculture and subsidies.
Immigration- underlying fear of western Europeans- one these east Europeans were
admitted a flood of them would be coming west for jobs. Schengen Accord- move freely
around Europe to all member states. Because the economic situation in the east was so
unstable- they were worried about how many people would move to west. So thought this
immigration would be good for western Europe- they need people to work and their birth
rates were going down so they need more people.
Agriculture- EU problem even before the former soviet states- too many subsidies in
western Europe. Told eastern European countries they needed to reform their agriculture-
no self-sufficient farmers- they will be crushed by competition and can’t afford to
subsidize all off them. These governments were told by EU to cut all subsidies and help-
it will be a hard transition but the agricultural profile needs to be changed. Their
remaining farmers after these cutbacks will be allowed subsidies from the EU.

Page 126
Contributed to disillusion that these eastern Europeans feel today- they had originally
supported EU now people are not so for it. Was very painful and long and hasn’t been the
big boom that everyone thought- for many it has worked (those who have restructured
successfully). However for those left out- it has caused dissatisfaction. There has been
more losers than winners- not so enthusiastic about EU anymore. _
Lecture 8 missed class November 16, 2006

Video- small lecture
The destruction of war
- Bosnian war 92-95…300 thousand killed, land mines are still killing people, 3
million displaced, ½ of the displaced have been returned to their home 10 yrs later;
unlikely further people will return; 30 billion dollars in damage done to the economy;
almost all infrastructure was destroyed; GDP 91 was about 1700 dollars a year, by end of
war it was 330 dollars a year; slovenia- GDP is over 15000 dollars a year,
Impact on Yugoslavia’s neighbors

- germany at height of conflict, btwn 300-400 thousand refugees housed in
germany; over half million from bosnia wound up spending whole war in croatia which
was going through its own war; hungary, Bulgaria and Romania suffered economic
disruption; each lost about 10 billions dollars b/c of restrictcion on trade b/c of UN
sanctions; Romania lost about 850 million dollars in lost trade during few months of war,
Bulgaria lost about 5-6 billion dollars b/c of drop in tourism and trade; Albania was
overwhelmed-800 thousand Albanians about ½ fled to Macedonia and Albania proper
Post war problems: corruption, econ-destruction, political deadlock

Opportunities for organized crime grew exponentially; empowering of warlord-like
leaders; Yugoslavia had a growth in corruption; econ destruction: rebuilding of economy
has barely begun; political deadlock: everything is magnified here, the wounds so fresh
from war in attempting to piece together and keep Kosovo together; ethnic problems in
central asia, and central Europe,
Balkan stability pact

Compared to a Balkan martial plan, summit held in 1999 in Sarajevo; states came
together to conclude this; 3 tables: political, economic and security; political: to
democratize, supporting human rights and minority rights, independent media, election
monitors, setting up trips btwn members of parliament to meet with European counter
parts to see how democracy works; security: a lot of money spent to reform military so
they don’t become gangland warlord militaries, to fight trafficking money given to repair
damage and move forward; rebuilding damage of war and bridges and infrastructure;
efforts to encourage regional trade to lower insanely high tariff barriers
Geopolitics of the Post-Soviet Energy Business

Oil and Gas

Page 127
Azerbaijan in Baku was one of the original oil cities on the edge of the Caspian Sea.
Along Caspian Sea are many oil deposits. Huge oil found throughout Russia and around
Caspian- Soviet authorities of the 50s and 60s explored under the Caspian for more oil to
develop throughout Russia and kind of ignored Caspian finds. Authorities continued to
develop resources within the country of Russia after the 60’s.For security reasons they
wanted their oil in the center of Russia- concerned with stability and control in the
Caspian region. Focus was on these resources, didn’t want to develop oil in the unstable
Caspian region Also it’s harder to drill offshore than on land so they decided to focus all
energy on drilling in central Russia. During Perestroika, spent most of their time on
Central Europe, not too much of a focus on the Caspian region. Also years followed
(before collapse of USSR) of no money to even think about investing in the Caspian oil.
By the mid 90s, enormous interest in the region, with partnering countries, discovering
how much oil there might be there, and a similar political shift. At the time of the Soviet
collapse, the whole Caspian region might have 7-10 billion barrels, within 5 years it
looked like 40 and 50 billion barrels, today the estimate is around 250 billion barrels or
more. Proven reserves of maybe 12 billion liters of natural gas in the region. Deposits in
other parts of the world aren’t found yet. This region is second to the Persian Gulf.
Natural gas 3 trillion cubic meters at least but most likely way more. Azerbaijan interest
is the newest find of tons of oil in the early mid 90s- British Petroleum and some
American Companies. Was quickly followed by interest in Kazakhstan- in the Caspian,
BP leading the way in Azerbaijan and Chevron/Texaco in Kazakhstan. Offshore drilling
necessary because much of the reserves where under water. Soviet and other oil
production had historically been on shore, Chevron had more experience in drilling under
water. Western firms trying to operate in this new environment couldn’t do so on the
purely business criteria that they may have hoped for, as one can image because of the
Russian autocracy legacy in the region. Exxon mobile, royal dutch shell- all major
companies were investing here. Immediate post collapse period of USSR- Azerbaijan and
Armenia were still fighting and even though countries riches are growing. Dynamic for
foreign investment changed- US congress supported Armenia- because of Armenian
nationals etc….this meant American FDI was done, no official aid, etc. But then as oil
interests increase dramatically this pro Armenian position loosens and Azerbaijan is back
in favor because so much business was to be done here. Politics reigned over economics
in this region during the time of interest in the mid-90s, with wars the number one issue
for many of these countries. Especially post 9/11 war on terror- these blocks in this
region where over. Best place to transport oil is through Iran- better than through central
Europe because of civil wars and unrest. However Iran’s not very US friendly so this is a
problem as well. US didn’t support oil pipeline through Iran, although this was the
simplest route for getting the oil out, didn’t want to go through Russia, reduce Russia’s
near monopoly on transport routes. Russia then by default has all the exit routes and gives
them a monopoly.
Getting the Goods to Market

Pipelines- 2 main Russian exit ports- one on black sea and a northern port of Vatspills.
Since fall there have been several new projects: build on soviet era infrastructure (easier
than to start from scratch) but there are down falls: allowing all these regions with new
oil to only go through Russia keeps the Russian monopoly going (gives them undue

Page 128
leverage), also there is a lot of unrest in this region (political instability). Chechen factor,
instability in the region to the west of the Caspian. Didn’t want to give more power to
Russia by giving them the transport routes. Didn’t want to go through Iran because of
conflict. Instability in the Russian Caucus region, could be explosions in this largely
Muslim region. Lastly, these routes can not handle how much oil now as been found in
this region, so there still needs to be other pipelines (can not export the oil fast enough).
New big pipeline in 1999- still transits Russia but does avoid Caspian problem region.
The first big completed post-Russia pipeline was the CPC, runs from northeast Caspian
region, through Kazakhstan and Russia, and into Novorossiyak on the Black Sea
Traffic in the Turkish straights, where oil has to be shipped through to get to western
Europe and other places, Amount of oil shipped through Turkish straits has more than
doubled in the last five or so years - should reach 80 million tons in next 10 years. With
new exploration, this traffic will increase even further. Increasingly increasing spills and
collisions, and even when things are going good these huge ships clog traffic for hours.
Turkey is making a huge amount of money off of this. Supertankers and other oil tankers
can clog up canals for at least 2 hours but sometimes up to 4- sometimes only 1 direction
but often the bigger boats clog in both directions. Very overloaded in black sea- causing
tons of environmental pollution.
Another option- through China, Iran, or Afghanistan- too many political problems and
instability, however.
Another option- Runs from Baku, through Georgia, exits from the port of Ceyhan in
Turkey into the Mediterranean Sea- Second major pipeline, the BTC- This had been a
decade project, cost of $6 billion to complete, and has had geopolitical problems all
along. In Georgia, this goes through delicate environmental regions. Many of these
concerns were solved with British Petroleum . When oil prices were low, companies
didn’t want to invest in this, only when prices began to rise the companies jumped on
board, began construction in 2000/2001, was built very quickly. Regional problems-
turkey borders Iraq- possible problems in future.
Central Asia pipelines- there is no easy way out- is there enough oil and profits to make
this all worth while?
US Gov: not go through Russia, help economies of newly independent states, Armenia,
Azerbaijan, etc…so new central Asian pipelines are better for US. Western European oil
mainly still comes from Russia.
Russian companies were then investing in these Caspian reserves and pipelines through
central asia- Russia was angered at this- this is weakening Russia and in short term
making money but in long term weakening their influence in this region.
Caspian Sea- who’s oil is whose? Another problem along with environmental and
political- for two decades, only two countries bordered the Caspian, Russia and Iran, they
decided everything in bi-lateral negotiation, drew a line across the Caspian to divide it
Now there are three new bordering countries on the Caspian. Could try to split it up, or
adopt the international ‘Law of the Sea’. Everybody gets a zone outside of their border.
But today there is Kazakstan, Azerbaijan, and Turkmenistan- now how do you break it
up? 5 countries now- how do you divide among 5? Idea- first measure coastline and put
in a coastal zone rule- from border out 25-50 km- then what about remainder- take deep

Page 129
waters and divide them up by drawing a line. Or do you take the percentage of shoreline
and match their percentage with deep waters- Iran for example has 12.5% coast line so
they get 12.5% of deep water. Iran didn’t like that so they suggested they get 20%
because they are 1 of 5. This issue has not been comprehensively settled- some have
settled it bilaterally. No final resolution- but one doesn’t seem necessary at this point
because of these bilateral settlements.
Up through the middle of Yeltsin’s presidency, Russian companies just wanted these
projects to go through so they could make profit, even projects whose main point was to
go around Russia. Gung-ho development. Geo-political standpoint was to slow down and
strategically keep influence in this region, i.e. vie for the pipelines to go through Russia.
After this, the tendency swung towards the geo-political, with Russia twisting arms, et
cetera, in order to gain influence. The Yukos company Gazprom, Russia’s oil monopoly.
This company turned into a state-run company (still a public company, but biggest
shareholder is the Russian government). In summary- Politics has gained the upper hand
over economics
How has Russia done this- Latvian port- (Ventspills) and Lithuania- both privatizing
industries- oil being sold to private investors- As these things were sold off, the Russians
stopped concluding new delivery contracts, this didn’t help Ventspill (Latvia oil
company) much in terms of attracting western investors, Russia bought up most of it then
continued the contracts- they used other exports- this took FDI so down because now
they weren’t being used a lot. So Russia controlled this whole operation even to them
getting FDI and privatizing- no one wanted to buy if oil wasn’t flowing. So Russian
companies bought this for cheap and oil is now flowing making them money.
Natural gas- main soviet built exit routes of natural gas into Eastern Europe go through
Belarus and Ukraine- over time because Ukraine was in such debt to Russia, Russia got
the majority of the energy infrastructure in Ukraine in exchange for forgiveness of some
debt- Belarus has essentially the same story. Gas is sold to Western Europe for a much
higher price than to Eastern Europe transition countries, until very recently (this was to
hold influence- they could raise the artificially low price of oil to Eastern Europe if they
wanted to)
Oil vs. Gas
Oil has commanded the foreign direct investment

Energy exports counted for 40%of GDP and 60% of their export earnings
Collapse in the 90s
Now up to 12 billion barrels a year- Russia is up there neck and neck with Saudi Arabia
(but Russia uses more than Saudi so they export less).
GAZPROM- biggest oil company-oil industry in general- soviet term carried over- its an
arm of the state, owns 60% of Russia’s natural gas reserves

Page 130
Russia as largest reserves of natural gas- use of natural gas will increase world wide
soon- more environmentally sound and oil is running out- natural reserves are just
beginning to be tapped. Before we get to these natural resources however, we have a long
way to go…many problems
Gas: Problems and Prospects

Many eastern European countries are very dependent on Russian sources.
Gas is very extensive and difficult to extract, process, and transfer to market. Natural gas
is highly volatile- it can explode and it’s a sensitive substance-why its much harder to
deal with. Needs to be cooled- needs sophisticated equipment, safety checks, better
pipelines, all around more expensive to move than oil
Crude oil is an inert substance- it is easier to move through pipes.
Russia not taking very many steps to privatize their oil and gas companies because of
political reasons.
What can go Wrong:

“Dutch Disease”- value of dutch currency sky rocketed once they found oil/gas then all
their other sectors could not do well. When oil ran out all their other economic sectors
were weak.
“Resource Curse”- when oil or gas is coming out of the ground easily it makes it easier
for political elites to build corruption, violence, not invest in education, infrastructure,
etc…too much energy and bank that their economy will rely on that. Then it runs out and
you are left with a state no capable of anything.
Energy Environment:
Russia is a very polluted country- highest percentage per capita and per economic size
has the most dangerous and maybe the worst environmental problems.
This is because of decades of bad economic development, Gosplan management, putting
out as much as possible with no concern for safety and long term environmental
protection. Had no environmental protection agencies until recently- Chernobyl-
example. Cut corners, not done right, no checks to make sure its safe, recklessly built and
not maintained properly.
Every 3rd child in Russia has an illness related to environmental pollution/problems
½ of Russia’s people drink water that doesn’t meet the countries own standards.
Russia’s rivers are open sewage channels many of its lakes are dead
Outbreaks of 3rd world diseases- cholera, deptheria, etc…
Russia has thousands of nuclear weapons, fissile material and nuclear waste unguarded
and unprotected- don’t meet any ones standards. Future nuclear disasters.
Security issue because of the unstable political situation in the region
Russia signed the Kyoto protocol but waited it out for best terms etc…but then turned
around and sold their terms to struggling countries so they were able to continue doing
what they were doing before.

Page 131
Video:
Nuclear weapons, know how, etc…are everywhere in Russia- had been under Soviet
control but after the fall- big security issue because they had lost control and weapons
were spread over a vast region- US offered to help destroy some of Russia nuclear
arsenal because it was a national security issue- threat reduction to keep nuclear materials
out of the wrong hands.
Russia is the largest source of fissile material for any terrorist group- hard to monitor and
secure. Russian facilities don’t even know stuff is missing- don’t have a good
infrastructure to monitor their supplies.
Overview- Russia, FSU, East, Central Europe
Russia- under Putin: tax reform, tax collection, banking reform, administration reform-
reestablish the rule of law- correction of worst abuses (regional bosses etc..)= result
improvement in manufacturing sector and agriculture, improvement in worst abuses-
west has applauded these reforms. Biggest sector- energy has back tracked- gov. has
taken back control- renationalized once private companies (this has hindered growth and
efficiency, Private companies would be doing much better)- Gazprom and others- so
Russian state has directly and indirectly taken back control of this sector- even with some
private countries Russian state has a monopoly over pipelines, etc..also they use political
pressure to intimidate and coerce. Putin has done all this with a tighter grip on politics-
clamped down on NGOs and political dissent, have been many assassinations of
dissidents, opponents are silenced, very authoritarian right now. Very assertive foreign
policy right now, Russia wants to distance itself from the west and carve out its influence
in their region, reestablish Russia as a big world power independent from Europe and the
US- use oil as their main lever to get this influence.
Emergence of highly authoritarian domestic political systems in most of central
Asia (Uzbekistan, Kazakistan, etc) façade of democracy (there is voting but not
democratic) but very dictatorial regimes- threat of fundamental Islam (dictators use this
threat esp after 9/11 to justify their crack down in the government- there wasn’t/isn’t a
threat of Islamic take over) the real opposition was western democratic opposition. These
countries are the poorest of the poor, the most polarized (these countries have lots of oil
wealth but has all gone to elite) no improvement, overwhelmingly rural- no benefit for
these people, most don’t live in big cities, and we see complete subordination to Russia
(not just oil and gas, every other sector as well) Russia has successfully through
institutions in central asia set up their monopoly and coordinated the foreign policies of
these states under Russian domination.
Western former USSR- done much better in transition to democracy and market
economy- border western Europe so had more help, cultural influence, closer to markets,
more FDI, joined NATO and EU.
Belarus- last dictatorship in Europe
Ukraine- mixed- western half is democratic and pro west, want to join Europe-
eastern part is pro Russia- Russia has a big monopoly over Ukraine. All leaders end up
constrained by this big domestic divide.

Page 132
Maladova- divided, separatists movements- claimed own independence and of

course Russia is all about that because they can assert their influence and it keeps the
country weak- Russia is only state that supports it because it is in their own interested
East central Europe- bosnia etc???? don’t have good notes on this
Russia is only member of UN security council that has taken a stance of no
independence for Kosovo- Russia’s interests are best served if rest of these states are
fighting and weak that’s why they support anti western, separatist movements
Nationalism- problem for everyone-
“Euroskeptic” turn for everyone- bad economic times, even for countries who
have done the best after fall of USSR and transition to market economy. Prolonged
sacrifices and waiting for better economics promised that never materialized- reforms and
better policies, social programs etc that didn’t work or haven’t helped situation.
Treatment of minorities has still been bad and tensions exists- gypsies is one example.
Under USSR no one was rich but no one was unemployed – now cutting of social
programs and privatization has left many completely stranded esp. the minorities- rich
can offered the private hospitals, schools, etc…the poor simply can not. Poorest and
marginalized that had been employed under job programs and state projects in the USSR
were now all out of work. Crime went up because of the desperate conditions, unresolved
tensions between ethnic groups, etc.
EU was making demands for the state to fix these things and this caused
resentment because local people felt EU doesn’t understand their history, their economic
situation and why its not easy just to fix these problems.

Page 133
III. Private Farming: Obstacles and Opportunities

Putin introduces a new land code
slow expansion of private farms
6% of agricultural lands = private farms
6% of land = “weekend” farms where urban citizens can grow food
these “weekend” farms produce 40% of output
Land code still unfinished
foreigners not allowed to purchase land
can only pass on land to children
Banking in Russia
What do banks do?

lender and borrower
lifeblood of economy
restructure requires credit
I. Soviet Legacies
tightness of loans
weakness of banking sector
Soviet-Era
no private businesses (including banks)
only option was “Sberbank” which offered <1% interest
Inflation
overhang: 50 million rubles came out of the mattresses
with inflation, no one wants to put $$ in a bank
Gosbank
no means of recourse to people who defaulted
no accountability
no conformity
no faith
II. Hyperinflation
when prices were liberalized they skyrocketed over 200x
high inflation kills economic growth
in response to increased prices the gov’t printed more $$
monetary overhang increased
economy contracted roughly 20%
plunged the people into poverty
the ONLY sector doing well was banking
How is this possible?
inflationary environment makes it good for borrowers
buy w/ borrowed $ something that will not devalue (gold) and sell at a profit
repay loans w/ devalued $ = profit
no oversight
1992: credit system is saved by paying interest to borrow money

Page 134
(October 26, 2006)
Banking
Legacies of the Soviet-Era
Banking was monopolized by the state
Didn’t respond to typical supply and demand
No accountability – soft budget constraints
Legacy of distrust
1990s: banking boom, but poor conditions for banking and consumer faith
FIGs serve the rich
Retail banking for ordinary consumers is grossly underdeveloped
II. Regulatory Vacuum
No system of recourse (Gustafson’s banking article)
MMM or other pyramid schemes
No federal deposit reserve
no insurance against a run on the bank
Failure to establish reliable credit ratings
banks would often not get paid for loans
did not build up required infrastructure
24 trillion rubles in unpaid loans by
III. Banking Elite
Vladimir Potanin – owner of Oneksimbank
owns Norelisk Nickel through “loans for share” scam
Vladimir Gusinksy - owner of MOST
Khodorkovsky - owner of Menatep
Bankers are the perpetrators of and victims of the banking system
criminals could take advantage of the loopholes in the system and rip off banks
crooks could take loans and never pay
bankers were also crooks too (hid profits)
Association of Russian Bankers
could buy politics
corrupted the Duma
created their own weak Politburo and could write their own laws
ex: Paramonova
she pushed to bring in foreign bankers to “teach us how to bank”
the ARB lobbied hard to delay her appointment
IV. Russian Banks under Pressure

Macroeconomic Changes
easing of hyperinflation
1996: inflation down to 22%
sharp devaluation of the ruble

Page 135
hurts the consumers

but helps Russia maintain a stable currency rate (25:1)
speculative operations were no longer profitable
delaying paying workers no longer meant that banks could make money
far less $$ to be made than in speculating on currency fluctuations
Microeconomic changes and policy steps
reserve requirements are raised
first steps to regularize accounting practice and make them more credible
tighten up the procedures for granting a license to conduct banking business
By mid-1990s: hundreds of banks close
fewer but stronger banks
beginning to hold banks themselves responsible for the repayment of credits
V. GKO Pyramid
equivalent of T-Bills
banks would buy these GKOs from the government and offer them to their clients
essentially created a legal pyramid scheme
led to the Financial Crisis of 1998
VI. Other “Normal” Operations
Wholly illegal or semi-legal operations
Money laundering
transfer abroad of a large amount of money
VII. “Veksels” and the “Virtual” Economy
“veksel” = bill of exchange in German
Russian equivalent of an IOU
Creation of an IOU market
vast majority of small businesses are struggling just to survive
stave off bankruptcy by reducing wages (paying later or reduced wages)
barter system: goods become a currency of exchange (not rubles)
creation of the inter-enterprise arrears crisis
1998: half of all business transactions are conducted in barter
was often physically impossible to deliver or receive goods
emerges a market of veksels or IOUs that can be freely traded easier than bartered goods
50-75% of all transactions are done in barter deals
secondary market of venture capitalists who take advantage of the undervalued goods, buy them
for cheap, and selling them at high prices where they are in high demand
VIII. House of Cards
GKO pyramid
+ Inter-enterprise arrears crisis
= House of Cards: huge piling of debt with no means to cover it
only raw materials are making consistent profits
banking, and other industries, are parasitic
the state is desperately trying to stay solvent and support the ruble by going deeper and deeper
into debt
August 1998: It all Comes Down
the State, the banking system, and all the IOUs default
Now, not just the commoners suffer

Page 136
powerful lobbyists, international investors all suffer too

Legacies
clears out the most corrupt, and the weakest banks
regulation to curb illegalities comes in to place
accounting practices and efforts to achieve transparency begin to make strides
people still have to choose between Sberbank or localized banks
(October 31, 2006)
Evolution of the Russian Federation

Federalism, Soviet & Russian
From Treaty of the Union to the Federation Treaty
“parade of sovereignty”
Subjects of the Russian Federation
89 federal subjects
49 oblasts or “regions”
21 republics defined by the dominant national group
10 autonomous okrugs or territories
6 krais or districts
2 federal cities – cities that are large enough that can be considered separate entities by
themselves
1 autonomous oblast in the Far East – special status because of its Jewish identity
and created by Stalin in response to the Palestinian movement
A Federation of Unequal Subjects
Politics Economics, Security
Mazdrateuko, Ilyumzhinov, Rakhimov
Federalism in Russia
How has Russia held together?
Soviet Federation
Supposedly a federation with 15 republics
Granted rights by the Constitution, but not in practice
Creeping regionalism (de facto)
Devolution of power to the regional officials
Much more power in the regions to take advantage of opportunities for corruption
Enormous regional and bureaucratic resistance to Gorbachev’s movements in the distant regions
Gorbachev ultimately did not tackle the problem of Moscow vs. all others
local communist party officials embraced nationalism/separatism to secure their interests
Nationalism rises within Russia
From Treaty of the Union to the Federation Treaty

Wave of Russian nationalism in response to republic nationalism
Yeltsin appealed to Russian nationalists and rides the wave to power
Yeltsin fueled the “parade of sovereignty”

Page 137
Gorbachev wakes up
Allows the republics more autonomy and creates a new union treaty
pushes for a new treaty but the regions hold out
1991: the union collapses
Yeltsin faces the problem of halting the economic collapse and territorial disintegration
1992: Yeltsin signed a voluntary Federation Treaty
with the exception of Tartarstan and Checnya, all the republics signed
The paper version and the real version diverged quite a bit
A Federation of Unequal Subjects

Several Aspects of Compromise
Subjects are not equal under the law
There are some differences in rights depending on ethnicity
created a two-tiered system of classes
Some subjects entered the treaty under completely different circumstances
Ethnic republics that otherwise would not have joined were given concessions by Yeltsin just to
get them to sign the treaty
Non Russian minority regions sought concessions and special dispensations and exceptions
Some Russian-dominant regions also sought special exceptions
Wanted special economic concessions
Fueled ethnic & regional fragmentation
Will these concessions continue to be enough for these regions?
more federalism usually means more democracy
however Russian regions have been taking advantage of their freedom
Yeltsin had to exceed his own constitutional powers to reign in the “regions gone wild”
At the same time as the constitution created extraordinary Russian presidential powers, they
could at the same time undermine democracy
Russian president has the right to appoint federal officials, judicial reviews, arbitration
Despite a strongly federal structure, the constitution actually gave the president a lot of power
Enormous imbalances
Central power determines the balance of benefits, property rights, control over property and
borders
In practice: local authorities often act in direct defiance of Moscow and have made decisions for
themselves
Each region is running their own foreign economic policy
routinely violated central laws that were trying to create standards to encourage
foreign direct investment
regional autarchy
trade barriers sprung up between different regions
some regions even issued their own currency
Deterrent to FDI
Politics, Economics and Security

privatizing Russian armed forces
local Russian leaders would use conscripts to build roads to avoid paying fair prices in the labor
market

Page 138
created a problem for readiness (ex: Chechnya)

local officials would pay bribes to keep these forces at home and not go to war in
Chechnya
each region, as soon as they find out about the exceptions allowed to different regions, begin to
renegotiate for amendments to the Constitution
created a patchwork of exceptions and amendments and inconsistencies
Mazdrateuko
leader of Eastern maritime region
economic policies are marked by defiance
1994: used his own riot police to force out of office the elected mayor of Vladivostok
center of naval forces and imports/exports
muzzled the local independent media
had to be bought off by Yeltsin – given a job overseeing the fishing industry
Ilyumzhinov
governor of a region bordering the Caspian sea
ruled like a tyrant
directed the elimination of the regional parliament
declared himself the only authority in the province
some of the more egregious acts were reversed by Yeltsin
Rakhimov
removed all of his opponents from the ballot except for one token member of his party
used the police to suppress the local media and demonstrations

federalism, like shock therapy, failed miserably in Russia
rather than leading to more democracy, it has led to much less

Page 139
(November 14, 2006)
East-Central Europe and the European Union (EU)

I. What is the EU?
II. Maastricht and Beyond
III. Deepening and Broadening
IV. What’s in it for US?
V. The Accession Process
VI. Problems & Prospects.
I. What is the EU?

began in the 1950s as the European coal and steel community
Germany, France, Italy, Belgium, Netherlands, Luxembourg
Reduce barriers to trade, create a single market for member countries
II. Maastricht and Beyond

Signed in 1991
Goal of Maastricht: create one single currency (Euro)
Removed most remaining barriers to trade
Meant to create a “united states of Europe” and a real single market
European Economic Community changed to European Union
Social and Political integration plans
Regulations that govern how to discipline children, how to fire workers, common labor practices,
maternity pay
Regulations regarding environmental, banking, communications, food production standards
Meant to get all the member states on one page
Reduced barriers matched by a continuation of high barriers between EU and non-member
nations
III. Deepening and Broadening

Post Cold-War time period
Europe wanted to protect itself from Communists, but at the same time knew it needed to help
weaker countries solve their problems to reduce problems (refugees, etc) for themselves
Ethical problem: How come E. Germans are allowed in but others are not?
Practical problem: Bosnian refugees fleeing into Belgium
These countries needed to be integrated into the West to solve their problems
IV. What’s in it for US?

Could signal to the whole world that these countries were safe and secure
Practical: could encourage FDI (Czech Republic, the Baltics, etc)
A Europe whole and free
Promised specific benefits
Europe has a common agricultural policy: subsidies to farmers that is more generous than
anywhere else
Operating budget of the entire EU is over $100 billion per year and half of that goes to
agricultural subsidies

Page 140
Structural funds: monies that the wealthier countries distribute to the poor countries (generally a
N to S pattern) totaling $30 billion per year
Meant to help fund infrastructure problems
V. The Accession Process

Why has it taken so long for some of these countries to join?
Why did it take over a decade for the most prosperous countries to join?
States joining the EU must be prepared
Firmly established political form
Functioning free market economy
Must conform to the Acquis Communitaire or the Acts of the Community
The Process
Begins with a formal application
Administration sets up a team to evaluate the applicant country
Contains 31 separate subdivisions or chapters to access policy (environment, human rights,
technological infrastructure, labor movement issues, border control, and agriculture)
Human rights: Baltic states had problems dealing with this chapter b/c of their discriminatory
policies
Democratization: no secretary of defense can be a serving member of the armed forces – Poland
had a long tradition of a general being the head of the defense ministry
Democratization: countries must be able to solve their problems peacefully – Romania and
Hungary had a long-standing conflict over Transylvania and the large Hungarian minority there
The process is eased b/c the EU is giving these countries funds and aid to help these countries
build the necessary infrastructure to match the requirements
PHARE: Poland and Hungary Aid to Reconstruct the Economy
SAPARD: the Special Accession Program for Agricultural and Rural Development
Over $50 billion was given to candidate countries before they joined to aid in every sector
Then is followed by the signing of a stability and accession agreement
VI. Problems & Prospects

Most of these candidate countries are populous, poor and perverted
Populous: over ¼ of the entire W. European population would be added with the inclusion of the
C. European states
Poor: how much time and money will be required for the West to rebuild their industries?
They need major agricultural reform to fit the profile of the EU
Perverted: after 40 years of communism, the peoples brought with them unprecedented problems
including weak judiciaries, corruption, etc
How could the process of accession be used to accelerate reforms?
1993: Copenhagen Criteria

Codified everything
Political criteria: candidate countries must show they have stable institutions guaranteeing
democracy, they function under the rule of law, and respect for and protection of the rights of
minorities

Page 141
Economic criteria: existence of a functioning market economy, capacity to cope with market and
competitive forces once joining the EU
Ability to take on the obligations of membership, including social, political and economic, and
take on the identity of the EU and adopt the Euro
Immigration
Underlying fear: once these countries were permitted to join the EU and once the Schengen
Accord came into effect, hundreds of refugees from the East would flood the West
Optimists: the restructuring and reformation of these countries will reduce the incentives to move
In truth, there has been a combination of both
Bigger issue: What did it mean for the countries joining?
Moving of the border of the EU requires a strengthening of borders between new states and non-
member states (Poland needs to fix the illegal Russian immigrant problem)
Aging Europe could use the influx of Eastern European people to fill unwanted jobs
Agriculture
Tax on all working citizens in the EU to fund these subsidies
Decision in the Berlin compromise to cut by half the subsidies
Poland: had to restructure agriculture to reduce the number of subsistence farmers and increase
the efficiency of farms by cutting off subsidies to force the remaining farmers to be more
efficient and be able to compete with the EU market
All of these reforms have left a lot of Europeans disillusioned, especially in Poland, about the
EU. It was more painful than expected and hasn’t had quite the level of benefits they were
expecting. A lot of newer, technology driven industries have seen a lot of progress, but for those
left out, and who had to restructure, it was a big loss.

Page 142
(November 16, 2006)
Movie:
1989: Milosevic comes into power
1991: Croatian War
1992: Bosnian War
1995: Dayton Accords
1999: bombing of Chinese ministry
UNMIK – United Nations Interim Mission in Kosovo: run Kosovo

KFOR – Kosovo Protection Force: keep the peace
2001: Milosevic is toppled
Post War Yugoslavia
I. The Destruction of War

- between 3 to 4 million killed
- landmines continue to kill today
- only about ½ of the displaced Bosnians have been returned to their homes
II. Impact on Yugoslavia’s Neighbors

- Hungary, Romania, Bulgaria lost over $10 million because of economic sanctions
- disruption of trade cost over $850 million to Romania over $2 billion to Bulgaria
III. Post-War Problems

corruption
economic destruction
political deadlock: ethnic hatred are fresh and keep
IV. Balkan Stability Pact
V. ICTY
(November 21, 2006)
Geopolitics of the Post Soviet Energy Business
History
oil city: Baku in Azerbaijan on the Caspian Sea
neighboring regions of Chechnya and Georgia (tapped out former oil centers)
Importance of Caspian Oil

Russia had oil within the interior of the country, but knew that there were far more resources
beneath the Caspian Sea
Productivity of the oil w/in Russia decreased after Perestroika

Page 143
Collapse of the Soviet Union

Offshore and onshore Caspian predictions were w/in 15 billion barrels – now an estimated 200
billion
#2 only to the Persian Gulf region
politics trumps economics: strong Armenian oil lobby meant the US Congress tilted heavily
toward Armenia
restricted investment in Azerbaijan
Getting the Goods to Market

US and other Western powers are concerned about pipelines that cross Russia give Russia undo
leverage
Chechen factor
Continued instability in the region
Potentially more explosions in largely Muslim populations
Aging routes and pipelines
A big pipeline can handle a million barrels a day, but existing Soviet pipelines can only handle
half that to maybe 100-150 thousand barrels a day
1999: huge pipeline going from the Caspian Sea to the Black Sea ports, avoiding the Caucasus
region, but still crossing Russia
Environmental problems
How does oil get from Novorosisyk to other areas?
It still has to go through the Turkish straights
Oil transportation requires continued relations with Russia, Turkey and Bulgaria
Now shipping over 50 million tons but could reach 80 million within 20 years
Collisions, dumping of waste, accidental spills adding to pollution and minor conflicts
British Petroleum pipeline going through Azerbaijan, Georgia and Turkey
Yeltsin Period
Competing economic and political imperatives pulled in different directions
Economics: it would be to everyone’s benefit to cooperate and have as many projects move
forward as possible and have Russia cooperate with US and Kazak governments
This strategy dominated through most of the first half of Yeltsin’s term
Kremlin: security halks grumble that oil companies shouldn’t enter into projects that are going to
threaten Russian dominance
Slow or even halt growth so that Russia can retain geo-political influence over the region
Yeltsin’s foreign policy swung during the second half of his term to more state-driven
Whose Oil?
New states, (Azerbaijan, Turkmenistan and Kazakhstan) increase the complexity of breaking up
the Caspian
Break it up according to national boundaries or follow the rule of the sea
New states, (Azerbaijan, Turkmenistan and Kazakhstan) increase the complexity of breaking up
the Caspian

Page 144
OCTOBER 17
CENTRAL ASIA & the CAUCASUS

Armenia, Georgia, Azerbaijan and the ‘stans: “Arc of Instability”
-Russia has treated like its backyard, overwhelming economic advantage over these states
-controls energy, transportation even when they have resources
-Russia’s POV: Not imperialism, or undermining independence but DEFENSIVE action
-instability are a major threat for Russia
-militant thread in countries, afraid of onslaught of mobilization
-refugees
-Tsarists Legacies
-even before Katharine the Great … except Armenians and Georgians, REGION
was weak, nomadic, sparsly populated
-claim was Silk Road – which disappeared
-when Russia pushes south to Black Sea…
-simple matter to conquer them
-w/ the exception of the Armenians and Georgians… who have separate identities
and glorious histories
-everyone else had TRIBAL identities… didn’t see as “Uzbeks”
-even into Soviet area… Kyrgies and Uzbeks the same language, no borders
-THEY didn’t recognize the borders!
-early soviet times… original map of USSR was “Turkistan”
-WHY IMPORTANT?
-strong sense of national self-identity is important in this time
-Russia is modal case in the middle … unsure of what to do
-OTHER extreme = Central Asia … at least Russians understood
Russianness
-Bolshevik-Soviet period
-when Tsarist empire ended, former provinces were brought back into Soviet
empire
-Language
-Bols thought to pick Latin alphabet to educate vast central people
-alphabet TURKEY used
-toyed with the idea of switching into Arabic
-largely Islamic people
-THEN chose to impose Cyrillic (Russian) alphabet
-had to invent some for them
-after a brief period, literate Kazaks/Kyrgyz couldn’t read any
seditious material from Turkey, Islam…
-BORDERS drawn
-didn’t conform to national lines
-made them chronically weak, squabbling w/ each other
-unfair advantages given to certain favored groups
-people pitted against each other
-MOST destructive treatment

Page 145
-(Kazakhstan becomes dumping ground)

-ECONOMICALLY
-This region perhaps the most disadvantaged in the USSR
-so poor to begin with and subsequent policy decision lowered it to
colonial raw-material provider
-Uzbekistan became cotton producing
-had been balanced agricultural system
-undermined for cotton
-MONOculture
-ENVIRONMENTAL consequences
-grandiose diversions of rivers to irrigate for cotton
-simply wasn’t enough water!
-Tragedy of the Aral Sea
-Begins to dry up
-ultimately nature takes revenge
-exposed former sea bed is repository of all pollutants
-raised birth defects, etc.
-Nuclear research facilities – dumping into rivers, leaching from
toxic materials
-PERESTROIKA and Path to Independence
-overall C. Asia is pretty quiet
-don’t see political uprising, com party bosses continue to lead
-furthest from Western journalism
-KAZAKHSTAN
-Gorb decides to clean up in 1986, gets rid of Com leader
-replaces with Gorb-selected reform guy
-BACKFIRES
-Gorb was bad at understanding ethnic stuff
-by firing native Kazaks (though corrupt) he inflamed natives
-no doubt communists support uprising
st
-1 big ethnic flashpoint of perestroika (artificial)
-Party boss that replaces is Nazarbayev … rules to this day
-authoritarian president, not quite as despotic
-WEALTHIEST of the central asian states
-UZBEKISTAN
-ruled by much more authoritarian Karimov
-old com leader, now new “nationalist” leader
-trying to build stronger national identity
-more despotic than Nazarbayev
-because of poor border drawing, it has large Kyrgyes, Tajics, etc.
- -ethiniccally fragile, most awkwardly drawn borders
-provoked militant Islam.
-Least militant of the entire Islamic world.
TAJIKISTAN
-Civil War/riot –Russia sent troups in . Fragile, but peaceful
-lots of drugs

Page 146
KYRGISTAN
ooops fell asleep
TURKMENESAN
-build cult of personality to cover up authoritarianism
-name is for the people
-Like Stalin
-on flag, much happening
-policy of neutrality – kept out of squabbling
-Truk has very large oil, gas reserves—still relies on Russia
OCTOBER 24 – AGRICULTURAL REFORM
-SOVIET LEGACIES
-kolkhoz
-less productive … very little incentive
-no stake in having big harvest
-people like factory workers, salary not tied to production
-drunk people down the chain ruin chance of bonus
-TOO big
-GOSPLAN
-also fouled up
-economy too large for centralized economy
-couldn’t account for local variations (weather, etc.)
-grew 200 million metric tons of grain, lost 50 – make up for it w/ imports
-subsidized with more profitable industry
-Gorbechev
-tried to tackle it with half-measures
-attached to the idea of state-owned farms
-privatization had negative image
-instead of privatization, offered leases
-25 years … why would you work the land for 25 years only to
lose it?
-extended to 50 years … helped, but not enough
-issues: transferable? Sellable? Inheritable?
-beuaracry resiststed (9 million of 18 mil. bureaucrats in agri)
-obstacles meant land reform never took place
-red tape, intimidation, violence
-Yeltsin
-doesn’t change much at all for 5-6 years
-land cannot be bought or sold
-can’t get through political infighting
-backlash against loans for shares and hyperinflation
-conservative parliament
-big problem was Land Code – law that prohibited private farming
-“pseudo” privatization of the land

Page 147
-myth in USSR that not a STATE farm … a collective farm

-every peasant has right to leave collection and take land
-similar to every country having right to leave USSR
-not the case…
-in practice: if you were gutsy enough to “exercise legal right”
-if not beaten up, stymied w/ red tape (90%) … garbage
-corruption on both sides
-more obstacles:
-Could asset strip a farm!
-many sharemen, though riding high, saw decline and cashed in
-left worse off than it had been before
-intense foreign competition
-processed food cheaper than what Russian farms were producing
-CREDIT
-piece-by-piece, a new land code is put into place
-w/ decent land  what is farmer going to do?
-kolkhozy relied on HUGE machines … no domestic production of
smaller stuff
-… and NO credit
-Credit is the life-blood of any modern economy
-you borrow money to get better tech, up production, make profit
and pay back loan
-larger pictures
-Russia originally at 120 mil. metric tons of grain, down to 70 now 90
-late in Yeltsin and beg. Putin
-FINALLY introducing rational land code
-slow expansion of private farming
-private farms occupy 6% of land
-on paper there are many more … fiction
-kolkhoz become incorporated…
-average size is 30-50 hectares (U.S. average is 500 hectares)
-Docha weekend farming – 6%
-furiously work small plot for sustenance
-doctors, lawyers, all professions
-have to grow their own food
-total 12%
-still produce 40-60% of total output!
-credit problems continue
-small-sized machinery created, imported  expensive
-the LAW
-not quite finished … sub-optimal for encouraging successful priv farms
-Land Code still has various restrictions attached to it
-not QUITE full title
-ex: foreigners still cannot buy Russian farmland
-against deeply held beliefs of foreigners owning Russia

Page 148
-don’t get expertise

-still can’t buy and sell land freely … can pass along to children
-only if they’ll continue to farm it
-can’t cash in land for non-agricultural purpose
-can’t sell to foreigners
-90% privatized … but need COMPLETELY free market to get max.
-3/4 completed, perhaps
-polar opposite of what was done in China
-major liberalizing was BREAKING up farms in one motion
BANKING
Bank basics
-borrow your money to make loans
-pay some interest to entice you to invest savings
-CHARGE interest for a loan – profit
-lifeblood of an economy
-agriculture, manufacturing
-all innovation is paid for on credit
-in West: loans to private sector = 80%-90% share of GDP
-ENORMOUS amount of borrowing
-close to 100% is, in essence, banking system doubles amt. of money
-In East – 25%
-In Russia – 12-14% … went below 10% during the worse
-means less economic activity
-Weakness of banking sector is symptom or cause of recovery?
-Soviet-era legacies
-what was on paper bore little resemblance to Western practices
-Home, consumer banking banking
-NO private firms – banking was state operated individual, household
banks … just one: Sberbank
-only place you could go
-why would you? No interest, but NO inflation
-but forced, unofficial inflation
-looooong joke that goes on and on
-interest rate so puny, and hidden inflation – actually LOSING money
-so most people didn’t … some for safety
-monetary overhang
-all the money that came out of the mattresses when it changed
-50 billion rubles
-Commercial Sector…
-Promstroibank, Vneshtorgbank, Agrobank (agriculture)
-monopolies, not there to make money; carry out state orders
-not really banks, STATE credit agencies
-all loaning predetermined by Gosplan, NOT responding to local
needs
-state financing state economic activity from above

Page 149
-if something couldn’t make payment – would be extended MORE credit

-never repaid
-SUMMARY:
-total state monopoly
-no conformity to maket supply and demand forces
-no accountability
-DISTRUST inflamed by episodes where state STOLE $$ from people
-corruption
-dirty money put in bank to distance ill-gotten gains
-state freezes ALL accounts … gigantic audit
-crooks could survive … had money to bribe
-ordinary Joes couldn’t prove their income
-Post-collapse
-Banking HUGELY profitable in beginning of the ‘90s
-2,500 private commercial banks spring up
-only growth sector of the economy – HOW?
-inflationary environment
-took advantage of hyperinflation
-in time of high infl., when $$ losing value: enormous profits to be
made if you’re a borrower
-instead of loaning money out to consumers, desperate people
-bank became borrowers and played on interest rate differentials
-mostly from the state!
-FIGs – financial industrial groups
-found lucrative business handling payment accounts of big clients
-city of Moscow, custom service, gas service
-had extensive financial needs
-had employees to pay, funds to invest
-big money to be made handling their money, investments
-even if it was legal … and it wasn’t
-delayed pay checks a few days – made $$$$$
-mafia needs bankers, too…
-violated Central Bank of Russia (CBR) guidelines
-Banking would have collapsed if CBR started charging negative interest
-PAYING enterprises to borrow money
Oct. 26:
-how did banks benefit?
-delayed payment … for payroll, credit, etc.
-value of money goes down
-bank gets profit
OCTOBER 26
INTRO

Page 150
-Consumer sector underdeveloped, FIGs serving monopolies/cities

-Early ’92 over 1000% inflation, 30% GDP in bank credit  down to 12% in ‘95
-bank deposits barely 4% of GDP in’95
-by ’93, overwhelming # of enterprises said they had no access to credit at all
REGULATORY VACUUM
-Emergence of investment houses/brokerages (MMM)
-promise big returns, turn out to be pyramid schemes
-Not adequate reserve requirements
-supposed to protect when everyone takes money out of bank
-normal reserve: 20% (he thinks…)
-finally has one now – what delayed it?
-CBR and bankers fought in congress over who should pay for it
-broke government?
-bankers themselves?
-no credible auditing procedures
-banks might not be repaid if they DID give credit
-need for internal revenue agency
-no credit checks
-over $X trillion debt owed to banks (awww poor bankers)
-why they went to well-financed entities (FIGs)
BANKING ELITE
 Patanin  oligarch who gets Norilsk Nickel
 Oneksinbank, his bank (FIG)
 Services for wealthy clients
 finagled loan for share because one of this own accounting firms was
overseeing the bids for Norilsk
Gusinsky  MOST bank (fascination with ATMs)

-owned only nation-wide television station (NTV)
-mags, newspapers, too  Rupert Murdoch
-praised by HR advocates ‘cause news was diverse, honest, critical
-Best known oligarch? Khodorkovsky, Menatep bank
-now in Siberian jail
-got oil company in L for S
-Banks were victims when criminal groups embezzled/defrauded them
But also PARICIPATORS, money laundering
Shifting around ill-gotten gains
Facilitated capital flight
Evaded taxes
Wrote legislation w/ lobbyists in Duma
-against opening to foreign competition

Page 151
BANKING UNDER PRESSURE

-1994, SHARP devaluation of the ruble
-bad … but Russia received some stability
-easier to control… peg to foreign currencies
-hyperinflation goes away
-not profitable to be speculative as banks were
-Macroeconomic changes followed by micro from CBR
-reserve requirements are raised
-1st steps towards regularizing account practices, achieving transparency
-phases out directed credit plan, acting as intermediary between small banks and
people who needed oans
-CBR holds banks responsible for getting $$ from loans
-force to improve collection, credit check operations
-closure of several hundred banks
-central banks  fewer, but STRONGER
GKO PYRAMID
-backin’ up:
-banks being phased out partly because of IMF pressure
IMF encourages CBR to run business better
-collect taxes, stop printing more money
-introdcue T-bill (treasury bill)
-short-term bond where gov promises rate of interest for loan
-like savings bond, but shorter term
-GKOs were bought by banks as investments from the governments
-offered to consumers in smaller chunks
-Central Bank should NOT sell beyond ability to pay!
-buyers promised rate of return … has to meet it
-if not, bank in default (don’t want central bank in default)
-in order not to default, over-promised and make MORE
-delays default, day of reckoning will be bigger
-government engages in its own pyramid scheme  COLLAPSE OF 1998
-Russian commercial banks had engaged in buying the GKOs (95-98)
-many Russian banks defaulted, too
OTHER “NORMAL” OPERATIONS

-Big accounts only benefited few banks that won them
-almost exclusively Moscow-based banks
-Russia becomes world capital of money laundering  done through legitimate
operations
-how is it done?
-fake business contract with foreign entity (also maybe fake)
-on paper, that business was purchasing a large amount of supplies
-but sale never exits; only thing that existed was transfer abroad of money
-can squirrel out of the country far more than you say (token purchase, maybe)
-“Normal” = wholly illegal or semi-illegal

Page 152
“VEKSELS” and the “VIRTUAL” ECONOMY

-“Veksel’ a German bill of exchange
-BUT in a Russia, Veksels an IOU given by emerging industries
-Virtual Economy
-flood of imports, domestic demand plummeted
-hard for domestic enterprises to survive
-paucity of domestic credit
-after ’94, CBR tightening to keep down inflation
-majority of enterprises struggling to avoid bankruptcy
-no bankruptcy laws/soft budget restraints keeping them alive
HOW THEY AVOIDED:
1) delay paying workers (but then with inflation, salaries worth less)
2) not pay taxes
3) relaying on payment in kind to pay bills – bartering
-goods replace money as primary means of payments
-workers @ first … then inter-enterprise debts
-offer goods for resources
INTER-ENTERPRISE ARREARS CRISIS
-by 1998, ½ of all business transactions are conducted in barter
-market emerges for VEKSELS (glorified IOUs)
-promise to pay money
-freely traded
-Veksel market emerges
-State tries to stop this by going further and further into debt with GKOs
-August ’98 collapse … have to devalue ruble again
-now, not just ordinary Russians suffering, BIG investors too
-foreigners buy GKOs, too…
-OPENNESS
-Russia slowly opening up banking sector to foreign banks
-until 1998, a limit to foreign involvement
OCTOBER 31 – boo – EVOLUTION OF THE RUSSIAN FEDERATION
-FEDERALISM, SOVIET & RUSSIAN
-All dealing with political, economic and ethnic problems

-after collapses of Yugo and Czech (which had struggled to find federalism), predictions
that Russia would split up… would it be bloody or “velvet”?
RUSSIA – technically a federation (meaning all had control over one)

-many debunked local powers; most a myth
-even origin, that they all came together as one, voluntary, a myth
-nominal federal structure undercut by CENTRAL POWER of communism
-all other republics had own com parties, seemed autonomous but not
-REAL aspects to Soviet federalism (especially culture, ethnic matters)

Page 153
-music, literature, poetry  encouraged to develop own uniqueness

-helped create nations where none had existed before (Kazaks and Kyrgyz …)
-post-Stalin, creeping federalism into bloc
-Stalin was the high mark of a central state
-Kruschev not so much, local powers could resist some policy
-Breshnev, locals could buy off local power
-except military industrial complext
-in Georgia (lang. difference), much more freedom
-Caucuses had more economic freedom
-some de facto federalism … more like regionalism
-FROM TREATY of the UNION to the FEDERATION TREATY
-Gorbechev struggled with this creeping fed. when he tried to make big changes
-almost no change in the fringes during Perestroika, elites mobilized against him,
stymied change
-rallied anti-reform sentiments cloaked in the flag of national/ethnic rights
-Gorb too idealistic … downplayed and ignored separatist movements
-belatedly realized this was tied to other elements
-Estonia/Georgia e.g. began embracing nationalism just to stay in power
-by 1991, nationalist movement arises in Russia itself
-Russia had its own problems with USSR
-particular grievance – we keep poor republic’s living standards up with our oil
and gas subsidies and they don’t appreciate it!
-“What about suffering Russia?”
-plus, all other republics had own com party … Russia only had USSR
-Moscow, even, was USSR capital NOT Russian capital
-Yeltsin rides to power against Gorb/USSR/com
-becomes first elected pres of Russia
-“we will not run a unitary state”
-begins new TREATY OF THE UNION
TREATY, spring/summer of ‘91
-New responsibilities and rights that would free up unitary state
-voluntary
-coup interrupts it … treaty collapses
-republics hold referendums -- “Parade of Sovereignty’
-New Year’s 1992, all broken up
-Yeltsin faces the problem of ruling Russia for real, and halting the economic problems
he helped build … had to face Russia’s territorial disintegration
“SUBJECTS” of the RUSSIAN FEDERATION (f.s. = federal subjects)

-89 FS
-49 oblasts (regions)
-21 republics (defined by national or ethnic group)
-10 autonomous okrugs (territories)

Page 154
-6 krais (districts)
-2 federal cities, Moscow and St. Petersburg
-1 autonomous oblast (Stalin-created home for Russian jews in far east)
(**teased ethnic group were Chukchi people of the north – Inuits)

(**Jewish state … Stalin needed reason to get Jews out of Moscow)
March of 1992, Yeltsin signed FEDERATION TREATY – updated status of post-

communist regions in Russia, VOLUNTARY
-one-by-one, all agreed with the exception of Chechnia (war!) and Tartarstan
-a Republic, once center of Mongol empire … eventually agree
-paper version and real version diverged quite a bit
FEDERATION of UNEQUAL SUBJECTS

-certain diversity has to be tolerated
-but diverse set of structures w/ different rights and responsibilities
-SOME have territorial structure, some are built on ethnic foundation
-some argue entire map should have been re-drawn
-kind of like 50 American states
-STRICTLY territorial in nature
-continued existence of two-tier system sows seeds of in-fighting/problems
OTHER problems
-these subjects came into new federation and signed new treaty under dif. circumstances
-Tartarstan, e.g., had special bilateral treaty
-agreed own Tartarstan laws/constitution had precedence over national
-other ethnically based units received similar concessions
-all in S. Russian region
-wanted more control over economies … most resource-rich
POLITICS, ECONOMICS, SECURITY

“Paradox of super president federation”
-More federalism SHOULD mean more democracy
-more leeway for local liberties, etc.
-but in Russia’s case, regions taken advantage of autonomy to act autocratically
-local political elites taking control of political process, media
-nepotism! Politics is dead in many regions
-taken intervention from Moscow to restrain the most egregious abuses
-Yeltsin had to abuse own constitutional authority
Presidential rights
-arbitration on legal disputes between regions
-judicial review
-decides balance of federal aid
-annually, regions PAY about 1,000 rubles per citizen
-but enormous disparities
-ECONOMIC authority
-prop rights, foreign economic rights, customs, currency, borders

Page 155
-even in confederal state … these are decided in the central

-MORE HERE … get later
-Practice very difference
-local officials often act in direct defiance
-some regions even issued their own currencies
-some improvement, but still lingering problem of Moscow’s inability to create
common economic space
-Deterrent to foreign investment
- -have to go through not ONE corrupt bureaucracy, but several
-can change every time there’s a new leader
FEDERALISM or FEUDALISM?
Nazdratenko
-poster child for corrupt local governor (Primorsky … region near Sea of Japan)
-created own economic free zone (negative sense)
-used own riot police to force out elected mayor in Vladislavok- main Pacific port
-eventually reversed when Yeltsin intervened from Moscow
-but such interventions the exception, not the rule
Ilyumzhinov
-banned regions Parliament, revived when it was under control
-didn’t ACT like a despot … DECLARED himself one
-sometimes Moscow intervened … still remain in office/powerful
-engaged in political killings
-chess fanatic
Rakhimov
-President of Bashkoktostan (or something … near Tartarstan)
-took EVERYONE else of the ballot except token party member
-closed down opposition radio station
-something about poaching and trees
Russia’s ECONOMIC FRAGMENTATION

-experts who came in and said federalism = democracy have reconsidered
-just like “Shock Therapy”
-needed more regulatory foundation in order to work
NOV. 2 -- EFFORTS TO REASSERT CENTRAL STATE AUTHORITY
-Yeltsin tries to reign in the regions

-especially during second term
-blustering, threats, rhetoric
-more assertive stance in terms of budget/taxes
-launching of court cases (’96-’97, 2,000+)
-overturned regional laws/declarations that contradicted federal ones
-local governments battled for their resources, aid, taxes
-pre-text of an auction in regions for … xxx?
-illegal re-privatizations/business takeovers

Page 156
-enterprises that turn things around STOLEN

-late 1997, Ministry of Justice re-emphasizes supremacy of federal law
-reopens negotiations over bilateral treaties
-gives a few years for regional constitutions to be redrafted
-said they’d never been ratified
-some laughed! Didn’t take seriously
-1998: The Nadir of Federal Authority
-bank collapse doesn’t help
-regions try to isolate themselves from currency fall out
-institute price controls, making inflation/market forces illegal
-implement export bans, prohibiting products from leaving
-food rations/coupons for scarce goods
-de facto (if not de jure) issuing of currency
-suspend all bank transfers to Moscow
-suspended tax payments to Moscow
-“Every region for itself”
-differentiation increases … rich-poor gap widens
-was a 5-fold difference before crisis, now …
-SOME leaders legitimate, desperately trying to get out of crisis
-Others simply a reason to cover up grab for power
VLADIMIR PUTIN’S RISE

-late 1998 to mid 1999: obscure official in Yeltsin’s government
-Went to Leningrad State
-recruited by KGB, spent time in East Germany, no sig. accomplishments
-left KGB, took more law, transferred to work for former law professor
-Sobchak  notable pro-perestroika liberal
-mayor of Leningrad (soon St. Petersburg)
-became deputy mayor
-late ’96 Sobchak ousted, EVERYONE went with
-Putin goes to work on Yeltsin’s re-election campaign
-this work gets him job in the Kremlin
-Works ineffectual jobs
-“President and Society” – PR, etc.
-works for Borodin, property manager of the Kremlin
Blah blah blah – has monitoring job, struggles with disintegration of region
-goes to work for Russian FBI – then vaulted to Prime Minister position
-5th of 1999
-Dec. 31, after only ½-year in office, Yeltsin announces early resignation
-Presidency went to current PM, elections set for March
-elected
-Putin pardons Yeltsin (just like Ford did for Nixon)
PUTIN TAKES ON THE POWER BARONS

Page 157
-new decree, plenipotentiary committees … country divided into seven districts:

-Moscow and central Russia
-St. P and northern Russia
-Cuacauses and southern Russia
-Vulga and some other part of Russia
-Ural mountains
-Siberia
-Far East
-each given a new leader – out to closely monitor and immediately respond to abuses of
past
-5 of the 7 he appoints are former KBG or military people
-IMMEDIATE assault on recalcitrant officials
-Kompromat
-“Compromising Materials”
-incriminating evidence (photo with prostitute popular) is used with investigations
to send chill through barons
-prosecute a few select abusers
-Ministry of Foreign Affairs
-Barons denied right to travel
-Fed. Council – used to automatically include regional leaders, became full-time officials
screened by Putin
-Upper house like the Senate
-Lower house, Duma, more important
-took way parliamentary immunity (which helped people like MMM guy)
1. Yeltsin still haven’t re=integrated regions, corruption still rampant, but HALTED it
2. methods? Some legal, some extralegal, EVEN if in the interest of the people
CHECHNEA
-Background
-1994-1996, first war
-1990-now, second war
-most ethnically diverse region in the world – 19 diferent coups
-mountainous region has preserved diversity
MORE INFO here….
-Chechens deported … over 250,000 die during Stalin (Holocaust … unites them in
hatred of Russia, even though Stalin a Georgian and done by Coms, not Russians)
-during USSR, try to Russia-fy it, hundreds of thousands didn’t speak it
-under Gorb
-Glasnost … nationalism takes off, freedom of the press
-Yeltsin fuels this with “take all the sovereignty you can handle” message
Dudayev

Page 158
NOVEMBER 14 – the EU
-8 former communist states joined in 2004
-end of 1991, Masstricht  euro the big focus…

-meant to create a United States of Europe, free movement of goods/cap/later
-name changed to EU
-creates free market within, but bigger restrictions to those outside of club
-political context = end of Cold War/reunification of Germany

-ethically and historically correct and just that E. Europe should be in
-also in their best interest
-if Europe wanted to protect itself from refugees/crime/etc. … integration better
-back to ethics…
-how could East Germany get integrated when ones you wanted to for
years couldn’t?
-practically … wars going on in former Yugoslavia made lots o’ refugees
“What’s in it for us?”

-joining EU meant Eastern Europeans could export to West w/o barriers
-import more freely, too
-joining NATO simultaneously would be double stamp of approval
-“this country has made it”
-some countries … Baltic states, etc. felt they wanted RE-JOIN club they already
thought they were a member of
-promised specific benefits:
-Europe has a common agricultural policy
-generous subsidies for farmers
*of $100 bil, roughly ½ (40 bil. Euros) goes to agricultural subsidies
-E-Central Europe strongly agricultural
-structural funds
-$30 billion re-channeled from rich to development in southern Europe
-E. Europe wanted to benefit from those as well
-The Accession Process

-why did it take ‘til 2004 and Bulgaria and Romania are still out?
-states have to be prepared to line up their political/economic w/ EU
-ACQUIS COMMUNITAIRE
-DEMOCRACY
Process:
1) begins with application, needs approval (Croatia’s been accepted, Turkey’s
hasn’t)
2) Existing membership and bureaucracy sets of team for each applicant country
a. 31 separate sub-divisions (chapters)
i. Environment
ii. Human rights

Page 159
iii. Legal system

iv. Technological infrastructure
v. Labor movement
vi. Border controls
vii. Agriculture, etc.
b. Baltic states, ex., had trouble with human rights
i. Discriminated against Russian-speaking minorities
c. example: can’t have a serving military officer be leader of armed forces
i. problem in Poland… powerful military lobby
d. other road block: Hungarian diaspora in Romanian Transylvania
i. Hungarians had to make concessions they were bitterly opposed to
with Romanian majority in order to close the democracy chapter
3) When fully conformed, that chapter is “closed”
a. EU gives funds to make reforms … and promises more…
b. Gives aid and advice
i. P.H.A.R.E.
1. Poland/Hungary/Aid to Restructure Economy
a. Given to other countries, too -- $10B
ii. S.A.P.R.D. special accession program for rural development
1. $$ given to candidates even before they joined
4) When all closed, the contract is signed
-PROBLEMS AND PROSPECTS

-Biggest difficulty … “populist, poor, and perverted”
-POPULIST
-with some 75 million people, represented ¼ of existing population
-POOR
-thought many would emigrate to the west for better life
-in West, GDP was more than $20,000
-East, from ¼ to ½ that
-how much $$ and time would it take to reform backward agricultural sec?
-West is modern/even post-industrial
-East has big agriculture numbers
-PERVERTED
-after 40 years of communism …
-difficult enough bringing in countries like Greece, Sweden, Portugal
-BIG corruption/org. crimes/kangaroo courts/media-for-hire…
-ethnic problems and prejudices in/between states
-“How can these problems be improved fast enough for them to qualify?”
1993  Copenhagen Criteria

-laid out 3 critera:
POLITICAL: candidates must function under rule of law, protect HR/minorities/have
stable institutions that guarantee democracy
ECONOMIC: exist in free market, capacity to cope under EU’s “blast of competition”
SOCIAL: take on the Acquis Communitaire

Page 160
1999  Berlin Compromise

-officially recognized problem of agricultural subsidies
-couldn’t be given to E. Europe the same way
-CAP cut by ½
-thought France still gets its big subsidies
Immigration – Schengen Accord (part of Maastricht)

-worried that 3 million people would move overnight
-others said that was widely overblown
-policies can help get rid of incentives of leaving
-countries like France, though, has felt the pinch…
-high unemployment already … feels a few 10,000s more
-problem … barrier that kept Poles out of Western Europe, for example, would
have to be moved to keep USSR people out of Poland
-could/would it do it?
But… Aging Europe NEEDS workers…
-so not all bad
-Italy only creating 1.2 kids!
-So many benefits ... so it’s easier to be unemployed for longer
-immigrants from Poland, Hungary, etc. fill the void
Agricultural stuff…
-E. Europe had too many self-sustenance farmers …
A lot of cynicism … joining EU hasn’t been as promising as it was supposed to be

-industries doing well …
-those left out … had to restructure (mostly agriculture) feel left out …
-realized goal was to turn them into homogenized version of W. Europe countries
GET NOV. 16 NOTES
NOVEMBER 21
ENERGY DAY
HISTORY
-Before Bolsheviks, Baku (now in Azerbaijan) was “Oil City” – Caspian Sea
-Persian oil reserves hadn’t been found
-People used kerosene to light houses, etc.
-relied on foreign capital
-Russia preferred to keep critical industry in mainland, not Muslim extremities
-vast Persion/Caspian resources go unfound for awhile…
-plus, they’re under water – lot harder to get to
SHITLOAD OF OIL

Page 161
-flash-forward to mid-‘90s, Russia and foreign co. start re-looking in Caspian Basin
-thought 7-10 billion barrels of oil
-then pre-lim said it was more like 40-50 billion
-no somewhere between 250 to 400 billion barrels
-second only to the Persian Gulf
(www.eia.doe.gov)
KAZAKHSTAN
-Attention ships from Azerbaijan
-“Tengez” fields, swampy land on NE side of C. Sea in Kazakh
-Chevron leads the way
-helps get oil 30 miles+ beneath the ground
-Brits, US, French get in on boom
-some is off-shore, need for Western investment
-all Russian history is on-shore – lack in technical abilities
WESTERN FIRMS
-Couldn’t go in on purely official, business-like basis
-Intervening politics
-North Korean style of autocracy
-PLUS dispute between Azerbaijan and Armenia
**THEME: Politics trump economics**
-Legislation: “Freedom support act”
-restricted FDI and US Aid into Azerbaijan … shifts when oil interests lobby
-now Armenia-Az dispute gone down a bit
PIPELINES! – “Getting the Goods to Market”

-Easiest to go through Iran, US doesn’t support
-Wants to go through Russia – US thinks that gives Russia too much monopoly
-Main line now goes through the Caucasus
-Allowing oil riches in new countries (Azerbaijan, etc.) to go through Russia = BAD
Problems:
1. Russia can tax the lines, turn them off, etc. … monopoly, undue leverage
2. Instability in Russian Caucasus regions
3. PLUS! Existing lines aren’t able to handle current flows
-Existing pipelines that DO bypass Russia have limited capacity
-NEW lines
-CPC (Caspian Pipeline Consortium)
-goes up into Russia and then back down to Black Sea
-4-5 times bigger than smaller, existing ones
-came online around 1999/2000
-avoids volatile caucauses but still goes through Rusia
--Environmental problems
-amt. of oil leaving Russia increasing …
-doubled in last 5 years – 40-50 million tons a year.
-spills, collisions going up

Page 162
-tankers clog passage way in both direction hours

-raises pollution in Black Sea and the straight
-can’t widen … have to shut the whole thing down
-China pipelines (or Iran or Pakistan)
-political problems
-second major pipeline after CPC – BIC
-runs through Baku, sends up though Armenia, down through Turkey
-like puttinpg a permanent a national park.
WASN’T ENOUGH INESTMENT – prices too cheap … didn’t think the foreign reporter
couldn’t sell it.
-2001, first spade on new something something
-Is there enough oil to make it work

-would be building more pipelince field.
-Told Baku they had to make … send oil out of the ground through new pipeline
to make it all com – told to meet commitments
-pipe line running UNDER the Black Sea – deepest one (~1,--- pipeline
Japanese helped … most advanced at deep undersea pipelines
USA gets 30% of oil use, some countries get 80%-90%
Evolution:
YELTSIN PERIOD:
-Competing economic/political groups divided – “zig zag”
-Everyone’s best interests at heart
-Dominated
-Oligarchs had a lot of autonomy in business
-Russian companies did what they wanted after privatizing.
PUTIN:
-We need to bring these companies under our control!
-Serve Russia’s best interests
-Slow down … craft policy to retain a dominance in the region, geopolitically
-Hadar xxxx  Gazprom
-state now owns more than 50% … state-run company again
-people didn’t trust government … stocks went down
CASPIAN SEA TERRITORIAL DISPUTES

-Bordered Iran and Russia, etc.
-treated as a lake
-Now a BUNCH of new states on the sea
-needed to be broken up into 5 now …
-or could do Law of the Sea – which set certain guidelines
-Iran and Azerbaijan have almost come to blows (Iran wants more!)

Page 163
-NO final resolution!
VENTSPIL … something in the Baltic Sea where Russia cut of a Baltic (Latvian?) oil co.
right when it was working with Western $$
-Russia squeezed it dry, crippled the privatization – then Russia bought it!!
UKRAINE …
-Natural gas lines run through Ukraine and Belarus …
-Russia agreed to wipe out certain Ukrainian and Belarusian debts to get pipeline control
NOVEMBER 28 – EURASIA’S ENERGY and Environmental future
Oil vs. Gas –

-Energy accounts for 40% of Russia’s GDP, 60% of exports, ¾ is OIL not GAS
-Oil accounts for most FDI
-Peak, produced 12 billion barrels a year, down to 6,back up to 12 (neck-neck w/ Saudis)
State never lost control of GAS: Gazprom

-owns 60% of Russia’s natural gas
-main pipelines review: through Belarus and Ukraine
-mutual dependence and exploitation
Russia is world’s SUPERPOWER of natural gas – largest reserves

-1,700 trillion cubic feet
Natural gas uses expected to increase … will give Russia more leverage/earnings
-makes up only 20% now …
1 = oil, 2 = coal
-w/in a generation nat. gas will skyrocket to 50%+
-why?
-much cleaner, produces less carbon, oil expected to run down
-gas is just beginning to be tapped
GAS: Problems
TECH:
-much more difficult and expensive to extract/process/transport than others
-natural gas “a waste” – found WITH oil and only complicates oil extraction
-burnt off to get to oil
-volatile …
-crude oil is fairly inert substance
-attacking gas creates catastrophe
-oil is just pumped where gas is cooled and pressurized
-most gas consumed w/in 1,000 k of production site
-story about huge explosion when gas pooled in land depression near Siberia

Page 164
-can turn to liquid and ship easier, but need reconstituting plant on the other side
(building one in long beach?)
ECON/POL:
-Russia only exports 6-7 trillion c.f. a year, but has 1,700 trillion!
-Needs major investment in infrastructure
-state monopoly … deters foreign investment
-EU is constantly monitoring Russia, presenting HR concerns
-stifled press/jailed oligarchs, etc
-want to liberalize Russian gas market
-Does Russia have “Dutch Disease” or “Resource Curse”?
-Resource Curse = wealth out of the ground at little effort makes it easy for
political officials not to build up other things like education, makes everyone more
corrupt, banks everything on energy supply
-Dutch Disease = oil crippled Dutch industry … other sectors grew weak because
Dutch currency went up, exports got too expensive, oil ran out …
RUSSIA’S ENVIRONMENT:
-Russia is very polluted … one of the most in the world
-Population is 140 million in urban concentrations, getting smaller
-Highest percentage of environmental problems in the world
-Product of decades of reckless economic development, Gosplan management that tried
to make as MUCH as possible as FAST as possible w/o long-term concerns
-Russia didn’t even have EPA equivalent until Gorb’s Perestroika
Specific examples:
-110 million bring air that is polluted beyond Russia’s own limits
-every third child in Russia falls ill, temp or permanent, from pollution-related cause
-1/2 of Russian soldier applicants are rejected because of poor health
-1/2 of Russia’s people drink water that doesn’t meet standards
-St. Petersburg… 2x the microclorins than in EU areas … in Ural Mountains is 350x EU
limit
-Rivers can be open sewage channels… lakes are dead
-Outbreaks of third world diseases still hit Russia (cholera, typhus, diphtheria)
-Not ONLY the environment, but mostly from drinking public water
Russia has thousands of nukes…

… so tons of WASTE – doesn’t meet ANY standards
-decommissioned subs, etc lying unsupervised
-all potential nuclear disasters
-dumber indiscriminately
-Scandinavia had pharmaceutical waste

-East Germany left a mess
-Kazakhstan was the nuclear testing site – still radiation

Page 165
-EPA-like agency made a committee … put in control of gas branch!

-Whistle-blowers have been jailed under false charges
-W/ Kyoto Protocol … it held out for largest quotas for various pollutants – traded credits
to countries having trouble meeting caps …
VIDEO – Nuclear waste is bad.

IR-439: Final Paper
Page 166
IR 439 Professor English

Research Paper Assignment
This project, making up 35 percent of your grade in this class, is essentially to do a typically
sized and executed modest research paper. That means a final length of 15-20 double-spaced pages,
including appropriate references (approx. 15 sources) and proper citations (any common academic
style is acceptable, so long as consistently employed).
As for topics, the range of acceptable ones is broad. They can be very contemporary or very
historical, policy oriented or culturally centered, etc. They need only have some link to post-
Soviet/post-communist political economy, however distant! Student unsure of what to tackle often
choose a country study—“Economic Transition in Post-Communist Armenia,” for example. Or they
can choose a two-country or regional issue—“Russian-Ukrainian Political and Economic Relations
since the Cold War’s End,” “Environmental Issues in the Baltic area,” “Sex Trafficking From the
Former USSR and Eastern Europe.”
Below are some further, more “specialized” topic suggestions. Whatever you choose—or are
simply thinking about—I need to see a proposal by Friday (Nov 3). This can be as simple as a one-
sentence declaration that you’re interested in a particular country or political-economic problem.
Those of you who haven’t done so yet, please give this some thought and make some choices. Once
that is done, I can help you further refine a topic and find the necessary sources.
Alcohol and Alcoholism in Russia, Past and Present
Drug Trafficking in Central Asia
Politics and Economics in the Breakup of Czechoslovakia (or Yugoslavia)
The Fall and Rise of the Russian Arms Industry
Environmental Challenges in the Development of Caspian Energy Resources
The Nuclear Power Industry in Eastern Europe and the Former USSR
EU Enlargement and East-Central Europe
Rebounding from War: Croatia, Serbia and Bosnia Compared
Corruption in Eastern Europe and Russia
China’s Political and Economic Relations with Russia and Central Asia
Reflecting on “Shock Therapy:” Russia and the IMF in the 1990s
Women in the Soviet and post-Soviet Russian Economies
“The Little Engines That Could:” Estonia and Slovenia Compared

IR-439: Final Paper
Page 167
Interactions Between Social Structures Within Societies of
Central-Eastern Europe and the Transition Process Following
the Collapse Of The Soviet Union
Keith Parker
ID#6390.4899.77
IR-439 Final Paper
Professor Robert English

IR-439: Final Paper
Page 168
When the Soviet Union collapsed, much of the focus in the region of Central-
Eastern Europe was on the impact that the coming structural transitions would have on
the populations of these countries. A discussion of these types of effects will be included
in this text, but the focus of this essay will rest more on the interaction between the
people of these states and the institutional changes occurring at this time. That is to stay
that there will also be a focus on the way in which cultural and social structures in place
before the collapse affected transition and general progress in these states. It is precisely
this interaction that is important in developing strategies for successful transition, not
merely the affect that one has on the other.
To begin, a discussion of some of the general theories for the absence of clearly
successful transition in the first few years after the Soviet collapse is necessary. While
some of the countries being observed here have seen economic and social success since
the communist collapse, this essay will focus on the time period directly after the collapse
and how attempted transitional strategies interacted with social situations.
People living under the communist regimes in Eastern Europe found themselves
with a complete lack of faith in the Leninist communist ideals that were looked so highly
upon during the early years of their implementation. The social problems due to
communism that affected the far majority of citizens in these countries, vast in number
and the basis for many scholarly works, had left entire generations of families with no
trust or pride in their political institutions. This absence of faith in political and economic
structures had enormous impacts on the social structures of these countries and the
personalities of their people. The values created by this lack of faith are very unique to
these countries, and wouldn’t just be replaced with democratic and consumerist values.

IR-439: Final Paper
Page 169
This is mostly because these western values are built upon years of history and
submersion in these values, as well as a general history with the protestant ethic. As one
historian put it, “The problem is not that the Soviet values have been jettisoned but that
there is nothing to replace them.” (Tsepkalo, 1998)
In order to fill this void, much work has been done by Western powers to immerse
these cultures in Western norms and work ethics after the Soviet collapse. Going back a
few pages in history, though, reveals that attempts at this Western immersion have been
made numerous times even before the collapse, but were actually initiated from within
the Union. Glasnost allowed for the liberalization of media and free speech, paving the
way for some social opening to the western world even prior to the Soviet break-up.
Glasnost was originated by Gorbachev in order to increase debate and social awareness
of current issues and, as Gorbachev was hopeful of, support the economic changes he had
set forth with his Perestroika agenda. While the original idea behind Glasnost was the
improvement of debate and transparency pertaining to the Russian management, it was
seen by the west as a step forward in free media and speech. This relaxation of
censorship pushed the communist party to lose its grip over the media. This, in turn,
allowed for more liberal news sources to highlight and publish to the masses many of the
social and economics ills throughout the Russian empire that previously had been
covered up by the state media; these issues included poor housing, food shortages,
alcoholism, widespread pollution, creeping mortality rates and the second-rate position of
women. Following this, and for years to come, Western cultural materials, including
books, TV programs, music, and magazines, increasingly were translated into the
languages of areas under control of the Soviet Union. While this liberalization helped to
Parker, Page 2
IR-439: Final Paper
Page 170
open people’s eyes to many of the issues previously suppressed by Russian authorities, it
did not significantly alter the worldviews help by people of these societies, their social
structure, or their personal ethics and attitudes.
Aside from small cultural openings, the majority of people in East-Central Europe
didn’t have very much of a western culture base during their years under communism.
Following the communist collapse, people from across the entire Soviet empire didn’t
have a reference point to begin the transition to consumerism and capitalism. In other
words, they were starting a cultural transformation relatively from scratch, in terms of
past experience (Their structural starting point will be discussed in more detail later).
Central-Eastern Europe had an advantage over the rest of the Soviet Union in this
transformation process, though. Unlike other Soviet territories, this region began with
historical links to Western Europe. Prior to World War II, many of the countries of
Central-Eastern Europe were culturally, economically, and politically linked to Western
Europe. While providing a reference point for reconstructions and cultural transition, this
historical link helped in other ways as well. Bordering Central European countries have
pushed large amounts of resources and other help into the economies of these countries.
Germany is the most notorious of these investors. German trade with The Czech
Republic, Slovakia, Hungary, Romania, Bulgaria, Ukraine, and Belarus is comparable
with the total trade that the rest of Europe and the United States do with these same
countries. German investment in the region has been so strong, in fact, that Britain and
The United States have made determined efforts to increase their investment in the region
in order to counter German dominance, particularly in Poland. This economic input has
led to increased contact with Western cultural practices and the consumerist notions the
Parker, Page 3
IR-439: Final Paper
Page 171
West has tried so hard to spread. As a result of their proximity and historical relations
with Western Europe, East-Central Europe was had more of an advantage in transforming
culturally and socially over other more distant Soviet territories.
In addition to a beneficial geographic location, the social structures of East-
Central Europe weren’t as state-dominated and controlled as appearances conveyed.
According to an analysis of the region, “The relations between and interactions among
members of these communities didn’t conform to normal, officially prescribed social
patters.” (Stark and Nee, 1989) Market transactions were widespread in these countries
in both the socialist sector as well as in the ‘second economy’ of these states. These
transactions were largely the result of the contradictions that result from a state
attempting to scientifically manage an entire economy. At the lower level, shortages and
bottlenecks in supply chains led to bargaining and exchanges between supervisors and
informal groups. Moving up to the managerial level, attempting to meet plan targets
required a thick network of informal ties that spread across enterprises and local
organizations. These ‘second economy’ structures are clear examples of some
consumerism and market economy activity occurring within these countries, even under a
state-planned economy. This system of working outside of the administrative economy
in order to reach one’s own goals is deeply engrained in the mindsets of people living in
these societies where, even today, large amounts of market activity still take place outside
of the regulated sphere even with a legal capitalist economy in place.
Nonetheless, even with a ‘second economy’ running outside of government
influence, this was not to say that societies were strong while the government was weak.
Conversely, during the transition years both societies and the Government were weak.
Parker, Page 4
IR-439: Final Paper
Page 172
These transition years saw inefficient bureaucracies confronted with weak societies while
there was no history of political organizations rooted deep within society to provide a
channel for collusion. Even so, the existence of parallel structures among society,
mentioned earlier in speaking about the ‘second economy,’ allow for a building point
towards a structured society. Instead of the empty vacuum that many outsiders saw in
these societies, there were structures already in place that could be built upon in order to
see more efficient, smooth, and successful transition. These routines, practices,
organizational forms, and social ties become assets, resources, and the basis for credible
commitments and coordinated activities. The main idea behind all of this is that instead
of economic and social influences from outside countries aiding in a social transition
from communism to capitalism and consumerism by replacing ideals, practices, and
methods of market interaction, we see something else. From a more enlightened vantage
point, it is clear that a ‘transformation’ has taken place, during which new ideas have
interacted with old structures to create collections of adaptations, rearrangements,
permutations, and reconfigurations of the existing organizational forms.
Up to this point, countries in East-Central Europe have been grouped into one
entity for the purpose of overall analysis of the topic at hand. The fact that most of these
countries began transition around the same time, after the Soviet collapse, contributes to
the mistaken belief that there is one united Eastern European transition in which
transitions among states vary only in degree and speed. However, these countries were
not all witnessing the same transition at different speeds, each country was actually
seeing a different transition. These transitions varied in kind and the paths taken to
achieve them. Further, these variances occurred differently among countries and within
Parker, Page 5
IR-439: Final Paper
Page 173
each state at the political, economic, and social levels. With this in mind, it is important
to take note that social change often takes place much more slowly than political or even
economic transition. Nonetheless, social changes may start taking place well before any
political or economic transition even begins. This is decidedly true in the case of Central-
Eastern Europe. As faith in the communist system, already low towards the end of Soviet
reign, plummeted as the Union began to collapse, the social transformation began to take
place well before political and economic structures began their steep descent. While the
social and cultural change in East Europe began early, the transformation still continues
today. On another note, as these countries were under the communist stronghold for such
a long period of time that the generation that lived without communism had all but
passed. The deep roots that communism planted among these citizenry are not easily
transformed, though significant progress towards consumerism had been made. Even
with this progress, though, there have been considerable backlashes against all things
western, as influence sometimes grows too overwhelming in these regions. Recently, as
Poland has seen large increases in foreign interest, many people within the country have
been angered with a sense that they are being force-fed Western ideas without regard for
their traditional values and needs. This has been seen many times and in many forms,
commonly in large-scale protests, among these states since the transformation from
communism began nearly 15 years ago. Examples of these movements in East-Central
Europe are easily found, with the two largest most recent movements in Prague, Czech
Republic on September 26, 2000 and in Warsaw, Poland on April 29, 2004.
It is largely due to the over-exposure of Western influence that these anti-Western
sentiments arise. One of the factors that led to this phenomenon following the
Parker, Page 6
IR-439: Final Paper
Page 174
communist collapse was the proliferation of ‘grand design’ theories meant to replace
entire systems of political and economic structures within societies. As a result of the
unique situations, politically, socially, and economically, that were in place in each of the
countries of Central-Eastern Europe, these prescriptions often did not work. These plans
were implemented at often very large cost, but for most post-Soviet countries they didn’t
work for a variety of reasons. The Washington Consensus was the most prominent of
these plans. The Washington Consensus was a fairly specific set of ten macroeconomic
policy prescriptions that were considered by many Western powers to constitute a
"standard" reform package promoted for countries in need of reform or in economic and
structural peril. Washington-based institutions such as the International Monetary Fund,
World Bank and U.S. Treasury Department created it for this purpose in 1990. While
some countries in other parts of the world have been successful in implementing reform
using these standards, the policies didn’t work for countries in Central-Eastern Europe.
Much of the reason for the Washington Consensus’ failure was due to its inadequate
implementation in some countries, and the complete inability of others to implement its
prescriptions given previous structural restrictions. In place of these grand economic
theories, many theorists have since recommended that smaller ‘designs’ be implemented
in these countries, but in larger quantities. In other words, instead of one grand
prescription, countries would be better to implement partial solutions to particular
problems. Using this strategy, societies find that design implementation and
transformation becomes a process undertaken by a number of different institutions,
organizations, and people on many different levels, leading to a more cooperative system
of structure building.
Parker, Page 7
IR-439: Final Paper
Page 175
As we move toward the more micro level of changes, we will take a look at the
way in which change took place in these countries’ societies. The changes that occurred
after the Soviet collapse were largely dependent on the system of trade and social
structures that were in each particular country before the transformation. As discussed
earlier, each of these countries being discussed went about change in much different
ways, and not only to differing degrees and speeds. Largely, this is due to the different
structures present in these states beforehand. In Poland, for example, the legacy and
importance of workers’ organizations in Polish society before the collapse had led to
trade unions and workers’ councils often being disproportionately highly influential in
changes taking place after the collapse. Another example was found in Hungary, where
the legacy of semi-autonomous contracting units within firms led to the presence of
larger variants of these units operating independently outside of these firms as limited-
liability corporations. While Russia isn’t among those states being discussed, a similar
phenomenon found in Russia’s transition helps strengthen this point. Russia’s end to
central planning didn’t leave a complete structural void in society, as old state-owned
company directors began to engage in barter trade through their old network connections.
These examples provide evidence that organizational forms in place before the collapse,
such as Polish workers’ organizations, shaped society to the extent that these societies
still interact in similar ways even after the collapse, such as using a trade union in Poland
as a channel through which to develop economic activity. Further, it is clear that the
structures in place before the collapse didn’t disappear with the end of the Union, but
instead will persist in these societies and must be considered when further transforming
the regions’ structural forms. Even more, while transformation has come a long way in
Parker, Page 8
IR-439: Final Paper
Page 176
Central-Eastern Europe, this lesson is helpful when considering the restructuring of
societies in other countries in similar situations today.
Following this discussion on many of the more theoretical interactions between
societies and transformations, this essay will be moving towards a more direct description
of the consequences and costs of transition using statistics form the period. To begin, the
transformation process had a severe effect on unemployment in these countries. While
the previous system in these post-communist societies held zero-unemployment as one of
its fundamental requirements, unemployment inevitably rose after the collapse. Further,
job losses were not necessarily always matched with increased opportunities for
employment in other sectors of the economy, as many transition optimists had hoped. A
few of the more extreme examples follow. In Hungary between the years of 1991 and
1996, the level of full-time employment fell from 49 percent to 37.8 percent. During the
same period, levels fell from 55.4 percent to 36.6 percent in Bulgaria, from 60 percent to
48.8 percent in Estonia and from 63.3 percent to 44.2 percent in Romania. Furthermore,
the drop in employment levels has been more sever in some regions within countries than
in others, creating areas where pockets of extreme poverty are found amid relative
prosperity. (Fowkes, 1999)
Second, transition resulted in drops of real income in these countries. The income
of the wage-earning sector of the population, that is real income, fell even faster and
further than GDP during the period of transition. This effect owes to the differential
impact that higher than expected rates of inflation have on wage earners. In
Czechoslovakia and Poland, falls in wages represented the majority of the fall in incomes
between 1989 and 1991, which in turn contributed to an increase in poverty. Third, food
Parker, Page 9
IR-439: Final Paper
Page 177
shortages resulted from large declines in agricultural production during the period of
transformation. Between 1990 and 1994, agricultural production fell 32 percent in
Poland, 30 percent in Bulgaria, 27 percent in Hungary and 13 percent in Czechoslovakia.
(Data provided by UNICEF)
Fourth, rises in mortality and declines in birth rates during transition led to
decreases in the rate of growth of the population in every country in the region. Where
populations had been declining prior to 1989, such as in Hungary, rates of population
decline increased. Where populations were increasing, the rate of increase dropped in the
countries of Poland and Slovakia, and turned into a decline in Bulgaria, Romania, and all
three Baltic states. These tendencies became a cause of concern for leaders of these
countries, where these newly independent states saw increases in population as essential
to national survival. In Latvia, which holds the record for falling birth rates, the
government introduced financial incentives to encourage the population to have more
children. In 1997, the incentive level was at 196 lats per child. In 1999, spending on this
program accounted for 10 percent of the national budget. Population decreases in the
region had been attributed to a variety of factors including economic instability, social
stress, a sense of hopelessness, and a lack of a government intervention in general
population health and welfare. Further, using a poverty line of $120 a month at 1990
price levels, research has shown that in 1994 the number of people living in poverty in
Eastern Europe had grown from 3.6 million to 18.7 million, a move from 4 percent of the
population to 19 percent. (Data provided by UNICEF)
Moving to an even more personal level, the changes in these societies after the
Soviet collapse had direct implications on the average worker himself. In studying the
Parker, Page 10
IR-439: Final Paper
Page 178
type of worker created by socialist countries, sociologist Victor Zaslavsky describes the
average ‘state-dependent worker’ as one who more closely resembled his predecessors at
the time of the Tsar than his counterpart in Western cultures. Policies of forced
industrialization and collectivization implemented in these socialist countries deprived
peasants of their status as free producers and transformed them into an enormous mass of
unattached and uprooted migrant workers. The urbanization of these masses was not
accompanied by a state-sponsored development of social infrastructure within the cities,
as the state was focusing on investing in more efficient production methods and high
rates of accumulation. As a result of this lack of increased social infrastructure, the
civilizing effect of the urban lifestyle, seen elsewhere in moves towards urbanization,
failed to become a reality for people of these states. What came about in these urban
centers instead was more of a mix of these migrants’ previous community values and the
emerging values of urban civilization. This new urban population wasn’t able to
experience urban market relations either, as both city-dwellers and new urbanized
peasants were subject to the same system or bureaucratic controls, propaganda, and
indoctrination. Furthermore, the state continued to reduce peasants’ freedom with the
systematic action of socializing institutions that reinforced traditional psychological traits
like social passivity and obedience to authority. With the collapse of the Soviet Union
came also the inability of the state to support these systems that had previously supported
the ‘state-dependent worker.’ Zaslavsky has singled out three basic reactions that this
group of people experienced with the transition away from communism. First, some
adapted by more or less participating in illegal market activity. These activities were
seen more in the form of market scamming than entrepreneurial innovativeness. The
Parker, Page 11
IR-439: Final Paper
Page 179
second reaction was to revert to an older system of survival: a subsistence economy
consisting of trades and barters among groups of kinship or friends. This process created
conditions favorable to the re-traditionalization of society. A third adaptive reaction to
these changing conditions was one more typical of state-dependent workers. This group
of people clang to the gigantic and obsolete factories that continued to provide wages,
social benefits, and some income for the state, although at the price of squandering
human and material resources. Furthermore, one of the many unforeseen consequences
of the state-controlled administrative economy was that it not only destroyed peoples’
will to work productively, but also fostered an alliance between the unskilled workers of
the masses and incompetent managers. Although the socio-economic transformations
that have come from the transition period in these states have alleviated the proliferation
of these alliances, they have not eliminated them altogether.
This analysis continues with a look at some of the innovate entrepreneurs in some
of these states. Sociologist Andrzej Kozminski found that, as a result of the changing
environment around them, these entrepreneurs have become much more ‘alert’ than those
found elsewhere. It seems that the best thing that new entrepreneurs can do in a ‘limbo
economy’ where legislation is irrational and constantly changing is to be alert to
opportunities for profit. Entrepreneurial activity in Central-Eastern Europe can be
separated into two distinct periods, according to a paper by Cristiano Codagnone. The
first stage, from about 1986 to 1991, is that of Soviet perestroika, when the majority of
entrepreneurs were engaged in appropriation and redistribution of state properties in a
grey area between legality and illegality. Many of these agents’ activities were similar to
the speculative activities that were characteristic of the arbitrageurs of the pre-industrial
Parker, Page 12
IR-439: Final Paper
Page 180
era. The second stage begins with the end of the Soviet Union and the beginning of
privatization programs. From 1992 and on, those from the nomenklatura era no longer
dominated the economic scene of these states insofar as many of the members of the
scientific- technological community became entrepreneurs. Codagnone concluded his
findings by stating that the contribution of this second group of entrepreneurs to society
has been limited, but significant: they have commodified the economy and contributed to
modernization as much as was possible for them to do.
Another study, referenced earlier, conducted by Andrzej Kozminski focuses more
on management strategies to cope with the restructuring requirements of enterprises after
the Soviet collapse. Kozminski stresses the fact that western perception of positive
change is usually based on macro-economic progress, but rather should be focused on the
development of competitive enterprises. Only with successful competitive enterprises
can a state develop and integrate with the market system of economics. He further states
that privatization and business schools may help with this process, but are not sufficient
in developing this necessary condition for positive economic and social change in the
countries. It is necessary instead to draw up a list of the problems faced by the new post-
socialist enterprise and develop responses to these items. Kozminski concentrates his
study on managerial strategies in three types of enterprise: the ‘dinosaurs’ of the military-
industrial complex, the ‘pretenders’ whose enterprises manage to export and whose
technological level of expertise allows them to compete in the international market, and
‘mixed’ enterprises. Three types of managers emerge from the transformation process of
post-Soviet restructuring. The first are the ‘populist politicians,’ who are more numerous
in the ‘dinosaur’ enterprises considering their deep-rooted traditions of productive
Parker, Page 13
IR-439: Final Paper
Page 181
activism and the various institutions of populist industrial democracy. As their factories
employed many workers, they pressured their employees to put pressure on the
government to speed up the privatization process in order to get their factory sold to the
highest bidder in order to liquidize their debt and restart production in a restructured and
downsized enterprise. The second type of manager described in this study was the ‘new
technocrat’ who based his restructuring strategies on international consulting firms and
resources rather than on the institutions of the populist industrial democracy.
Nonetheless, this case also involved the division and downsizing of enterprises. In this
case, though, this activity was accompanied by financial and productive integration with
Western companies and by the elimination of self-management structures. Two more
types of managers were involved in the restructuring process during transformation in
this region, according to the study. The first was the ‘foreign mercenary’ who was
basically a consultant who sold standardized and simplified versions of Western
management techniques. The second type was unlike the ‘mercenary’ in that he took into
account the local context and cultural differences of running a business in these countries.
He was the ‘foreign crusader,’ with different motivations and sensitivities than the
mercenary. Most of these types were first and second generation emigrants who
produced organizational and cultural change because, apart from making a profit, they
hoped to do something useful for the people of their country of origin.
A widely acknowledged fact seen in the aforementioned study and others similar
to it is that privatization is absolutely necessary to advance the transition process, but not
sufficient for the marketization of post-socialist countries in Central-Eastern Europe.
Another study by Bruno Grancelli proposes further that despite the institutional and
Parker, Page 14
IR-439: Final Paper
Page 182
organizational changes that had taken place in these states, there was still a significant
semantic incongruency between Eastern and Western definitions of management
principles. Clearly structures of management and types of managers that have emerged
from the post-Soviet enterprising field play an important role in restructuring these
societies, but it is also important to note that the methods implemented by states in the
restructuring process also shape the future managers of that state’s economy and society.
Having found that the occurrence of transition itself in Central-Eastern Europe
was responsible for a significant portion of negative effects on the populations of these
countries, we also have seen that the structures embedded into these societies have
affected directly the successes or failures of independent transformational strategies. It
was often the failure of these strategies, or of their implementations, that led to the social
ills mentioned in this text. This Catch-22 effect, where societal structures lead to the
failure of some transition strategies, and the failure of these strategies leads to social ills,
is precisely the interaction that must closely be studied when today’s political forces are
considering transformational aid in situations similar to those of Central-Eastern
European countries after the Soviet Union collapse.
Parker, Page 15
IR-439: Final Paper
Page 183 Keith Parker, ID#6390.4899.77
Preliminary Bibliography for Final Paper
Paper Topic “Western cultural influences in Eastern Europe's transition after the
Soviet collapse”
Bakacsi, Gyula, Takacs Sandor, Karasconyi Andras, and Imrek Viktor. “Eastern
European Cluster: Tradition and Transition.” Journal of World Business 37 (2002): 69-
80.
Bernhard, Michael. “Civil Society and Democratic Transition in East Central Europe.”
Political Science Quarterly 108 (1993): 307-326.
Eronen, Jarmo. “Cultural Regions and Integration in Europe.” Helsinki School of

Economics, ‘New Europe 2020’ conference August 2004. 10 February 2006.
Fowkes, Ben. The Post-Communist Era : Change and Continuity in Eastern Europe. New
York: St. Martin's P, 1999.
Goldnman, Minton F. Revolution and Change in Central and Eastern Europe: Political,
Economic, and Social Changes. New York: Armonk, 1997.
Grancelli, Bruno. Social Change and Modernization: Lessons From Eastern Europe.
Berlin: Walter De Gruyter, 1995.
Inglehart, Ronald, and W. E. Baker. “Modernization, Cultural Change, and the

Persistence of Traditional Values.” American Sociological Review 65 (2000): 19-51.
Inglehart, Ronald. Modernization and Postmodernization : Cultural, Economic, and

Political Change in 43 Societies. Princeton: Princeton UP, 1997.
Ramet, Sabrina P. Social Currents in Eastern Europe : the Sources and Consequences of
the Great Transformation. 2nd ed. Durham: Duke UP, 1995.
Rupnik, Jacques. “Eastern Europe.” Journal of Democracy 11 (2000): 115-129.
Stark, David. "The Great Transformation? Social Change in Eastern Europe."

Contemporary Sociology 21 (1992): 299-304.
Slowinski, Joseph. “SOCRATES Invades Central Europe.” Education Policy Analysis

Archives 6 (1998).
Tsepkalo, Valery V. “The Remaking of Eurasia.” Foreign Affairs 77 (1998): 107-127.
Weiner, Robert. Change in Eastern Europe. Westport: Praeger, 1994.

MRKT-465: Syllabus
Page 184
Marshall School of Business

USC
MARKETING 465
GLOBAL MARKETING MANAGEMENT
Fall, 2006
Faculty: Dennis A. Schorr, Ph.D.

Office: ACC 301J
Phone: 740-5041
e-mail: dschorr@marshall.usc.edu
Office Hours: Thurs. 4:00-6:00 P.M. or by appointment
Course Objectives:
The major objectives of this course are to:
a) Understand the key characteristics of various country markets and

how to develop marketing plans in diverse environments
b) Appreciate the limitations of an ethnocentric approach to international

marketing and develop a complex, global perspective on marketing
c) Understand the role of marketing in a company’s global strategy and

learn how to develop global marketing strategies
d) Develop a multidimensional, nuanced perspective on marketing

standardization vs. adaptation and learn how to balance the pressures
for globalization vs. localization of the various elements of the
marketing mix
e) Appreciate the roles of global, regional, and local brands in a

company’s portfolio and learn how to manage effectively each type of
product or service
In support of these goals, the course is divided into five major topic areas. The first topic
area focuses on the opportunities and challenges of international marketing and how to assess
country environmental factors that are most relevant to the management of international
marketing. The second topic area concentrates on how to select markets to enter and how to

MRKT-465: Syllabus
Page 185 Marketing 465 Global Marketing Management Professor Schorr
develop international and global marketing strategies. The third topic area examines the
similarities and differences in product markets across countries and how to develop marketing
strategies for various types of products and services. The fourth topic area deals with how to
develop product policy in the international context including the management of branding,
positioning, product attributes, and packaging. The fifth topic area is concerned with how to
develop distribution/retailing, advertising/promotional, and pricing policies in the international
context including how to manage the tradeoffs of standardization vs. adaptation associated with
each element of the marketing mix. Throughout the course, a variety of country markets in
various regions of the world will be discussed and a variety of different types of products and
services will be addressed.
Class Sessions:
The class sessions will focus on the understanding of major concepts, frameworks, and
analytical tools used in global marketing and the application of these concepts, frameworks, and
tools to the understanding of real-world situations. The textbook chapters are designed to
introduce the major concepts in the field. Readings are chosen to expose you to recent trends in
global marketing. Case discussions will develop your skills in applying the concepts to actual
managerial situations. Assignments and exercises will also assist in developing your knowledge
and competencies in the area. Class sessions will consist of lectures in which conceptual material
will be clarified and of discussions of cases, readings, exercises, and concepts to allow you to
practice applying the material. Before each class session, you should read the assigned textbook
chapters, readings, and cases and be prepared to discuss them in class.
Course Evaluation:
25% Midterm Exam

25% Final Exam
10% Class Participation
10% Group Assignment # 1
As an important part of the learning in this course comes from class, you are expected to
participate actively in class sessions. The level of class discussions and how much you gain from
them depend in large part on how well prepared you are for each class and how actively you take
part in the discussions. Thus, your level of preparation for class sessions and participation in
discussions will be factored into the final evaluation. I realize that occasionally it is not possible
to attend class. You can miss up to three class sessions without it affecting your grade; however,
if you miss more than three sessions, it could have an impact on your participation grade.
2
MRKT-465: Syllabus
Marketing 465 Global Marketing Management Professor Schorr Page 186
Occasionally, I will ask groups to make informal presentations in class; these informal
presentations will be factored into the participation grade.
Your individual mastery of the course material will be tested in a midterm and a final
examination. The exams are designed to assess your knowledge of the material covered up to that
point in the course.
The four group assignments should be completed in groups of 4-5 people. They are
designed to give you hands-on experience developing skills relevant to global marketing. Learning
in these assignments should be enhanced by interacting and discussing the material with other
members of your group. Peer evaluations of each member of your group will be conducted to
ensure that all members contribute equitably to the assignments. All assignments are due at the
beginning of class on the due date. Assignments that are handed in late will have their grades
marked down.
Texts:
KG: Keegan, Warren J., & Green, Mark C. 2005. Global Marketing (4th Ed.). Upper
Saddle River, NJ: Prentice Hall.
PCR: Packet of Cases and Readings.
3
MRKT-465: Syllabus
Course Outline:
Week 1 Introduction and Overview:

International Marketing Opportunities and Challenges
8/21 No Preparation for Today
8/23 Textbook: Chapter 1 (KG)
Week 2 International Marketing Opportunities and Challenges:

Assessing the Cultural and Social Environment
8/30 Case: Barbie: The American Girl Goes Global (Case 4-2 KG)
Marketing an Industrial Product in Latin America (Case 14-1 KG)

Assessing the Economic, Financial, and Technological
Environment
9/4 University Holiday – No Class Today

Case: Vietnam’s Market Potential (Case 2-1 KG)

Assessing the Political and Regulatory Environment
9/11 Textbook: Chapters 3 & 5 (KG)

Case: Acer, Inc. (A) (Case 1-2 KG)
Acer, Inc. (B) (Case 2-2 KG)
9/13 Reading: Articles on European Integration (PCR)

Case: The Euro Yo-yo (Case 3-2 KG)
Due: Group Assignment # 1
Week 5 Global Marketing Strategy:

Entering New Markets and Allocating Resources Across
Countries
4
MRKT-465: Syllabus
9/20 Case: Citibank: Launching the Credit Card in Asia Pacific (PCR)
5
MRKT-465: Syllabus

Understanding the Relationships Between Business Strategy and
Marketing

Case: Proctor & Gamble Europe: Vizir Launch (PCR)
9/27 Reading: Articles on International Fast Food (PCR)

Case: McDonald’s Expands Globally While Adjusting Its
Local Recipe (Case 1-1 KG)

Balancing the Pressures for Standardization vs. Adaptation
10/4 Case: Kao Corporation (PCR)

Week 8 International Product and Service Markets:

Analyzing Customers, Competitors, Company Resources, and
Level of Market Development
10/9 Case: Emdico (A) (PCR)

Kodak in the Twenty-First Century (Case 15-1 KG)
Week 9 Global Product Policy:

New Product Development
10/16 Exam: Midterm Exam
10/18 Case: International and Global Greeting Cards
6
MRKT-465: Syllabus

Managing Branding and Positioning
10/23 Reading: How Global Brands Compete (PCR)

Articles on Global Branding (PCR)
Case: Bud versus Bud (Case 5-1 KG)

Case: Procter & Gamble: Balancing Global vs. Local Concerns in the
Worldwide Feminine Care Business (PCR)

Designing Product Attributes and Packaging
10/30 Reading: The Lure of Global Branding (PCR)

Case: Research Helps Whirlpool Act Local in the Global Market (Case 6-1
KG)
The Smart Car (Case 10-2 KG)
11/1 Case: Cola Wars in China: The Future is Here (PCR)

Week 12 The Global Marketing Mix:

Analyzing the Advertising and Promotional Environment
The Internet and Global Marketing

Reading: Articles on International Advertising (PCR)
Case: Benetton Group SpA (Case 13-1 KG)

Reading: Articles on the Internet and International Marketing (PCR)
Case: DeRemate.com: Building a Latin American Internet Auction
Site (PCR)

Developing Advertising and Promotional Campaigns

Case: The Global Brand Face-Off (PCR)
11/15 Case: Unilever in India: Hindustan Lever’s Project Shakti (PCR)
7
MRKT-465: Syllabus
8
MRKT-465: Syllabus

Managing Distribution Channels and Retailing

Case: Fair Trade Coffee: Ethics, Religion, and Sustainable Production (Case
4-1 KG)
Concerns About Factory Safety and Worker Exploitation (Case 8-1
KG)
11/22 Reading: Articles on International Retailing (PCR)

Case: Wal-Mart’s Global Expansion (Case 12-1 KG)

Managing Pricing Policies

Case: Pricing AIDS Drugs in Emerging Markets (Case 11-1 KG)
11/29 Case: LVMH and Luxury Goods Marketing (Case 11-2 KG)
Week 16 Final Examination
12:00-1:50PM Section
12/8 Exam: Final Examination – Friday, 11:00AM – 1:00PM
4:00-5:50PM Section
12/6 Exam: Final Examination – Wednesday, 4:30PM – 6:30PM
9
MRKT-465: Course Documents
Page 193
xxxxxxx

Page 194
Motivations to Internationalize Resource Seeking Motives

• Traditional Motivations • Secure Key Supplies
– Resource Seeking Motives • Access Low Cost Factors of Production
– Market Seeking Motives – Source components or complete products
• Emerging Motivations
– Changing Industry Economics
– Scanning and Learning Capabilities
– Competitive Positioning
Market Seeking Motive Changing Industry Economics

• Companies with competitive advantages • Increasing Scale Economies
over local players • Ballooning R&D Investments
• Small domestic markets • Shortening Product Life Cycles
• Saturated domestic markets
Scanning and Learning

Competitive Positioning
Capability
• Cross-Subsidization of Markets
• Exposure to alternative sources of supply • Attack Competitors in Home Markets or
or alternative low-cost production sources Major Markets
• Exposure to new technologies or market
needs
Prof. Schorr 1
Page 195
Occupants % Headed Average Age % Pop % Pop % HHs

Per HH by Women Women 1st 0-14 65+ Owning
Marriange Home
France 1 1 2.41 25.8 29.6 18.7 16.1 54.6
Germany 2 2 2.11 32.0 28.4 14.8 17.7 48.6
Italy 3 3 2.53 28.7 28.9 14.3 18.6 73.1
UK 4 4 2.36 34.8 28.7 18.1 16.1 74.0
Russia 5 6 2.69 30.5 24.2 15.6 13.6 50.8
US 6 17 2.58 60.1 29.2 20.9 12.3 69.0
Argentina 7 14 3.61 26.9 24.9 27.6 10.0 79.7
Brazil 8 15 3.47 27.4 27.0 27.3 5.5 77.1
Mexico 9 16 4.31 21.1 28.6 32.0 5.1 72.8
China 10 7 3.45 48.6 26.1 19.5 8.0 88.5
India 11 8 5.29 12.2 27.5 32.6 5.2 71.7
Japan 12 9 2.63 NA 32.0 14.0 19.0 63.5
Egypt 13 10 4.36 18.3 23.4 33.2 4.1 72.2
Nigeria 14 12 4.81 18.3 22.4 44.3 3.1 NA
Saudi Arabia 15 11 5.91 NA 22.3 39.8 3.1 48.1
South Africa 16 13 3.89 NA 30.0 30.8 5.1 62.7
EU 17 5 2.43 NA NA 16.4 16.3 62.2
Note: 2004 Data

Source: Euromonitor International, Global Market Information Database

Page 196
Prof. Schorr Conducting a Country

Environmental Analysis
 Political and Regulatory
 Economic and Financial
 Social and Cultural
 Technological and Infrastructure
Global Marketing
Role of Culture and Social Factors in

International Marketing
Implications for Marketing What is Culture?

 Product and Service Opportunities  A Shared System of Values and Meanings
 Customer Attitudes, Needs, and Preferences – guides how world is perceived and interpreted
 Segmentation, Targeting, and Positioning  Learned
 Product and Branding – derived from social environment, not biology
 Promotion, Advertising, and Communications
 About Groups
 Place/Distribution
– a collective phenomenon that is passed down
 Pricing to new generations
Aspects of Culture – Outward

The Iceberg Model of Culture
Behaviors, Events, Symbols
 The Tip of the Iceberg  Languages -- spoken and written
 Religious and Ethnic Groups
– Music, Art, Food and Drink, Greetings, Dress,  Holidays
Manners, Rituals, Outward Behaviors  Aesthetics, Art, and Music
 Most of the Iceberg is Below the Surface  Colors, Numbers, and Symbols
 Tastes, Food, and Drink
– Consists of Orientations to:
 Dress
 Environment, Time, Action, Communication,
 Material Culture
Space, Power, Individualism, Competitiveness,
Structure, Thinking  History
 Customs and Traditions
1
Page 197
Aspects of Culture - Social Social Roles - Role of Father in

Organization Different Cultures
 Greetings and Social Interactions  % of Kids Rating Dads as Somewhat or Very
Actively Involved in Their Lives
 Roles of Men and Women in Society
– U.S. 89%
 Household Sizes and Organization – Germany 63%
 Age Distribution – Japan 47%
 Age at Marriage  % of Kids Who Say They Talk with Their Dads
Every Day
 Work Hours
– U.S. 87%
 Educational Levels – Germany 63%
– Japan 54%
Aspects of Culture - Values and Group vs. Individual Oriented

Orientations Culture
 Norms and Values  Group Oriented Culture
– people tend to identify themselves by the group to
 Group vs. Individual
which they belong
 High vs. Low Context  harmony is highly valued
– e.g., Japan
 Monochronic vs. Polychronic
 Individual Oriented Culture
 Hofstede’s Five Dimensions of Culture – people tend to identify themselves as individuals
 competition is rewarded
 e.g., most Western societies
Monochronic vs. Polychronic

High to Low Context Cultures
Culture
 Implicit vs. Explicit Styles of Communication  Monochronic
– Japan
– Arab – a linear, more rigid attitude towards time
– Greek  e.g., U.S. and Northern Europe
– Spanish
 Polychronic
– Italian
– English – a more fluid attitude towards time, activities
– French not regimented by the clock
– American  e.g., Latin America and Middle East
– Scandinavian
– German
2
Page 198
Hofstede’s Basic Dimensions of

Culture
 Individualism vs. Collectivism
– personal freedom vs. responsibility to the group
 Power Distance
– degree of acceptance of social hierarchy and respect for authority
 Uncertainty Avoidance
– degree to which risk is avoided and security is valued
 Masculinity vs. Femininity
– degree of emphasis placed on so-called masculine values of
performance and visible achievement
 Long Term Orientation vs. Short Term Orientation
– degree of emphasis on the future, delay in gratification of needs,
and persistence
3
Page 199
A CULTURAL PROFILE
Observable Manifestations of Culture
• Languages -- spoken and written

• Religious and Ethnic Groups
• Holidays
• Aesthetics, Art, and Music
• Colors, Numbers, and Symbols
• Tastes, Food, and Drink
• Dress
• Material Culture
• History
• Customs and Traditions
Social Organization
• Greetings and Social Interactions

• Roles of Men and Women in Society
• Household Sizes and Organization
• Age Distribution
• Age at Marriage
• Work Hours
• Educational Levels
Underlying Values and Orientations

• Norms and Values
• Group vs. Individual
• High vs. Low Context
• Monochronic vs. Polychronic
• Hofstede’s Five Dimensions of Culture
 Individualism vs. Collectivism
 Power Distance
 Uncertainty Avoidance
 Masculinity vs. Femininity
 Long Term Orientation vs. Short Term Orientation

Sheet1 Page 200
2004
Countries with Largest Population Countries with Largest
Sorted by Level of Economic Development Land Areas (sq. miles)
(World Bank Publications) Russia 6,592,800
GNI/cap GNI/cap at PPP Canada 3,851,809
LOW INCOME ($825 or less) China 3,691,521
India 620 3,100 U.S. 3,536,341
Pakistan 600 2,160 Brazil 3,286,470
Vietnam 550 2,700 Australia 2,966,150
Sudan 530 1,870 India 1,229,737
Kenya 460 1,050 Argentina 1,072,067
Bangladesh 440 1,980 Kazakstan 1,049,000
Nigeria 390 930 Sudan 967,491
Tanzania 330 660
Congo, Dem Rep 120 680
Ethiopia 110 810 Countries with Highest Average Annual
Myanmar GDP Growth Rates 1990-2003
LOWER MIDDLE INCOME ($826-$3,255) (greater than 5.5%)
Brazil 3,090 8,020 China 9.6%
Thailand 2,540 8,020 Ireland 7.7%
Iran 2,300 7,550 Vietnam 7.5%
Algeria 2,280 6,260 Myanmar 7.4%
Colombia 2,000 6,820 Mozambique 7.0%
Morocco 1,520 4,100 Liberia 7.0%
Egypt 1,310 4,120 Uganda 6.8%
China 1,290 5,530 Cambodia 6.5%
Ukraine 1,260 6,250 Singapore 6.3%
Phillipines 1,170 4,890 Lao PDR 6.3%
Indonesia 1,140 3,460 Malaysia 5.9%
UPPER MIDDLE INCOME ($3,256-$10,065) India 5.9%
Mexico 6,770 9,590 Dominican Rep. 5.8%
Poland 6,090 12,640 Yemen 5.8%
Turkey 3,750 7,680 Sudan 5.7%
Argentina 3,720 12,460 Chile 5.6%
South Africa 3,630 10,960 South Korea 5.5%
Russia 3,410 9,620
HIGH INCOME ($10,066 or more)
US 41,400 39,710
Japan 37,180 30,040
UK 33,940 31,460
Germany 30,120 27,950
France 30,090 29,320
Canada 28,390 30,660
Italy 26,120 27,860
Spain 21,210 25,070
South Korea 13,980 20,400
Page 1
Page 201
Prof. Schorr General Environmental Factors

Affect International Marketing
 Economic and Financial Factors
 Cultural and Social Factors
 Technological and Infrastructure Factors
 Political and Regulatory Factors
Global Marketing
The Economic and Financial

Environments
Wealth Stages of Market Development

 GDP per capita or GNP per capita  High Income Countries
– at exchange rates
 Upper Middle Income Countries
– at PPP
 Stages of Market Development  Lower Middle Income Countries
 Private Consumption per capita  Low Income Countries
 Growth Rates
Size of Economy Economic Distribution

 Population  By Income Level
 GDP or GNP  By Region
– at exchange rates  Urban vs. Rural
– at PPP
 Growth Rates
1
Page 202
Financial Situation Structure of Economic Activity
 Inflation  Trade
– Size of Imports and Exports
 Exchange Rates
– Imports and Exports by Product Category
 Interest Rates – Major Trading Partners
 Foreign Investment
– amount
– by sector
– by country
 Economic Statistics by Sector
– production, services, agriculture
Structure of Consumption
 Private Consumption By Category
– Food Expenditures
– Clothing Expenditures
– Transportation Expenditures
– Housing Expenditures
– Health Care Expenditures
– Education Expenditures
– Leisure Expenditures
– Etc.
2
Page 203
AN ECONOMIC/FINANCIAL PROFILE
Wealth
• GDP per capita or GNI per capital

o At exchange rates
o At PPP
• Stages of Market Development
 High Income Countries
 Upper Middle Income Countries
 Lower Middle Income Countries
 Low Income Countries
• Private Consumption per capita
• Growth Rates
Size of Economy
• Population
• GDP or GNI
o At exchange rates
o At PPP
• Growth Rates
Economic Distribution
• By Income Level
• By Region
• Urban vs. Rural
Financial Situation
• Inflation
• Exchange Rates
• Interest Rates
Structure of Economic Activity
• Trade
• Foreign Investment
• Economic Statistics by Sector
Structure of Consumption
• Private Consumption by Category

Page 204
Prof. Schorr
Geography and Climate
 Size of Country
 Population Density
 Major Geographical Features
 Climate
Global Marketing
The Technological Environment
Basic Infrastructure Transportation Infrastructure

 Water  Transportation Networks
– Road
 Sanitation – Rail
– Water
 Electricity
– Air
 Vehicles
– Bicycles
– Motorcycles
– Automobiles
– Commercial Vehicles
Communications and Information

Household Technology
Technology
 Media  Kitchen Technology
– Newspapers and Magazines – Microwave Ovens
– Refrigerators and Freezers
– Radios
 Cleaning Technology
– Televisions
– Vacuum Cleaners
– Cable and Satellite TV Connections
– Washing Machines
 Communications  Entertainment Technology
– Landline Telephones – Music Systems
– Cellular Phones  Stereo Systems, CD Players
– Internet Connections – Video Systems
 Televisions, DVD Players, Videotape Recorders, Videogame Consoles
 Information Technology
 Climate Control
– Computers
– Electric fans and Air conditioners
1
Page 205
A TECHNOLOGICAL PROFILE
Geography and Climate
• Size of Country
• Population Density
• Major Geographical Features
• Climate
Basic Infrastructure
• Water
• Sanitation
• Electricity
Transportation Infrastructure
• Transportation Networks
• Vehicles
Communications and Information Technology

• Media
• Communications
• Information Technology
Household Technology
• Kitchen Technology
• Cleaning Technology
• Entertainment Technology
• Climate Control

Page 206
Prof. Schorr Home vs. Host Country

Considerations
 Home Country Considerations
– promotion of exports
– restrictions on exports
 Host Country Considerations
Global Marketing
Political and Regulatory Environment
Role of Government in the

Type of Government
Economy
 Political System  Control vs. Ownership
– Democratic vs. Authoritarian – Market
– Mixed/Market
– Structure of Government
– Mixed/Command
 Political Parties – Command
– Single-party dominant  Index of Economic Freedom
– Dual-party  Protection and Support of Industries
– Multiple-party  Government Procurement
 Government Centralization vs.  Taxes
Decentralization  Corruption
Tariff and Nontariff Barriers Investment Policies

 Tariffs  Ownership Limitations
 Nontariff Barriers  Financial Controls
– government participation in trade
 procurement and subsidies
– customs and entry requirements
– product requirements
– quotas
– financial controls
– structural impediments
1
Page 207
Types of Legal Systems Major Legal Issues

 Common Law vs. Code Law  Intellectual Property Protection
 Reliance on Legal System to Settle Disputes – patents
 Methods of Enforcement – copyrights
– trademarks
– trade secrets
 Antidumping Laws
 Antitrust Laws
 U.S. Foreign Corrupt Practices Act
Risks of Conducting Business Reductions of Worldwide Trade

Overseas and Investment Barriers
 Country Risk Ratings  GATT and WTO
– political risk  Regional Trading Groups
– financial risk – free trade area
– economic risk – customs union
– composite risk – common market
– economic union
– political union
EC 92 Market Integration
Issues Facing EU
Program
 Eliminating Border Control  Maastricht Treaty and European Monetary
 Regulations and Principle of Mutual Union
Recognition  Expansion into Eastern Europe
– minimum standards set, e.g. food and toy safety  Decision and Budget Problems
 Opening Up of National Procurement  Concerns About Sovereignty
 VAT Harmonization  A Two Track Europe
 Liberalization of Services -- e.g., Financial
Services
2
Page 208
A POLITICAL/REGULATORY PROFILE
Type of Government
• Political System
• Political Parties
• Government Centralization vs. Decentralization
Role of Government in the Economy

• Market vs. Command Economy
o Market
o Mixed Market
o Mixed Command
o Command
• Index of Economic Freedom
• Protection and Support of Industries
• Government Procurement
• Taxes
• Corruption
Tariff and Nontariff Barriers

• Tariff Levels
• Nontariff Barriers
Investment Policies
• Ownership Limitations
• Financial Controls
Type of Legal System

• Common Law vs. Code Law
• Reliance on Legal System to Settle Disputes
• Methods of Enforcement
• Major Legal Issues, such as Intellectual Property Protection
Risk
• Political, Financial, Economic, and Composite Risk
Trade Group Memberships

• WTO
• Regional Trading Groups

Page 209
Global Marketing
Prof. Dennis Schorr
International Presence of Your
Company
 Countries Where You Make Sales
– for target product
– for other products
 Breakdown of Sales by
Evaluating Country Markets – region of world
– country
Selecting Countries to Enter and  Market Share
Allocating Resources Across – global
Countries – in major markets
Factors Affecting Country Selection

for a Worldwide Business Narrow Market Choices
 Evaluate All Potential Countries in World using
Country Rough Indicators of Attractiveness
Selection
– General Economic Indicators
– Widely Available Industry Information
 Evaluate A Short List of Countries using More
Specific Indicators of Attractiveness
– General Economic Indicators
– Additional Industry Specific Criteria
Standalone Relative Global
Attractiveness Competitive Strategic
Strength Importance
Rough Indicators of Industry Specific Indicators of

Attractiveness Attractiveness
 Economic Statistics  Market Characteristics
– size and growth of market
 Social and Cultural Statistics
– distribution channels
 Technological and Geographical Features
 Customer Characteristics
 Political and Regulatory Environment – attitudes towards product
 Widely Available Industry Specific – use of product and similar products
Statistics  Competitive Characteristics
– intensity of competition
– widely available proxies
– characteristics of competitors
 Regulations Affecting Your Product
Page ‹#›
1
Page 210
Examples of Industry Specific Specify Criteria to Assess

Indicators of Attractiveness Attractiveness
Size of Market

 Growth Rate of Market and Market Potential  Fit with Company Strategy and Goals
 Competitive Situation
 Similar Product Performance
 Cultural Acceptance
 Barriers to Entry
 Political and Regulatory Conditions
 Taxes and Duties
 Marketing Infrastructure
– Distribution Channels and Communication Media
 Production Levels
 Imports and Exports
 Price Levels
 Level of Risk
 Profit and ROI Potential
 etc.
Steps in Conducting Quantitative

Selection Models
Multivariate Comparisons
 Filters  Develop a Set of Criteria for Evaluating Countries
 Break Each Category of Criteria into Subcriteria that
 Qualitative and Quantitative Multivariate Provide Measures of the Category
Comparisons  Assign Weights to Each Category of Criteria and Each
Subcriterion
 Collect Data for Each Country on the Subcriteria
 Translate the Data for Each Country into a Rating for
Each Subcriteria
 Multiple Weights by Ratings and Sum for Each Country
to Get a Weighted Average Index for Each Country
Techniques for Estimating

Issues in Analyzing Data
Country Market Size
 Estimation by Proxy  Per Capita Data vs. Overall Market Size
 Estimation by Analogy  Percentage Data vs. Overall Size
– Cross-sectional  Dealing with Missing Data
– Time lagged
 Estimation Using Income Elasticity of
Demand
 Estimation Using Regression Analysis
Page ‹#›
2
Page 211
Global Marketing Factors Affecting Country Selection

Prof. Dennis Schorr
for a Worldwide Business
Country
Selection
Evaluating Country Markets

Selecting Countries to Enter and Standalone Relative Global
Allocating Resources Across Attractiveness Competitive
Strength
Strategic
Importance
Countries
Indicators of Relative
Relative Competitive Strength
Competitive Strength
 Ability to enter and establish competitive  Potential competitive strengths in market
advantage – product fit
– resources, capabilities, and core competencies fit
 Fit with current resources and strengths in
– strengths relative to competition
country – similarity to existing markets
– in target business – etc.
– in other businesses  Current competitive strengths in market
 Fit with current resources and strengths in – market share
neighboring countries – access to distribution channels
– brand reputation
– etc.
Similarity to Home Country and Developing a Model for

Competitive Strength Assessing Markets
 Competitive strength and similarity to the home country
 Companies often enter countries in order of similarity to
 Portfolio Models (GE-McKinsey)
home country – Attractiveness of Market
 Countries most similar to U.S. (in rank order) – Relative Competitive Strength in Market
– Canada, Australia, U.K., Germany, France, Belgium, Italy, Japan,
Netherlands, Argentina, Mexico, Spain, India, Brazil
 Position in Investment Sequence for U.S. Companies (in
rank order)
– U.K., Canada, Australia, France, Japan, Germany, Brazil, Mexico,
Italy, Belgium
Page ‹#›
1
Page 212
Ford Tractor Business Country Ford Tractor Business

Attractiveness Factors Competitive Strength Factors
 Market size  Market share
 Market growth rate  Product fit
 Government regulations
 Contribution margin
– Price controls
– Nontariff barrier
– Profit per unit
– Local content – Profit percentage, net of dealer cost
 Economic and political stability  Market support
– Inflation – Quality of distribution system
– Trade balance – Advertising vs. competition
– Political stability
Global Strategic Importance Scheduling of Global Expansion

 Concentric Expansion
 Platform Expansion
* Home market of global customers
 Focused Expansion
* Home market of global competitors
* Significant market of global competitors
* Major source of industry innovation
* Home of most demanding customers
Source: Yip, Total Global Strategy
Market Participation
Choice of country-markets in which to conduct
business, and the level of activity, particularly in
terms of market share.
FULLY FULLY
MULTILOCAL GLOBAL
No Particular Significant Share In

Pattern Strategic Markets
Source: Yip, Total Global Strategy
Page ‹#›
2
Page 213
Global Marketing Strategy

Global Marketing Strategy • Types of Global Marketing Strategies
• Coordinating Mechanisms and the Complex
Global Strategy
Types of Global Marketing

Strategies
• Market Extension or Ethnocentric
Types of Global Marketing • Multidomestic or Polycentric
Strategies • Simple Global or Geocentric
• Complex Global, Transnational, or
Complex Geocentric
Advantages of the Advantages of the Simple

Multidomestic Strategy Global Strategy
• Fit to Customer Preferences • Efficiencies and Cost Reductions
• Fit to Competitive Conditions • Transfer of Learning
• Responsive to Political/Regulatory • Consistency of Image
Environment • Coordinated Global Competitive Approach
• Strong, Entrepreneurial Country Managers
1
Page 214
Advantages of the Complex

Global Strategy
• Combines the Advantages of the
– Multidomestic, and the
Coordinating Mechanisms and
– Simple, Global the Complex Global Strategy
• But, Very Difficult to Implement!
Create a Matrix in Each

Coordinating, Not Dictating
Manger’s Mind
• Keep Marketing and Managerial Resources • Change the Organizational Culture and
Dispersed and Decentralized Mindset
• Build In Mechanisms to Achieve Greater • Balance Global versus Local Concerns in
Coordination of Marketing Activities Each Manager’s Mind
Mechanisms for Coordination

with Dispersed Resources
• Cross-country Managerial Teams
• Forums to Come Together, Share Ideas, and Develop
Informal Relationships
• Foster Intensive Communications Through Technology
• Rotate Managers Across Countries and Between
Headquarters and Countries
• Reward Systems Based on Local and Global Performance
• Build in Managerial Interdependencies Across Countries –
Each Country Leads Different Cross-country Teams
• Developing Guidelines for Managing Brands Across
Countries
2
Page 215
Situation Analysis for

International Product Markets
• Competitive
Lecture • Customer
• Company
Analyzing the • Market
Product Market – Marketing Infrastructure
Situation
For Each Category Need to Ask Competitive Factors

• How Similar vs. Different are various • Competitors and Competitive Positions
countries on each factor? • Competitive Environment
• What Impact will each factor have on the – Products, Pricing, Distribution, Advertising
marketing of this product? • Your Company’s Competitive Position
• Are there ways of Changing or – Market Share, etc.
Overcoming the pressures for adaptation
among countries?
Customer Factors Company Factors

• Segmentation • Core Competencies
• Conditions of Product Use • Stage of Development of Presence in
• Needs Satisfied Country
• Preferences • Resources Available in Country
• Perceptions of Category Offerings • History of Past Performance in Country
• Amount of Cross-Border Communication • History of Products and Brands in Country
– Amount of International Travel • Route to Entry into Country
– Amount of Media Spillover

Page 216
Market Factors Marketing Infrastructure Factors

• Stage of Market Development • Distribution Channels
– Product Life Cycle Stage • Advertising Vehicles
• Strategic Importance of Market • Promotional Vehicles
– Lead Markets • Market/Customer Information
• Size • Marketing Support Firms
• Growth
For Each Category Need to Ask

• How Similar vs. Different are various
countries on each factor?
• What Impact will each factor have on the
marketing of this product?
• Are there ways of Changing or
Overcoming the pressures for adaptation
among countries?

Page 217
Perspectives on Global
Marketing Strategy Levitt’s Perspective on Global
Levitt’s Perspecitve on Global Marketing Marketing
Ohmae’s Perspective on Global Marketing
Quelch and Hoff’s Perspective on Global Theodore Levitt
Marketing
The Globalization of Markets
1983 Harvard Business Review
Consumer Tastes Around World High Quality and Low Cost Global
are Converging Products will Beat out Adapted Products
• Communication and transportation technologies • Global scale permits
expose people around world to similar information – Low cost and low price
– High quality
– television and radio
• Consumers will choose lower priced, high quality products
– movies
even if they are not exactly tailored to part habits and local
– telecommunications market needs
• phone – consumers around world desire same things
• fax • value -- stretching their income as far as possible
• internet • alleviation of life’s burdens and expansion of discretionary time
– satellites – so lower priced goods of high quality will beat out locally tailored
products that are higher priced
– jet travel
• Strategy can expand markets with aggressive low pricing
Quote from Theodore Levitt

The Japanese Approach
Article
• “If the price is low enough, they • Japanese companies have become
will take highly standardized powerful players in certain
world products, even if these industries
aren’t exactly what mother said –consumer electronics
was suitable, what immemorial –automobiles
custom decreed was right, or what • Used this strategy of low cost and
market-research fabulists asserted high quality global products
was preferred.”
1
Page 218
The Multinational (or

The Global Corporation
Multidomestic) Corporation
• Tailors products to each country • Offers standardized global products around
• Slavishly responds to what it perceives as the world
different product needs in different countries – offers combination of low price and high
• Many are thoughtlessly accommodating quality
– believe preferences are fixed not because they are but because of rigid
habits of thinking • Does not refrain from customization when
– respond to way things have been done in past, habit, without questioning
whether it is necessary
required
• Costs and prices are higher because of lower – “But the global corporation accepts and adjusts
economies of scale and development economies to these differences only reluctantly, only after
relentlessly testing their immutability, after
trying in various ways to circumvent and
reshape them…”
Global Strategy and an

Equidistant Mindset
• Companies tend to focus primarily on the
Ohmae’s Perspective on Global domestic market
Marketing – everything else is the “rest of the world”
• Global Strategy requires a global perspective
– take an equidistant perspective on markets around world
Kenichi Ohmae
– “overseas” should not be part of corporate vocabulary
Managing in a Borderless World
1989 Harvard Business Review
How to Develop a Global

The New Borderless World
Product
• Free Flow of Information Around World • Designing by averages can lead to lackluster
– communication technology has advanced tremendously appeal
– foreign travel is becoming common in many countries • So Design products for lead markets
– ability of governments to restrict information is limited – design different cars for different lead markets
• Therefore, people look for best, least expensive – then sell to worldwide segments that desire each car
products from around world • Nissan example
• Operating Procedures in Many Industries have – Sporty Z model and four wheel drive family vehicle for
Worldwide Standards U.S.
– needs for industrial equipment are becoming – Car suitable for fleet sales in U.K.
standardized in these industries – Small, high quality economy car for Japan
2
Page 219
Different Types of Global Different Types of Global

Products Products
• Ted Levitt’s Globalization • Products requiring insiderization like Coca-Cola
– products lend themselves to aggressive cost reductions – need to replicate complete business system in each
through economies of scale country
• The “Japan game” like battery powered electonic products – need to establish infrastructure in each country to push
– cameras, watches, pocket calculators product and establish local demand
• Premium-Priced Fashion-Oriented Items • Industrial products
– Gucci bags, Mercedes-Benz, Rolex watches – largely chosen on performance characteristics
– wealthy consumers will search for these goods – still need to have insider functions
– operate through a pull strategy • engineering, sales, installation, finance, service
Headquarters Mentality can Get Customers are Becoming More

in Way of Globalization Alike
• If Foreign Operation becomes successful • Needs and preferences are globalizing and
– headquarters might get more involved in decisions
• If Problems Develop Overseas fixed costs of meeting them have risen
– headquarters wants to get more involved • Need to see customers around world from
• Local Autonomy is Restricted and Decisions Made with
Headquarters/Home Country Perspective equidistant mindset
– can’t respond adeptly to needs of local market • This way can see customers around world
• Corporate Systems and Structures can Restrict
Globalization clearly and try to meet needs with a global
– financial statements don’t accurately reflect foreign operations strategy
– reward systems may interfere with globalization
Globalization Is Not an Either -

Or Proposition
• Standardization vs. Adaptation Along a
Quelch and Hoff’s Perspective Continuum
on Global Marketing • Different Elements of the Marketing Mix
And Different Levels of Standardization
John A. Quelch and • Potential for Standardization Depends on
Edward J. Hoff the Situation
Customizing Global Marketing – Type of Product
1986 Harvard Business Review – Type of Country
3
Page 220
Standardization and Product

Problems Created by Lack of
Type - Economies and
Globalization
Efficiencies
• Inconsistent Brand Identities • Standardized Products can Lead to
• Limited Product Focus and Expertise Economies of Scale in Manufacturing and
Among Managers R&D
• Slow New Product Launches • Marketing can potentially Contribute to
Scale Economies
– by Offering Standardized Products
– by Offering Standardized Advertising
Executions
Standardization and Product Standardization and Product

Type - Economies and Type - Amount of Cultural
Efficiencies Grounding
• Standardized Products and Marketing • Products Used in Homes More Subject to Cultural
Programs Conserve Managerial and Other Influence than Those Used Outside of Home
Resources • Industrial Products Less Subject to Cultural
Influence
• Standardized Products and Marketing – Tend to buy on performance and value characteristics
Programs can Leverage Scarce Innovative
• Young People Tend to Be Less Influenced by
Marketing Ideas Cultural Variables in their Purchases
• People who Travel a Lot or are Exposed to
Information from Other countries tend to be less
Culture Bound in their Purchases
Standardization and Type of How Implement Globalization is as

Country Important as Amount of Globalization
• Small Countries Lend Themselves to • Multidomestic Corporation Has Many Strengths
– strong local managers
Greater Standardization – local managers have autonomy to run business effectively
– may not have enough resource to develop their – local managers can be responsive to local environment and can
own programs to same level react quickly to developments
– strong local managers are a good source of new innovative ideas
• Poor Performing Countries are Often Under • Standardization Should be Done in a Way That Retains
More Pressure to Adhere to Corporate Many of these Strengths
Wishes on Standardization – don’t act too quickly or radically
– poor implementation could lead to departure of good strong
managers and their strengths
4
Page 221
Prof. Schorr Product Policy can be Broken

Down into Elements
 Standardization vs. Adaptation Decisions
Can be Made About Each Element
 Each Element can Vary Along a
Continuum from very adapted to very
Global Marketing standardized adapted
– e.g., very adapted, somewhat adapted,
somewhat standardized, very standardized
Product Policy
Global Companies and

Elements of Product Policy
Portfolios of Products
 Global  Product Positioning
 Regional  Branding
 Local  Product Features
 Packaging
 Product Line
 Customer Support
Product Positioning Branding

 Benefits - needs satisfied  Image
 Usage situations  Name
 Position vis-a-vis other brands  Typeface
 Value = quality/price  Logo
 Target segments  Super and subbranding
1
Page 222
Product Features Packaging

 Attributes  Layout
 Specifications  Pictures
 Ingredients
 Instructions
 Taste
 Labeling
 Texture
 Promotions
 Appearance
 Performance Levels  Cross-promotions
 Quality  Language
 Size
Product Line Customer Support

 Which products offered  Service
 Number of variations  Technical Support
 Types of variations  Maintenance
 Which products emphasized  Warranties
 Customer Information and Contact
Product Elements Specific to General Questions Related to Product

Your Product Policy Standardization vs. Adaptation
 Elements of Product Policy to be Thought  What attributes are most important to the customer in each
market?
Out for Your Product Category
 Where are the commonalities in customer preferences?
 This List is Generic  Which preferences are unique and strong?
 Are customers willing to pay more for adaptations?
 What is the cost of adaptations?
 Are the resources available for adaptation?
 What is the incremental volume that can be expected from
adaptation?
 What is overall profitability of adaptation?
2
Page 223
Market Segments and Economic

Status
Marketing in Developing Countries • Tier 1 – greater than $20,000
– Wealthy – High Income
– Very small percentage
“The End of Corporate Imperialism” • Tier 2 - $10,000-$20,000
– Upper Middle Income
C.K. Prahalad and Kenneth – Small percentage, less than 10 percent
Lieberthal • Tier 3 - $5,000-$10,000
– Middle Income
Harvard Business Review, 1998 – But Lower or Lower Middle Income by Standards of Wealthy
Countries
– Significant percentage, about 30 percent
– Standards of Living Rapidly Rising
• Tier 4 – less than $5,000
– Low Income
Tiers In Brazil, China & India

Tiers In Brazil, China & India
Consumer Behavior and

Economic Status Corporate Imperialism
• Tier 1 – responsive to • Big, Emerging Markets
– Great deal of potential for international companies
international brands • Typical Entry Approach
– Use same mindset and marketing strategies as in
• Tier 2 – less attracted to established markets
international brands • Limited, Niche Position in Market
– Can reach upper-income customers (Tiers 1 and some
• Tier 3 – loyal to local customs, in Tier 2)
• Difficulty Penetrating Mass Market
habits, and often local brands – Huge growth potential
– Can’t reach emerging middle-class (Tier 2 and Tier 3)
1
Page 224
Business Model for Emerging Middle

The Solution Class in Developing Countries
• Rethink every element of business model to • Rethink price-performance equation
– Good value for low prices with global standards
appeal to mass market
• Rethink brand management
– Emerging middle class in developing countries – Not do all things the same regarding the brands
not like middle class in developed countries • Rethink cost of market building
• Upper class in developing countries often like – May be profitable to develop local types of products instead of
middle class in developed countries changing habits
– Can use this alternative model and marketing • Rethink product design
– Redesign for local needs and uses and local distribution systems
strategy in large areas of the world (developing
countries) • Rethink packaging
– Size and protection
• Rethink capital efficiency and cost structures
– Rethink business models to lower cost structure
Importance of Distribution Mix of Local and Expatriate

Systems Management
• Invest in local distribution • Get right mix of local and
• National distribution is important foreign managers
–Buy ways to obtain differ by country
–May have to invest in building –Foster two way knowledge
distribution systems in countries flows
with undeveloped national
distribution structure
Importance of Government Careful Consideration of Partners in

Relations Local Markets
• Partnerships are typical way of entering but
• Often necessary to present one subject to problems and tensions
face in dealing with government – Different strategic objectives of partners
• Long term market building vs. short term profits
• One set of policies for all – Local partners often don’t have local consumer and
market knowledge
business units in negotiating • Predate emergence of real consumer markets
• Increasing numbers of companies entering
with government developing countries with wholly-owned
subsidiaries
– 18% in China in 1992
– 37% in china in 1996
2
Page 225
A Portfolio of Global, Regional,

and Local Brands
Global Branding • Global Brands
– Worldwide consistency
• Regional Brands
– Consistency within a region
• Local Brands
– Offered in Individual Countries
• Define the International Scope of Your Brands
– Marketing Strategy Impacted by International Scope
Brands and Country of Origin

Brand Names Across Borders
Positioning
• Meaning of the Brand Name in the Local • Brands are Often Associated with Country of
Languages Origin
• Some Country of Origin Associations are
• Subtle Associations of the Brand Name in
Highlighted in the Brand Positioning
the Country and Local Languages
– Certain Countries of Origin Bring Positive
• Ease of Pronouncing the Brand Name Associations to the Brand
• Ease of Remembering the Brand Name • Some Country of Origin Associations May
Conjure up Negative or Neutral Associations
Overcoming Negative Country Legal Strategies Against Piracy

of Origin Associations and Counterfeiting
• Give it a Foreign-Sounding Brand Name • Register Trademarks and Copyrights in
• Get a Foreign Designer and Emphasize Countries Worldwide
• Emphasize Other Things in Communications
– Such as good value and price
• Lobby Governments for Stricter Laws
• Obtain a Celebrity to Endorse the Brand • Lobby Governments for Stricter
• Make Products for A Strong Brand Enforcement
• Make Private Label Products for a Strong Retailer • Court Cases
• Assemble Part of the Product in a Foreign Country
• Specialize in Niche Products with Positive
Country of Origin Associations
1
Page 226
Marketing Strategies and Transitioning from a Local to a

Protections Against Imitation Global Brand
• Communications Campaign to Differentiate the • Summary Axing
“Authentic” Product from Imitators – Immediately drop and replace with global name
– Usually not recommended
• Distribute a Portion of the Product Offering and • Platform Branding
Offer the Full Offering After the Customer – Develop a global look and feel for the brand platform
Registers the Product – Maintain the local brand name
• Leverage Relationships with Distributors to • Fade-In, Fade-Out
Obtain Better Shelf Space than Imitators – Include both the local and global brand name
– Gradually increase the size of the global name and decrease the
• Innovate Faster than the Imitators size of the local name
• Acquire or Partner with the Imitators • Transparent Forwarding
– Intensive communications program to alert customers to change
2
Page 227
Global Brand Leadership

• Global Brand Leadership, Not Global
Aaker and Joachimsthaler’s Brand Standardization Should be the Goal
Perspective on Global Branding • Global Brand Strategy Should Coordinate
and Leverage Country Brand Strategies
“The Lure of Global Branding”
David Aaker and Erich Joachimsthaler
Harvard Business Review, 1999
Difficulties of Globalizing A Nuanced Approach to Global

Brands Brand Management is Needed
• Economies of Scale Often Elusive • Sharing Insights and Best Practices
• Influence of Cross-Border Media Often Worldwide
Overstated • Using A Consistent Global Brand Planning
• Successful Global Brand Teams Difficult Process Worldwide
to Form
• Assigning Global Coordination
• Company Resources, Customer Responsibility for Brands
Characteristics, and Competitive
Conditions Differ Across Countries • Delivering Brilliance
Using A Consistent Global

Sharing Insights and Best
Brand Planning Process
Practices Worldwide
Worldwide
• Formal Meetings • Analysis Frameworks/Templates
• Informal Meetings • Monitor Brand Associations
• Communications Technology • Monitor Brand Equity
• Internal Intranet and Databases • Communicate Brand Identity Internally
• Link Country Brand Strategy to Global
Brand Strategy
1
Page 228
Assigning Global Coordination

Delivering Brilliance
Responsibility for Brands
• Senior Executive Group or Individual Responsible for • Look for Most Brilliant Ideas Across the
Global Brand
– Business Management Team Globe
– Brand Champion
• Middle Management Group or Individual Responsible for
• Transfer Good Ideas Across Borders
Global Brand • Roll-Out Brilliant Innovations Across
– Global Brand Teams
– Global Brand Manager
Borders
• Some Aspects of Brand Management Influenced Heavily
by the Global Teams or Managers
• Some Aspects of Brand Management Left Mostly at the
Local Level
Conclusion
• All Companies Should Engage in Global
Brand Leadership Holt, Quelch, and Taylor on
– But Not Necessarily Global Brand Global Branding
Standardization
“How Global Brands Compete”
• Companies That Use Unconnected and
Douglas Holt, John Quelch, and Earl
Directionless Local Brand Strategies Will Taylor
Find Mediocrity as Its Reward Harvard Business Review, 2004
Challenge for Global Brands Dimensions of Strong Global Brands
• Glocalization in Managing Global Brands • Quality Signal (44% of variance in preference for
global brands)
• Lightening Rods for Antiglobalization – Global products seen as high quality
• Very Salient in Minds of Consumers • Global Myth (12% of variance)
– Global products tie people to a shared, perhaps
imagined, global identity
• Social Responsibility (8% of variance)
– Expect global brands to behave responsibly and hold
these brands to a high standard of social responsibility
• U.S. Brands were not perceived more negatively
or positively
2
Page 229
Opportunities and Responsibilities

Global Consumer Segments
in Managing Global Brands
• Global Citizens (55%) • Manage Brand as a Global Symbol
– See global success of a brand as signal of quality and innovation,
concerned about social responsibility • Manage the Dark Side
• Global Dreamers (23%)
– See global brands as quality products and readily buy into the • Build Credible Myths
myths associated with the brands, less concerned about social
responsibility • Treat Antiglobals as Customers and Try to
• Antiglobals (13%) Gain their Trust
– Skeptical that global brands are higher quality and don’t trust their
social responsibility • Be Proactive in Social Responsibility
• Global Agnostics (8%)
– Don’t base purchase decisions on whether brand is global or not
3
Page 230
Prof. Schorr Aspects of International and

Global Communications
 Target Audience
 Objectives
 Theme and Message
 Platform
Global Marketing  Execution
 Budget
International and Global Advertising,  Media and the Communications Mix
Promotion, and Communication
Target Audience Objectives

 Who is the target audience in each country?  Consistency with Other Marketing Mix Elements
 Positioning Objectives
 How broad is the audience?  Image vs. Product Benefits
– Mass vs. Targeted  One-Way vs. Two-Way Communications
 How similar are the target audiences across  Pull vs. Push Marketing
countries?  Objectives and the Product Life Cycle
– Cognitive: Awareness and Knowledge
 Is it possible to target an intermarket – Affective: Liking, Preference, Conviction
segment? – Behavioral: Trial, Repeat Purchase
– Switch Users from Competitors vs. Develop New Users
– Reinforcing Existing Uses vs. Generating New Uses
for Product
Theme and Promotional Message Platform

 What is the theme and general message you want  Structure
to convey? – Order
 What are the benefits or attributes emphasized? – Placement of Items
 What is the message regarding the positioning of  ColorScheme
the product?
 Melody
 What is the type of image presented?
 Tone
 Coca-Cola
– soothing, relaxing drink that fits with contemporary
 Form
lifestyles
– “Can’t Beat the Feeling”; “I Feel Coke”
1
Page 231
Platform and Tone Platform and Form

 Emotional vs. Informational  Announcement
 Display
 Humorous vs. Serious  Association Transfer
– Lifestyle, Celebrity
 Argumentative vs. Narrative
 Lesson
 Competitive vs. Non-competitive  Drama
 Hard Sell vs. Soft Sell  Entertainment
– Humor
 Direct vs. Indirect  Imagination
– Cartoon
– Mostly in words or in pictures
 Special Effects
Execution Budget
 Source  Objective and task - 64%
– Actors
 Percentage of sales - 48%
– Celebrities
 Content  Executive judgment - 33%
– Words  All you can afford - 12%
– Images/Visuals
 Matched competitors - 12%
– Music
 Settings  Same as last year plus a little more - 9%
 Same as last year - 3%
Media and The Communications

Media Strategy
Mix
Advertising
Which media or communications vehicle

– Television, Radio, Newspapers, Magazines 
 Direct Marketing

– Infomercials, Catalogs, Direct Mail, E-mail, Telemarketing, Internet Marketing
Sales Promotions
for which messages
 Percent of budget allocated to each media
– Samples, Coupons, Rebates, Price and Bonus Packs, Premiums, Tie-ins, Continuity programs,
Contests
 Trade Promotions
– Slotting allowances, Coop advertising, Floor planning, Temporary price cuts, Volume
discounts, Contests
or communications vehicle
 Public Relations
 Sponsorships
 Product Placements
– Products in movies and television shows
 Personal Selling
 Sales Force Promotion Tools
– Trade shows and conventions, Sales contests, Promotional gifts
2
Page 232
Selecting Media and the Scheduling of Media and

Communications Tool Communications Vehicles over Time
 Availability  Schedule over Course of Year
 Regulations  Schedule over Course of Week and Day
 Habits and Intended Audience  Schedule the Intensity
– which media or communications vehicle is our
– Even
target audience most receptive to
– Pulse
 Fit of the Objectives/Message to the Media
or Communications Vehicle – Blitz
 Cost
Determining the Schedule Consumer and Trade Promotions

 When is our target audience most likely to  Mostly a local activity
be exposed to the communications? – economic development
 Seasonality of product usage and exposure – culture and perceptions
 Introduction of a new product – regulations
– pre-launch, launch, post-launch – retail structure
 Communicating new information about a – infrastructure for promotions
product
 Response to competition
Consumer and Trade Promotions Agency Selection

 Increasing Headquarters Involvement  Different Agencies Different Countries
– Cost  Same Agency Across Countries - Little
– Complexity Coordination
– Global Branding  Same Agency Across Countries - Much
– Transnational Retailing Coordination
3
Page 233
Constraints in International Trends in International

Advertising Advertising
 Cultural and language differences  Deregulation of Media
 Different regulations  Growth of Commercial Television and Radio
 Different infrastructures  Growth in Cross-Border Cable and Satellite TV
– media availability, agency availability, research data availability  Increased Availability of Global Media
 Different consumer characteristics and attitudes  Growth of Global Advertising Agency Networks
– economic status, literacy, role of advertising in society  Growth in Worldwide Sports and Events Sponsorships
 Different market characteristics  Growth of Product Placements in TV and Film Reaching
– stage of product life cycle, competitive environment Global Audiences
 Different product strategies  Growth of Advertising in Emerging Countries
– differences in positioning, packaging across countries
 Potential of the Internet
The Product Portfolio and

Growth in Global Advertising
Global Marketing
 Trend toward harmonization of strategic  Distinguish among global, regional, local
elements of advertising brands
 While maintaining flexibility at local level
for execution
 Think Globally, Act Locally
Global Brands Regional Brands

 Highest level of headquarters influence  Moderate level of regional management
 Headquarters promotes coordination of influence
marketing strategy  Regional management promotes
– certain marketing elements may be coordination of marketing strategy
standardized – certain marketing elements may be harmonized
 Implementation left to local level across countries
– perhaps with guidelines and approval  Implementation left to local level
procedures – perhaps with a few guidelines and approval
procedures
4
Page 234
Local Brands
 Highest level of local autonomy
 Development of marketing strategy and
execution left at local level
– little need for coordination
– little need for guidelines and approval
procedures
 Information may be transferred across
countries but with no attempt to influence
local managers to adopt new ideas
5
Page 235
The Grid and The Grid Revisited

• Stars of film wore new line of sunglasses
The Global Brand Face-Off from a eyewear brand.
• Created much publicity for the company’s
brand and its new line
Anand P. Raman
Harvard Business Review, 2003
Natasha Singh – Executive Vice

Espoir’s Marketing Decision
President of Global Marketing
• Espoir is a major global cosmetics brand • Made Espoir’s Indian business successful
• Positioned for women who are smart, independent, risk
takers by challenging headquarters ideas
• Opportunity to sponsor sequel to Diana’s She Devils • In India can get a facial for Rs 300 ($6.66)
• Three stars are from Europe, Asia, and South America
or a manicure for Rs 75 in a beauty parlor.
• Create three new lipstick and nail polish combinations in
right palette for each of three stars • Why pay Rs 120 for lipstick or Rs 75 for
• Launch new combinations at same time as film and nail polish?
associate the stars with the advertising
Indian Success U.S. Reaction

• Reduced pack sizes - 8 ml vs. 12 ml
• Willing to help pay for campaign because
• Slashed prices - Rs 35 vs. Rs 75
• Penetrated small retailers around country two of stars represent big ethnic markets in
• Small trays of lipsticks and nail polishes created for small U.S.
retailers to place on counters
• Local market leader 12ml for Rs 30
• Introduced purple shades to fit with current rage in
traditional Indian dresses
• Later had to introduce global colors in India because
consumers were asking why weren’t available
• So segmented market, less expensive local line and more
expensive international line
1
Page 236
Western European Reaction Eastern European Reaction

• Revlon had boosted top-of-mind awareness • Manager claims Eastern Europe is different from rest of
world
by tying in with movies, like the Bond film • Movie promotions won’t help sales. We are in beauty
Die Another Day business, not movie business
• Wanted to appoint beauty queens like Miss Russia and
• Positive to Global Movie Sponsorship idea Miss Ukraine as brand ambassadors
• But, argued website to buy customized • Contests where write in with suggestions for new colors,
each beauty queen will pick her favorite, and there will be
products from Espoir would need to have a lots and lots of prizes
different look and feel from the U.S. and a • Brand not well known, so major goal is to develop brand
as quick as possible
different name to appeal to Europeans • Manager threatens to leave if force the global campaign
on him
Indian Reaction Arguments for Global Campaign

• Many new department stores opening in cities, easing retailing
bottlenecks • Trend toward global convergence in customer
• Many international brands now competing in market tastes
• Farmers adopting cell phones
• Internet cafes every two miles in countryside • Global movies a good way for reaching targeted
• Rooftops crowded with satellite TV dishes segments around the world
– Customers asking for latest global colors advertised on satellite TV from
other other countries • Cost Savings
• Billboards in countryside for Cosmo, Elle, Friends
• Point of reference for rural areas used to be closest large city, now it is • Quality of global campaigns is typically better
becoming the world
• Hollywood films doing well in India recently, in addition to
than what can be done locally
Bollywood films – better dubbing, quick global releases, less import • Leveraging good knowledge and ideas worldwide
regulations
• But still need local responsiveness because of large income
differences and cultural differences
Arguments Against Global

Expert Reactions to the Case
Campaign
• Many companies that have tried globalizing • Singh is on right track to want to globalize marketing more, but needs
to find the right balance balance between globalization and localization
marketing have failed at it • She needs to keep Espoir’s marketing programs relevant to local
• Global approaches tend to either over- markets as global scale and best practices are leveraged
• She has to get buy-in of frontline executives who will be
standardize or oversimplify implementing the program
• Global approaches tend to discourage local • She has to become less of a developer of marketing programs and
more an orchestrator
innovation • Achieving both global scale and local relevance requires time and a
• Espoir brand may have different images in flexible approach
different parts of world • The organization and implementation of the global marketing
approach is key
2
Page 237
Expert Recommendations
• A team of managers from the different regions/countries should
develop and shape global marketing ideas
• Identify areas of marketing that must be globally consistent and leave
other areas of marketing to the decisions of local managers
– Marketing strategy may be more globalized while execution can be left to
local control
• Identify global products that must be more standardized across
countries and then allow other products that are country specific
• Create a global communications platform and menu of options, but
local managers can choose from the menu and add local elements to
the global platform
• Quantify both the benefits and costs of global consistency and develop
a measurement system for tracking in future
3
Page 238
Modes of Entry into

International Markets
• Increasing Commitment, Risk, Expertise,
and Control
International Distribution and
– Indirect Exporting
Retailing – Direct Exporting
– Licensing
Global Marketing
– Joint Ventures
Prof. Schorr – Direct Investment
• Marketing and Sales Subsidiaries
• Manufacturing Subsidiaries
Distribution and Retailing Traditional Retailing

Environments Across Countries Environments
• Distribution and Retailing Environments are • Traditional Retail Formats
Highly Localized
– Outdoor Stalls - Street Markets
– Different Retail and Distribution Structures in
Different Countries – Small “Mom and Pop” Retailers - The Corner
– Retailers and Distributors Tend to be Local Players Market
– Relationships with Retailers and Distributors Needs
to be Localized • Early Modern Form of Retailing
• Recent Trends are Making Distribution and – Department Stores
Retailing Environments More Similar Across
Countries
International Trends in Retailing Growth of Large Scale Retailing

• Growth of Large Scale Retailing • Increase in Number of Large Stores
• Rise of Discount Stores • Growth of Chain Stores
• Internationalization of Retailing
• Movement to City Outskirts
• Retailers are Taking Power from Branded
Manufacturers • Rise of Shopping Malls
• Increasing Sophistication of Information Systems
• Greater Ability to Shop Anytime, Anywhere
• Opportunities for Internet Retailing
1
Page 239
Rise of Discount Stores Internationalization of Retailing

• With Quality Products • Pan-European Supermarket Chains
• Including Branded Goods • International Hypermarket Chains
• Department Stores Operating Across
Borders
• Worldwide Retailing in Narrow Categories
– Ikea and Toys’R Us
Foreign Retailing Investments

A Few Major Global Retailers
In China
• Wal-Mart • Carrefour
– One of Mexico’s largest retailers
– Stores in South America and Asia
• Wal-Mart
– Stores in U.K. • Makro
• Makro, Dutch Wholesale Club • Metro
– One of SE Asia’s largest retailers, $2B Sales • Lotus
– Stores in Latin America
• Carrefour, French Hypermarket • Ikea
– One of Brazil and Argentina’s leading retailers
– Stores in Asia
• Japanese Department Stores
– Stores Throughout Asia
• Costco
– Stores in North America, Northeast Asia, and U.K.
• Toys’R Us
• Ikea
Local Copies of Global Increasing Sophistication of

Retailers Emerging Information Systems
• Japan • Increase Efficiency and Lower Costs
– Victoria Sports • Better Understand Customers
– Aoki, Aoyama Men’s Suits
• More Sophisticated Marketing
• Hong Kong
– including more precise targeting
– Grand Mart
– M-Mart
• Korea
– E-Mart
2
Page 240
Retailers Are Taking Power from Ways Branded Manufacturers Can

Branded Manufacturers Respond to Powerful Retailers
• Reinforce Pull Marketing
• Consolidation of Retailers – Reinforce quality image
• Retailers are Extracting Greater Price – Discredit private brands
– Relationship marketing
Concessions • Provide Adequate Push Marketing
• Lower Your Costs Through Efficiencies
• Growth of Private Label Goods – Lower Prices to Diminish Price Gap
• Retailers are Making Their Names into – Eliminate the Gouge Factor
– Use Promotional Pricing
Strong Brands • Negotiate with Retailers on a Global Basis
• Establish Strategic Partnerships with Retailers
– Category Management
• Innovation
Greater Ability to Shop Opportunities for Internet

Anytime, Anywhere Retailing
• Longer Hours for Retail Stores • Certain Segments of Most Countries
• Growth of Direct Marketing Have Internet Access
• Internet Retailing Provides New
Possibilities for Market Entry
• Internet Retailing Gives Customers
Greater Information, Selection, and
Bargaining Power
Global Retail Trends and

Implications for Manufacturers
• Simplifies the Task of International Distribution
– Allows for Entry into a New Country with Less
Investment
– Allows for Greater Standardization of Distribution
Across Countries
• But It Comes at a Price
– Lose Power to Global Retailers
– Price Concessions Extracted
– More Dependent on a Small Number of Powerful
Retailers
– Risk of Losing Retailer to Another Manufacturer
3
Page 241
Prof. Schorr Factors to Consider in Setting

Prices in International Markets
 Company Internal Factors
 Cost and Profit Factors
 Market Factors
 Environmental Factors
Global Marketing  Managerial Issues
Pricing for International Markets
Company Internal Factors Internal Cost and Profit Factors

 Consistent with Marketing Strategy and  Manufacturing costs
Other Elements of the Marketing Mix – direct manufacturing costs
– Consistent with target market characteristics – indirect manufacturing costs
– Consistent with product positioning and image  Selling, marketing, and general
 Consistent with Company Strategy and administrative costs
Goals  Profit margin
– Marketing skimming vs. penetration pricing  Manufacturer’s selling price
– Profitability vs. market share goals
Cost and Profit Factors External Export Related Costs and Price
to the Company Escalation
 Costs Related Either to Domestic, Overseas Production, or Export  Costs of shipping, insurance, tariffs, taxes,
Sales
– Taxes importer margins, and distribution margins can
– Distributor Margins make retail prices in export markets much higher
 wholesalers
than domestic retail prices
 retailer
 Costs Related to Exporting  How to lower price escalation
– Transportation and Insurance Costs – price based on marginal costs
– Tariffs
– eliminate layers of middlemen in importing and
 Manufacturer’s Selling Price Plus Above Costs Determine Final Price
to Customer distributing the product
– redesign product to lower costs
– set up production in overseas markets
1
Page 242
Market Factors Environmental Factors

 Demand  Government Regulations
– demand vs. supply – price controls
– price elasticity of demand – anti-dumping laws
 Income Level of Country  Inflation Rates
 Competition  Foreign Exchange Rates
– price levels
– intensity
– differentiation of product
 Product Life Cycle Stage
Managerial Issues
 Relative vs. Absolute Pricing
 Multidomestic vs. Global Strategic Orientations
 Coordination and Pricing Policies
– global customers and potential need for coordination
 Gray Market Problems
 Product Characteristics, Package Sizes, and Prices
2
Page 243
Prof. Schorr
Segmentation Strategies
 National Market Segment Strategy
– Primary Segmentation Variable: Within Each
Country
 Country Clusters Market Segment Strategy
Global Marketing – Primary Segmentation Variable: Groups of
Similar Countries
 Global Market Segment Strategy
Segmentation – Primary Segmentation Variable: Factors that
Cut Across Countries or Regions
Criteria for Grouping Countries - Criteria for Grouping Countries -

General Characteristics Product Market Specific Variables
 Economic Grouping  Size of Market
 Geographic Grouping  Growth of Market
 Political Grouping  Competitive Intensity
 Religious Grouping  Product Life Cycle Stage
 Cultural Grouping  Customer Acceptance of Product
 Quality of Life Grouping  Customer Knowledge of Product
 Product Usage Grouping  Other Criteria Relevant to Your Product
Market
Formal Technique for Grouping Customer Trends Across

Countries Countries
 Cluster Analysis  Increasing Homogenization
– a statistical technique  Increasing Segmentation
– groups countries into clusters – customers are being segmented into more
– countries within a cluster are relatively similar specialized segments
to each other on the variables used for the  How Can These Two Trends Be
clustering
Reconciled?
– multiple variables can be used to cluster
– specialized segments can be enlarged by
countries
segmenting across countries
 using intermarket segments
1
Page 244
Potential Intermarket Segments -

Emerging Intermarket Segments
Teenagers
 Teenagers  Common Needs
 Working Women  Common Products and Services
 Middle Class Families  Common Media
 Upscale Consumers  Common Icons and Vocabulary
 Business Managers
Potential Intermarket Segments - Business

Managers
 Have Many Similar Needs
– effectively and efficiently carry out managerial responsibilities
 Desire Similar Products and Services
– notebook computers, pocket organizers, calendar and address book
software, cellular phones, briefcases, airline travel, hotels, business attire,
etc.
 Can Be Targeted with Global Media
– Economist, Wall Street Journal, International Herald Tribune, Financial
Times, Business Week, In-flight Magazines
– CNN, BBC
 Have Similar Icons and Vocabulary
– many speak English
– many read same business books and are familiar with similar managerial
theories and practices
 Porter, Drucker, Peters, Ohmae, Iacocca
2
MRKT-465: Assignments
Page 245

MARKETING 465
ASSIGNMENT # 1
Professor Schorr
Fall, 2006
The goal of this assignment is to give you experience in conducting environmental

analyses of a selected country and considering the implications of the environment on marketing.
Select any country in the world that interests you, and develop environmental profiles for that
country. Note: Do not select a country where a group member has lived for more than three
months.
1.) Develop a cultural and social profile of the country. Consider the implications of the cultural
and social environment for marketing in that country.
2.) Develop an economic, financial, and technological profile of the country. Consider the
implications of the economic, financial, and technological environment for marketing in that
country.
3.) Develop a political and regulatory profile of the country. Consider the implications of the
political and regulatory environment for marketing in that country.
4.) Summarize the highlights of the environmental analyses, and summarize the implications of
the environmental factors for marketing.
Be sure to reference sources of information. Feel free to use exhibits to help present your
profiles, if appropriate This assignment is due at the beginning of class on September 13.

Page 246
Criteria used for analysis:
Population: The population indicates the total population of the given countries. Ranks
were assigned to the countries based on the total population, higher populations being
assigned higher ranks. Although much of populations may not be able to afford the
product in question, this is adjusted for with the disposable income and GNI per capita
indexes. Population was given a 12% weight because it is important in determining the
market size which directly correlates with the potential profit to be made in each country;
the population is not as important of an indicator as other factors which more accurately
display the amount of the population may be captured with this product.
GNI per Capita: The GNI per capita indicates the Gross National Income per citizen of
the given country. Ranks were assigned to the countries based on a higher GNI per
capita indicating a more attractive market. Countries with the highest GNI per capita are
likely to be best able to purchase the product. GNI per capita was given a 10% weight
because it’s not as strong of a determinant in ability of consumers to purchase the
product, with more weight given to the related criteria of disposable income.
Technology Infrastructure/ Internet Users: Tech infrastructure indicated the amount

of technology available to consumers, most notably the number of computer in use in the
market per capita; it is necessary for a consumer to have a computer to be able to use an
mp3 player, therefore there must be a high computer usage rate for consumers to even
consider purchasing the product. Countries with a higher computer usage per capita were
given higher rankings, because it would follow that they are more likely to purchase mp3
players. Tech Infrastructure was given a 20% weight because the product’s success
depends highly on the amount of infrastructure, specifically PCs, in place within the
country in question.
Disposable Income: Disposable income is the amount of income that consumers are
able to keep for the purchase of luxury items, such as mp3 players. As mp3 players are
largely seen as a luxury item, high disposable incomes are necessary in order for
consumers to consider purchasing mp3 players. Ratings were assigned to countries based
on highest disposable income levels, adjusted to a common currency. Disposable income
was given the high weight of 20% because it is seen as one of the most important factors
leading to the adoption of mp3 players into the population. Only if consumers have high
disposable incomes will they be able to purchase mp3 players.
Lack of Saturation: Lack of saturation indicates the stage of penetration in regards to

mp3 players that the market is currently in. With a high lack of saturation (i.e. low
market saturation), markets are more attractive due to the lack of competition and market
penetration. Markets with high levels of saturation were rated least attractive, while
markets with low levels were labeled most attractive. The market saturation factor was
given a weight of 15% largely because it is very important in a market such as mp3
players, where the first into the market tends to become the market leader (i.e. iPod in the
United States). Nonetheless, it is not as determinant of a factor as disposable income or
tech infrastructure because it is most important for consumers to have the ability to

Page 247
purchase the product (these two highest weighted indicators are signs of purchasing
power in relation to mp3 players)
Consumer Electronics Growth Rate: The consumer electronics growth rate indicates
the growth in the given countries of the consumer electronics industry over the last two
years, representing signs for future growth of the mp3 market important in determining
long-term company goals. Countries were rated based on GMID data on the growth rates
in the luxury consumer goods sector, with higher growth rates given a higher overall
rating. An 18% weight was given to this category because of its importance in
determining where the market is heading over the coming years, and thus a strong
indicator of potential growth in company products after entering the market.
Age distribution: Age distribution indicated the percentage of country residents within
the

Page 248
The worldwide markets for MP3 Players

I. INTRODUCTION TO MP3 PLAYERS
MP3 players
1. Product description
o Generic term used to refer to portable digital audio players.

o Device that stores, organizes and plays digital music files:
i. downloaded music from online music stores  internet
connections
ii. music ripped from Compact Discs via computer  PC
o Wide range of types and models
o Range in price from US$300 to US$500 target: high income levels and
countries
o Benefit: convenience of storing 1,000-5,000 songs
2. Product use
o Users often connect players to car and home stereos
o The growing cell phone market is adopting MP3 capabilities
3. Market overview
o MP3 are currently enjoying the most dynamic growth in
personal/portable audio products growing market for MP3, not
saturated!!! No need to look for high income levels in emerging countries;
better to directly focus on high income countries
o Most of the growth results from the success of Apple's iPod
o Mp3 demand remains in its infancy in several major markets, notably the
UK: consumer reluctance to change from mini-disc to MP3  there is a
large room in developed rich countries
o Research firm IDC predicts that the MP3 player market will experience 20
% growth each year for the next few years and hit $58 billion in
revenues in 2008
o Spain: growth of 562% from February to September 2004.
o China's market for MP3 players:
i. growing with a 250-per-cent increase year-on-year in demand for
MP3 chips predicted (nov 2004)

Page 249
ii. In 2004, China's MP3 player market maintained a momentum of

fast growth, seeing a steady rise in both sales volume and sales
revenue. Falling flash chip prices and intensified market
competition resulted in continuous price drop in the MP3 player
market and a gradual expansion of the user base that could afford
it. Together with a growing recognition and acceptance among
users, MP3 players gradually spread. As small- and medium-sized
brand vendors entered the market with a low price strategy and
overall product prices dropped, there was a notable fall in market
concentration. Personalization and large capacity were the two
major features of MP3 player innovations in China in 2004
(http://www.globaldp.com/ConsumerGoods/ConsumerElectronics/
AnnualReportonChinaMP3PlayerMarket.html).
o US market:
i. “In 2006, the MP3 and portable audio player market is worth an
estimated $5.7 billion in manufacturer sales, almost three times its
worth of just over $1.9 billion in 2001.”
(http://www.marketresearch.com/browse.asp?categoryid=1436&SID=38753965-
312454812-282130481)
ii. The % of U.S. households with MP3 players will jump from about
6 percent in 2004 to as much as 25 percent by the end of 2006.
o The top brands and manufacturers of MP3 players are not well-known
(with the exception of IPOD)
The goal of this assignment is to give you experience in analyzing country markets
to prioritize countries in terms of attractiveness for marketing a specific product or
service.
II. MAIN CRITERIA
1.) Use a filtering model for selecting a short list of eight to ten countries from all
countries around the world to analyze in more detail. Describe and justify the criteria
that you used in this initial filtering process. Obtain data for your filtering criteria.
Describe how you came up with this short list using your filtering model. Attach
copies of the data that you used for you filtering model and annotate the data to show
how you filtered out the most attractive countries for your short list.
The following criteria have been used to set up the final list of 8 countries by using the
filtering system.
1. High-income countries

Page 250
We will focus on those countries with high income levels and large numbers of
wealthier people. There are 54 high-income countries.
2. GNI per capita: > 25 000
3. This indicator shows the size of the economy. We have selected the biggest
economies.
4. GDP growth: > 2,5%  growing eco
5. GDP ppp: > 1.000.000 mn$ in 2006
6. Population
7. We are seeking countries with around 50 millions people. The biggest the
population in high-income countries, the biggest should be the potential market
for MP3.
8. Age distribution
MP3 customers are aged between 15-64 years. We will select those countries with
a % of 65 or more of this population.
9. Annual Disposable income
10. Households (% of total) with an annual disposable income over US$25,000
We have selected an income of $25000 as an indicator of attractiveness. People have to
afford without too much effort the purchase of MP3.
PC's in Use: # per capita > 0,4
11. Internet users
We look for those countries with a % of internet users above 40%. As we said
earlier MP3 involve the use of the internet to download music.
12. Total Consumer Electronics: Global Volume Sales % Growth
We are interested in those regions in which the % of growth in global volume
sales of consumer electronics is higher. That is why we will pay attention to Asia-
pacific, Western Europe and North America.
Other criteria
1. Inflation
The countries selected should have inflations rates around 3% or less.
2. MP3 market growth
o “China's market for MP3 players is growing with a 250-per-cent increase
year-on-year in demand for MP3 chips predicted.”(Nov 2004)
o “The percentage of U.S. households with MP3 players will jump from
about 6 percent in 2004 to as much as 25 percent by the end of 2006”
(January 2006)

Page 251
Filtering system
Having ranked all the countries we have selected those which fulfilled all the requirements or
criteria above mentioned. In such a way we have been able to list 8 attractive countries for the
MP3 market.
List
1. USA
2. UK
3. JAPAN
4. Hong Kong, China
5. Germany
6. South Korea
7. France
8. Italy
Source: https://www.cia.gov/cia/publications/factbook/fields/2092.html
http://devdata.worldbank.org/data-query/
III. SHORT CRITERIA ANALYSIS
Use a quantitative multi-factorial model for evaluating your short list of countries and
prioritizing the short list in terms of attractiveness for your product or service. Describe
and justify the criteria you used for evaluating your short list of countries. Justify the
weights you assigned to each criterion. Obtain data related to your criteria for your short
list of countries. Describe the system you used for assigning ratings to the criteria. Attach
a copy of your table or spreadsheet containing the weights, data, ratings, and overall index

Page 252
for each country. Which countries are most attractive based on the quantitative analysis?
Rank the attractiveness of the countries based on this analysis. Discuss why the top
countries come out as most attractive based on the quantitative model. Explanations of
criteria used for analysis (discuss in this paragraph).

of technology available to consumers, most notably the number of computer in use in the
market per capita; it is necessary for a consumer to have a computer to be able to use an
mp3 player, therefore there must be a high computer usage rate for consumers to even


Page 253
Age distribution: Age distribution indicated the percentage of country residents within
the age group most likely to purchase mp3 players, those aged 15 to 64. The age
distribution of the market is important in determining its attractiveness in that markets
with a high percentage of the population in this age group are more likely to catch on to
new technologies, such as the mp3 player, and are more prone to purchase trendier
consumer electronics. Countries with the highest percentages of population in the age
group 15 to 64 were given the highest rankings in this category, and vice versa. A 5%
weight was placed on this category because, although it is important for the market to be
comprised of this target age group, this factor was not considered to be as important as
any of the other factors for the aforementioned reasons in the preceding paragraphs.
Short Criteria Summary: Based on the quantitative model, Japan is ranked as one of
the most attractive markets to enter due to its relatively low points ranking. Although the
market is very saturated already, the Japanese economy has one of the highest consumer
electronic growth rates. The high technological infrastructure suggests that the Japanese
often invest in faster, stronger, and state-of-the-art technologies whenever available as to
keep up with the economic world leaders. The United States has a very large population,
high GNI per capita, high technological infrastructure, relatively considerate disposable
income levels, and is one of the largest consumer electronic growth markets. It is a prime
market to enter due to the fact that although the market is somewhat saturated, the high
disposable income leads to people spending more on new products even if they have a
similar substitutes. South Korea is a relatively unattractive market because it has a
relatively small population, relatively low average disposable income levels, and low
GNI per capita. Although the country passed through the filters, the market economy is
just relatively too poor for us to enter.
IV. QUALITATIVE ANALYSIS
(MEGAN’S PART)

Page 254
2.) Be sure to do a qualitative analysis of your countries in addition to the quantitative

analysis. Discuss your qualitative analysis. Which countries are most attractive based
on your qualitative analysis? Rank the attractiveness of the countries based on this
analysis. Discuss why the top countries come out as most attractive based on the
qualitative analysis.
V. SUMMARY
3.) How consistent are the quantitative and qualitative conclusions? If they are
consistent, explain why you think they are consistent. If they are not consistent,
explain why you think they are not consistent. If they are not consistent, how would
you rank the attractiveness of the countries?

Page 255
Worldwide Markets for MP3

Players

Assignment 2
Elizabeth Doherty
Michael Marzouk
Keith Parker
Megan Ramer
Gisela Vendrell
1
Page 256
I. INTRODUCTION TO MP3 PLAYERS
This analysis will conclude in the development of a list with eight countries that are most
attractive to the MP3 player market. To begin, a brief overview of the product itself is
necessary. The term MP3 player is a generic term used to refer to portable digital audio
players. Namely, these are devices that store, organize, and play digital music files. The
user of an MP3 player would load their MP3 player with songs downloaded from the
Internet or with music “ripped” (the process of copying music from your CDs to your
hard-drive) from traditional CDs using a computer. It is important to note that ownership
or access to a computer is a definite prerequisite to the purchase of an MP3 player, as
computers are necessary to load the MP3 player with music and/or other data types.
There are a wide range of types and models of MP3 players available to current markets
today. Range in price is from US$60 to US$400; thus this analysis will emphasize an
interest in high-income countries, especially as computer access is necessary for a market
to be desirable. The main benefit MP3 players provide over traditional methods of
playing music is its ability to store thousands of songs with easy access in a small
package.
MP3 players are often connected to home stereos or in cars to play music through these
systems. Concurrently, there is a growing market for pseudo-MP3 players with cell
phone capabilities, video capabilities, and other varieties of uses.
An overview of the current MP3 player market shows that MP3 players are currently
enjoying the most dynamic growth of any product in the ‘personal or portable audio
product’ market; vis-à-vis the attractiveness of high income markets, our interest in these
markets is validated by the lack of market saturation and continued growth in the MP3
player market in high income countries. Most of the growth in the MP3 player market
has been the result of the wildly successful Apple iPod®. MP3 demand remains in its
product cycle infancy in several major markets, notably the United Kingdom; consumers
in the UK have shown a reluctance to change from mini-disc players to MP3 players,
therefore there is still much room for growth. The research firm IDC predicts that the
MP3 player market will experience 20% growth each year for the next few years and hit
US$58 billion in revenues towards 2008. In Spain there was a growth of 562% from
February to September 2004 alone. China’s market for MP players has also shown
attractive, with a 250% increase year-on-year in demand in MP3 players predicted. In
2004, China’s market for MP3 players maintained strong momentum in its growth, seeing
a steady rise in both sales volume and sales revenue. Falling chip prices and intensified
market competition resulted in continuous price drops in the MP3 player market,
combined with a growing recognition and acceptance among users, have resulted in large
growth in the Chinese market. The US market has proven its worth in this market as
well, with an estimated US$5.7 billion in manufacturer sales in 2006 (almost three times
its worth of just over US$1.9 billion in 2001. Furthermore, the percent of US households
with MP3 players is expected to jump from six percent in 2004 to as much as 25% by the
2
Page 257
end of 2006. Nonetheless, the top brands and manufacturers of MP3 players are not well
known, with the exception of the iPod®.
II. MAIN CRITERIA
Through the utilization of a complicated filtering model, we have prioritized countries in

terms of attractiveness for marketing MP3 players. After analyzing country markets, we
have selected a short list of eight countries from all the countries in the world to examine
in more detail. The following criterion was used in this initial filtering process.
High-Income Countries: After immense contemplation, our group decided to focus on

wealthy countries possessing a significant “high-income” population. High-income
countries are ideal for MP3 players because inhabitants will likely possess the disposable
income, as well as the technological education, to purchase and use them. Through in-
depth research on the MP3 market, we found that no country already possesses a
saturated MP3 market. Therefore, our group decided to focus on markets where it is
feasible and viable for a large number of consumers to afford and desire MP3s. According
to our data, there are fifty-four countries classified within these terms.
NOTE: Initially we decided to aim our marketing effects toward upper- and
lower-middle income countries. This notion was based on the principle
foundation that high-income countries will likely already possess a saturated MP3
market, as disposable incomes are high and MP3 players have recently become
increasingly popular. We wanted to focus on finding a less saturated market
where our MP3 could quickly gain market share upon introduction. However,
after applying a complete filtering model to these upper- and lower-middle income
countries, we realized that the data associated with upper- and lower-middle
income countries (i.e. GDP, growth rate, population density, number of PC’s in
use, etc.) was not in concordance with what we felt to be the necessary
characteristics for an ideal country for MP3 players. Ultimately our filtering
model concluded with the following countries: Argentina, Chile, Czech Republic,
Hungary, Malaysia, Russian Federation, Slovak Republic, Thailand, Turkey
(please refer to the Appendix for data and the criteria used with this version of the
filtering model). Although this list seemed reasonable, we did not believe that
these ten countries were the absolute best for our product. We therefore generated
a wholly new filtering model, starting with high-income countries, and
implemented this model to see which countries to analyze in more detail.
Population: Population indicates the total population within a specified country. We are
seeking countries with large populations because, even though a large portion might be
unable to afford MP3 players, a high population typically implies a larger market size,
higher growth potential, the possibility for a larger quantity of consumers, and so on.
Because of these favorable attributes, we are seeking to find countries with large
3
Page 258
populations, thereby eliminating any countries with populations less than fifty million
people.
Age Distribution: Analyzing the age distribution of the market is important in

determining a country’s overall attractiveness, since markets with a large percentage of
residents within the ideal range will inevitably provide a larger purchasing group for the
product. We choose to target countries with a high percentage of residents within the
range of 15 to 64 because those within this span make up the large age group of people
most likely to purchase an MP3 player. Furthermore, people within this age group are
likely to be more technologically advanced and in-tune with new trends and technologies.
This means that this range makes up the age group of people most likely to purchase new
consumer electronics, such as an MP3 player. We selected countries that possess a
percentage of at least 65% of their population within the age range of 15 to 64.
GNI per Capita: The GNI per capita indicates the Gross National Income per person in
the specified country. Because countries with the highest GNI per capita are likely to be
best able to purchase this relatively expensive product (most retail for anywhere from $70
to $500 US), we eliminated any countries where the GNI per capita was less than
$25,000.
able to keep for the purchase of luxury or unnecessary items, such as MP3 players.
Because MP3 players clearly aren’t necessary for survival, they are considered a luxury
product. High annual disposable incomes are necessary to enable the purchase of such an
expensive item. Consumers will only be able to consider buying this product if they have
the financial purchasing power to do so. Therefore, in order for a country to be attractive
for the MP3 player, a significant proportion of its residents must have an ample amount
of purchasing freedom, as indicated by high annual disposable income. We have selected
an annual disposable income of $25,000 as an indicator of attractiveness.
Internet Users: As previously stated, MP3 players require a PC hook-up, as well as

access to the internet. This is necessary in order for the user to download music onto the
product. It is therefore necessary for a country to have not only a large number of PC’s
in use, but it is equally important for a country to have a significant number of internet
users, as well as readily available internet access. We looked for countries where the
percentage of internet users was at least forty.
PC’s in Use: The number of PC’s per capita is an important indicator for a country’s
overall attractiveness because this can be used as a general indicator for the technological
capabilities of a country. In order for MP3 players to thrive within a market, it is
imperative for the market to have fundamental technological knowledge and a desire to
keep up with the latest consumer electrics or basic technological products.
Personal computers are often seen as a somewhat generic form of technology. A country
with a large population of PC users implies that inhabitants are adverse in the world of
technology and are also able to afford luxury technological items. This is an extremely
important indicator for MP3 players because the majority of MP3 players require PC’s to
4
Page 259
setup the product and download music onto it. Therefore, we are targeting countries with
the number of PC’s in use per capita greater than 0.4.
Main Criteria Summary:

After reviewing numerous
factors for market
attractiveness, we have
utilized specific criteria to
prioritize countries in terms
of attractiveness for
marketing MP3 players.
After analyzing country
markets, we have selected a
short list of eight countries
from all the countries in the
world to examine in more
detail: United States, UK,
Japan, Hong Kong/China,
Germany, South Korea,
France, and Italy. Not only
did our data analysis illustrate these countries as possessing optimal markets for MP3
players, but several sources also verified our findings. For example, the CIA fact book
stated in January 2006 that “the percentage of US households with MP3 players will
jump from about six percent in 2004 to as much as 25 percent by the end of 2006.” It
was also stated in November 2004 that “China’s market for MP3 players is growing with
a 250-percent increase.” Using these statements and our collected data as evidence, we
have selected these eight countries as potentially successful markets for our product.
III. SHORT CRITERIA ANALYSIS
After narrowing all of the countries in the world down to a list of eight countries, we
utilized a quantitative multi-factorial model for evaluating this short list of countries and
prioritized the short list in terms of attractiveness for your product or service. The
following describes and justifies the criteria used for evaluating these eight countries.
5
Page 260

of technology available to consumers, most notably the number of computers in use in
the market per capita; it is necessary for a consumer to have a computer to be able to use
an mp3 player, therefore there must be a high computer usage rate for consumers to even

6
Page 261
Age Distribution: Age distribution indicated the percentage of country residents within
the age group most likely to purchase mp3 players, those aged 15 to 64. The age
distribution of the market is important in determining its attractiveness in that markets
with a high percentage of the population in this age group are more likely to catch on to
new technologies, such as the mp3 player, and are more prone to purchase trendier
consumer electronics. Countries with the highest percentages of population in the age
group 15 to 64 were given the highest rankings in this category, and vice versa. A 5%
weight was placed on this category because, although it is important for the market to be
comprised of this target age group, this factor was not considered to be as important as
any of the other factors for the aforementioned reasons in the preceding paragraphs.
Short-Criteria Summary: Based on the quantitative model, Japan is ranked as one of

the most attractive markets to enter due to its relatively low points ranking. Although the
market is very saturated already, the Japanese economy has one of the highest consumer
electronic growth rates. The high technological infrastructure suggests that the Japanese
often invest in faster, stronger, and state-of-the-art technologies whenever available as to
keep up with the economic world leaders. The United States has a very large population,
high GNI per capita, high technological infrastructure, relatively considerate disposable
income levels, and is one of the largest consumer electronic growth markets. It is a prime
market to enter due to the fact that although the market is somewhat saturated, the high
disposable income leads to people spending more on new products even if they have a
similar substitutes. South Korea is a relatively unattractive market because it has a
relatively small population, a relatively low average disposable income level, and a low
GNI per capita. Although the country passed through the filters, the market economy is
just relatively too poor for us to enter.
IV. QUALITATIVE ANALYSIS
Ranking of attractiveness of our eight countries based on Qualitative Analysis:

1. USA
2. China and Hong Kong
3. Japan
4. UK
5. South Korea
6. Germany
7. Italy
8. France
USA: The United States presents the most attractive market because of local familiarity
with the product, and historical receptiveness to MP3 marketing campaigns. A strong
marketing infrastructure is already in place and there are only a few key players in the
market so far. There is a large population in our targeted income segment and excellent
potential for this market. Consumer attitudes towards MP3 players are very receptive.
7
Page 262
Cons: Barriers to entry. Apple’s iPod currently has a huge proportion of market share,
making it difficult to envision a successful new player in the market.
China and Hong Kong: This is also a very attractive market. An interesting advantage
for entering China is that, since it still has a culture that values communist ideals, the
Chinese culture encourages copying and borrowing of ideas. The modern day
implications of this include the fact that file sharing on the internet is not seen as
unethical. This makes MP3 technology very popular and will increase the demand for
MP3 players. Furthermore, another interesting pro for the Chinese market is presented in
the following graph:
According to the study on people who intend to buy an MP3 player in the next 12
months, 80% of the respondents from China already own one and are looking to replace
it. Because people are already knowledgeable about the technology and are familiar with
product features, downloading music, and listening to online radio broadcasts, MP3
manufacturers can take their marketing strategy to the next level in China and South
Korea; that is, increasing brand loyalty and customizing features to these markets. One
reason that China is not ranked as “most attractive” in our study is the issue of pirated
technology. Western firms must keep in mind that Asian companies are quick to copy
technology and drive prices down. For example, when Creative Technologies of
Singapore introduced a small, patented MP3 player called the MuVo, knockoffs were
soon found in the streets of Shanghai made by 40 different companies. In the end, the
8
Page 263
company had to use Chinese manufacturers to make bargain versions of its products for
the Chinese market and sell them at lower prices. (Fishman 233)
Japan: Japan is an attractive market but not as much so as the previous two. Pros: Japan
and several other countries in the Asia-Pacific region lead the world in terms of technical
innovation as well as receptiveness to new technologies. Also, Japan is more
industrialized than several of the other Asian markets. Thirdly, Japan is considered a
‘lead’ market in many categories and knowledge gained there can be applied around the
globe. Cons: Unfamiliarity with distribution channels and customer profiles. Although
Japan is an attractive market, much more information needs to be collected before a
marketing plan can be formulated.
The United Kingdom: Pro: This market is similar in a lot of ways to the US market, so
tailoring a marketing plan to the UK customer won’t be too difficult. Apple’s iPod
already has market dominance in the country, but there is plenty of opportunity for
growth. The consumer is still in the ‘curious’ stages with MP3 technology, as evidenced
by the preceding graph. Of the British respondents who intend to buy an MP3 player in
the next year, only 30% have owned one before. Cons: the UK is not as digitally savvy
as the “Asian Tigers” listed above, and is not nearly as aggressive in terms of adopting
new technology.
South Korea: South Korea presents itself as an exciting opportunity, but presents more
challenges in terms of unfamiliarity with marketing infrastructure there. Parks
Associates, an independent research firm, recently ranked nations according to their
‘digital living index’, a statistic that examines the availability, adoption rate, and use of
technology-driven products and services in a given country. Korea was ranked second on
this list behind Taiwan (BBCnews.com). It is obvious that the South Korean population
would be receptive to MP3 players despite the marketing challenges.
Germany, Italy, and France: These three countries came out with relatively similar
results in the qualitative analysis. They are not as attractive because they are not “lead
markets” since Europeans give preference to low-priced solutions in the MP3 industry. A
poor design and mediocre performance will not prevent them from use. In these
countries, the most popular MP3 players are currently also the least sophisticated.
(mobile-review.com)
V. CONSISTENCY ANALYSIS
In order to reconcile our two rankings, one must thoroughly consider all aspects of
attractiveness in a market. The first most obvious discrepancy on our two lists is the
placement of Hong Kong/China. Quantitatively, the country ranked #7 out of 8. This is
due to the use of GNI per capita as a filter variable, since it does not take into
consideration the vast income disparities. Because of the huge population, there is still a
viable market of 30+ million upper income consumers. This was taken into consideration
9
Page 264
along with the receptiveness to new technology and the aggressive rate of innovation, and
leads China to be ranked #2 in our qualitative study.
Next, note the difference in the ranking of South Korea. Upon considering the variables
of population size, average disposable income, and GNI per capita, South Korea seems
like a market of little use to the MP3 industry. But consider also that Korea is one of the
“Asian Tigers;” that is, nations with a passion for technology and innovation who are
experiencing rapid growth in the technology sector right now. Samsung, the number two
maker of MP3 players in the entire world behind Apple, is located in Korea. The nation
has tremendous pride in their production of new technological products and the market is
incredibly receptive and quick to adopt new technology. This is why South Korea was
last in terms of quantitative analysis but came in 5th in our qualitative discussion.
VI. CONCLUSION
After extensive marketing, statistical, and informational research, we have found the top
countries’ markets into which we feel it would be most advantageous to enter. There are
a wide range of types and models for MP3 devices varying at different price levels and
there are countries whose economy cannot support up-to-date technologies and can,
therefore, not afford to purchase these products. The quantitative and qualitative reports
above prove that after a very thorough filtering process, quantitative analysis, and
qualitative analysis, only the optimum markets that will generate the greatest revenue and
return on investments are left in the pool.
An overview of the current MP3 player market shows that MP3 players are currently
enjoying the most dynamic growth of any product in the ‘personal or portable audio
product’ market. The attractiveness of high income markets with low saturation levels
and continued growth patterns lead us to believe that these countries will be great to enter
with the product. Most of the growth in the MP3 player market has been the result of the
successful iPod. MP3 demand still remains in its product-cycle infancy in several major
markets such as the United Kingdom. The research firm IDC predicts that the MP3
player market will experience 20% growth each year for the next few years and hit
US$58 billion in revenues towards 2008. In Spain there was a growth of 562% from
February to September 2004 alone. Although the iPod is the most recognizable MP3
player in the United States, it is not that well known in markets with low saturation. If
MP3 product imaging can be reinforced in the UK, it will make for a very valuable
market economy to enter as shown by the quantitative and more so the qualitative
analysis.
10
Page 265
Quantitative Analysis
Population: GNI per Tech Disposable Lack of Consumer Age Totals
12% Capita: Infrastructure/ Income: Saturation: Electronic Distribution:
10% Internet 20% 15% Growth 5%
Users: 20% rate: 18%
USA 1 .12 1 .1 1 .2 6 1.2 5 .75 7 1.26 2 .1 3.63
UK 5 .6 3 .3 6 1.2 4 .8 4 .6 1 .18 5 .25 3.88
Japan 2 .24 2 .2 3 .6 1 .2 7 1.05 6 1.08 3 .15 3.37
Italy 6 .72 6 .6 8 1.6 3 .6 2 .3 3 .54 7 .35 4.36
Hong 8 .96 7 .7 2 .4 7 1.4 6 .9 2 .36 1 .05 4.72
Kong
Germany 3 .36 5 .5 4 .8 5 1 3 .45 8 1.44 4 .2 4.55
South 7 .84 8 .8 5 1 8 1.6 8 1.2 4 .72 8 .4 6.16
Korea
France 4 .48 4 .4 7 1.4 2 .4 1 .15 5 .9 6 .3 4.03
Rank Country Rating

1 Japan 3.37 Rating:
2 USA 3.63 1 = Most Attractive Market

8 = Least Attractive Market
3 UK 3.88
4 France 4.03 A Lower Total Rating Leads To A
5 Italy 4.36 Higher Market Attractiveness
6 Germany 4.55
7 Hong Kong 4.72
8 South Korea 6.16

Page 266
VII. APPENDIX, part 1
The following is the criteria that we used for our first filtering model. However, as
discussed earlier, Argentina, Chile, the Czech Republic, Hungary, Malaysia, Russian
Federation, Slovak Republic, Thailand, and Turkey, are ultimately not the best and more
viable markets for MP3 players. We therefore structured a new filtering model with
revised criteria and concluded with a new set of countries, which we felt were better
matches for our product.
Regions: Lower-middle-income economies and upper-middle-income economies

Total Population: > 4,000
Urban Population: > 55%
Population between15-64: 3,500
Percentage of Households with Annual Disposable Income > 15000
GDP growth: > 3.5%
PC's in Use: # per capita > 0.5
Imports: > $20,000,000,000
Criteria 1 Criteria 2 Criteria 3 Criteria 4 Criteria 5 Criteria 6 Criteria 7 Criteria 8

Albania
Algeria Algeria Algeria Algeria Algeria Algeria
American
Samoa
Angola Angola Angola Angola
Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina
Armenia
Azerbaijan Azerbaijan Azerbaijan Azerbaijan Azerbaijan Azerbaijan
Barbados
Belarus Belarus Belarus Belarus Belarus Belarus
Belize
Bolivia Bolivia Bolivia Bolivia Bolivia Bolivia Bolivia
Bosnia and Bosnia and
Herzegovina Herzegovina
Botswana
Brazil Brazil Brazil Brazil Brazil
Bulgaria Bulgaria Bulgaria Bulgaria Bulgaria Bulgaria Bulgaria
Cameroon
Cameroon Cameroon Cameroon
Cape Verde
Chile Chile Chile Chile Chile Chile Chile Chile

China China
Colombia Colombia Colombia Colombia Colombia Colombia Colombia
Congo, Rep.
11
Page 267
Costa Rica Costa Rica Costa Rica
Croatia Croatia Croatia

Cuba Cuba Cuba Cuba
Czech Czech Czech Czech Czech Czech Czech Czech
Republic Republic Republic Republic Republic Republic Republic Republic
Djibouti
Dominica
Dominican Dominican Dominican Dominican
Republic Republic Republic Republic
Ecuador Ecuador Ecuador Ecuador Ecuador

Egypt, Arab Egypt, Arab
Rep. Rep.
El Salvador El Salvador El Salvador El Salvador
Equatorial
Guinea
Estonia
Fiji
Gabon
Georgia Georgia Georgia
Grenada
Guatemala Guatemala
Guyana
Honduras Honduras
Hungary Hungary Hungary Hungary Hungary Hungary Hungary Hungary
Indonesia Indonesia
Iran, Islamic Iran, Islamic Iran, Iran,
Rep. Rep. Islamic Islamic
Rep. Rep.
Iraq Iraq Iraq Iraq
Jamaica
Jordan Jordan Jordan
Kazakhstan Kazakhstan Kazakhstan Kazakhstan
Kiribati
Latvia
Lebanon Lebanon Lebanon Lebanon
Lesotho
Libya Libya
Lithuania
Macedonia,
FYR
Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia
Maldives
Marshall
Islands
Mauritius
12
Page 268
Mayotte
Mexico Mexico Mexico Mexico Mexico
Micronesia,
Fed. Sts.
Moldova Moldova
Morocco Morocco Morocco Morocco Morocco
Namibia
Nicaragua Nicaragua Nicaragua
Northern
Mariana
Islands
Oman
Palau
Panama
Paraguay Paraguay Paraguay Paraguay
Peru Peru Peru Peru Peru Peru Peru
Philippines Philippines
Philippines Philippines Philippines Philippines
Poland Poland Poland Poland Poland
Romania Romania
Russian Russian
Federation Federation
Russian Russian Russian Russian Russian Russian
Federation Federation Federation Federation Federation Federation
Samoa
Serbia and Serbia and Serbia and Serbia and
Montenegro Montenegro Montenegro Montenegro
Seychelles
Slovak Slovak Slovak Slovak Slovak Slovak Slovak Slovak

Republic Republic Republic Republic Republic Republic Republic Republic
South Africa South Africa
Sri Lanka Sri Lanka

St. Kitts and
Nevis
St. Lucia
St. Vincent
and the
Grenadines
Suriname
Swaziland
Syrian Arab Syrian Arab
Republic Republic
Syrian Arab Syrian Arab
Republic Republic
Thailand Thailand Thailand Thailand Thailand Thailand Thailand Thailand
Tonga
13
Page 269
Trinidad and
Tobago
Tunisia Tunisia Tunisia Tunisia Tunisia Tunisia Tunisia

Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey
Turkmenistan Turkmenistan
Ukraine Ukraine Ukraine Ukraine Ukraine

Uruguay
Vanuatu
Venezuela, Venezuela,
RB RB
West Bank
and Gaza
VIII. APENDIX, part 2
Total Population 2005 Age distribution

Rank Country Pop Rank Country % Population 15-64
1 CHINA (excluding TAIWAN) 1,307,802 1 China - '000 72% 937,542.11
2 INDIA 1,094,583 2 India - '000 62% 681,509.04
3 UNITED STATES 294,931 3 USA - '000 65% 192,260.21
4 Indonesia -
4 INDONESIA 220,558 '000 67% 147,172.86
5 BRAZIL 180,641 5 Brazil - '000 68% 122,291.30
6
6 PAKISTAN 155,772 Russia - '000 71% 100,525.35
7 Bangladesh -
7 BANGLADESH 142,968 '000 63% 89,940.74
8 Pakistan -
8 RUSSIAN FEDERATION 142,322 '000 57% 88,187.46
9 NIGERIA 141,115 9 Japan - '000 67% 85,264.85
10 JAPAN 127,169 10 Nigeria - '000 67,975.85
11 MEXICO 105,332 11 Mexico - '000 66,822.39
12 Germany -
12 PHILIPPINES 84,392 '000 67% 55,643.08
13 VIETNAM 82,966 13 Vietnam - '000 53,840.79
14 Philippines -
14 GERMANY 82,491 '000 51,056.18
15 TURKEY 72,636 15 Turkey - '000 47,568.00
16 ETHIOPIA 71,256 16 Iran - '000 45,945.57
17 Thailand -
17 EGYPT, ARAB REP. 69,907 '000 43,995.36
18
18 IRAN, ISLAMIC REP. 67,468 Egypt - '000 43,806.46
19 United
Kingdom -
19 THAILAND 62,732 '000 67% 39,451.36
20 FRANCE 60,090 20 France - '000 66% 39,362.30
21 UNITED KINGDOM 59,315 21 Italy - '000 68% 39,029.66
22 ITALY 57,471 22 Ethiopia - '000 37,967.66
23 CONGO, DEM. REP. 56,446 23 South Korea - 70% 33,792.66
14
Page 270
'000
24 MYANMAR 50,429
25 KOREA, REP. 48,364
98 HONG KONG, CHINA 6,873
Total Population 2005 Age distribution

Rank Country Pop Rank Country % Population 15-64
CHINA 1
(excluding
1 TAIWAN) 1,307,802 China - '000 72% 937,542.11
2 INDIA 1,094,583 2 India - '000 62% 681,509.04
UNITED 3
3 STATES 294,931 USA - '000 65% 192,260.21
4 INDONESIA 220,558 4 Indonesia - '000 67% 147,172.86
5 BRAZIL 180,641 5 Brazil - '000 68% 122,291.30
6 PAKISTAN 155,772 6 Russia - '000 71% 100,525.35
7 Bangladesh -
7 BANGLADESH 142,968 '000 63% 89,940.74
RUSSIAN 8
8 FEDERATION 142,322 Pakistan - '000 57% 88,187.46
9 NIGERIA 141,115 9 Japan - '000 67% 85,264.85
10 JAPAN 127,169 10 Nigeria - '000 67,975.85
11 MEXICO 105,332 11 Mexico - '000 66,822.39
12 PHILIPPINES 84,392 12 Germany - '000 67% 55,643.08
13 VIETNAM 82,966 13 Vietnam - '000 53,840.79
14 Philippines -
14 GERMANY 82,491 '000 51,056.18
15 TURKEY 72,636 15 Turkey - '000 47,568.00
16 ETHIOPIA 71,256 16 Iran - '000 45,945.57
EGYPT, ARAB 17
17 REP. 69,907 Thailand - '000 43,995.36
IRAN, 18
18 ISLAMIC REP. 67,468 Egypt - '000 43,806.46
19 United
19 THAILAND 62,732 Kingdom - '000 67% 39,451.36
20 FRANCE 60,090 20 France - '000 66% 39,362.30
UNITED 21
21 KINGDOM 59,315 Italy - '000 68% 39,029.66
22 ITALY 57,471 22 Ethiopia - '000 37,967.66
CONGO, DEM. 23 South Korea -
23 REP. 56,446 '000 70% 33,792.66
24 MYANMAR 50,429
25 KOREA, REP. 48,364
HONG KONG,
98 CHINA 6,873
Households (% of total) with an
annual disposable income over
US$25,000 Ann disposable income
1 Japan 97.73 Rank Country
2 Norway 93.17 1 Indonesia - Rp mn 1,374,486,043.13
2 South Korea -
3 Switzerland 91.28 Won mn 480,130,071.91
4 Austria 85.94 3 Vietnam - VND mn 421,415,743.06
5 France 85.19 4 Japan - ¥ mn 312,630,642.58
6 Finland 82.97 5 Colombia - Col$ mn 158,044,763.98
7 Kuwait 82.38 6 Venezuela - Bs mn 156,763,765.65
United Arab 7
8 Emirates 82.2 Chile - CH$ mn 36,196,837.13
9 Ireland 79.89 8 Turkmenistan - 26,494,568.04
15
Page 271
TMM mn
10 Netherlands 77.56 9 Belarus - BRb mn 24,155,757.04
11 Denmark 75.14 10 India - Rs mn 21,293,107.32
12 Italy 74.66 11 Hungary - HuF mn 10,837,275.43
United 12
13 Kingdom 73.91 Russia - Rb mn 9,101,532.41
14 Germany 73.56 13 USA - US$ mn 7,477,666.48
15 USA 73.37 14 China - RMB mn 7,389,459.38
16 Belgium 72.92 15 Taiwan - NT$ mn 7,171,265.90
17 Singapore 72.78 16 Nigeria - NGN mn 5,552,590.30
18 Canada 72.02 17 Mexico - MX$ mn 4,889,658.68
Hong Kong, 18
19 China 69.41 Thailand - Bt mn 3,825,975.15
19 Slovenia - Tolars
20 Sweden 67.85 mn 3,599,808.69
29 South Korea 33.41 20 Pakistan - PKR mn 3,344,239.82
21 Algeria - DZD mn 3,144,991.98
22 Kazakhstan - KZT
mn 2,797,351.15
23 Philippines - Ps mn 2,690,530.79
24 Germany - € mn 1,442,282.84
25 Czech Republic -
CK mn 1,347,267.47
26 Sweden - SEK mn 1,160,816.52
27 Hong Kong, China
- HK$ mn 1,052,179.26
28 France - € mn 1,010,459.86
29 Brazil - R$ mn 982,255.29
30 Italy - € mn 906,395.22
32 Slovakia - SKK mn 763,409.51
33 United Kingdom -
£ mn 761,609.43
Internet users PC's

Rank Country % Internet users Rank Country #
1 United 1 USA -
States 69% 203,824,428 '000 208,760.84
2 2 China -
China 8% 111,000,000 '000 80,620.19
3 3 Japan -
Japan 68% 86,300,000 '000 54,996.40
4 Germany
4 India 50,600,000 - '000 40,998.60
5 South
Korea -
5 Germany 59% 48,722,055 '000 27,816.75
6 United
United Kingdom
6 Kingdom 64% 37,800,000 - '000 26,834.25
Korea, 7 France -
7 South 70% 33,900,000 '000 23,927.49
8 Brazil -
8 Italy 50% 28,870,000 '000 22,156.39
9 Russia -
9 France 44% 26,214,174 '000 21,979.35
10 India -
10 Brazil 25,900,000 '000 16,254.06
11 Italy -
11 Russia 23,700,000 '000 16,153.65
12 Canada -
12 Canada 20,900,000 '000 15,946.62
13 Mexico -
13 Indonesia 18,000,000 '000 14,480.73
16
Page 272
14 Australia
14 Spain 17,142,198 - '000 12,539.05
15 Taiwan -
28 Sweden 6,800,000 '000 10,582.54
Hong 16 Spain -
37 Kong 71% 4,878,713 '000 10,330.10
High-income economies (56) # COUNTRY 2,005
Andorra Germany Netherlands
Antilles 1 Luxembourg 65,630
Antigua and Barbuda Greece New
Caledonia 2 Norway 59,590
Aruba Greenland New
Zealand 3 Switzerland 54,930
Australia Guam Norway 4 Denmark 47,390
Austria Hong Kong, Portugal
China 5 Iceland 46,320
Bahamas, The Iceland Puerto Rico 6 United States 43,740
Bahrain Ireland Qatar 7 Sweden 41,060
Belgium Isle of Man San Marino 8 Ireland 40,150
Bermuda Israel Saudi
Arabia 9 Japan 38,980
Brunei Darussalam Italy Singapore 10 United Kingdom 37,600
Canada Japan Slovenia 11 Finland 37,460
Cayman Islands Korea, Rep. Spain 12 Austria 36,980
Channel Islands Kuwait Sweden 13 Netherlands 36,620
Cyprus Liechtenstein Switzerland 14 Belgium 35,700
Denmark Luxembourg United Arab
Emirates 15 France 34,810
Faeroe Islands Macao, China United
Kingdom 16 Germany 34,580
Finland Malta United
States 17 Canada 32,600
France Monaco Virgin
Islands
(U.S.) 18 Australia 32,220
French Polynesia Netherlands 19 Italy 30,010
Hong Kong,
20 China 27,670
21 Singapore 27,490
22 New Zealand 25,960

23 Spain 25,360
# Country 2005 2006 2007
1 Indonesia - Rp mn 1,374,486,043.13 1,596,909,350.84 1,742,964,106.88
2 South Korea - Won mn 480,130,071.91 510,231,897.46 544,602,867.97
3
Vietnam - VND mn 421,415,743.06 467,118,278.68 511,549,310.65
4 Japan - ¥ mn 312,630,642.58 321,676,351.05 331,267,880.68
5 Colombia - Col$ mn 158,044,763.98 171,979,364.52 184,899,752.16
6 Venezuela - Bs mn 156,763,765.65 178,444,191.53 211,418,691.63
7 Chile - CH$ mn 36,196,837.13 37,988,412.27 39,834,053.73
8
Turkmenistan - TMM mn 26,494,568.04 29,730,841.44 32,656,137.48

9 Belarus - BRb mn 24,155,757.04 26,868,678.94 29,647,894.27
17
Page 273
10
India - Rs mn 21,293,107.32 23,062,632.54 25,338,228.29
11 Hungary - HuF mn 10,837,275.43 11,574,707.33 12,642,643.96
12 Russia - Rb mn 9,101,532.41 10,302,955.08 11,532,467.15
13
USA - US$ mn 7,477,666.48 8,043,168.44 8,457,068.63
14 China - RMB mn 7,389,459.38 8,040,952.37 8,597,607.49
15 Taiwan - NT$ mn 7,171,265.90 7,506,190.89 7,828,024.53
16 Nigeria - NGN mn 5,552,590.30 6,211,961.40 6,832,932.52
17
Mexico - MX$ mn 4,889,658.68 5,168,746.27 5,477,916.26
18 Thailand - Bt mn 3,825,975.15 4,203,965.36 4,449,513.25
19
Slovenia - Tolars mn 3,599,808.69 3,781,210.19 3,913,243.02

20 Pakistan - PKR mn 3,344,239.82 3,688,387.78 4,070,785.91
21 Algeria - DZD mn 3,144,991.98 3,410,187.10 3,668,471.39
22 Kazakhstan - KZT mn 2,797,351.15 3,238,073.46 3,657,361.97
23 Philippines - Ps mn 2,690,530.79 2,955,349.79 3,176,421.85
24 Germany - € mn 1,442,282.84 1,492,796.60 1,556,810.45
25 Czech Republic - CK mn 1,347,267.47 1,409,835.87 1,482,432.71
26 Sweden - SEK mn 1,160,816.52 1,192,411.52 1,234,871.85
27
Hong Kong, China - HK$ mn 1,052,179.26 1,079,778.20 1,160,627.92
28
France - € mn 1,010,459.86 1,057,726.71 1,104,186.39
29
Brazil - R$ mn 982,255.29 1,042,153.15 1,109,369.32
30 Italy - € mn 906,395.22 965,860.90 999,116.69
32
Slovakia - SKK mn 763,409.51 825,226.31 880,074.59
33
United Kingdom - £ mn 761,609.43 797,497.12 827,703.32
# Country 6th semester Rank Country Internet users
1 China - '000 937,542.11 1 World 1018057389
2 European
India - '000 681,509.04 2 Union 230097055
3 United
USA - '000 192,260.21 3 States 203824428
4 Indonesia - '000 147,172.86 4 China 111000000
5 Brazil - '000 122,291.30 5 Japan 86300000
6 Russia - '000 100,525.35 6 India 50600000
7 Bangladesh - '000 89,940.74 7 Germany 48722055
8 United
Pakistan - '000 88,187.46 8 Kingdom 37800000
9 Korea,
Japan - '000 85,264.85 9 South 33900000
10 Nigeria - '000 67,975.85 10 Italy 28870000
11 Mexico - '000 66,822.39 11 France 26214174
12 Germany - '000 55,643.08
13 Vietnam - '000 53,840.79
14 Philippines - '000 51,056.18
15 Turkey - '000 47,568.00
18
Page 274
16 Iran - '000 45,945.57

17 Thailand - '000 43,995.36
18 Egypt - '000 43,806.46
19 United Kingdom - '000 39,451.36
20 France - '000 39,362.30
21 Italy - '000 39,029.66
22 Ethiopia - '000 37,967.66
23 South Korea - '000 33,792.66
IX. APENDIX, part 4
2000-01 2001-02 2002-03 2003-04 2004-05

Leisure and
personal goods
retailers S1
United
Kingdom - £
mn 2.19 5.24 8.41 6.44 4.96
Hong Kong,
China - HK$
mn -5.84 -4.42 -2.99 2.01 2.64
Italy - € mn 2.53 2.15 3.28 5.37 2.2
South Korea -
Won bn -0.01 8.28 3.72 2.18 1.63
France - € mn 2.92 2.45 2.38 1.87 1.51
Japan - YEN bn -5.98 -11.84 -0.27 2.24 0.49
USA - US$ mn -0.66 0.31 1.97 3.63 0.45
Germany - €
mn -0.59 -7.02 -5.28 -2.07 -0.94
2000 2001 2002 2003 2004

Leisure and
personal goods
retailers S1
United
Kingdom 586.84 595.58 624.9 675.17 716.43
Hong Kong,
China 652.27 608.74 576.54 551.86 556.5
USA 555.03 546.66 543.83 550.08 565.54
Germany 492.89 489.41 454.04 429.52 420.17
Japan 490.91 460.23 405.29 403.71 412.29
Italy 326.57 333.88 340.09 350.43 368.57
France 302.06 309.35 315.3 321.09 325.38
South Korea 140.01 139.19 149.77 154.42 156.89
19
Page 275
BIBLIOGRAPHY
BBC News. 2006. <http://BBCNews.com>
CIA World Fact Book. 2006.

< https://www.cia.gov/cia/publications/factbook/index.html>
Encyclopedia of the Orient. 2006. < http://lexicorient.com/e.o/morocco_2.htm>
Euromonitor International. 2006. <http://www.euromonitor.com>
Fishman, Ted. “China Inc: How the Rise of the Next Superpower Challenges America
and the World.” New York: Scribner Press, 2006
ISI Emerging Markets. 2006. <http://www.securities.com>
Mobile Review. 2006. <http://mobile-review.com>
Wikipedia. 2006. <http://www.wikipedia.com>
The World Bank. 2006. <http://www.worldbank.org>
World Trade Organization. 2006. <http://www.wto.org>
20
Page 276
Assignment #3
Marketing 465
Global Marketing Management
The objective of this assignment is to research and understand the differences in products and how they are
marketed between an overseas country and the U.S. The Los Angeles area is a particularly rich area in which to obtain some
in-depth information about aspects of the marketing environment in other countries because it is such a cosmopolitan city
with markets carrying imported goods from all over the world. You should choose a market that specializes in importing
foreign foods and make a field visit to the market.
The product category you should focus on for this assignment is room temperature pre-prepared packaged sweet
snacks. Therefore, the product category includes items like cookies and candy. The room temperature specification excludes
sweet snacks that are refrigerated or frozen such as ice cream. The pre-prepared specification excludes items like cake mixes
and gelatin mixes that must be cooked or baked before they can be eaten. The packaged specification excludes fresh baked
items, like fresh baked muffins and fresh baked cakes that can be bought in certain sections of U.S. supermarkets.
In choosing a market that specializes in imported foods, you can choose one from any part of the world. However,
make sure that the market you visit has a sizeable section of pre-prepared packaged sweet snacks. For example, Mitsuwa , a
Japanese supermarket with locations in Little Tokyo, Mar Vista (West L.A.), Torrance, and a couple other locations, has a
sizeable section of imported goods in this category from Japan. There are import stores from many other parts of the world
too that have nice sized sections of imported sweet snacks. If you are unsure where to find these other markets, then focus on
Japan and Mitsuwa. However, if you can find a store from another part of the world that has an ample section of sweet
snacks, then feel free to select that store instead of Mitsuwa. As an example, there are nice sized markets in Los Angeles that
import many food items from Korea, Taiwan, Mexico, and other countries. If the import store you visit does not have a large
or representative sample of sweet snacks from that country, you may need to go to a second import store from your country
to get a fuller picture of the category in your target country (and put the results together from the observations at both stores).
Everyone should also visit an American supermarket (like Ralph’s, Vons, Albertsons, etc.) to compare U.S. sweet snack
products with their overseas counterparts.
In visiting the stores, you should think about the full set of characteristics related to one of the four P’s, the product.
Therefore, you should consider the a) types of products that are sold in the category, b) the characteristics of the products
such as their ingredients, look, and taste, c) the positioning of the products, d) the packaging, e) the branding, f) the product
line and variations associated with a brand, g) the type of customer support offered, if any, and h) any other aspects of the
product that are relevant.
When you visit the import market, you should spend some time examining the range of products available in the
sweet snack category -- in other words, you should think about the kinds of products available in this category in the other
country. When you visit a U.S. supermarket, you should think about the same question, namely the range of products
available in this category in the U.S. Based on these visits, you should be able to develop some insights into the similarities
and differences in the kinds of products in this category in both countries.
You should purchase five import products that you will analyze in more detail. You can then take the products
home, examine them closely, open them up, examine the appearance and texture of the products, and taste the products if
you’d like. Your five products should be different products as opposed to different flavors of the same product (e.g. Pocky
from Japan comes in many different flavors but these different flavors of Pocky would not be considered different products).
Make sure the products you select are produced in the foreign country and sold in the same packaging that is used in that
country. For example, the Japanese packages at Mitsuwa usually, but not always, have an obvious label slapped onto the
product with an English translation of the product and its ingredients. Also, the products in packages that are sold in Japan
will typically have bar codes that begin with a “4;” one exception to this is when the barcode in on the slap-on label with
English translation in which case it will not begin with a “4.” In addition to examining the slap-on translation labels (when
they are available), you might want to ask some foreign friends or other students at USC to help you translate some of the
additional items on the packaging to further understand what is written on them (this is optional since typically the
translations you need will be on the slap-on translation labels).
You should then purchase five products from the U.S. supermarket to compare to your foreign products. You should
choose five U.S. products that you believe are most similar to your foreign products. In some cases, you will not be able to

Page 277
find a similar U.S. product; that is fine as a product highly specific to another culture may not have a U.S. equivalent. In this
case, you should choose a U.S. product that you think is the closest to your foreign product (even though it may not be that
close) of the available U.S. choices.
In thinking about the kinds of products available in both countries, please note that some types of products are not
imported into the U.S. In particular, international brands available in both the U.S. and foreign countries are typically not
imported into the U.S. from other countries. For example, the following products are available in stores in Japan but are not
imported from Japan: Mars products such as M&M’s and Snickers, Nestle products such as Kit Kat, Hershey products such
as Kisses, and Nabisco products such as Oreo cookies.
Please note that this assignment focuses on the full set of characteristics related to one of the four P’s, the product
policy; you do not need to analyze pricing, distribution, or advertising for this assignment.
For your paper, you should address the following issues:
1.) What are the similarities and differences in this product category between your chosen country and the U.S.,
2.) What are your hypotheses about what accounts for the similarities and differences between the product category in the
two countries, and
3.) If you were a consultant to an American sweet snack food company about to enter your chosen country market, what
recommendations would you make to them about what elements of the product policy could be standardized across the
two countries, what elements would need to be adapted, and how they would need to adapt the product policy.
Be sure to tell me the name and location of the import store you visited and what country they specialize in. The
bulk of the paper should focus on the first of these three issues. This part of the paper should include your analyses of the
range of types of sweet snack products available in the foreign and American stores you visited and the specific analyses of
each of your five pairs of foreign and U.S. products. If appropriate, feel free to use exhibits or tables to assist in presenting
these analyses.
Along with your paper, you should include the packages of your five foreign and U.S. products in a bag labeled with
the names of the members of your group; you do not need to include the contents of the packages. Every member of your
group should visit the import market that you select for this project (all of you do not need to visit at the same time, but
everyone should visit at some time to learn first hand about the market and its products). Please do not choose a country to
analyze where any member of your group has lived before for more than a year. Also, do not choose the country that you
already analyzed for the first assignment (the environmental profile).

Page 278
The Thai and Americans alike are very fond of candy, as are most cultures.
While these two countries, The United States and Thailand, both have a bit of a sweet
tooth, there are clearly differences in the types of sweets consumed by these markets. At
first appearance, many of these candies look extraordinarily foreign. To some it may
appear that size is the only similarity in these products (While this is not the only
similarity, it is true that both markets prefer their snacks in single-serve sizes).
Nonetheless, it’s important to take a second glance at the common types of candies in
these two markets and uncover the similarities between the two. In identifying product
similarities, a US company can discover whether their product strengths are attractive in
Thailand, as well as understand the extent to which the potential export must be adapted
to the Thai market.
To begin, there are a few key similarities in the types of candies sold that must be
observed. Five candy products were chosen from the Thai market, three of which had
very similar types of candy available in the US. The differences in these products will be
discussed later. Most similar of these were the Gummy Bears. The Gummy Bears from
Thailand were in a shiny plastic package, of similar shape and size to that of its US
counterpart. Even further, both packages prominently display a drawing of a bear sitting
down next to the Gummies. The English translation of the name is even “Jolli Bears,”
which is much too similar to the western name “Gummy Bears” to be coincidence (Or
even to the name “Rubber Bears” under which the product was first created by the
German company Haribo in 1922). Clearly, this product has been adopted from western
markets into the Thai market and has kept many of its distinctive features both as a
product and in its packaging. However, The product has been adapted to the local market

Page 279
in a few ways that will be discussed in the next section. Vis-à-vis these similarities, a
parallel may be made between these Gummy products and the next product we have
selected for comparison: A chocolate bar that bears a strikingly similar taste and texture
to the Crunch bar that is well known in the United States. Again, looking past product
adaptations to the Thai market, these two products are similar in size, basic shape, taste,
and texture (though slight differences in taste and texture are recognized later). This
parallel doesn’t hold true for product packaging, as we will see in the next section.
Both the Thai and the US market seem to enjoy dried fruit as well. Both markets
have wide variety of dried fruits, including the dried mango analyzed from the US
purchases in our sample and the dried apricot purchased from the Thai market. Both
products feature similar packaging, in both size and shape. Further, both packages
incorporate a small clear window so that the purchaser can view the product itself.
Clearly, this detail displays the emphasis that both Americans and Thai put on the
appearance of their foods; this point will be expanded upon in the analysis of these
similarities. Further exhibiting this preference are the other eight products sampled from
the US market and the Thai market (with the exception of the Crunch Bar) which all
prominently feature a drawing or photograph of the product being sold or a clear window
through which the product can be seen.
Identifying the similarities in candy products found in these two very different
markets is essential in deciding on entering the Thai sweets market. Single-serving
packaging, product types, packaging (to an extent), preference placed on product
appearance (i.e. clear ‘windows’ in product packaging), and even product mascots (the

Page 280
Gummy ‘Bear’) are all important similarities in these markets that can be used by
marketing teams in adapting a new product meant for Thai candy stores.

Page 281

Page 282

Page 283

MRKT-465: Class Notes
Page 284
MRKT-465 8/23/06 4:06 PM
Importance of international business and Global Marketing
Challenges of going abroad
The PEST analysis

• What is Culture?
• Developing a social/ Cultural profile
• Implications for marketing
• Focus on Japan
Highlights
• World is becoming more globalized
• Large number of customers have significant international sales
• Competitors are increasingly likely to be international customers
Many markets in the US are already nearly completely saturated, so many

companies are growing more overseas
Reasons for going global

• Market seeking reasons
o Local market saturated
 Product has competitive advantage over local products
 Local market may be limited
• Resource seeking reasons
o Less expensive factors of production
 Lower cost labor
 More relaxed regulations
• Changing Ind. economics
o Access to global scale
• Competitive positioning
o Competitors are going global, so many companies have to go
global to survive
• Scanning and learning capacity
Why is marketing important in going into a new market

• Branding

Page 285
• Product awareness through promotions, advertising

• Research into understanding the customers in each market we go
into
o Understand the decision-making unit and process – Who is
making the decision for different products in different
regions?
o Usage behavior – What do people normally use the product
for in that region?
o Customer needs and preferences in relation to the product
o Marketing will figure out the product policy
 What features are going to go into the product?
Product features will be different in different regions
 Branding/Packaging
 Product line
 Language has to be localized
 Positioning – how will the product be positioned in each
region - who are the competitors? – competitor analysis
- segmentation
 Distribution – will be different region to region
 Price – pricing strategy in each country – what is
‘reasonably priced’ in individual countries
 Product and service opportunities
Challenges that companies face when they go abroad

• Cultural differences
• Product entry barriers within the country – strong saturation
already exists in the country
• Regulatory environment/ Political environment
• Company management
• Marketing/ Distribution
• Economic environment
• Technological environment
• Customers differences
The PEST Challenges
• Political and Regulations
• Economic and Financial

Page 286
• Social and Cultural

• Technological
The Product Market Situation – The 3 C’s
• Customer, Company, Competition
Positioning in relation to language

• Customer service and support
• Packaging
• Language used in advertising – using an Italian word in an add to
make the product sound classy
• Signage at the retail outlet has to be customized
• Segmentation and targeting – Different dialects in different regions
of countries
Language
• In Japanese language
o Three writing systems: Kanji, Hiragana, Katakana, Romanji
o The different writing styles have different connotations –
Romanji is used to make something seem more western and
modern
o The language is more indirect in its style
o One talks differently to different classes and ages of people
Religious and Ethnic groups

• Japan is very homogenous in this regard
o 96% say they are Shinto
o 76% say they are Buddhist
o 1% Christian
o 12% Other
• India is the opposite, many different groups and languages
o Hindi and English are the official languages, used mostly
among middle-upper class
o The lower class uses the language local to their region
Holidays
• In Japan

Page 287
o Emperor’s Day
o Respect for the aged day
o December 28th – January 3rd: Western New Year
o Valentine’s Day (adopted from the US)
 Women give presents to the guys
 One month later, guys give more expensive presents
back to those chicks who gave them shit earlier
Aesthetics, Art and Music

• Traditional Japanese music, traditional string instruments
• Avant-Garde music (edgy, non-traditional)
• Western classical music
• Traditional Japanese art, harmonious nature
• Modern art (seen a lot in Tokyo)
• Cutesy animation and art
• Why are these things important
o For segmenting and positioning your product
o If marketing traditional products to older people, ads and
packaging and music in ads will be more traditional in nature
o Vis-versa if targeting the younger audience
Tastes
• Many tastes are very culturally specific
• Some food products just wouldn’t sell at all in some markets

Page 288
MRKT-465 8/31/06 2:08 PM
Cases excluded: perfect substitutes, perfect complements, and satiation

MRS is a constant
• With perfect compliments, the MRS is infinity, undefined, or zero
• More on slides…
The budget constraint

• I = p1x1 + p2x2
• Solving for x2 we have x2 = I/p2 – (p1/p2)x1
o Where x2 will be placed on the vertical axis. This is a linear
equation with intercept I/p2 and slope – (p1/p2).
Demands
• Solve (1) and (2) for x1 and we have Marshallian demands
• For either I, fix all other prices and income and vary own price.
This gives us simple demand.
Many commodities: composite good
Application: Employee housing subsidy

• Utility: u = u(H,M)
• Budget: I=pH+M
Price subsidy
• New budget: I=(p-s)H+M
• New equilibrium: (Hs, Ms)
• Cost to the firm: Ms-A=(I-A)-(I-Ms) = [pHs-(p-s)Hs]=sHs
Cash grant: lump-sum

• Give the employee the cash that the firm would spend on the price
subsidy = sHs
• The new equilibrium is shown at (Hm,Mm)
• Yields higher utility than price subsidy
In-kind subsidy

Page 289
• Use expenditure on the subsidy sHs to purchase housing at the

price p. Give this amount of housing to the employee directly
• This amount of housing is given by sHs/p=Hd
• Equilibrium: (Hd,I)
• In figure 8, this performs worst

Page 290
MRKT-465 9/25/06 8:18 PM
Developing an Economic/ Financial profile

Focus on Mexico
Cases
• Laundry practices in Mexico
• Vietnam’s market potential
About 200 countries in the world

• How many with more than 100 million people? 11 Countries
o China
o India
o Brazil
o Mexico
o USA
o Japan
o Russia
o Indonesia
o Pakistan
o Bangladesh
o Nigeria
World Bank divides countries into five groups

• High income: US, Japan, Western Europe, Canada, Australia, New
Zealand, Singapore, Hong Kong, Korea, Taiwan
• Upper Middle income: Mexico, Brazil, Russia, Poland, Argentina
• Lower Middle income: Turkey, China, Malaysia, Indonesia, Thailand,
Egypt
• Low income: Nigeria, Congo, Cambodia, Laos, India
Wealth – GNI/capita – adjusting to PPP (Purchasing Power Parity)

• Relates how expensive things are in that country compared to the
income per capita
• How rapidly is that wealth growing?
After looking at the wealth of a country, the next thing to look at is the:
• Size of the economy

Page 291
o Population
o Adjusting for PPP
Economic distribution
• By region
o Most of Mexico’s wealth is in Mexico city, Monterey,
Guadalajara
o Important to know for many reasons
• Urban vs. rural
o Mexico is 75% urban; China is about 35% but is urbanizing
rapidly
• By income level
How would you market laundry detergents in Mexico

Page 292
MRKT-465 9/29/06 9:48 PM
Countries with 100 million or more
High income countries in the triad
37 Countries have populations of 30 million or more

• There’s about 200 countries, so that’s less than 20% of all countries
Developing an Economic/ Financial profile

Vitenam’s market potential
ACER case
Looking at financial factors

• Inflation
o Typical in US: 2 or 3%; some countries run much more
inflation
o Mexico from 1980-90: inflation @ 72.1%
 From 1990-99, @ 19.3%
o How does inflation affect business decisions?
• Exchange rates
• Interest rates
o Mexico: lending rate decreased tremendously from ’97-‘03
• Structure of economic activity
o Size of imports and exports
o Imports and exports by product category
o Major trading partners
• Foreign investment
o Amount
o By sector
o By country
• Economic statistics by sector
o Production, services, agriculture
• Structure of Private consumption
o India spends 43.4% of its income on food, while the US
spends 8.4%. This shows where opportunities are as it shows
where people are spending their money

Page 293
A technological profile
• Geography and Climate
o Size of country
o Major geographical features
o Population density
o Climate
• Basic infrastructure
o Water
o Electricity
o Sanitation
• Transportation infrastructure
o Transportation networks
o Vehicles
• Communication and Information technology
o Media
 Newspapers and magazines
 Televisions
 Radios
 Cable and satellite TV connections
o Communications
o Information technology
• Household technology
o Kitchen technology
o Cleaning technology
o Entertainment technology
o Climate control
Using Global Market Information Database
Opportunities and Challenges in Vietnam

• Looks like an attractive market to enter
The ACER case study we were supposed to read for today

Page 294
MRKT-465 9/25/06 8:45 PM
Developing a Political/ Reg profile

Protecting trademarks and intellectual property against imitators
Euro
Product opportunities
Customer analysis: Needs and preferences
Product/ branding policy

• Branding
• Product line
• Customer service
• Product features
• Packaging
Promotion/ Communication
• Advertising
• Personal selling
Place distribution
Pricing
House vs. host country considerations

• Home country considerations
o Promotion of exports
o Restrictions on exports
• Host country considerations
Type of government
• Political system
o Democratic vs. Authoritarian
o Structure of government
• Political parties
o Single-party dominant

Page 295
o Dual party
o Multiple party
• Government centralization vs. decentralization
Role of government in the economy
www.heritage.org
• Numbers on the types of governments in countries
• A republican thinktank
www.prsgroup.com
• Risk guide
o Provides rating for how risky it is to enter a specific country’s
market
www.wto.org
• Trade statistics for countries
GMID – Global Marketing Information Database
Monday (9/18/6) will be doing the Citibank case

• Will post case preparation questions under ‘Course assignments’
Brand protection
• How do you protect your brand?
o Legal means
 Register your brand in every country
 Lobby government for better protection
 Take violators to court
• How do you use non-legal means/ marketing strategies to protect
your brand against imitators and violators?
o Use distribution channel ties to keep out all imitators
o Advertise/ communicate that the real product is better than
the copy product
o Make registering product mandatory

Page 296
MRKT-465 9/30/06 12:35 PM
Free trade area: removal of internal tariffs

• Customs Union: adds common external tariffs
• Common Market: adds free flow of capital and labor
• Economic Union: adds harmonization of economic policy
• Political Union: ads political integration
European Union
• Started in order to unite European countries so as to prevent wars
between countries
• 1960s, original 6 members in a full customs union
• Currently 25 members of the European Union
• 1992, Europe became a common market
• 1999, added common currency, became an economic union
• After 1992, people and goods could move across borders freely
without lines or paperwork or passports
o This makes things much easier for businesses in Europe
Elimination of trade and service barriers at the border

Only need to meet one set of standards for al of Europe
One currency
Elimination of trade and service barriers at the borders

• Move products easily across borders
• Set up operations easily across borers
• Consumers can easily shop across borders
Only meet one set of regulations

• Develop one product for all of Europe
• Consumers can buy products from other countries easily
One currency
• Elimination of exchange rate risks
• Elimination of exchange rate conversion costs
• Consumers can compare costs/ prices easily across borders (price
transparency)

Page 297
More on EU
• Companies can easily expand throughout Europe
• Consumers can easily shop or make price comparisons across
borders
• Raises competition and increases consumer choice
o Lower prices
o Restructuring companies for greater efficiency
o Consolidation of operation
o Consolidation of supplies
• Effects on marketing
o Easier distribution
o Standardization of products across Europe
o More standardization of marketing approaches through
Europe
o Barriers to make this happen: cultural and language barriers
o Pan-European products: products that are standardized and
sold across borders, with different languages on the
packaging
Citibank case: challenges and opportunities

• Selecting/ prioritizing countries
• Standard vs. adaptation of marketing and positioning
Challenges
• Political/ regulatory
o Lack of adequate legal structure to collect bad debts
o Regional restrictions on banking
• Technology
o Lack of infrastructure
o Some markets saturated
o Credit checking infrastructure limited
o Telecomm
o Postal Service
• Economy
o Low per-capita income
• Competitors

Page 298
o Lower priced local competing credit cards

• Cultural
o Use of credit cards varies among countries
o Cultural attitudes about debt are negative
Benefits
• Growing economies
• Big populations
• Large number of wealthier people (even though they are a small
percentage of the population)
• Don’t need branches – cross sell products
• Wealthy people are concentrated in big cities, so it is easy to reach
them

Page 299
MRKT-465 9/25/06 8:55 PM
PESTanalysis summaries
• Germany, Morocco
Standard vs. adaptation of marketing strategy for Credit Card in Asia Pacific
at Citibank
Selecting and prioritizing markets
Citibank case continued from previous lecture

• Premium
o High income
o Upper-middle income
o Middle income (aspirational)
Incomes over $12,500
TV ads in Asia for Citibank cards

• Similarities
o Premium positioning, reliable other premium features
o Branding – logo: not just Via, Citibank Visa
o Product and Product features
• Differences
o Local people used and local languages
o Some male centered, others female centered
o Emphasis on different products
o Targeting different age groups
Next case for Monday: P & G laundry detergent case

Page 300
MRKT-465 9/25/06 4:00 PM
Highlights of PEST profile for Vietnam
Selecting and Prioritizing countries

• Quantitative serving models
Procter & Visir Gamble case
Narrow Market Choices
Industry Specific Indicators of Attractiveness
Quantitative analysis of a market

• Population
• GNI per capita
• Density of population
• Tech infrastructure
o Number of telephone lines per 100 households
o Development and reliability of mailing system
o Number of businesses with processing equipment
• Government regulations
o For. Bank access to ??
o Restrictions on income levels of consumers
o Laws for collection of bad debts
• Competitors
o Intensity of rivalry among established credit card companies
o How well established are the competitors
o Is main competitor there or not?
o # of competitors in the market
• Size of market
o # of Credit Card holders
• Growth potential of market
o Saturation of the credit card market
o Population with incomes above $12,500
o GNI per capita
• Ability to reach target segment
o Density of population
o Density of people with incomes over $12,500

Page 301
• Customer attitudes
• Give different categories different weights (20%, 12%, et cetera)
Making a spreadsheet
• List categories, with subcategories
• To the left of this, the weights (.11, .11, .2, et cetera)
• To the left of this, countries, divided into two columns
o The number (24 Million for market size, for example)
o The rating (# 9 among countries analyzed, for example)
• A weighted average (.11 * 24 million, for example)
P & G case
• European versus US clothes washing
• More loads versus fewer loads
• Lower temperatures vs. boil wash
• Some liquids vs. no liquids
• Larger vs. smaller loads
• Top loading vs. front loading
• More synthetic vs. more natural clothing
Europe
• Lead market for laundry detergent
• More sophisticated, more demanding, and more discriminating
about laundry and what a ‘good clean job’ is
Within Europe – Many Markets

• Differences
o Hand wash vs. machine wash
 Hand wash: Italy and Spain
 Machine wash: UK and Germany
o Coupons not permitted in some markets, vs. OK in others
o Regulations about packaging differ from country to country
o Distribution: Large retailers vs. small retailers selling these
products
o Phosphate regulations differ among countries
o Formulas and features differ

Page 302
• Similarities within Europe

Page 303
MRKT-465 9/27/06 4:01 PM
Selecting/ Prioritizing Countries

• Estimating attractiveness
P&G Vizir
Types of Global/International Marketing Strategies
• Advantages and Disadvantages
Class on Monday is informal, so people who come to class will just be

splitting up into their groups and working on the group projects
P&G case
• What was the main difference between the US and European
markets?
o European market is more demanding, sophisticated market
o What do we call a market like this?
 A ‘Lead’ market
• More adapted vs. more standard approach
o They were using a more adapted approach
o Mini P&G in each country
 Marketing
 Manufacturing
 Research and Development
o How was Ariel positioned differently in different countries?
 Low suds vs. high suds
 High temperature vs. Low temperature
 Nine different formulas
o As country’s differences begin to subside, the adapted model
begins to become less effective
• Advantages of adaptive model
o Tailor products to different customer markets and customer
characteristics
o Respond more rapidly to developments in the markets or
competitive conditions
• Disadvantages
o Higher costs, duplication of efforts across countries
o Inefficiencies

Page 304
o Manager in case says overhead costs in Europe are 50%

higher than in the US
o Slow innovation, new product launches don’t move along very
quickly
• Where was the market growth in the 80s?
o About 2% a year, it had basically flattened out
o Product life cycle: mature
• Wait only 4 months to launch product
o Henkel might preempt
o First mover usually gets the market
o Consistent with innovative position
• Wait 1 full year for launching product
o Standard procedure
o The ‘safe’ way of doing things
Should they stay adapted (non-Eurobrand) or become Eurobrand

• Become Eurobrand
o Economies of scale
o Brand consistency – reinforce consistency
o Good transfer of ideas
o New type of products can be released faster and produced
more efficiently
o Mature environment
• Stay non-Eurobrand
o Consumer washing preferences still differ too much between
countries
o Getting coordinated across countries will be easier
o But they might not get support from regional managers

Page 305
MRKT-465 10/4/06 4:04 PM
International Global Marketing Strategies – Advantages and Disadvantages

How to achieve complex global strategy
Kao case and marketing in Japan
Going over what we learned about the P&G laundry detergent case study
--On a graph--
Pressures for Globalization, standard and integrated
• Simple, Global
When pressure for both the above and below are high, Transnational
Strategy (or Complex Global) approach, this is the middle point
Pressures for local adaptation/ customization

• Multidomestic: P7G before 1981 in Europe
Coordination of Marketing activities

High Not reliable P&G moves here
Low P&G in 1980
High Low
Centralization of marketing activities
Market Extension (or Ethnocentric) = E

Multidomestic (or Polycentric) = M
Simple Global (or Simple Geocentric)= S
Complex Global (or Transnational, or Complex Geocentric) = C
Fit to local customer preferences

• M&C
Fit to local competitive condition
• M&C
Responses to local Political/ Regulatory environment
• M&C
Strong entrepreneurial managers
• M&C

Page 306
Efficiencies and Cost reductions

• S&C&E
Transfer of Learning
• S&C
Consistency of image
• S & C & Maybe E (Will have consistency, but may not be effective
for the country in question)
Coordinating global competitive approach
• S&C
Create a Matrix in Each manager’s mind

• Change the Organizational Culture and Mindset
• Balance Global versus Local Concerns in Each Manager’s Mind
Mechanisms for coordination with dispersed resources
Diaper case – P&G
Entering into the Japanese market

• Size too big – The US kids are bigger than Japanese kids
o It leaked
o 2 times too big, twice as big as Japanese competitors
• Disposable diapers are more expensive than cloth diapers
• Cultural: Mothers were slacking if they used the easy disposable
diapers
• Cardboard boxes dented on shipping from the United States,
making it look like the diapers were of poor quality: packing is
important to Japanese consumers
• Traditionally used cloth diapers made from Old Kimonos
• These aren’t the reasons that P&G did poorly, these are difficulties
for the entire disposable diaper market, not just P&G
Reasons for P&G doing so poorly

• Poor relationships with distributors
• Distribution systems in Japan are very complex, P&G couldn’t
handle it without close relationships

Page 307
• Not much shelve space, only a few packages on the shelves, P&G
couldn’t restock quickly
• Competitor could restock quickly with computer based system,
restocked within 24 hours
• P&G didn’t have this, often there were no Pampers on the shelves
• Don’t have automates inventory system like their competitors
• Retailers received less profit from Pampers’ product, so product
wasn’t emphasized and not much shelve space was given
• P&G didn’t have a 24 hour hotline
• P&G diapers too thick, packages were too big; competitor used
thinner diapers and smaller plastic packages
• Absorbance was much lower than the competitors ,leading to more
leaking
Three big challenges for marketing products in Japan

• Product quality
• Product packaging
• Distribution
P&G was using an ethnocentric marketing strategy for Japan, didn’t work so
well
• How successful do you think they are going to be with the new
Pampers? (after they changes their strategy)
• They start to give retailers higher margins, and slowly begin
correcting distribution problems
• New Pampers are thinner, smaller, absorbency of new product
much higher than the Japanese competitors, didn’t leak
• Changed to smaller plastic packaging
They hold onto a 25% market share now, similar to their leading competitor
On Monday will be discussing the next (Amdico) case

Page 308
MRKT-465 10/9/06 4:01 PM
Kao case and marketing in Japan

Joy of P&G in Japan
Importance of Japan market
International situation analysis
EMDI Co (A) case
Important factors in Japan Marketing

• Small box, things must be shrunk into small packaging
o Small houses
o Very little shelf space in stores
• Packaging represents quality, must have nice packaging
• Quality is important to Japanese consumers
P&G vs. Kao: Advantages

• P&G
o Deep financial resources from international process
o Global presence allows for knowledge transfer and able to
take leading edge knowledge from different parts of the world
and combine to come up with more powerful higher quality
product
o P&G is known for its marketing, brand management
• Kao
o Deeper understanding of the Japanese market and culture
o Established brand loyalty
o Very strong distribution system with close relationships with
distribution channels and automated inventory systems
What can Kao do when it finds out that P&G will be releasing new product
that is better than theirs?
• Strengthen ties with distribution to effectively block P&G from
stores
• Begin to improve own product quality
• Leverage strong brand equity
• Come out with high quality product as soon as possible (case says it
will be one to two years)

Page 309
How important is the Japanese market to a company like P&G?

• In 1985, at the time of the case, P&G had lost money in Japan for
13 years
• Strongly considered pulling out
• Japan is a lead market, so they could take learning from Japan to
make themselves more competitive in other parts of the world
• Huge market, important to be in Japan, one of the four largest
markets in the world
• Competitor in Japan, Kao, wanted to be a global competitor to P&G,
by P&G staying in Japan, they are hindering Kao’s progress in
becoming a strong globally competitive company
• P&G decided that Japan was in strategy very important to stay in,
for the aforementioned reasons
In 1987, P&G started to earn a profit in Japan

• Top three, including Kao and Lion, suppliers of consumer household
goods in Japan
Why was dishwashing soap category declining in market value year by year
in Japan? More people eating out
• Kao and Lion have 40% each of the market in this category
• What to do?
o More concentrated, grease cutting formula
o High quality packaging
o Offer distributors and retailers high margins
o Combine global innovation with local Japanese innovation,
come up with high quality grease cutting formula
o Small packaging, efficiently uses distribution space
Beginning on situational analysis

• The product marketing strategies
• Three C’s plus ‘Market Condition’
Competitive factors
• Competitors and competitive positions
• Competitive environment

Page 310
o Products, Pricing, Distribution, Advertising

• Your company’s competitive position
o Market share, et cetera
• Customer factors
o Segmentation
o Conditions of product use
o Needs satisfied
o Preferences
o Perceptions of category offerings
o Amount of cross-border communication
 Amount of international travel
 Amount of media spillover
• Company factors
o Core competencies
o Stage of development of presence…
o …
• Market factors
o Stage of market development
 Product life cycle stage
o Strategic importance of market
 Lead markets
o Size
o Growth
Why is it difficult to market film products in Saudi Arabia

• Women in pictures- not cool
o Strangers can’t see women unveiled
• People wait for their film to be developed, watching to make sure
that nothing sketch is going on
• Men do most of the shopping
o Only 1/7th of women actually go to the store to buy products
o They have 1/3rd influence in purchasing decisions
• Women take photos – done professionally in photo studios of in
weddings

Page 311
• Fairly wealthy customer base, indicates that there might be more

potential here than what is indicated in the market by previous
statements
• High disposable income among middle class
o (By world standards, still lower than US)
• 92% of homes have cars, almost all have washing machines, 2/3rds
have A/V equipment
• Why do they have so much disposable income?
o No income tax, subsidized things, free health care, et cetera
• 25% of the population are expatriates, may not have same
stringent beliefs as locals
• 49% less than 16 years of age – hook them early
• Concentrated in Urban areas
• Pilgrims, can’t take pictures of holy sites, et cetera, but some
extend their stay and become tourists with purchasing power for a
little while before or after their pilgrimage
How much potential for the market here?

• 17 million people
• Growing very rapidly, going to double by 2010 to 34 million people
• These people are increasingly exposed to outside influences
• Adopted satellite TV after 1990 war, most people have satellite TV –
increasingly exposed to ads and lifestyles from other parts of the
world
• How much untapped potential? A good amount
• Find a way to market film that assures people that they won’t be
breaking customs by using this product

Page 312
MRKT-465 10/11/06 4:05 PM
Turned in assignment #2
EMDICO(A) Case and marketing in Saudi Arabia

Selecting/ Prioritizing Country Markets II
Customers
• Restrictions on photo taking, et cetera
• When looking closely, it is clear that there is an untapped potential
here
o Fairly wealthy people
o Large group of young people
o Large expatriate population
o Satellite- large exposure to outside influences
• What must be done to tap into this potential?
o Marketing that reassures people that photos are good
What kind of marketing approach would fit more with the cultural constraints
of this country?
• Mini-labs – less than 1 hour developing: can watch what is being
done and make sure no Islamic code is being broken
o 216 mini-labs at the time
o Saudi Arabia: 78,000 people per mini-lab
o U.S.: 12,000 people per mini-lab
o Neighboring countries: 10,000 – 20,000 per mini-lab
o Would expect Saudi Arabia to be (17,000,000 people divided
by 12,000) 1,416 mini-labs
o 80% of mini-labs are in two cities
• Digital photo would be good for this market, but wasn’t around so
much in 1990 when this case was presented
• Instant cameras (Polaroid style)
Competitive Analysis
• Kodak (43%), Konica (44%), Fuji (8%)
• Not much fierce competition
o Few mini-labs
o Higher prices

Page 313
o Little advancement
o Not broad scale
Company (Fuji)
• Weakness
o Latecomer
o Negative perception
o Negative perception because they sell in Israel
o Distributor is good with cameras, but not so good with film
distribution
o Only 16 of 216 mini-labs
o 100 Retailers dropped Fuji in the last year
 Why? Late deliveries, stock-outs, not good
relationships with distributors
o Lower penetration
• Strengths
o Medical x-ray
• Where do they have strengths in other markets that they could
bring into this market?
o Developed more compact, durable mini-lab
o Fuji mini-lab machines have a lower break-even point
• Market share in surrounding countries – Over 30% market share in
mini-labs in surrounding countries
Marketing
• Emphasize mini-labs, in the two main cities but especially in those
outside of these two cities where Fuji will have a greater market
share in entering the market
• Where else to distribute product?
o Supermarkets and drugstores, more retail channels
o Hotels, et cetera
• Lots of advertising
o TV ads, sampling promotions
o Reassure of no people seeing the photos as they are produced
o Educate them about photography
o Build Fuji brand awareness in the market

Page 314
• 460 mini-labs in 1995, forecast 742 by 2006

o Fuji had the majority of these new mini-labs
Factors affecting country selection for a worldwide business

• Country Selection
o Standalone attractiveness
o Relative competitive strength
o Global Strategic Importance
• Similarity to Home country and competitive strength
o Companies first go to countries most similar to the home
country, because of knowledge and competitive strengths
relevant to these kinds of markets
• BCG Matrix
•
• GE-McKinsey Matrix
Exam on Monday
• Mostly Short Answer question, 70-75%
• Multiple Choice, 23-30%
• Won’t ask about anything that wasn’t covered in class
• Concepts, cases, aspects, lessons of cases

Page 315
• Examples that we’ve talked about, such as Joy or Mexico economic

conditions
General topics on Midterm

• PEST: why is it important to go abroad?
o How to develop a cultural and social profile
o Implications of this profile for how to do marketing in this
country
o Economic/ Financial profile
o Implications for marketing
o Technological profile
o Political/ Regulatory profile
o Sources of data for these analysis
o Applied to many different countries
o Economic conditions in Mexico
 Laundry detergents in Mexico
 How this is influenced by the economic environment
o Looked at the EU, and how to do marketing in Europe
o China and India, some things going on in these markets
relating to the size and growth rates of these markets
o Countries with largest populations in the world, countries with
largest economies in the world
o Stage of market development in different parts of the world,
(Low income, high income, et cetera)
o Cases:
 Barbie case
 Marketing industrial products in Latin America
 Vietnam’s Market potential
 Protection against imitators and trademark violators
 How a company can protect itself
 ACER case
 Won’t be included on the exam
• Selecting Markets
o Assessing attractiveness

Page 316
o Relative competitive strength

o Strategic Importance
o Filtering, Quantitative, Scoring, Qualitative
o Citibank
• Global and International marketing strategies
o Market extension
o Mulit-domestic
o Simple Global
o Complex Global, Transnational
o Advantages and disadvantages of each
o How to achieve Complex Gloab
o Cases:
 Laundry detergent, P&G in Europe
 Kao, P&G and Diapers in Japan
 Dishwashing soap, P&G in Japan
 Won’t talk about Fast Food reading
o Marketing successfully in Japan
o Marketing in Europe
o Marketing in Saudi Arabia
• Situational Analysis
o Customers
o Competitive
o Company
o Market conditions and product life-cycle
o EMDICO(A) case and marketing in Saudi Arabia
• Wont’s ask about student’s powerpoint slides

Page 317
MRKT-465 10/23/06 4:03 PM
Consumer tastes around the world and convergence
Levitt’s simple global approach – case study
High quality and low cost global products will beat out adapted products
• Global scale permits low cost and low price, and high quality
• Customers will choose lower priced, higher quality products even if
they are not exactly tailored to part habits and local market needs
• The Japanese approach – uses this idea
o Consumer electronics, automobiles
• The global corporation
o Accepts and adjusts to differences reluctantly
• This is basically the simple global approach to things
• Global Strategy and an equidistant mindset
o Focus internationally, not domestically
o Global strategy requires global perspective
o Don’t use ethnocentric approach
• The new borderless world
o Free flow of info around the world
Developing a global product

• Averaging product will produce lackluster results
• Design products for lead market
Different types of products require different attention
Headquarters mentality can get in the way

• End up being ethnocentric
Customers are becoming more alike

• Need to see customers around world from equidistant mindset
Levitt has a point, but only applies to certain products
Quelch & Hoff’s perspective on global marketing: Customizing global

marketing

Page 318
Globalization isn’t either-or

• Different elements of the marketing mix and different levels of
standardization
• Different types of products
Standardization and product type

• Globalization: lower prices and transfer ideas and conserve
managerial resources
• Don’t customize for small markets, it just won’t produce a profit
because customization requires many resources
Product Policy can be broken down into elements
Elements of product policy

• Product positioning
• Branding
• Product features
• Packaging
• Product line
• Customer support
Can break the above elements down further
McDonalds is different in different places, yet similar too- I Like!
Categorizing
• Categories along the top
o Very Adapted
o More adapted
o In between
o More standardized
o Very standard
• Categories along the left-hand side
o Low price, predictable, American style fast food: Very
Standard

Page 319
o For kids: More standard than adapted

o Hip place to hang out: More adapted than standard
o Branding: Name, color, logo: Very standard

Page 320
MRKT-465 10/25/06 4:05 PM
Marketing internationally used to be focused on the triad, now more

emphasis on emerging markets in order to gain more market share in these
markets, which are generally less saturated
Marketing in developing countries

• Babysan & Pampers in Chile
• Corporate Imperialism
• Kit Kat & Chocolate covered wafers in Chile
• P&G Feminine care case
Babysan diapers market share in Chile was 90%, then it was bought by
Pampers
• Over years, P&G phased out Babysan name and made Pampers
name more prominent
• Over the years, market share went to 30-40%
• Babysan used to be in red packaging, changed packaging when
bought by Pampers
• Other company used name Babysec, took market share
• In 2003, P&G changed name from Pampers back to Babysan
Kit Kat bars in Chile

• How to change them for a lower-class market in Chile
P&G is a world leader in international marketing
P&G FemCare case

• GBUs – doing more advertising
o Media buying
o Overall strategy for each product category
o Evaluated on the basis of P&L (Profits and Losses)
o Advertising
o Branding is managed here
o Pricing decisions
o New product development
 In Japan, US, and Germany
 Developing marketing

Page 321
o Packaging
o Product manufacturing and supply
o Product positioning
• MDO – doing more direct customer marketing
o Responsible for executing the marketing in each region or
country
o Market development
o Distribution and Retailing
o Evaluated on the basis of sales revenue
o Promotions
• Communication and coordination between these two groups
o Global Brand teams
o Weekly teleconferencing
o 4 times per year face-to-face meetings
o E-mails and phone calls
o Become friends with each other
o Rotate managers
FemCare case
• Focusing on Mexico and China
• Mexico
o Customers
 Rush down Femcare aisle
 Know what they want, very demanding
 Good quality at affordable/ low price
 20-25% Premium market
 55% Mid-tier market
 25% Lower market
o Competition
 Very competitive market
 Saba – 26% - Mid-tier
 P&G – 21% - Premium
 K-C Kotex - Mid-tier
• China
o Customers
 Study products carefully before buying

Page 322
Not so embarrassed purchasing these products, linger

in the feminine care aisle for more time
 Buying 2-3 different brands/products at one time
 Good quality at affordable/ low price
 10% Premium market
 40% Mid-tier market
 50% Lower market
o Competition
 Competition very fragmented
 Many small local brands, over 1,000 selling locally
 Global competition
 All five major global brands represented
 Two Japanese companies and three US companies
 P&G Market Share – 11%
 Market share leader
 Strong Chinese competitor – Has 15% of market
 P&G is premium product in China, while other players
are mid-tier or low-tier

Page 323
MRKT-465 11/1/06 4:13 PM
2 Perspectives on global branding

Lay’s around the world
Global Cola Marketing and Cola Wars in China
Cola taste tests

• Coke – Blue Lines
• Pepsi – Disney
• Go – Floral
• RC – Blue palms
Reaching mass markets in low-income countries

• Create a good quality good value product
• Global branding should mean global brand leadership
o Should strive for having the best brands around the world,
but not necessarily standardizing everything about these
global brands
o Companies that use global brand standardization and
unconnected and directionless local brand strategies will find
mediocracy as its reward
• Prof’s brilliant marketing strategy for ‘making great success’: Make
a inexpensive product of top quality with perfect distribution- High
Five!
Glocalization (Clever) – get the right blend of global and local emphasis
Challenge for Global Brands

• Glocalization in managing global brands
• Lightening rods for anti-globalization
• Very salient in minds of consumers

• Global citizens (55%)
• Global dreamers (23%)
• Antiglobals (13%)
• Global Agnostics (8%)

Page 324
Opportunities and responsibilities in managing global brands
Coke as a global brand

• Brand image
• Distribution
o Philosophy to put the product within arms length of desire
• Advertising
o Very important because they know they’re selling a brand
o General strategy in each region – to support the brand image
o Coke sponsors sporting events in each country, but different
types of sports for each country; use young, hip celebrities in
adverts, but this is localized for each region
Future Cola as a global brand

• More adverts in rural areas in China
o Coke and Pepsi are strong in the big cities on the eastern
seaboard of China
o Less than a third of China’s population lives in the cities in
this region
o Future Cola is going after the 2/3rd rural population, with less
purchasing power per capita but there are many more of
them
• Lower prices
• Very strong relations with Chinese distributors

Page 325
MRKT-465 11/6/06 4:23 PM
Coca Cola case

• How does Coke decide what to standardize in markets and what to
adapt
• Standardize things that are globally strategically important
US
• Coke – 41% Market Share
o % of Sales – 24%
o % of Profit – 20%
o Profit Margin – 21.7%
• Pepsi – 31%
Internationally
• Coke – 45%
o Profit Margin – 29.9 %
• Pepsi – 14%
This data sucks for Pepsi
Strategic importance of China in Cola/ Beverages – Why is this so

strategically important
• Huge market, already one of the four largest markets in the world
for beverages
• Disposable income is growing, market not yet saturated
• Competitors are starting out on a more level playing field
• Can upset the dominance of the global leader if you dominate this
market

Page 326
Chinese companies are typically known for their operations, not marketing
knowledge
• Recently some Chinese have started to master western marketing
techniques
• Wahaha Marketing skills are like western skills
o What are they doing in China?
o Engaged in brand-building efforts, developed a strong brand
o “Good for children”
o Many sponsorships
o Sophisticated advertising, lots of advertising, mostly on
national TV network
o Celebrity endorsements
o Know Chinese customs very well
• Where does Wahaha have a clear advantage over Coke & Pepsi?
o Very strong in the rural markets
o Great relationships with distributors in the rural markets
o Lower price
o Position as a Chinese brand
o More product variety
o Taste of Cola is tailored to Chinese preferences
• How worried is Pepsi about all of this?
o Should be worried, but Pepsi and Coke both have very large
budgets and many more years of experience
o Distribution is a problem
• Market shares in China
o Coca-Cola – 42%
o Pepsi-Cola – 23%
o FutureCola – 18%
• Coke left India in 1977 because they didn’t want to give away their
secret formula
o 1989, Parle Group (Thumbs Up Cola and Limca Cola) 90% of
market share, Pepsi entered market
o 1993, Pepsi had 33%, Parle group had 60%
o 1993, Coke bought Parle, suddenly had 60% of market share
o Coke put all of their marketing budget behind Coca-Cola,
didn’t advertise Parle products

Page 327
o This didn’t turn out too well, looked like Coke was ruining this
local brand that people were proud of
o Coke went down to 53% in late 90s while Pepsi went up to
40%
• What can Coke do in this situation?
o Adapt much more to the local market
o Sponsor local events
o Get Indian celebrities on ads
o Show local Indian settings
o Sell Both Global brand and local Brand, emphasize Thumbs
Up so they have a better image

Page 328
MRKT-465 11/8/06 4:14 PM
Sweet snacks around the world

International/ Global Advertising and Communication
Deremate.com Case
Coke ads: sports in ads (whichever sport is most popular in each country)
• Target Audience
o Highly Standardized or Mass Market
• Objectives
o Highly Standardized
o Push vs. Pull
o Image
o Positioning
• Theme and promotional message
o Highly standardized, Refreshing, Relaxing, Hero’s Elixir
• Platform
o Highly standardized, same structure, storyline
No Class on the Wednesday before Thanksgiving
Differences in Latin America internet business

• Lower penetration of internet throughout the population
o Mostly upper-income and younger generation
• Unreliable internet infrastructure, instability on internet connections
• Differing methods of payments, don’t use debit/credit cards, mostly
cash
• Not into collectibles, selling electronics and cars
• Selling older products that might be considered junk in the US
• Using to monetize for old assets
• Don’t have a well-developed reliable set of delivery options

Page 329
MRKT-465 11/15/06 4:03 PM
Global Brand face-off

Global marketing movie marketing
Unilever in India
Product placement in movies
The grid and the Grid revisited
Espoir in India, shrunk package size, decreased price, and other things to
customize products for India
• Indian reaction
Arguments for the global campaign, against campaign
Managers in Espoir
• Like the global idea, but want it mixed with localization
• Quantify benefits and costs of global versus local campaign
• Implementation is lacking in generating good buy-in for managers
across the country
• What was the problem with the way she introduced this global-plan
campaign?
o Said that marketing (including advertising and product line)
parts should be globalized, parts should be localized
o Could have said that local managers could localize around the
suggested platform
 Eastern European manager could use eastern European
beauty queens in advertising, while still using the
marketing plans from headquarters
o Shouldn’t have used simple global, should have used complex
global
o Common platform, localize around the platform
o Should have gone with a bottom-up approach and team to
develop the campaign

Page 330
o Not dictating, should have been more of an orchestrator

instead
o Headquarters could pay for the global campaign, and leave
local managers with as much budget for local advertising as
they were going to have before
o Lesson: Simple Global dictating = bad
 Not Global Dictating (i.e., not being a dumbass) = good
o What movies go global best? Action movies, easily translated,
very few cultural nuances and cultural humor
o Positioning movies is different in different countries. Brilliant.
• Reasons for movies being released simultaneously around the world
o Frustrating movie fans by making them wait months, might
not go to theater when it finally comes out
o Counterfeit products
o Will order US version before it is released in local cinema
o Bad reviews don’t have time to spread
• Movie stars don’t like simultaneous rollouts, talk-show appearances
aren’t staggered, have to promote movie all around the world at
the same time
• Second problem- need to translate and dub these films before
worldwide release
• In many countries there aren’t many cinema screens, might have to
wait until screens become available
• Fourth problem, release timing (in US films are released early
summer, other countries have different optimal times for releases)
Unilever® in India case

• #1 consumer products in India
• Market share in India is 40-45% of market
• Great sales and distribution network
• Lots of different products and brands
o Personal care products
o Fabric Care/ Detergents
o Beverages and food products (Knorr food brand)
o Femcare, compete with P&G in this market
• Very strong brands

Page 331
• Local reputation – Hindustan Lever – JV’s with local shareholders

• Urban areas
o Represent about 25% of the market, or about 250 million
people
• Is Lever strong in rural areas?
o Strongest of anybody in rural areas, but still not that much
penetration
o Which rural areas have they reached already?
 Accessible rural areas – in the vicinities of major cities
 How much of a market do these accessible markets
make up? About another 250 million people (25%)
o Inaccessible rural areas
• Challenges and opportunities
o Growth in urban areas
o Many of global players
 P&G
 Colgate-Palmolive
 L’Oreal
 Kao
o Profits have been declining
o New local players
 Local Indian players are targeting tier three of
customers
• Lever introduced two new tier three brands
• Designed these new brands from scratch

Page 332
MRKT-465 11/20/06 4:04 PM
Global/ International advertising and promotion

Unilever in India
Marketing in an Indian Village – Kelve
Localizing advertising and promotion

• Advantages
o Resonate/ connect with customers more deeply
o Avoid insulting
o Media available for advertising varies
o Customer needs and behavior varies
o Competition varies
o Regulations vary
• Disadvantages
o Costly
o Uses more managerial resources
o Confusing customers about positioning and branding
o Not reinforce brand as people hear messages across borders
• Growth of cross-border media spillover
o Growth of the internet, people see ads across borders could
be confused over branding and positions
o Satellite and Cable TV- brings programming and advertising
from other countries into the living room
o International travel- people travel abroad more often,
inconsistent messages across borders, especially in Europe,
could become confusing
Selecting media and the communications tool

• Availability
• Regulations
• Habits and intended audience
o Which media or communications vehicle is our target
audience most receptive to?
• Fit of the Objectives/ Message to the media or communications
vehicle
• Cost

Page 333
Unilever in India
• Shakti Entrepenuers
o Distribution to the inaccessible small, poor villages in India
(who account for 50% of India’s population)
o Train women to distribute goods, increase their household
income by 50%
o Working with SHG’s to obtain microfin for entrepreneurs
• ShaktiVani
o Organize groups in local villages to educate about personal
hygiene and health
o Communication vehicle for Unilever products
• Shakti
o Access to internet in Shakti home store
o Draws people to the Unilever distribution point
o Communication about Unilever products through online
advertising on these computer terminals
Challenges to this program set up by Unilever

• Sellers need training, support, and education in order to be
successful
• Need to scale up the program nationally in India without raising
resources needed too much in order to make this program work
• Can they make it profitable?
• Self-Help groups and humanitarian groups, as well as consumers,
have concerns about possible exploitation of these poor customers
in these villages; also host concerns about commercialization
aspects of this program
Kelve
• 80 Km outside of Mumbai (Previously Bombay)
• 2.5 hours by train, 3.5 hours by car
• 3,000 people in the village, on the Indian Ocean
• Extended families living under the same roof
• 50% own their own banana groves and vegetable groves, make
small incomes from their small plot enough to get by
• A few people own a lot of land and are relatively wealthy

Page 334
• 10% are fisherman

o Less well-off than those who have their own plots of land
• 15% are farmhands, or tribals, don’t own land just work on farms
o Poorest of these groups
• 3% commute to Mumbai for work
• A handful of professionals, such as doctors and dentists
Spent 20 minutes on slideshow- found out that Kelve is, in fact, a village.
Things this class makes me want to do:

• Go to the village in the pics, and steal their fish
• Dive out of the window to my left

Page 335
MRKT-465 11/29/06 4:04 PM
International and Global Distribution and Retailing

International and Global Pricing
KFC in Japan
Evaluations
Outline of Course Material
Other countries have stores

• Surprisingly, these stores have things for sale in them
• One of these items: Coke. Megan tells me that Coke is, in fact, a
Global Product
Rise of discount stores around the world, as well as a rise in large

supermarkets
Price escalation
• For exports
• Shipping
• Insurance
• Taxes/ Tariffs
• Importer and distributor margins
Absolute Price Standardizing

• Pricing something equally around the world
Relative Price Standard

• Pricing relative to the average price level for that type of product in
that country
KFC in Japan
• Customizing stores to fit to the Japanese environment
• Adapted some of the side dishes and menu, but left core menu the
same
• Branding left consistent
• Employees are like 5 year old children
Potential for globalization

Page 336
• More potential for standardization

o Product
 Branding – More Standard
 Features – Less Standard
 Positioning – Even Less Standard
 Packaging – Not So Standard
 Customer Service and Support – Not Standard at all
o Communication
 Advertising strategy – More Standard
 Advertising Platform – Less Standard
 Execution – More Localized
 Media – Even More Local
 Promotions – Most Local
• Less potential for standardization
o Pricing
o Distribution
Final Exam on Wednesday, 12/6 4:30-6:30PM
Office hours:
• Thurs: 4:30-6:30
• Tues: 4:30-6:30
Perspectives on Global Marketing

• Levitt
• Ohmae
• Quelch and Hoff
Product branding
• Elements
o Positioning
o Branding
o Product features
o Packaging
o Product line
o Customer service and support

Page 337
• Global Branding
o Portfolios of global, regional, and local brands
o Brand names across borders
o Brands and COO Positioning and how to overcome negative
COO fxsoc
o Protecting brands from piracy and imitation
o Transitioning local brand to a global brand
Readings
• Haker and Joachinstaler – The lure of global branding
• Holt, Quelch, and Taylor: How global brands compete
• End of corporate imperialism
Cases
• ELC – International and global greeting cards
• Bud versus Bud
• P&G Femcare Case
• Cola wars in China and WW
• Coke and Thumbs up in India
• Lay’s chips around the world
• Super 8 in Chile
• Babysan/ Pampers in Chile
Advertising/ Promoting and communications

• Elements
o Target audience
o Communication objectives
o Theme and message of communication or ad
o The platform
 The tone of the ad- emotional of informational
 Form of the ad
o Execution of the ad
o Budget
o Media
Differences in Communications Environment Across Countries

Page 338
• Constraints and trends in international advertising

o Difficulties in making advertising global
o Problems with mixed messages across borders with different
regional advertising
• Cases
o Deremate.com
o Global Brand face-off
o IBM Global advertising approach
o Coke ads around the world
o Coke ads from India, Coke ads from japan, cultural
advertising differences
o Kellogg’s Corn Flakes Boxes from around the world
o Global movie marketing and changes in release dates around
the world
o Distribution and retailing
o Traditional formats for retailing like outdoor stalls and mom
and pop stores
 Trends affecting retailing around the world
o Need for localization of retailing and distribution
o Unilever in India and project Shokti
o Indian village outside of Bombay
o Cost affecting pricing across countries
o Market factors affect prices across countries
o Environmental factors affect pricing across countries
o Managerial issues, affect on pricing
o Relative versus absolute pricing
Segmentation
• Country Cluster segmentation
• Global international market segments
• Teenagers, Business managers
• 4 P’s potential for globalization
• Example of KFC in Japan

MRKT-465: Study Notes for Final
Page 339
Final Review
Office Hours:
Thursday 11/30 4:30-6 pm
Tuesday 12/05 4:30-6pm
Thursday 12/7 4:30-6 pm
Perspectives on Global Marketing Strategies

Levitt
Ohmae
Quelch and Hoff
Product and Branding Policy
Elements
Positioning
Branding
Prod. Features
Packaging
Customer Service and Support
Global Branding
Portfolio of Global, Regional, and Local Brands
Brand names across borders
Brand and coo positioning and overcome negative coo position
Protect brand from piracy, and imitation
Transition on brand from local to global brands
Readings
Anker and Joachimstaler – Lure of global branding
Hold, Quelch, and Taylor – how global brands compete
What makes global brand strong
End of corporate imperialism
Cases
ELC – Int’l and global greeting cards
Bud vs. bud
P&G Fem Care
Cola wars in china and WW
Thumbs up 4 coke in India
Lay’s Chips around world
Super 8 in Chile
Babysan and pampers in Chile
Advertising/Promotion/Comm.
Elements
Target Audience
Objectives
Message - tone

Page 340
Platform - form
Execution
Budget
Media
Diffs in Advertising/media Envir across countries
Constraints in Int’l Advertising
Trends in Int’l Advertising
Cases
Deremate.com
Global Brand Face Off
IBM Global Ads
Coke Ads – worldwide, India, Japan
Kellogg’s Around the World
Global Marketing
Dist. And Retailing

Trad’l formats
Trends around the world
Needs for localization
Cases
Unilever in India – Project Shakti
Indian Village – Kelve
Pricing
Elements
Co. Internal factors
Costs
Mkt. factors
Envir factors
Managerial Issues
Relative vs. Absolute
4P’s and Potential for Globalization
Case
KFC in Japan
Segmentation
Country Cluster Segmentation
Global Intermarket Segments
Teenagers, Business Managers

Page 341
Global Marketing Management

Final Exam Review
I. Perspectives on Global Marketing Strategy

a. Levitt
i. Simple global
b. Ohmae
i. Complex global
ii. Global strategy and an equidistant (complex global) mindset
c. Quelch and Hoff
i. Customize global marketing
ii. Break market down into different components and each has
different levels of potential for globalization
iii. Globalization is not an either/or proposition
iv. Potential of standardization depends on the situation (product and
country)
II. Product and Branding Policy
a. Breaking down product into elements
i. Positioning (benefits, usage situations, value = quality/price),
branding, product features (attributes, appearance, quality,
performance levels, ingredients), packaging (pictures, language,
labeling, promotions, size), product line (which products offered,
variations), customer support (service, warranties)
ii. Standardization vs. adaptation decisions can be made about each
element
b. Global Branding
i. Brands and country of origin positioning / how to overcome

negative country of origin associations
1. Give it a foreign-sounding brand name, get a foreign
designer and emphasize, emphasize other things in
communications (good value, price), celebrity
endorsements, make products for a strong brand, make
private label products for a strong retailer, assemble part of
the product in a foreign country, specialize in niche
products with positive country of origin associations
2. Ex: China Clothing Manufacturing
a. Overcome with: design by a foreign or Italian
designer, celebrity endorsements, OEM for strong
western brands (partnerships, JV), private label for
retailers, create a French or Italian sounding name
ii. Piracy and imitation
1. Legal strategies against piracy and counterfeiting: register
trademarks and copyrights in countries worldwide, lobby
governments for stricter laws, lobby governments for
stricter enforcement, court cases

Page 342
2. Marketing strategies and protections against imitation:

communications campaign to differentiate the “authentic”
product from imitators, distribute a portion of the product
offering and offer the full offering after the customer
registers the product, leverage relationships with
distributors to obtain better shelf space than imitators,
innovate faster, acquire or partner with the imitators
iii. Transition of a local brand into a global brand
1. Summary axing
a. Immediately drop and replace with global name
(not recommended)
2. Platform branding
a. Develop a global look and feel for the brand
platform, maintain the local brand name
3. Fade-in, Fade-out
a. Include both the local and global rand name,
gradually increate the size of the global name and
decrease the size of the local name
4. Transparent forwarding
a. Intensive communications program to alert
customers to change
iv. Aaker-Joachimsthaler – The Lure of Global Branding (perspective
on global branding)
1. Global brand leadership, not global brand standardization
v. Holt, Quelch, Taylor – How Global Brands Compete
1. Strong global brands = high quality associations, global
myths, show corporate social responsibility
a. US brands were not perceived more negatively or
positively
2. Challenge for global brands is getting the right mix of
localization and glocalization in managing global brands
3. Global consumer segments: global citizens (55%, see
global success of a brand as signal of quality and
innovation, concerned about social responsibility), global
dreamers (23%, see global brands as quality products and
readily buy into the myths associated with the brands),
antiglobals (13%, skeptical), global agnostics (8%, don’t
base purchase decisiosn on whether brand is global or not)
vi. End of Corporate Imperialism (how to develop products for mid-
tier, marketing in developing countries)
1. Tier 1: greater than $20,000 (responsive to international
brands), Tier 4: Less than $5,000 (loyal to local customs
and often local brands)
2. Corporate Imperialism – great deal of potential for
international companies because of big, emerging markets
 typical entry approach: use same mindset and marketing

Page 343
strategies as in established markets, can’t reach emerging

middle class but huge growth potential in tier 2 and tier 3
c. Cases
i. ELC – Designing greeting cards
ii. Bud vs. Bud
iii. P&G Fem-care
1. GBU’s – doing more advertising, MDO – doing more
direct consumer marketing
a. Communication and coordination between these
two groups: global brand teams, weekly
teleconferencing, 4 times per year face-to-face
meetings, emails and phone calls, become friends
with each other, rotate managers
2. Focusing on Mexico and China
3. Mexico
a. Customers: rush down Femcare aisle, know what
they want / very demanding, good quality at low
price, 20-25% premium market, 55% mid-tier
market, 25% lower market
b. Competition: very competitive market, Saba 26%
mid-tier, P&G 21% premium, K-C Kotex mid-tier
4. China
a. Customers: study products carefully before buying,
not embarrassed when purchasing these products,
linger in the feminine care aisle for more time,
buying 2-3 different brands/products at one time,
quality at low price, 10% premium market, 40%
mid-tier, 50% lower
b. Competition: very fragmented, small local brands,
all five major global brands represented (2
Japanese, 3 US), strong Chinese competitor has
15% of market
c. P&G is premium in this market
iv. Cola-Wars in China and Worldwide
v. Coke and Thumbs up in India
1. 1977 Coke leaves India because they didn’t want to give
away their secret formula
2. Parle group: Thumbs up, Limea  had 90% of market by
1989
3. Pepsi enters and gets 33%, Parle down to 60%
4. Coke buys Thumbs up and Limea  gets 60% with
purchase
a. Put all of their marketing budget behind Coca-Cola,
didn’t advertise Parle products
5. Coke’s market share started to decrease because the people
in India hate foreign dominance  imperialism

Page 344
6. Recommendations for Coca-Cola in India

a. Adapt to local market
b. Sponsor local events
c. Get Indian celebrities on ads, show local Indian
settings
d. Sell both global brands and local brands, emphasize
Thumbs Up
7. Coke’s strategy priorities: keep Pepsi’s market share in
India low, brand consistency
8. In the past 10 years Coke has localized itself more than in
the past
a. The branding still remains global
9. Coke ads: sports in ads (whichever sport is most popular in
each country
a. Target audience: highly standardized or mass
market
b. Platform: highly standardized, same structure,
storyline
vi. Lays Potato Chips around the world
1. Platform branding strategy (left Sabritas name on the chips
in Mexico but made packaging look like theirs)
vii. Super 8 in Chile
1. Develop a chocolate covered wafer product for the mass
market
viii. Babysan, Pampers in Chile
1. Babysan diapers market share in Chile was 90%, then it
was bought by Pampers
2. Over years, P&G phased out Babysan name and made
Pampers name more prominent
3. Market share when to 30-40%
4. Babysan used to be in red packaging, changed packaging
when bought by Pampers
5. Other company used name Babysec, took market share
6. In 2003, P&G changed name from Pampers back to
Babysan
III. Advertising, Promotion, Communication
a. Aspects/elements of international and global communications
i. Target audience (who in each country, mass vs. targeted,
similarities with other countries’ tm’s), objectives (consistency
with other marketing mix elements, image vs. product benefits,
pull vs. push, objectives and the product life cycle: cognitive
(awareness and knowledge), affective (liking, preference),
behavioral (trail, repeat purchase)), theme and message (ex: Coke
 soothing, relaxing drink that fits with contemporary lifestyles,
“Can’t beat the feeling”), platform (structure, color scheme, tone,
form), execution (source, content, settings), budget, media and the

Page 345
communications mix (advertising, direct marketing, personal

selling, sales/trade promotions, product placements, PR)
ii. Selecting media and the communications tool: availability,
regulations, habits and intended audience, fit of the objectives, cost
iii. Trends: deregulation of media, growth of commercial tv and radio,
growth in cross-border cable and satellite tv, increased availability
of global media, growth of global advertising agency networks,
growth in worldwide sports and events sponsorship, growth of
product placement in tv and film reaching global audiences,
growth of advertising in emerging countries, potential of the
internet
iv. Growth in global advertising: trend toward harmonization of
strategic elements of advertising, while maintaining flexibility at
local level for execution
1. Think globally, act locally
b. Differences in communication environments across countries
i. Ex: little TV advertisements in Sweden, lots in Mexico
ii. Ex: lots of spending per capita in the US
iii. Advantages of localized adv and promo
1. Resonate/connect with customers, need and behaviors vary,
competition varies, avoid insulting or misunderstanding,
media available varies, regulations vary
iv. Disadvantages
1. Costly, uses more managerial resources, confusing
customers about brand, not reinforcing brand
v. If per capita spending is high, you’ll probably have to spend more
on advertising to achieve the same objective
vi. Some countries have regulations on amount of TV ads (Finland:
government channels with no commercials)
vii. Need to know what kind of media being emphasized in the market
c. Constraints and trends in international advertising
i. Cultural and language differences, different regulations, different
infrastructures, different consumer characteristics and attitudes,
different market characteristics, different product strategies
(positioning, packaging)
d. Cases
i. Deremate.com
1. Challenges / differences of auction website in Latin
America
a. Unreliable internet infrastructure
b. Different payment methods – lack of credit card use
/ prevalence of cash
c. Lower penetration of internet connections
i. Mostly upper-income and younger
generation
d. Reliable delivery services are not well developed

Page 346
e. Selling electronics and cars, not collectibles, CDs,

books
f. More of a market for older, obsolete products
g. Use the site for different needs  liquefy assets to
get access to cash
2. Similarities across Latin American countries
a. Spanish language (except Brazil), cultural
similarities, developing countries (lower income)
3. Differences
a. Usage of Spanish varies, delivery services, payment
methods, development of internet varies, income
levels vary
4. Standardized by deremate.com across L Am. Markets
a. Fee for posting, advertising on cable TV, branding,
positioning of website, look and feel of the website.
software development / platform
5. Adapted / localized
a. PR, different media for advertising, product
category, different delivery services, payment
methods, execution of the site, local sales force
ii. Global Brand Face-Off
1. Espoir is a major global cosmetics brand positioned for
women who are smart, independent, and risky
2. Opportunity to sponsor sequel to Diana’s She Devils (3
stars are from Europe, Asia, and South America)
3. Natasha Singh – Executive VP of Global Marketing
a. Made Espoir’s Indian business successful by
challenging HQ ideas
i. Reduced package sizes, slashed prices,
penetrated small retailers, introduced purple
shades and global colors
4. US reaction: willing to help pay for campaign because two
of the stars represent big ethnic markets in the US
5. Western European reaction: positive to global movie
sponsorship idea, but argued that the website to buy
customized products would need to have a different look
and feel for each country
6. Eastern European reaction: claims E. Europe is different
from rest of world, movie promotions won’t help sales,
wanted to appoint beauty queens as brand ambassadors,
manager threatens to leave if the global campaign is forced
on him
7. Indian reaction: still need local responsiveness because of
large income and cultural difference
8. Arguments for global campaign: trend toward global
convergence in customer tastes, global movies a good way

Page 347
for reaching targeted segments around the world, cost

savings, quality of global campaigns is typically better than
what can be done locally, leveraging good knowledge and
ideas worldwide
9. Arguments against: many companies have tried globalizing
marketing and have failed, global approaches tend to either
over-standardize or oversimplify, global approaches tend to
discourage local innovation, espoir brand may have
different images in different parts of the world
10. Expert reactions to the case: Singh needs to find the right
balance between globalization and localization, needs to
keep marketing programs relevant to local markets
11. Recommendations: a team of managers from the different
areas should develop and shape global marketing ideas,
identify areas of marketing that must be globally consistent,
identify global products that must be more standardized
across countries and then allow other products to be
country specific, create a global communications platform
and menu of options where local managers can choose
from the menu and add local elements to the global
platform
12. Not dictating, should have been more of an orchestrator
iii. IBM global advertising approach
iv. Coke ads (worldwide, India, Japan)
v. Kelloggs Corn Flakes boxes from around the world
1. Standardized with adaptations in communications
vi. Global movie market
1. Action films travel  translate easily (success in the US =
success in other countries), very few cultural nuances and
cultural humor
2. Positioning movies is different in different countries
IV. Distribution and Retailing
a. Distribution and retailing environments are highly localized
b. Traditional formats
i. Outdoor stalls – street markets, small “mom and pop” retailers –
the corner market
c. Trends
i. Making distribution and retailing more similar across countries
ii. Growth of large scale retailing (increase in number of large stores,
growth in chain stores, movement to city outskirts, rise of shopping
malls), rise of discount stores, internationalization of retailing
(pan-European supermarket chains, international hypermarket
chains, department stores operating across borders, worldwide
retailing in narrow categories like Ikea and Toys R Us), retailers
are taking power from branded manufacturers (consolidation of
retailers, retailers are extracting greater price concessions, growth

Page 348
of private label goods, retailers are making their names into strong
brands  manufacturers should respond with strong pull
marketing, adequate push marketing, lower costs through
efficiencies, negotiate with retailers on a global basis, establish
strategic partnerships with retailers, innovation), increasing
sophistication of information systems (increase efficiency and
lower costs), greater ability to shop anytime/anywhere,
opportunities for internet retailing
1. Global retail trends and implications for manufacturers
a. Simplifies the task of international distribution
(entry with less investment, greater standardization
of distribution), but it comes at a price (lose power
to global retailers, dependent on a small number of
powerful retailers, risk of losing retailer to another
manufacturer)
iii. Major Global Retailers
1. Wal-Mart, Makro (Dutch wholesale club), Carrefour
(French hypermarket), Japanese department stores, Costco,
Toys R Us, Ikea
d. Need for localization
e. Cases
i. Unilever in India
ii. Kelve – Indian village
1. 80 km outside of Mumbai
2. 3000 people in the village, extended families under 1 roof
3. 50% own their own banana groves and vegetables groves,
make small incomes from their small plot enough to get by
4. 10% fisherman, 15% farmhands, 3% commute to Mumbai
V. Pricing (factors to consider in setting prices in international markets)
a. Company internal factors
i. Consistent with marketing strategy and other elements of the
marketing mix
ii. Consistent with company strategy and goals
b. Cost and profit factors
i. Internal: manufacturing costs, selling / marketing / general admin
costs, profit margin, manufacturer’s selling price
ii. External: costs related to domestic / overseas production / export
sales, costs related to exporting, manufacturer’s selling price plus
above costs determine final price to customer
iii. Price escalation: for exports, shipping, insurance, taxes/tariffs,
importer and distributor margins
c. Market factors
i. Demand, income level of country, competition, product life cycle
stage
d. Environmental factors
i. Governmental regulations, inflation rates, foreign exchange rates

Page 349
e. Managerial issues
i. Relative vs. absolute pricing
1. Absolute: pricing something equally around the world
2. Relative: pricing relative to the average price level for that
type of product in that country
ii. Multidomestic vs. global strategic orientations, coordination and
pricing policies, gray market problems, product charactertistics /
package sizes / prices
VI. Segmentation
a. Country cluster
b. Global inter-market segments
VII. Four P’s
a. Their potential for globalization
i. More potential for standardization in product and communication
ii. Less for pricing and distribution
b. Ex: KFC in Japan
i. Customizing stores to fit to the Japanese environment
ii. Adapted some of the side dishes and menu, but left core menu the
same
iii. Branding left consistent
iv. Employees are like 5 year old children

Page 350
GLOBAL MARKETING NOTES 10/30 THROUGH 11/29

(I MISSED OCT 18, 23 AND 26)
10/30: P and G Feminine Care
• Good quality for a low price
China
Whisper brand extension for both top and mid-tier markets
Brazil
Brand extension, like China
Due to: competitive structure and market conditions are similar to Chinas
Also, Naturalmond already existed, it was similar to Naturella
Mexico
2 different brands
Always- top tier
Naturella- mid tier
Chile
Used strategy like Mexico
What did they learn? There are many considerations to global branding. Companies need
to consider mass markets in developing countries and use a strategy of a whole new
product, rethought from scratch to get value at low prices
Branding Discussion
Consistency
• as consumers travel, branding is reinforced

• avoids confusing the customer
• lower costs in advertising and marketing
• transfer of knowledge and ideas
• avoids competitive preemption, like in the Vizir case where competitors come in
first with similar names and products
Ex: China- TV Station called “Konka”

USA association- either it sounds amateur like a toy, or like “Konk out”
Fashion- positive associations from Italy, poor from China

What can they do?
Celeb endorsements

Page 351
Make the brand name sound foreign

Budweiser- trying to market in Europe, but it rivaled an existing product name
The Czech company wouldn’t sell out to Budweiser, as it was a source of national
pride
Transitioning from a Local to a Global Brand

Many companies like P & G with their Ariel use a strategy where they just acquire a
popular foreign brand, then gradually fade out their info to their own branding
Example: Babysan de Pampers in Chile- eventually it transitioned to just Pampers
Strategy #2: Transparent Forwarding

Example: Comcast to TimeWarner
Strategy #3: Summary Axing strategy

Example: CVS/ SavOn: completely dropped SavOn from the Ads
Probably because savon had no brand equity left
11/1/06 GLOBAL BRANDING

Global brand teams are difficult to form
Just coordinate the efforts, frameworks, and processes
Two approaches:
Global Brand Teams
One global manager
Certain kinds of products are easy to standardize and it makes sense to do so globally,
others need to be adapted for different markets
Portfolios: Global, regional, local
Ex: Coke
Global-Coke, Sprite
Regional- Qoo cola, Diet Coke
Local- Thumbs Up, Inca Cola
HOW GLOBAL BRANDS COMPETE?
The Challenge: getting the right mix of Glocalization
Also: companies become targets of anti-globalization sentiments because they are
very salient in the minds of consumers
Example: the WTO riots in Seattle, they looted every Starbucks
Advantages: people assume that ‘global=quality’
The concept of ‘global community’ is appealing to consumers
What brands need to do:
Build Credible Myths
Be proactive in terms of social responsibility
Treat Anti-global people as potential customers
11/6/06
Lay’s Around the World

Page 352
Mexico- Lay’s bought Sabritas

This was the ‘platform strategy’
They didn’t convert it to Lay’s because Sabritas brand name was strong enough
already
India- Lay’s made local adaptations, like Magic Masala flavored potato chips
China- the competition is very fragmented
There’s lots of product variety
All types of Lay’s
A favorite: Five Flavored Fish Lay’s
The reason for all this variation? China is low on the Product Life Cycle, so Lay’s
is just trying to build awareness
Cola Wars in China:
Coke: Assets- Brand image, Advertising, widespread penetration
These three assets need to be standardized to reinforce their strength around the
world. Things like pricing, size, etc, can be adapted as long as these 3 most important
stay consistent
Chinese companies are known for low cost, good quality, NOT known for good
marketing. This makes it easy for foreign players to come in and take market share
Over the last four years, Chinese marketing has improved a lot
One example: Wahaha Beverages
Wahaha Marketing Skills:

1. Good for children
2. Lots of sponsorships
3. Sophisticated advertising
4. Celebrity endorsements
5. They know their customers well
Wahaha’s Advantages over Coke/Pepsi:
1. Strong in Rural Markets
2. Close relationships with distributors
3. Lower prices
4. Positioned as a Chinese Brand
5. Catered to Chinese tastes (fruits, milk, teas, etc)
6. Tastes are sweeter and stronger
Coke sees it as a priority to get into the rural markets
Current market shares:
Coke 42%
Pepsi 23%
Future cola 18%

Page 353
COLA WARS
U. S. INTERNATIONAL
Coke Pepsi Coke Pepsi
Market Share 41% 31% 45% 14%
% of Sales 24% 68% 76% 32%
% of Profits 20% 80% 80% 20%
Profit Margin 21.7% 15.6% 29.9% 6.2%
Summary: Pepsi should be worried about their position in the global market
• In China, the market is much more close
• Already a huge market
• Huge growth potential
• Not yet saturated
• The competitors are on a much more level playing field
• Pepsi can make its move to upset Coke if they dominate China
Conclusion: China and India need to be top priorities for both Coke and Pepsi
Both need to focus on their distribution, lowering prices, and adapting specifically for
China
Situation in India:
1977- Coke pulled out of India
Why? The government wanted them to share their secret formula
1989- Pepsi enters India
1993- Coke buys Thumbs Up and Limca
market: pepsi- 30%
Parle group (coke) 60%
Recommendations for Coke in India:
1. Adapt to the local market
2. offer both Coke and traditional Thumbs Up
3. Keep pepsis market share low
(their strategic priority in India. In other parts of the world, #1 strategy is brand
consistency)
Coke’s advertising in India is becoming much more localized, using the 15 small
languages and local music
Bottom line: in Markets like China and India, you have to figure out how to get into mass
markets and localize
11/13 Deremate.com
Challenges and differences in Latin America vs the United States

Page 354
• Unreliable internet infrastructure

• Different payment methods
• Prevalence of cash, lacking in credit cards
• Lower penetration of internet connections, translates to less familiarity with e-
commerce
• Lack of reliable delivery services
• Types of items: more electronics, cars, as opposed to the US where we like CDs,
books, etc
• Market for older, seemingly obsolete electronics
• People use the site for different reasons, like liquefying assets for cash
Within Latin America:
Similarities:
Spanish language (except for Brazil)
But don’t forget u must tailor your efforts to each country
Cultural similarities
Differences:
Uses of Spanish
Delivery services
Development of internet varies
Income levels
Payment methods
Brazil likes debit cards, other countries like cash
Deremate’s strategy:
Standardized:
• fee for postings is the same
• cable tv advertising
• branding
• look and feel
• software platform
• features of the web site
Adapted:
• marketing strategy, PR in each country
• product categories: in Brazil, computers less, soccer more
• different delivery services
• different payment methods
customer education: sales force goes to college campuses, finds the technology-oriented
people
customer service: localized in every country
Why do I care? Its important to know that websites and other high technology products
must be very specialized in each country
Deremate is using a COMPLEX GLOBAL strategy, also called GLOCALIZATION
In 2000, market:
Deremate.com
Mercadolibre.com
E Bay was not yet in Latin America

Page 355
Recommendations
Hire local managers
Build more “Sold it on E Bay” stores
Partner with E Bay
See who can hook up first
*Mercado libre did it first, in the last 6 months they have bought deremate
using fade-in fade-out or transparent forwarding strategy
11/15 THE GLOBAL BRAND FACE-OFF
Marketing (including the advertising and product line) should be partly global, partly
localized. Global ideas mixed with localization
They should have gone with a bottom-up approach and a global team
Shouldn’t be ‘dictating’, orchestrating instead
Headquarters could pay for the global campaign, but leave global managers with as much
for local advertising as before.
GLOBAL MOVIE MARKETING

Action films do well
Translate easily
Comedy and Drama can be much tougher
Considerations:
1. Fan base- don’t make them wait
2. Fans will buy counterfeit copies
3. Amazon.com
4. Bad reviews wont have time to spread
5. Stars hate simulataneous rollouts- they have to be at openings everywhere
UNILEVER IN INDIA CASE
#1 consumer products company in India (US is P&G)

Strengths:
40 to 45% market share
Great distribution networks
Different products and brands
Personal care
Fabric care
Beverages
Foods
Feminine care
Very strong brands
Local reputation
Has joint ventures with local shareholders
Distribution systems are the best developed in the urban areas
Urban= 25% of India, 250 million people
Challenges and Opportunities:

Page 356
The potential is huge, untapped

Growth in urban areas is slowing down
Theres lots of global players (P&G, Colgate Palmolive, L’Oreal, Kao) but none of
these are going after the ‘inaccessible’ lowest income part of the population, 500 million
people
Shakti Entrepreneurs:
They set up shop in their homes
Women, for the most part, have no education and no rights
This project is transforming social lives in small villages
Before Shakti, women got approximately $22 per month, 300 per year.
Shakti adds 150 more dollars per year
Like the Grameen Bank
1960s- Bangladesh
remote villages
gathered groups of women and offered them ‘micro-loans’ of 10 to 30 dollars, then they
started their own companies.
No other bank would even consider them for loans
Called “micro Finance”
Vani Shakti:
Seminars about personal care and health
Promotes usage of Unilever products
iShakti:
internet in women’s homes
draws women to the Unilever distribution point, facilitates communication about
Unilever products
Major Challenges:
• Entrepreneurs need a lot of support and training
• Scaling up the program without raising the necessary resources
• Can Unilever make this profitable?
• Self-help groups and consumers have concerns about possible exploitation and
commercialization attempts
Opportunities: organize the women into smaller support groups, follow Grameen model
11/20
WHY LOCALIZE ADVERTISING AND PROMOTIONS?
Advantages:
• To resonate/connect with customers
• Avoid offensive misunderstandings with language, culture
• Media availability varies
• Customer needs and behaviors vary
• Competition varies
• Regulations vary
Disadvantages:
• Costly
• Uses more managerial resources
• Confuses the customer about brand image
• Doesn’t reinforce the brand

Page 357
Growth of cross-media spillover:

• Ads on the Internet
• Satellite and cable TV
• Increased international travel
Different Advertising Mediums
Some countries have government funded television, and it doesn’t have
commercials
Different regulatory environments
Low use of TV? High usage of print advertisements
Outdoor: streets, buses, etc
These affect how you budget your $, consider the available mediums
Promotions:
Must be much more localized than advertisements because of all the regulatory
environments
Advertising agencies:
Recent trend toward global agencies
THINK GLOBAL ACT LOCAL
Strategic aspects, globalize
Executional aspects, localize
CASE STUDY, KELVE:
‘Accessible’- 80 km north of Mumbai (Bombay)
• Takes 2.5 hours by train, 3.5 hours by car
• 3,000 people
• on the Indian ocean
• employment: mostly agriculture
• 50% own banana groves and vegetable groves
• 10% are fisherman, lower income
• 15% are farm hands, lowest income
• 3% have jobs in Mumbai
• 1% professionals like doctors
11/29 INTERNATIONAL TRENDS IN RETAILING AND DISTRIBUTION
1). Big stores- 80 check out lines

all over the world is the growth of super/hypermarkets
similar all over the world, france, spain, china
Large-Scale Marketization
2). The rise of Discount Stores

Category Killers- small marketplaces like IKEA, Toys R Us, Costco
3). Internationalization of retailers

Takes the power away from branded manufacturers like Coke, Nestle, P&G
Expanded shopping hours are more popular
PRICING: INTERNATIONALLY AND GLOBALLY

Consider internal factors: price positioning must align with local strategy and goals

Page 358
Example: price penetration is priced much lower but it builds market share
quickly
Next consider Cost Factors
Price escalations for exports: shipping, insurance, taxes/tariffs, importer markups
Value-added tax
Market factors
Customer demand
Income levels
Competition?
What stage in the PLC
Environment factors
Government price controls
Inflation rates
Exchange rates
Managerial issues
Absolute price vs relative price
Absolute is standardized, relative is relative to the average price for a competitive product
in a country. Hardly any companies use absolute
KFC IN JAPAN
The chicken and the branding stay the same everywhere
The side items change

Page 359
October 23rd
Perspectives on Global Marketing Strategies
Levitt’s Perspective on Global Marketing: “The Globalization of Markets”
Consumer Tastes Around the World are Converging
- Communication and transportation technologies expose people around the world
to similar information
o Television and radio, movies, telecommunications (phone, fax, internet),
satellites, jet travel
High Quality and Low Cost Global Products will Beat Out Adapted Products
- Global scale permits
o Low cost and low price, high quality  economies of scale!
- Consumer will choose lower priced, high quality products even if they are not
exactly tailored to part habits and local market needs.
o Consumers around the world desire the same things
 Value – stretching their income as far as possible
 Alleviation of life’s burdens and expansion of discretionary time
o Lecture Notes:
 Lessons from lead markets, then expand worldwide
 Consortium: can buy globally (resource)
 Reputation
 Can put more money into R&D
- Strategy can expand markets with aggressive low pricing
Example: The Japanese Approach
- Japanese companies have become powerful players in certain industries.
o Consumer electronics
o Automobiles  didn’t fit American needs (too small, etc…)
- Used this strategy of low cost and high quality global products.
Multinational or Multi-domestic Corporation
- Tailors products to each country.
- Slavishly responds to what it perceives as different product needs in different
countries…is this necessary?
- Many are thoughtlessly accommodating.
o Believe preferences are fixed not because they are of rigid habits of
thinking.
o Respond to way things been done in past, habit, without questioning
whether it is necessary.
- Costs and prices are higher because of lower economies of scale and development
economies.
The Global Corporation
- Offers standardized global products around the world.
o Offers combination of low price and high quality
- Does not refrain from customization when required.
- Lecture Notes:
o Only adjusts products as a LAST RESORT if need to.
 i.e. Adapt power supplies, but only absolute essential things.
1
Page 360
Disadvantages
- Seems simplistic, sweeping and extreme
- What about luxury items: people will still pay premium
o Theory only relevant to certain products.
- SIMPLE GLOBAL APPROACH
Ohmae’s Prespective on Global Marketing: “Managing in a Borderless World”
Global Strategy and an Equidistant Mindset
- Companies tend to focus primarily on the domestic market.
o Know domestic market really well and everything else is the “rest of the
world”  ETHNOCENTRIC
 Need to change this!
- Global strategy requires a global perspective.
o Take on equidistant perspective on markets around world
 All valued the same and get rid of ethnocentric market.
o “Overseas” should not be part of corporate vocabulary
The New Borderless World
- Free flow of information around the world
o Communication technology has advanced tremendously
o Foreign travel is becoming common in many countries
o Ability of government to restrict information is limited
- Therefore, people look for best, least expensive products from around the world.
- Operating procedures in many industries have worldwide standards
o Needs for industrial equipment are becoming standardized in the
industries.
How to Develop a Global Product
- Designing by averages can leas to lackluster appeal – BAD
o i.e. average size of Japanese and American cars
- So design products for lead markets
o Design different cars for different lead markets
o Then sell to worldwide segments that desire each car
- Nissan example:
o Sporty Z model and four-wheel drive family vehicle for U.S.
o Car suitable for fleet sales in the U.K.
o Small, high quality economy car for Japan.
Different Types of Global Products
- Ted Levitt’s Globalization
o Products lend themselves to aggressive cost reductions through economies
of scale – Agrees for certain products
- Premium-priced fashion-oriented items (products derived differently)
o Gucci bags, Mercedes-Benz, Rolex watches…
o Wealthy consumers will search for these goods
o Operate through a pull strategy
- Products requiring insiderization like Coca-Cola
o Need to replicate complete business system in each country
o Need to establish infrastructure in each country to push product and
establish local demand
2
Page 361
- Industrial products
o Largely chosen on performance characteristics
o Still need to have insider functions (engineering, sales, installation,
finance, service)
Headquarters Mentality Can get in Way of Globalization
- If foreign operation becomes successful
o Headquarters might get more involved in decision
- If problems develop overseas
o Headquarters wants to get more involved
- Local autonomy is restricted and decision made with headquarter/home country
perspective
o Can’t respond adeptly to needs of local markets
- Corporate systems and structures can restrict globalization
o Financial statements don’t accurately reflect foreign operations
o Reward systems may interfere with globalization
Customers are Becoming More Alike
- Customers coming more alike, but they are still different  need to maintain an
equidistant mindset!
Disadvantages
- Doesn’t take into account different sizes of countries
- Too much emphasis on customer convergence
- If loose domestic market focus can be risky
- Takes more flexible view to globalization but can be difficult to obtain
- Transnational, more complex global market
Quelch and Hoff’s Perspective on Global Marketing: “Customizing Global Marketing”
Globalization is Not an Either-Or Proposition
- Standardization vs. adaptation along a continuum
o A lot of grey area – on a sliding scale
- Different elements of the marketing mix and different levels of standardization
o Packaging, etc…
o NOTE: handed out chart – Global marketing Planning Matrix
o Taking more of a complex view
- Potential for standardization depends on the situation
o Type of product and country
Problems Created by Lack of Globalization
- Inconsistent brand identities
- Limited product focus and expertise among managers
- Slow new product launches
Standardization and Product Type – Economies and Efficiencies
- Standardized products can lead to economies of scale in manufacturing and R&D
- Marketing can potentially contribute to scale economies
o By offering standardized products and advertising
- Standardized products and marketing programs conserve managerial and other
resources
- Standardized products and marketing programs can leverage scarce innovative
marketing ideas  leverage ideas from lead markets
3
Page 362
Standardization and Product Type – Amount of Cultural Grounding

- Products used in homes more subject to cultural influence than those used outside
of home
o Products with less grounding can be standardized
o Products with more grounding can be standardized
- Industrial products less subject to cultural influence
o Tend to buy on performance and value characteristics
- Young people tend to be less influenced by cultural variables in their purchases
- People who travel a lot of exposed to information from other countries tend to be
less cultural in their purchases
Standardization and Type of Country
- Small countries lend themselves to greater standardization
o May not have enough resource to develop their own programs to same
level – too costly!
- Poor performing countries are often under more pressure to adhere to corporate
wishes on standardization
How Implementation of Globalization is as Important as Amount of Globalization
- Multi-domestic corporation has many strengths
o Strong local managers
o Local managers have autonomy to run business effectively
o Local managers can be responsive too local environment and can react
quickly to development
o Strong local managers are a good source of new innovative ideas
- Standardization should be done in a way that retains many of these strengths
o Don’t act too quickly or radically
o Poor implementation could lead to departure of good strong managers and
their strengths
 COMPLEX GLOBAL STRATEGY 
4
Page 363
Product Policy
Elements
- Product positioning
- Branding
- Product features
- Packaging
- Product line
- Customer support
Product Positioning
- Benefits: needs satisfied
o Examples: ipod, over-counter medications, service companies
- Usage situations
o Yogurt: snack, dessert, lunch, etc… (How do you use the product?)
o Examples: cell phones (songs, text messages, email), clothing (formal,
casual sports, wedding)
- Position vis-à-vis other brands
o Example: “7up the un-cola”
- Value = quality/price
o Examples: Cars – Honda & Toyota, Walmart, Target, Arco Gas
- Target segments (best for kids, parents, sports…?)
o Examples: deodorant, cars, ESPN phones, Nike – running, climbing,
biking
Branding
- Image
- Name
- Typeface
- Logo
- Super and subbranding
o Kit-Kat: Nestle versus Kit-Kat name (China: both names prominent,
generally Kit-Kat>Nestle)
Product Features
- Attributes
- Specifications
- Ingredients
- Taste
- Texture
- Appearance
- Performance Levels
- Quality
Packaging
- Layout
- Pictures
- Instructions
- Labeling
- Promotions
- Cross-promotions
5
Page 364
- Language
- Size
Product Line
- Which products offered
- Number of variations
- Types of variations
- Which products emphasized
o Example: M&Ms
 How big is the product line in each country  What countries are
offered what?
Customer Support
- Service
- Technical support
- Maintenance
- Warranties
- Customer information and contact
General Questions Related to Product Policy Standardization vs. Adaptation
- What attributes are most important to the customer in each market?
- Where are the commonalities in customer preferences?
- Which preferences are unique and strong?
- Are customers willing to pay more adaptations?
- What is the cost of adaptations?
- Are the resources available for adaptation?
- What is the incremental volume that can be expected from adaptation?
- What is overall profitability of adaptation?
McDonalds Around the World
Differences and Similarities
DIFFERENCES SIMILARITIES
- Meals: hamburgers, - Language: English always
vegetarian, apple pie… and local language
- World: more upscale than in - Image oriented toward
the U.S. children
- Different sauces - Mc in the name
- Make small local changes - Menus all look the same
globally
Very 2 In 4 Very
Adapted Between Standardized
6
Page 365
Positioning
- American √
style food
- Usage for √
socializing
or on the go
- Kids and √ √
families
Branding
- Logo √
- Brand √
name √
- Colors √
- Typeface √
- Image
Features
- Core menu √
- Sides √
- Counter √
area √
- Signage √
- Sitting area
Customer
Service or
Support
- Self Serve √
- Service √
7
Page 366
October 25th
Marketing in Developing Countries
- Marketing and products are successful with upper end customers.
o PROBLEM: not reaching the masses, thus restricting.
o Bigger growth rate in the middle of the pyramid.
Diapers in Chile
- CMPC: “Babysan”.
o Came in a red package, had 90% market share.
o SUCCESS: created for mass market at a low price.
- 1995: P&G buys Babysan
o Turn it into Pampers by
 Change package to pampers’ green color
 Raised quality and price
 Faded out Babysan name to Pampers
o RESULT: share went down to 30 – 40%
- CMPC: non-competition agreement until 2000
o 2000: created Babysec in the red package
- Pampers: lesson learned
o Can’t apply same policy to developing nations
o Should have kept Babysan as is
o Then could have introduced Pampers as a premium product
- 2003: Pampers brought back Babysan but too late!
POWERPOINT
Market Segments and Economic Status
- Tier 1: greater than $20,000
o Wealthy – High Income
o Very small percentage of population
- Tier 2: $10,000 - $20,000
o Upper Middle Income
o Small percentage, less than 10%
- Tier 3: $5,000 - $10,000
o Middle Income
o Lower or lower middle income compared to wealthy countries
o Significant percent of population, about 30%
o Standards of living rapidly rising
- Tier 4: less than $5,000
o Low income
Consumer Behavior and Economic Status
- Tier 1: responsive to international brands
- Tier 2: less attracted to international brands
- Tier 3: loyal to local customs, habits, and local brands
Corporate Imperialism
- Big Emerging Markets
o Great deal of potential for international companies
- Typical Entry Approach
o Use same mindset and marketing strategies as in established markets
8
Page 367
- Limited, Niche Position in Market

o Can reach upper-income customers (Tier 1 and some Tier 2)
- Difficulty Penetrating Mass Market
o Huge growth potential
o Can’t reach emerging middle class (Tier 2 and 3)
The Solution
- Rethink every element of business model to appeal to mass market
o Emerging middle class in developing countries not like the middle class in
developed countries
 Upper class in developing countries often like middle class in
developed nations
o Can use this alternative model and marketing strategy in large areas of the
world (developing countries)
Business Model – 6 Things to Rethink for Emerging Middle Class:
- Rethink price-performance equation
o Good value for low price with global standards
- Rethink brand management
o Not do all things the same regarding the brands
- Rethink cost of market building
o May be profitable to develop local types of products instead of changing
habits
- Rethink product design
o Redesign for local needs, uses and local distribution systems
- Rethink packaging
o Size and protection
- Rethink capital efficiency and cost structures
o Rethink business models to lower cost structure
Importance of Distribution Systems
- Invest in local distribution
- National distribution is important
o Buy ways to obtain differ by country
o May have to invest in building distribution systems in countries with
undeveloped national distribution structure
Mix of Local and Expatriate Management
- Get right mix of local and foreign managers
o Foster two-way knowledge flows.
Importance of Government Relations
- Often necessary to present one face in dealing with government
- One set of policies for all business units in negotiating with government
Careful Consideration of partners in Local markets
- Partnerships are typical way of entering but subject to problems and tensions.
o Different strategic objectives of partners
 Long term market building vs. short term profits
o Local partners often don’t have local consumers and market knowledge
 Predate emergence of real consumer markets
9
Page 368
- Increasing numbers of companies entering developing countries with wholly

owned subsidiaries.
o 18% in China in 1992
o 37% in chine in 1996
Kit Kats in Chile
- What can you do to reduce the cost of the Kit Kat but maintain design and relative
size?
o Produce in Chile, using local ingredients
o Lower quality of packaging
o License to Chilean candy company
o One stick instead of four
o Thinner layer of chocolate
o Less dense wafer
 P&G Fem-Care Case 
Organization
Support Organizations
- Global business service
- Corporate functions
GBU’s
- Centered around product categories
- P&L
MDO’s
- Market development in each region
- Sales volume
What Each Organization Does
GBU’s (things that can be standardized)
- Pricing → need to be adaptive/locally responsive
- Branding
- R & D Centers: Japan, Germany, & U.S. → PROBLEM: lead developing
nations
- Advanced development
o Product supply and mfg
- Packaging
- Positioning
MDO’s (things that are adaptive/localized)
- Market development
- Distribution
- Media buying
- Promotions
- CONFLICT: between sales volume and P & L
o Give MDO’s more P&L, esp. in developing countries
o Exeptions: Chine and Eastern Europe have P&Ls…but is this enough?
What Are They Doing Right? – GOOD COORDINATION!
- Global brand teams
- Weekly teleconferences
- Face to face meetings quarterly
10
Page 369
- Rotate managers
- Intranets and emails
STEP 2: ANALYZE COUNTRIES AND CUSTOMERS
China Mexican
- Knowledgeable, study product
before buying - Fairly knowledgeable, but don’t
- Want good value study products as much
- Use 2-3 brands at the same
Customers time
- Not embarrassed when - Want good value
shopping - 20-25% premium, 55% mid-tier,
- 10% premium, 40% mid-tier, 25%low-tier
50% low-tier
- Lots of local competition, over
1000 - Very price competitive
- All 5 global competitors - Saba: 26% non-woven
Competition - P&G Whisper = 11-12% - P&G: 21% premium
market share - Kotex: non-woven
- Fragmented - Growth Stage: low to medium
- Growth Stage: very low
To Do – China: To Do – Mexico:
- Need good value products - Need good value products
- More product variety
- Creating brand awareness
- Information on packages
What the Did – China: What They Did – Mexico:
- Same brand name - New Brand
- “Whisper” - “Naturella”
- Brand extension - Adapted to customer
- Contract marketing - Added chamomile
- Unique resolution - More applicable
 Overall: Good value product for 
mid-tier consumers
(good quality at a low price)
LESSON: P&G learned how to be adaptive for developing countries, created models to
role out globally.
Note: Always – most of world
Whisper – Asia only
11
Page 370
October 30th
Managing Brands Globally
Most Valuable Brands:
1. Coca-Cola
2. Microsoft
3. IBM
4. GE
5. Intel
6. Disney
7. McDonalds
8. Nokia
9. Toyota
10. Marlboro
- Brands need to be managed consistently across borders.
Why Consistency in Branding is Important Across Borders?
- Saves cost in advertising and marketing → higher efficiencies
- Not consistent: confuses customer and hurts brand equity
- Consistent: reinforces brand images as travel
- As customers shop globally it reduces search costs
- Customer loyalty
- Facilitates transfer of learning
- No competitive pre-emption
- Prestige factor
POWERPOINT
A Portfolio of Global, Regional, and Local Brands
- Global companies can have different global, regional and local brands…
- Global Brands
o Worldwide consistency
- Regional Brands
o Consistency within a region
- Local Brands
o Offered in individual countries
- Define the international scope of your brands
o Marketing strategy impacted by international scope
- Example:
o Global = Coca-Cola & Sprite
o Regional = Fanta, Powerade, Qoo(Asia),& Diet Coke (can be Coca-Cole
Lite)
o Local = canned teas and Georgia Coffee in Japan
- Meaning of the brand name in the local languages
o Could have negative connotations
o Examples:
 NOVA cars – “no go” in Mexico
 Bimbo Dolls – popular in Europe
 Asia: will use characters that will sound like the name
12
Page 371
• 7-Up said “drink from death”

• Coca-Cola characters mean tasty & fun/happy
- Subtle associations of the brand name in the country and local languages
o “Konka” television brand in Asia
 U.s.: sounds like Tonka Toys & “konked out”
o “Assugrin” – Brazilian sweetener
- Ease of pronouncing the brand name
o Example: Sony (was a really long name)
- Ease of remembering the brand name
o Frosted Flakes: Mexico – “Zucaritas” (sugar association)
Brazil – “Sucrilhos” (sugar association)
Europe – “Frosties”
Brands and Country of Origin Positioning
- Brands are often associated with country of origin
- Some country of origin associations are highlighted in the brand positioning
o Certain countries of origin bring positive associations to the brand
- Some country of origin associations may conjure up negative or neutral
association
- Examples:
o German Cars – premium & luxury autos
o Italy & France – premium clothing (Gucci, Louis Vuitton…)
o China (clothing) – low quality/cheap
 How do you overcome this?
Overcoming Negative Country of Origin Associations (Chinese Clothing)
- Give it a foreign sounding name (i.e. Bossini & Giordano)
- Get a foreign designer and emphasize
- Emphasize other thing in communication
o Such as good value and price
o Clothing – silk and cashmere
- Obtain a celebrity to endorse the brand
- Make products for a strong brand (i.e. Yves Saint Laurent)
- Make private label products for a strong retailer (i.e. Nordstrom’s)
- Assemble part of the product in a foreign country
- Specialize in niche products with positive country of origin association
Legal Strategies Against Piracy and Counterfeiting
- Register trademarks and copyrights in countries worldwide
- Lobby governments for stricter laws
- Lobby government for stricter enforcement
- Court Cases
Marketing Strategies and Protections Against Imitation
- Communications campaign to differentiate the “authentic” product from imitators
- Distribute a portion of the product offering and offer the full offering after the
customer registers the products
- Leverage relationships with distributors to obtain better shelf space than imitators
- Innovate faster than the imitators
- Acquire or partner with the imitator
13
Page 372
Transitioning from a Local to a Global Brand

- Summary Axing
o Immediately drop and replace with global name
o Usually not recommended
- Platform Branding
o Develop a global look and feel for the brand platform
o Maintain the local brand name
o Example: Bud in Europe
- Fade-in, Fade-out
o Include both the local and global brand names
o Gradually increase the size of the global name and decrease the size of the
local name
o Example: Pampers with Babysan
- Transparent Forwarding
o Intensive communications program to alert customers to change
o Example: “SPC Is now AT&T”
 Time Warner taking over Adelphia
 “Radar” candy in Germany into “Twix”
Budweiser Mini-Case
- Town in Czechoslovakia → Bud…there is a beer from the town called Budweiser
as well
- Originator of Budweiser knew this but did not realize future global market
- 1900’s: companies agreed that Budweiser had North America & Asia, while Bud
had Europe
- Recently a problem: Budweiser wants to go to Europe
o BW wanted to partner up, but Czech company didn’t want to because seen
as a premium company
o BW is a mass production company
- 2 Strategies
1. Call the beer Bud
2. Took case to court saying the agreement was no longer valid
o This worked in a few nations…had 2 different Budweisers
Kellogg Corn Flakes Around the World

SIMILARITIES DIFFERENCES
- Bowl of cereal
- Rooster character
- “Corn Flake” name - Box sizes
- Coloring - Promotions on American boxes
- Overall font - Some feature other Kellogg products
- Name “Kellogg” featured - Asia: use kiwis, not strawberries as
- Use of fruit with cereal the featured fruit
- Corn association - Rooster: cartoonish to more realistic
- Featured as healthy product
- All have customer service info
14
Page 373
15
Page 374
November 1st
Aaker & Joachimsthaler’s: Perspective on Global Branding
Global Brand Leadership
- Global brand leadership, not global brand standardization should be the goal
- Global brand strategy should coordinate and leverage country brand strategies
o Coordinate but not overly standardized
Difficulties of Globalizing Brands
- Economies of scale often elusive
- Influence of cross-border media often overstated
- Successful global brand teams difficult to form
- Company resources, customer characteristics, and competitive conditions differ
across countries.
A Nuanced Approach to Global Brand Management is Needed
- 4 Steps:
1. Sharing insights and best practices worldwide
2. Using a consistent global brand planning process worldwide – uniform framework
to analyze country
3. Assigning global coordination responsibility for brands
a. Global teams, senior brand executive
4. Delivering brilliance
a. Look for best ideas globally to role out…causes global competitive
advantage.
Sharing Insights and Best Practices Worldwide
- Formal meetings
- Informal meetings
- Communication technology
- Internal intranet and databases
Using a Consistent Global Brand Planning Process Worldwide
- Analysis frameworks/templates
- Monitor brand associations
- Monitor brand equity
- Communicate brand identity internally
- Link country brand strategy to global brand strategy
Assigning Global Coordination Responsibility for Brands
- Senior executive group or individual responsible for global brand
- Middle management group or individual responsible for global brand
- Some aspects of brand management influenced heavily by the global teams or
managers
- Some aspects of brand management left mostly at the local level.
Delivering Brilliance
- Look for most brilliant ideas across the globe
- Transfer good ideas across borders
- Roll-out brilliant innovations across borders
Conclusion
- All companies should engage in global brand leadership
o But not necessarily global brand standardization
16
Page 375
- Companies that sue unconnected and directionless local brand strategies will find
mediocrity as its reward
- GLOCALIZATION!! Balance with standardization and adaptation.
 COMPLEX GLOBAL 
17
Page 376
Holt, Quelch, & Taylor on Global Branding

Challenge for Global brands
- Glocalization in managing global brands
- Recent years, anti-globalization
o I.E. Starbucks with WTO meeting in Seattle
- Very salient in minds of consumers
o Don’t downplay globalization of company because consumers will still
know
Dimensions of Strong Global Brands
- Quality Signal (44% of variance in preference for global brands)
o Global products seen as high quality
- Global myth (12% of variance)
o Global products tie people to a shared, perhaps imagined, global identity
- Social Responsibility (8% of variance)
o Expect global brands to behave responsibly and hold these brands to a
high standard of social responsibility
- U.S. brands were not perceived more negatively or positively
- Global citizens (55%)
o See global success of a bran as signal of quality and innovation, concerned
about social responsibility
- Global dreamers (23%)
o See global brands as quality products, readily buy into the myths
associated with the brands, less concerned about social responsibility
- Anti-globals (13%)
o Skeptical that global brands are higher quality and don’t trust that social
responsibility
- Global Agnostics (8%)
o Don’t have purchase decisions on whether brand is global or not
Opportunities and Responsibilities in Managing Global Brands
- Manage brand as a global symbol
- Manage the dark side
- Build credible myths
- Treat anti-globals as customers and try to gain their trust
- Be proactive in SOCIAL RESPONSIBILITY
Cola Taste Test
- Lesson of Exercise: taste of Coca-Cola, Pepsi, etc are indistinguishable and
people buy a certain brand (i.e. Coke) due to brand IMAGE
Lays Around the World
- In many countries they bought an already established brand…kept the original
name or not?
o Taiwan: Poca → early stage combined Poca in Chinese and lays in
English
 Eventually did FULL fade-in, fade-out. Lays in English and
Chinese
o Australia: did the same as Taiwan
18
Page 377
o China: English and Chinese

o Thailand: Thai characters that look like “lays”
o Chile: fade-in, fade-out (“Evercrisp” to “lays”)
o Spain: fade-in, fade-out (“Matitanu” to “lays”)
o Mexico: kept Sabritas name but changed to Lay’s package → platform
branding
o Brazil: Elma chips → platform branding
- China
o HUGE amount of variety, many different flavors
o Many meat flavors
o Consumers like to try varieties (test & study)
o Very fragmented market with many competitors
 Brand awareness & get shelf space with a lot of variety
 Cola Wars Case 
What Are They Selling?
- Caffeine benefit
- Image of fun & good times
- American, western image around the world
- Image association of pizza and hamburgers
- Feelings of childhood memories
What Important strategically
BRANDING IMAGE ADVERTISING
(Most Important) STRATEGY
DISTRIBUTION
PHILOSOPHY
“Put Coke within an arm’s
reach of desire”.
- They keep these attributes consistent & similar
o Specifics may vary/be localized but generally stays the same
- Myth: concentrate same around the world & recipe locked up in a vault in
Atlanta
o Feeds into branding, image, mythology of the product
Advertising Strategy
- Language
- Actors
- Sponsor sporting events & festivals
Diet Cokes vs. Coca-Cola Lite
- Negative attitudes toward “diet”
Future Cola in China
- Lower price range
- Targeting rural areas/customers (lower incomes but big population)
- A lot of other drinks beside cola
- Very localized distribution system with close relationships
- Position: “A Chinese Product” (homegrown)
19
Page 378
Coke Versus Pepsi

- Pepsi needs to improve strength internationally
- Compete with Coke in the U.s. despite international efforts
- U.S. mature market, profits will decrease
- Where can Pepsi increase international strength?
o Germany, Japan, Australia, Mexico already developed by Coke
o China good because Coke is weak is well
 Huge market
 Category unsaturated
o India same situation as China
o India and China VERY important to Pepsi
o Coke needs to defend itself in China and India to maintain global status
Strategic Importance of China to Coke
1. Huge market
2. Huge growth potential because it’s unsaturated
3. The global competitive positioning of players can change depending on Chinese
market
4. Competitors are on a more equal playing field
20
Page 379
November 6th
Product Line Variation Across Countries
Examples: Chips (especially in China)
Coca-Cola (Koo, Diet Coke, Coca-Cola Lite…)
Pizza Around the World
- Japan: Pizza L.A.
o BLT
o Bacon, eggs, curry…
- Shakey’s Pizza Japan
o Corn, curry…
- Domino’s Japan
o Seafood pizza, spicy, Mexican, Tuna…
- Pizza Hut in Hong Kong
o Corn popular, Hot & Spicy, seafood
o BIG THING: thousand island sauce
CVS Pharmacy: Savon to CVS → SUMMARY AXING
- Totally dropped Savon logo, name and image
 WA-ha-ha - China 
What Characterizes Chinese Companies?
- Imitation
- Lower production price
- Weak marketing
Wa-ha-ha
- Absorbed lessons from global players
- Advertisements placed on National TV Channel
- Sponsor
- Use of local celebrities
- Knew customers very well
- Developed a strong brand image
Wa-ha-ha Over Coke and Pepsi
1. Strong relationships with distributors (esp. in rural areas)
2. Lower price
3. Position themselves as Chinese brand
4. Dominate in rural areas
5. Strong brand with awareness & reputation (means child and happiness)
6. Broad product line: shelf space and segmentation
o Milk (2nd biggest)
o Tea (2nd biggest)
o Mixed Kongi drinks (sweet & local) (2nd biggest)
o Bottled Water (biggest segment)
o Carbonated drinks (smallest section in market)
o These other products growing rapidly worldwide
7. Cola taste adapted to Chinese tastes
Pepsi/Coke Over Wa-ha-ha
- Strong in urban areas
- Coke went to mid-sized cities, Pepsi only in biggest cities
21
Page 380
o Here income lower, but over population is larger

- Market shares:
o Coke - 42%
o Pepsi – 23%
o Wa-ha-ha – 18%
- Wa-ha-ha could take product into cities so Coke needs to go rural (cities already
saturated)
- Mass markets in China are in the rural areas
o VERY difficult to do this, but strategically important
What Does Coke Need To Do This?
- Lower price
- Local distribution network
- Bring in drinks that fit local tastes
- Localize advertising
- Sponsor local events
- Endorse local celebrities
- MUCH MORE LOCALIZED
- Challenge for Coke:
o Maintain consistency
o But adapt for these developing/rural markets
 WA-ha-ha - India 
Strategic Importance of India to Coke
1. Huge market
2. Huge growth potential because unsaturated
3. The global competition position of players can change depending on Indian
market
4. Competitors are on more even playing field
History of Coke in India
- Had to leave India in 70’s because government said had to partner & share syrup
with local company
- Pepsi entered first
- Coke’s bottling company had dominate share with “Thumbs Up”
- Coke bought Parley’s group which gave them immediate 60% market share
o Now own competing Cola group
o Took away marketing & advertising money away from “Thumbs Up” &
into Coke
- Pepsi had 30% market share
- India very sensitive to colonialism – Coke appeared imperialistic
o Coke share went down to 53%
o Pepsi up to 40%
What Should Coke Do?
1. Emphasize “Thumbs Up” in marketing
2. Sell both products but slowly concentrate on Coca-Cola to phase out
3. Localize marketing, more sponsorship for local events (promote social
responsibility)
Coke’s major Strategic Goal in India
22
Page 381
- Brand consistenvy
- MAIN: keep Pepsi market share low.
o Thumbs Up does this better → Coke changes to emphasize Thumbs Up →
Pepsi shares down
Advertising in India
- STANDARD
o Tagline
o Jungle
o Logo
o Glass bottle
o Red Color
- LOCALIZED
o “Baliwood” stars
o Language
o Sports (Cricket)
- NOTE: ads more localized now, segmented to local differences
23
Page 382
November 8th
Advertising and Promotion
Aspects of International and Global Communications
- Target Audience
- Objectives
- Theme and Message
- Platform
- Execution
- Budget
- Media and the Communications Mix
Target Audience
- Who is the target audience in each country?
- How broad is the audience?
o Mass vs. Targeted
- How similar are the target audiences across countries?
o Standardization possible?
- Is it possible to target an inter-market segment?
Objectives
- Consistency with other marketing mix elements
- Positioning Objectives
o How do you want to be positioned?
o Companies normally reluctant to have adapted positioning
o EXCEPTION: Japan → adapted KFC to premium position
- Image vs. Product Benefits
- One-way vs. Two-way communications
- Pull vs. Pull Marketing
o Pull: communicate to end consumer to pull the product through channels
o Push: communicate with retailers/distributors to push product to
consumer
- Objectives and the Product Life Cycle
1st o Cognitive: awareness and knowledge
o Affective: liking, preference, conviction
o Behavioral: trial, repeat purchase
o Switch Users from competitors vs. develop new users
Last o Reinforcing existing users vs. generating new users for product.
Theme and Promotional Message
- What is the theme and general message you want to convey?
- What are the benefits or attributes emphasized?
- What is the message regarding the positioning of the product?
- What is the type of image presented?
- Coca-Cola
o Soothing, relaxing drink that fits with contemporary lifestyles
o “Can’t beat the feeling”, “I feel Coke”
Platform
- Structure
o Order
24
Page 383
o Placement of Items
- Color Scheme
- Melody
- Tone
- Form
o Blocking: structure/order of scenes
Platform and Tone
- Emotional vs. Informational
- Humorous vs. Serious
- Argumentative vs. Narrative
o Argumentative: talks directly to you…”Go Buy Coke”
o Narrative: tells a story
- Competitive vs. Non-competitive
- Hard Sell vs. Soft Sell
o Hard Sell: Aggressively pushes the product
- Direct vs. Indirect
o Mostly in words or pictures
Platform and Form
- Announcement
o Gives info…released on this date, sale this weekend
o Example: Macy’s
- Display
o Show product with out words
o Example: cars
- Association Transfer
o Lifestyle, Celebrity
o Example: Nike, proactive
- Lessons
o How might benefit, how to use
o Example: infomercials, Insurance
- Drama
o Slice of life
o Example: Credit Cards, Pharmaceuticals
- Entertainment
o Humorous
o Example: Aflak, Beer
- Imagination
o Cartoons
o Example: cereal, Red Bull
- Special Effects
o Example: Scion cars
Execution
- Source
o Actors & Celebrities
- Content
o Words, Images/visuals, Music
25
Page 384
- Settings
Media and the Communication Mix
- Advertising
o Television, radio, newspapers, magazines
- Direct Marketing
o Infomercials, catalogs, direct mail, e-mail, telemarketing, internet
marketing
- Sales Promotions
o Samples, coupons, rebates, price & bonus packs, premiums, tie-ins,
continuity programs, contests
- Trade Promotions
o Slotting allowances, coop advertising, floor planning, temporary price
cuts, volume discounts, contests
- Public Relations
- Sponsorships
- Product Placement
o Products in movies & television shows
- Personal Selling
- Sales Force Promotion Tools
o Trade shows & conventions, sales contests, promotional gifts
Media Strategy
- Which media or communications vehicle for which messages
- Percent of budget allocated to each media or communications vehicle.
Coke Advertisements – Sport Star & Kid Ad
Target Audience
- Coke Ads: highly standardized
o Sports enthusiasts (different sport stars across nations)
- Are they geared to everybody?
o U.S. football, Brazil soccer → national pastime, mass market
Objectives
- Pull marketing
- Image building
- Positioning: something you could use broadly
- Very standardized
Theme & Promotional Message
- Refreshing
- Relaxing
- Hero’s elixir
- Very standardized
Platform
- Basically the same throughout the ads
- Very Standardized
o Structure, order, storyline, blocking…
Tone
- Emotional not information – standardized
- More serious than humorous
26
Page 385
- Narrative
- Non-competitive
- Soft sell
- Indirect (more pictures, scenes than words)
- Everything standardized
Platform & Form
- Drama
- Association transfer
- Standardized
Execution
- Different celebrities
o Used sports (football, soccer…)
- Platform the same, but local visuals
o According to each countries’ stadium
- Different languages
- Different specific setting
- HIGHLY ADAPTED
OVERALL
- Typically easier to standardize 1st three elements, more difficult to do the last two
o Coke standardized first 4, adapted the last (execution)
 Deremate.com Case 
Overview
- EBay type website
- American web companies concentrated in the U.S., so…
- Local European, Latin American, & Asian companies looked at American web
market, took idea, then made local adaptations
- When American companies wanted to expand, there were already strong,
localized web companies
Differences From U.S. to Latin America
- Reasons for using auction site
o Limited cash, want to monetize assets
- People don’t use credit cards
o Need to have cash on delivery
o Need to exchange in person
- Internet not widely used
o Target more medium-premium market
- Not used to yard sales, classified ads, etc.
o Need to educate the customer A LOT
- Very different products being sold and bought
o Lower end products
o Used VCRs
o Electronics & cars
- Underdeveloped delivery infrastructure
o Need to set up strong relationships with services they can trust
- Can marketing be the same? NO!
27
Page 386
November 13th
 Deremate.com Case Continued 
Similarities (Within Latin America)
- Language (except Brazil)
- Why customers use auction sites
- Cultural similarities
Differences (Within Latin America)
- Use of Spanish is different
- Levels of internet development
- Delivery methods
- Payment methods
- Types of goods sold
DEREMATE.COM
STANDARDIZED ADAPTED
- Transaction completion method:
payment, taxes, & delivery
- Product categories
featured/emphasized
- Fees for using the service
- Content of ads: localize with
- Orange, logo, branding
newspapers/radio/etc.
- Look & feel of the website
- Media used to advertise depending
- The software platform
on infrastructure (billboards,
- Positioning
radio…)
- Ads on cable TV channels
- Publicity, PR
- Product/website development (new
- Direct sales (especially with college
features)
campuses
- Customer Service
- Execution of specifics on the
website
- OVERALL: similar to other cases where key aspects are standardized but
specifics are localized
Competitors
- Deremate.com
- Meradolibre.com
- EBay: What should they do to enter?
o Could partner with one of the 2 local companies
 Would combine global knowledge of EBay with local
responsiveness
 Small companies should court EBay
What Ended up Happening?
- Mercadolibre.com ended up with EBay & became the dominant player across
Latin America
- Branding is the same → PLATFORM
- Specifics are very different from market to market
- Marcadolibre.com eventually recently out deremate.com
o Chile & Argentina too strong & deremate.com did not sell out
28
Page 387
 IBM Global Advertising 

Overview
- IBM one of the most valuable brands in the world
- Thought of as: 1 brand with many expressions around the world
- 1994: 400 marketing agencies into 1 agency → Ogilvy & Mathers
- 1996: IBM brand association with internet and e-commerce
o “The Biggest Dot.Com of Them All”
- Brand:
1. One brand, many point of contact
2. One brand, many tactics
- Advertisement: Will it work in the U.S. and Japan?
o Language
o Hierarchal structure (kid young & not respectful)
o Sense of humor
o Japanese board rooms look different
- IBM adapted ad for Japan, but standardized…
o Branding
o Sequential order & plot
o Music
o Black & white film footage
Advertisement Layout
1. Target Audience
o Highly standardized: business people Same Strategy
2. Objectives
o Highly standardized: e-commerce
3. Theme and Message
o Highly standardized: use IGM for e-commerce Same Creative
4. Platform Idea
o Fairly Standardized
5. Execution Expression is
o Highly adapted Localized
- At IBM: type of ad called intelligent adaptation
- Why is execution localized?
o Objective to connect with customer deeply & psychological
o Want resonation with customer
 COMPLEX GLOBAL - GLOCALIZATION 
2nd Advertisement (Japan vs. U.s.)
- Rhyming: there isn’t this sense of humor in Japan
- Blaming
- Adapted for Japan:
o Still humorous and concept the same
o More questioning than blaming – more polite
o More collaborative: people worry together to solve problem
o Circular
- First 4 concepts standardized, execution localized
29
Page 388
 Global Brand Face-Off 

The Grid and The Grid Revisited
- Stars of film wore new line of sunglasses from an eyewear brand
- Created much publicity for the company’s brand and its new line
- Espoir is a major global cosmetics brand
- Positioned for women who are smart, independent, risk takers
- Opportunity to sponsor sequel to Dianna’s She Devils
- Three stars are from Europe, Asia, and South America
- Create three new lipsticks and nail polish combinations in right palette for each of
the 3 stars
- Launch new combinations at same time as film and associate the starts with the
advertising
Natasha Singh – Executive Vice President of Global Marketing
- Make Espoir’s Indian business successful by challenging headquarters ideas
- In India can get a facial for Rs 300 ($6.66) or a manicure for Rs 75 in a beauty
parlor
- Why pay Rs 120 for lipstick or Rs 75 for nail polish?
Indian Success
- Reduced pack size to 8ml vs. 12ml
- Slashed prices to Rs 35 from Rs 75
- Penetrated small retailers around the country
- Small trays of lipstick and nail polish created for dmall retailers to place on
counters
- Local market leader 12ml for Rs 30
- Introduced purple shades to fit with current rage In traditional Indian dresses
- Later had to introduce global colors in India because consumers were asking why
weren’t available
- So segmented market, less expensive local line and more expensive international
line
U.S. Reaction
- Willing to help pay for campaign because two of starts represent big ethnic
markets in U.S.
Western European Reaction
- Revlon had boosted top-of-mind awareness by ting in with movies, like the Bond
film Die Another Day
- Positive to global movie sponsorship idea
- But, argued website to buy customized products from Espoir would need to have
a different look and feel from the U.S> and different name to appeal to
Europeans.
Eastern European Reaction
- Manger claims Eastern Europe is different from rest of world
- Movie promotions won’t help sales. We are in beauty business, not movie
business.
- Wanted to appoint beauty queens like Miss Russia and Miss Ukraine as brand
ambassadors
30
Page 389
- Contests where write in with suggestions for new colors each beauty queen will
pick her favorite, and there will be lots and lots of prizes
- Brand not well known, so major goal is to develop brand as quick as possible
- Manager Threatens to leave if force the global campaign on him
Indian Reaction
- Many new department stores opening in cities, easting retailing bottlenecks
- Many international brands now competing in maker
- Farmers adopting cell phones
- Internet cafes every two miles in countryside
- Rooftops crowded with satellite TV dishes
o Customers asking for latest global colors advertised on satellite TV from
other countries
- Billboards in countryside from Cosmo, Elle, Friends
- Point of reference for rural areas used to be closest large city, not it is becoming
the world
- Hollywood films doing will in India recently, in addition to Bollywood films –
better dubbing, quick global releases, less important regulations
- But still need local responsiveness because of large income differences and
cultural differences
Argument for Global Campaign
- Trend toward global convergence in customer tastes
- Global movies a good way for reaching targeted segments around the world
- Cost savings
- Quality of global campaign is typically better than what can be done locally
- Leveraging good knowledge and ideas worldwide
Arguments Against Global Campaign
- Many companies that have tried globalizing marketing have failed at it
- Global approaches tend to either over-standardize or oversimplify
- Global approaches ten to discourage local innovations
- Espoir bran may have different images in different parts of world
Expert Reactions to the Case
- Singh is on right track to want to globalize marketing much more, but needs to
find the right balance between globalization and localization
- She needs to keep Espoir’s marketing programs relevant to local markets as
global scale and best practices are leveraged
- She has to get buy in of frontline executives who will be implementing the
programs
- She has to become less of a developer of marketing programs and more an
orchestrator
- Achieving both global scale and local relevance requires time and flexible
approach
- The organization and implementation of the global marketing approach is key
Expert Recommendations
- A team of managers from different regions/countries should develop and shape
global marketing ideas
31
Page 390
- Identify areas of marketing that must be globally consistent and leave other areas
of marketing to the decisions of local managers
o Marketing strategy make be more globalized while execution ca be left to
local control
- Identify global products that must be more standardized across countries and then
allow other products that are country specific
- Create a global communication platform and menu of options, but local managers
can choose from the menu and add local elements to the global platform
- Quantify both the benefits and costs of global consistency and develop a
measurement system for tracking in future
32
Page 391
November 20th
Advertisement & Promotion Cont - Localized
ADVANTAGES DISADVANTAGES
- More costly
- Resonate/connect with customer on
- More resources: management
deep level
resources
- Customer Behavior can vary
- Confuse customers
- Regulatory environment vary
- Doesn’t reinforce the brand as
- Competitive situations vary
people hear messages from
- Avoid misunderstanding & insults
different countries
More Cross Border Media Spillover
1. Internet
2. More International Travel
3. Cable & Satellite TV
Advertisement Statistics
- Should look at a country’s stats in order to determine the best mode of
advertisement
- Regulations on advertisement
o Europe especially
o Not the same with new cable stations
o Example: Can’t interrupt shows, have to do in between shows
o Before: state owned channels, NO ADVERTISING
- Last 30 Years:
o Britain – first to introduce advertisement
o Last 10 years in some European countries with cable & satellite
o IN GENERAL: advertising restrictions have decreased with time
- Cinema
o France: 30 minutes of ads before movie…but assigned seating
POWERPOINT
Selecting Media and the Communications Tool
- Availability
- Regulations
- Habits and Intended Audience
o Which media or communications vehicle is our target audience most
receptive to?
- Fit of the objectives/message to the media or communications vehicle
- Cost
Determining the Schedule
- When is our target audience most likely to be exposed to the communications?
- Seasonality of product usage and exposure
- Introduction of a new product
o Pre-launch, launch, post-launch
- Communicating new information about a product
- Response to Competition
Consumer and Trade Promotions
- Mostly a local activity
33
Page 392
o Economic development
o Culture and perceptions
o Regulations
o Retail structures
o Infrastructure for Promotions
Consumer and Trade Promotions
- Increasing Headquarters Involvement
o Cost
o Complexity
o Global branding
o Transitional retailing
Agency Selection
- Different agencies different countries
- Same agency across countries – little coordination
- Same agency across countries – much coordination
Constraints in International Advertising
- Cultural and language differences
- Different regulations
- Different infrastructures
o Media availability, agency availability, research data availability
- Different consumer characteristics and attitudes
o Economic status, literacy, role of advertising in society
- Different market characteristics
o Stage of product life cycle, competitive environment
- Different product strategies
o Differences in positioning, packaging across countries
Trends in International Advertising
- Deregulation of media
- Growth of commercial television and radio
- Growth in cross-border cable and satellite TV
- Increased Availability of Global Media
- Growth of global advertising agency networks
- Growth in worldwide sports and events sponsorships
- Growth of product placements in TV and Film reaching global audiences
- Growth of advertising in emerging countries
- Potential of the Internet
Growth in Global Advertising
- Trend toward harmonization of strategic elements of advertising
- While maintaining flexibility at local level for execution
- Think globally, act locally
The Product Portfolio and Global Marketing
- Distinguish among global, regional and local brands
Global Brands
- Highest level of headquarters influence
- Headquarters promotes coordination of marketing strategy
o Certain marketing elements may be standardized
34
Page 393
- Implementation left to local level

o Perhaps with guidelines and approval procedures
Regional Brands
- Moderate level of regional management influence
- Regional management promotes coordination of marketing strategy
o Certain marketing elements may be harmonized across countries
- Implementation left to local levels
o Perhaps with a few guidelines and approval procedures
Local Brands
- Highest level of local autonomy
- Development of marketing strategy and execution left at local level
o Little need for coordination
o Little need for guidelines and approval procedures
- Information may be transferred across countries but with no attempt to influence
local managers to adopt new ideas
 Unilever in India 
Shakti Program
1. Shakti Entrepreneurs
o Distribution into remote/rural area (50% of population)
o Women entrepreneurs, increase HH income 50%
o Work with self help groups like microfinance
2. Shaktivani
o Meet with women in groups – educate them about hygiene & health
o Communicate about Unilever products
3. iShakti
o Internet access
o Brings people the Unilever products
o Communicates about Unilever
Challenges
1. Entrepreneur women need a lot of education & support
2. Was pilot program but not want to scale it up to entire country without a large
increase in resources
3. Want it to become profitable
4. Self help groups (SHG) – consumers working with Unilever but concerned about
exploitation and commercialization
Indian Village: Kelve
- 800 km from Mumbai (a.k.a. Bombay)
- Takes 2.5 hours by train, 3.5 hours by car
- Road not straight & poor infrastructure (lower speed)
- Population of 3000
- On Indian Ocean
- Citizens:
Wealthier o Banana Groves & 50% Regular groves
o Fishing 10%
o Farm Hands – Tribals >15%
o 3% work in Bombay
Poorer
35
Page 394
o Less than 3% professional misc. (i.e. doctors)

- Street vendors for fruit & fish (Other products - shoes, plastic buckets, etc)
- Some small shops with sachets of detergent, shampoo…
- Many outdoor ads painted on buildings
- Tier 3 Village: close to the city/accessible
o Wealthy when compared to Shakti villages, poor vs. the city
o Have electricity
o 20% refrigeration
o Wells, not running water (in back yard for average person, electronic
pump for wealthy)
- Tribals
o Dirt floors in home, made of bamboo & mud, use communal wells
- 3 elementary schools, 1 high school
- Many Hindu temples (small to large)
36
Page 395
November 27th
Segmentation
Segmentation Strategies
- National market segment strategy
o Primary segmentation variable: within each country
o Multi-domestic → No coordination
- Country cluster market segment strategy
o Primary segmentation variable: groups of similar countries
o Segment within this block in a similar way
- Global market segment strategy
o Primary segmentation variable: factors that cut across countries or regions
Criteria for Grouping Countries – General Characteristics
- Economic grouping
o World Bank Clustering
- Geographic grouping
o Most simple (i.e. North America, Europe, etc)
o PROBLEM: U.K. with Europe for geographic grouping but with North
America for cultural grouping
- Political grouping
o Index of economic freedom OR political trade group
- Religious grouping
- Cultural grouping
- Quality of Life grouping
- Product Usage
Criteria for Grouping Countries – Product Market Specific Variables
- Size of market
- Growth of market
- Competitive intensity
- Product Life cycle stage
o Mature: brand loyalty, differentiation & innovation, & efficiency &
reasonable pricing
o Growing
o Initial: awareness, education, generating primary demand
- Customer acceptance of product
- Customer knowledge of product
- Other criteria relevant to your product market
Formal Technique for Grouping Countries
- When using multiple variables
- Cluster Analysis
o A statistical technique
o Group countries into clusters
o Countries within a cluster are relatively similar to each other on the
variables used for the clustering
o Multiple variables can be used to cluster countries
- Associated with a regional approach
Customer Trends Across Countries
37
Page 396
- Increasing homogenization, BUT…

- Increasing segmentation
o Customers are being segmented into more specialized segments
o Example: cereal – for kids, adults, healthy, increased fiber…
- How can these two trends be reconciled?
o Specialized segments can be enlarged by segmenting across countries →
Using Inter-market Segments
Emerging Inter-market Segments
- Because the world is coming together, but becoming more specialized, companies
have to find segments that are common across the globe
- Teenagers
- Working Women
- Middle Class Families
- Upscale Consumers
- Business managers
4 Characteristics That Define Inter-Market Segments
1. Have many similar needs
2. Desire Similar Products and Services
3. Can be Targeted with Global Media
4. Have Similar Vocabulary
38
Page 397
November 28th
International Distribution and Retailing
Modes of Entry into International Markets
- Increasing commitment, risk, expertise, and control
As You Go Down o Indirect Exporting: cheap and low risk
The List
o Direct Exporting: export yourself
o Licensing: local company, they manufacture & sell with guidelines
o Joint Venture
o Direct Investment
More Commitment, Risk  Marketing and sales subsidiaries
… Over Operations  Manufacturing subsidiaries
Distribution and Retailing Environment Across Countries
- Distribution and retailing environments are HIGHLY LOCALIZED
o Different retail and distribution structure in different countries
o Retailers and distribution tend to be local players
o Relationship with retailers and distributors need to be localized
- RECENT TRENDS are making distribution and retailing environments more
similar across countries
Traditional Retailing Environments
- Traditional = Localized
- Traditional Retail Formats
o Outdoor Stalls – Street Markets
o Small “Mom & Pop” retailers – The Corner Market
o Example: Kelve, India
- Early Modern Form of Retailing
o Department stores
- In the U.S.: traditional faded away after WWII
o Traditional still strong in many countries
o Others “modernized” in different time periods, other changing now
International Trends in Retailing
- Growth of large scale retailing
- Rise of Discount stores
- Internationalization of retailing
- Retailers are taking power from branded manufactures
- Increasing sophistication of information systems
- Greater ability to shop anytime, anywhere
- Opportunities for internet retailing
- Example: Shanghai → had mega stores but many bicycles outside.
→ Mom and Pop stores still exist next to mega stores
Growth of Large Scale Retailing
- Increase in number of large stores
- Growth of chain stores
- Movement to city outskirts
- Rise of shopping malls
- Example: Carrefour is the lead market globally
Rise of Discount Stores
39
Page 398
- With quality products

- Including branded goods
- More competitive with prices
- Examples: Wal-Mart, Costco, and then smaller ones within each country
Internationalization of Retailing
- Pan-European Supermarket chains
- International hypermarket chains
- Department stores operating across borders
- Worldwide Retailing in Narrow Categories
- Examples:
o Wal-Mart
o Makro, Dutch Wholesale Club
o Carrefour, French Hypermarket
o Japanese Department Stores
o Costco
o Toys’R Us
o Ikea
- China
o Carrefour
o Wal-Mart
o Makro
o Metro
o Lotus
o Ikea
- Local Copies:
o Japan
 Victoria Sport
 Aoki, Aoyama Men’s Suits
o Hong Kong
 Grand Mart
 M-Mart
o Korea
 E-Mart
Increasing Sophistication of Informational Systems
- Increase Efficiency and Lower Costs
- Better understand customers
- More sophisticated marketing
o Including more precise targeting
Retailers Are Taking Power From Branded Manufacturers

- Consolidation of retailers
- Retailers are extracting greater price concessions
- Growth of Private label goods
- Retailers are making their names into strong brands
- Ways Branded manufactures Can Respond:
o Reinforce Pull Marketing
40
Page 399
 Reinforce quality image

 Discredit private brands
 Relationship marketing
o Provide adequate push marketing
o Lower your costs through efficiencies
 Lower prices to diminish price gap
 Eliminate the gouge factor
 Use promotional pricing
o Negotiate with retailers on Global Basis
o Establish Strategic partnership With retailers
 Category management
o Innovation
Greater Ability to Shop Anytime, Anywhere
- Longer hours for retail stores
- Growth of direct marketing
- Example: restrictions in Germany (have to close at 8)
Opportunities for Internet Retailing
- Certain segments of most countries have internet access
- Internet retailing provides new possibilities for market entry
- Internet retailing gives customers greater information, selection and bargaining
power.
Global Retail Trends and Implications for Manufacturers
- Simplifies the task of international distribution
o Allows for entry into a new country with less investment
o Allows for greater standardization of distribution across countries
- But it comes at a price
o Lose power to global retailers
o Price concessions extracted
o More dependent on a small number of powerful retailers
o Risk of Losing retailer to another manufacturer
41
Page 400
Pricing for International Markets

Examples
- Chart with Zurich = 100
- Price of Big Macs globally: vary due to costs and wages
Factors to Consider in Setting Prices in International Markets
- Company internal factors
- Cost and Profit factors
- Market factors
- Environmental factors
- Managerial issues
Company Internal Factors
- Consistent with marketing strategy and other elements of the Marketing Mix
o Consistent with target market characteristics
o Consistent with product positioning and image
- Consistent with company strategy and goals
o Marketing skimming vs. penetration pricing
Price
Skimming
Penetration
Pricing
Time
o Profitability (higher prices) vs. market share goals (lower prices)
Internal Cost and Profit Factors
- Manufacturing Costs
o Direct manufacturing costs Add These 3 To
o Indirect manufacturing costs Get Selling
- Selling, Marketing, and general administrative costs Price
- Profit margin
- Manufacturer’s Selling price
Cost and Profit Factors External to the Company
- Cost related either to Domestic, overseas production, or export sales
o Taxes
o Distribution margins
 Wholesalers
 Retailer
- Cost related to exporting
o Transportation and Insurance Costs
o Tariffs
- Manufacturer’s selling price plus above costs determine final price to consumer
Export Related Costs and Price Escalation

- Cost of shipping, insurance, tariffs, taxes, importer margins, and distribution
margins can make retail prices in export markets much higher than domestic retail
prices.
- How to lower price escalation (4 Ways)
o Price based on marginal costs
42
Page 401
o Eliminate layers of middlemen in importing and distributing the product

o Redesign product to lower costs
o Set up production in overseas markets
Market Factors
- Demand
o Demand vs. supply: High S, Low D OR Low S, High D
o Price elasticity of demand: customers price sensitive or not?
- Income level of country
- Competition
o Price levels
o Intensity
o Differentiation of Product
- Product Life cycle stage
o Price comes down with maturity
Environmental Factors
- Government regulations
o Price controls
o Anti-dumping laws
- Inflation Rates
- Foreign Exchange Rates
Managerial Issues
- Relative vs. absolute pricing
o Relative: average price + relative price when compared to a competitor.
More feasible because related to market conditions and competitors
o Absolute: Exact same price. Not frequently used because conditions in
markets vary drastically.
- Multi-domestic vs. Global Strategic Orientation
- Coordination and Pricing Policies
- Gray Market Problems
o Entrepreneurs buy product at lower price in a different country then sell it
for more but lower than true price in that country…angers retailers.
- Product characteristics, packaging sizes, and prices
Pricing in the EU
- Theory: prices go down if not modereated to the lowest common price
o Companies react by incrementally raising prices in cheap countries, and
lowering expensive countries = moderate LOWER price.
- Reality: people feel that prices ROSE, not lowered.
KFC Video in Japan
- Employees work for life
- Image: American and HIGH QUALITY
- Expensive to start a new store – very concerned about locations
GLOBALIZED ADAPTED
- Branding elements - Side dishes
- Core product - Size of store
- General look and feel - Positioning and advertisement
43
Page 402
Summary of the 4 Ps
MORE POTENTIAL LESS POTENTIAL
TO GLOBALIZE TO GLOBALIZE
1. Product 2. Advertising/Promotion 3. Pricing 4.Position/Distribution
PRODUCT
Brand Product Packaging Packaging Customer

Features Design Material Service
ADVERTISING/COMMUNICATION/PROMOTION
Advertising Strategy Media Execution Customer Support
PRICING
Relative Price Absolute Price
44
OWEO: Mission Statement
Page 403
Group email: overseasexperience@gmail.com
In today's business world, knowledge of overseas working practices

is more important than ever. The Overseas Work Experience
Organization is dedicated to the dissemination of knowledge about
working abroad as a step towards a more successful career in any
field. The OWEO will provide members with the valuable
information needed for finding work overseas, as well as the steps
that should be taken for getting the most out of an overseas work
experience.
This is the Facebook group for the USC chapter of the Overseas
Work Experience Organization, which is an officially recognized USC
group. USC OWEO was founded in September 2006 by Keith Parker
as a means of spreading knowledge to the USC undergraduate
student body about the benefits of traveling abroad for work during
summer breaks, as well as information about how one would go
about doing this. Meetings are held in the Philosophy building (or
in the courtyard). Membership is open to all, and free. Just request
to join this group and you'll be on the OWEO membership list and
get news about meetings.
Everything else you need to know about the group is on the group
website, which also has some helpful travel info.
Here's the OWEO mission statement:

"In today's business world, knowledge of overseas working practices
is more important than ever. The Overseas Work Experience
Organization is dedicated to the dissemination of knowledge about
working abroad as a step towards a more successful career in any
field. The OWEO will provide members with the valuable
information needed for finding work overseas, as well as the steps
that should be taken for getting the most out of an overseas work
experience."
Cheers,
Keith Parker
President and Founder
variety of ways during their stay at the backpacker’s resort. This

put us in contact with backpackers from all over the world and also

OWEO: Mission Statement
Page 404
gave us an insight into the business practices of a Greek company

at the Micro-level.
Many people find work similar to the aforementioned hostel job
by buying tickets to a location of interest for them, then finding a job
on arrival. This has worked for a large number of people. This
shows that even if somebody hasn’t found a job overseas by the
time that summer rolls around, all is not lost. While this approach
might not work for everybody, it is usually very effective.
Nonetheless, it is important to be very motivated upon arrival to a
new place in order to find a job. In my personal experience, I have
used this method in Italy, Greece, Maui and Thailand. I found a
good job in each country, but never at first. Everywhere I have
gone, it has taken up to a week of constant searching and
persistence to find work. Every business I’ve worked for overseas
didn’t need new employees when I arrived; after approaching
owners and managers multiple times daily, I eventually was offered
a position. Furthermore, finding work on arrival often results in a
more unique work experience than if a job was found beforehand,
as many jobs that are found on-location through word-of-mouth
aren’t posted anywhere online. For many, though, planning ahead
is necessary to eliminate the stress associated with finding work
on arrival and the possibility that work just isn’t available upon
arrival.
In the Information page of this site there are many links that you
may find helpful in deciding on an area to look for work. There are
also links to sites dedicated to securing jobs in various locations
before you even book your ticket.
Cheers,
Keith

OWEO: Constitution
Page 405
Constitution for The Overseas Work Experience Organization

University of Southern California
ARTICLE I. NAME AND PURPOSE
Section A: NAME
Part 1.The official name for this organization is the Overseas Work Experience Organization.
Part 2.This organization will use the name or its acronym, OWEO, in all publicity materials and
correspondence.
Section B: PURPOSE
Part 1.The purpose of this organization is to explore and promote academic and career issues
related to the field of psychology, and to help those interested in the field to get to know one
another better outside the classroom and laboratory.
Part 2.All activities of this organization must be directed toward this purpose.
ARTICLE II.MEMBERSHIP
Section A: REQUIREMENTS
Part 1. All currently enrolled undergraduate USC students are eligible to be voting members.
Part 2. All other USC students and USC staff, faculty, alumni, and alumnae are eligible to be
non-voting members.
Part 3. Members must pay no fee to be a part of this organization, though fees may apply for
participation in events sponsored by the organization.
Part 4. All members are required to demonstrate support for the purpose of this organization.
Part 5. Membership decisions will not discriminate on the basis of age, race, religion or creed,
national origin, ethnicity, gender, disability, or sexual orientation.
Section B. RIGHTS
Part 1. All members are eligible to attend all meetings and events of this organization.
Part 2. If a fee is charged to attend a particular event, the membership will establish a fee scale
for voting members, non-voting members, and others as appropriate.
Section C. WITHDRAWAL OF MEMBERSHIP

Part 1. Members may have their membership withdrawn for failure to adhere to the requirements
for membership as stated above.
Part 2. A simple majority vote of the quorum of membership at a regular or special meeting shall
be sufficient to withdraw membership.
Part 3. Members to be voted upon in this regard will be notified of the intention to do so in
writing at least one week prior to the meeting at which the vote will be taken.

OWEO: Constitution
Page 406
ARTICLE III. OFFICERS

Section A: OFFICER TITLES
President
Vice President
Secretary/Treasurer
Program Committee Chair
Section B. DUTIES
Part 1. The President will chair all meetings of OWEO and will call special meetings as needed.
The President will vote on OWEO matters only in case of a tie.
Part 2. The Vice President shall chair any ad hoc committees or task forces of the organization.
Part 3. The Secretary/Treasure will take, record, and file meetings minutes; produce all official
correspondence for the organization, and maintain records and report on the financial
transactions of OWEO.
Part 4. The Program Committee Chair will direct the planning of the organizations education and
social programs.
Section C. REQUIREMENTS FOR RUNNING FOR AND HOLDING OFFICE

Part 1. All officers and candidates for office must be currently enrolled USC undergraduate
students.
Part 2. All officers must be voting members of OWEO.
Section D. NOMINATIONS AND ELECTIONS

Part 1. Nominations for all offices will be taken from the floor of the third-to-last regular
meeting of the spring semester each year.
Part 2. Any members may nominate any other member, including himself or herself.
Part 3.Elections will be held at the second -to-last meeting of the spring semester.
Part 4.Nominations may also be made during the election meeting itself, prior to closing of
nominations and taking the vote.
Part 5.A simple majority vote of the quorum present at that meeting will be sufficient to elect an
officer. If there are more than two candidates and no candidate receives a majority, there will be
a run-off vote between the top two vote recipients in the general meeting.
Section E. REMOVAL FROM OFFICE

Part 1. Officers may be removed from office for failure to perform duties or for violation of
membership clause.

OWEO: Constitution
Page 407
Part 2. Officers to be voted upon in this regard will be notified of the intention to do so in writing
at least one week prior to the meeting at which the vote will be taken.
Part 3. A two-thirds majority of quorum present at a regularly scheduled meeting shall be

sufficient for removal form office.
Section F. TERMS OF OFFICE AND VACANCIES

Part 1. The term of office shall be from the last meeting of each spring semester until the end of
the second-to-last meeting of the subsequent spring semester.
Part 2. Should a vacancy in office occur, there will be another nomination procedure and election
for the vacant office.
Part 3. In the meantime, the Vice President will assume the duties of the President, the
Secretary/Treasurer will assume the duties of the Vice President, and the Program Chair will
assume the duties o the Secretary/Treasurer should those offices be vacant.
ARTICLE IV. MEETINGS

Section A: Regular meetings will be held the first and third Tuesdays of every month.
Section B: Special meetings may be called by any combination of two of the officers. Notice of
special meetings must be communicated to all members at least 48 hours in advance of the
meeting.
Section C. To conduct business at any meeting, one half of the entire voting membership must be
present to form quorum.
ARTICLE V. COMMITTEES
Section A. PROGRAM COMMITTEE
Part 1. The only standing committee of OWEO is the Program Committee, whose purpose is to
pan events and programs for the organization.
Part 2. All decisions of the Program Committee involving committing organization funds in
amounts greater than $25.00 will require the approval of the majority of those members present
at the regular or special meeting of OWEO. Similar decisions, but for $25.00 or less may be
approved by the Program Chair with consent from all other officers.
Section B. OTHER COMMITTEES

Part 1. Other committees may be appointed by a majority vote of the members at a regular
meeting of OWEO, or by the President.
Part 2. In appointing such committees, OWEO members, or the President if the committee was
appointed by the president, must specify the purpose and chair or co-char of that committee, and
establish its duration.
ARTICLE VI. AFFILIATIONS

Section A.USC
Part 1. This organization is a recognized student organization at the University of Southern
California, but is not part of the University itself.
OWEO: Constitution
Page 408
Part 2. In all correspondence and business transactions, it may refer to itself as an organization at
USC, but not as part of USC itself.
Part 3. OWEO accepts full financial and production responsibility for all activities it sponsors.
Part 4. OWEO agrees to abide by all pertinent USC policies and regulations. Where USC
policies and regulations and those of OWEO differ, the policies and regulations of USC will take
precedence.
Part 5. This organization recognizes and understands that the University assumes no legal
liability for the actions of the organization, and that the University is not providing blanket
indemnification insurance coverage for any activities of the organization, unless those activities
expressly benefit and further the goals of the University, and have received prior review,
approval, and consent of Campus Activities, Risk Management, and/or General Counsel.
Section B. OWEO
Part 1. OWEO is an independent group started at USC in 2006, and may branch out to other
Universities.
ARTICLE VII. FACULTY/STAFF ADVISOR

Section A. ADVISOR REQUIREMENTS
Part 1. As a recognized student organization at the University of Southern California, OWEO is
required to have an official advisor from the USC faculty and/or staff.
Part 2. Other persons may serve as special advisors as needed.
Section B. DUTIES
Part 1. The advisor must sign the recognition application each year, or whenever officer
information changes or amendments are made to the constitution.
Part 2. Officers should meet with the advisor five times per semester.
Part 3. An advisor may not vote in OWEO matters, hold office or unduly influence decisions of
the student organization.
ARTICLE VIII. BY-LAWS AND AMENDMENTS

Section A. BY-LAWS
Part 1. By-laws can be added to this constitution by a simple majority vote of the entire
membership at a regular meeting of OWEO.
Part 2. This constitution takes precedence over any and all by-laws.
Section B. AMENDMENTS
Part 1. This constitution can be amended by a two-thirds vote of the entire membership at a
regular meeting of OWEO.
Part 2. Notification of such a motion must be made to members at least one meeting in advance
of the one in which the actual vote is taken.

OWEO: Group Application
Page 409
USC Student Organization Account Application

This application is for an organizational account on the campus’ student server. Below, please provide all requested information.
Incomplete or inaccurate applications cannot be processed. The account owner must have a current USC computer account.
Organization Name:
Affiliated Department/School:
Account Type:
❏ Academic ❏ Social ❏ Fraternal ❏ Other (please specify):
Requested Account Name (No more than 8 characters):
Account Owner (please print name):
Owner’s USC Email Address: Phone:
Faculty Advisor (please print name):
Advisor’s Email Address: Phone:
Departmental Authorized Signer* (please print name):
Student Affairs Authorization† (please print name):
* Only required for organizations affiliated with academic departments.

† Please see Heather Larabee, Office of Student Activities. (TSC 100, x05693)
University Park Campus Applicants: Take this form to the ISD Customer Support Center (JEF 150) or send it
via campus mail.
Health Sciences Campus Applicants: Take this form to the Norris Medical Library Learning Resources Center
(NML LRC).
Each individual must sign to indicate that they agree to read and abide by university computing policies. Policies can be
Account Owner’s Signature Date Departmental Authorized Signers’ Signature Date
Faculty Advisor’s Signature Date Student Affairs Authorization Signature Date

OWEO: Facebook Picture
Page 410

Facebook | USC OWEO http://usc.facebook.com/group.php?gid=2215093058
OWEO: Group Members, 11/11/2006
Page 411
home search browse invite help logout
USC OWEO USC

Search
My Profile edit Information edit
My Friends Group Info

My Photos Name: USC OWEO
My Shares Type: Organizations - Professional Organizations
My Notes Description: The USC Overseas Work Experience Organization
My Groups (OWEO)
My Events This is the Facebook group for the USC chapter of

My Messages the Overseas Work Experience Organization, which
My Account is an officially recognized USC group. USC OWEO
was founded in September 2006 as a means of
My Privacy
spreading knowledge to the USC undergraduate
student body about the benefits of traveling abroad
for work during summer breaks, as well as
information about how one would go about doing
this. Meetings are held in the Philosophy building (or
in the courtyard). Membership is open to all, and
free. Just request to join this group and you'll be on
the OWEO membership list and get news about
meetings.
Everything else you need to know about the group is

on the group website, which also has some helpful
travel info.
Cheers,
Keith Parker
President and Founder
Contact Info
Email: overseasexperience@gmail.com
Website: http://www-scf.usc.edu/~kaparker/Welcome.html
Office: Philosophy Building (For meetings)
City: Los Angeles, CA
Recent News edit
Along with the Marshall Business Student Government (MBSG), I, along

with USC OWEO, will be helping to host a panel about the benefits of
working overseas after graduation. Food and beverages will be provided.
The panel will consist of speakers giving a 5-10 minute presentation,
followed by a Q&A session. Afterwards, there will be time for some
one-on-one talk and networking. The event is on November 28th from
7-9 PM in ZHS 252. Message me with any questions, hope to see you
there if you're interested!
Recognized by the University October 3rd, 2006 through Fall of 2007!
Photos
Displaying 4 photos. Add Photos | See All
Discussion Board
Displaying 2 discussion topics. Start New Topic | See All
Work in China
1 post by 1 person. Updated 4 hours ago.
Thanks!
1 of 2 11/6/06 11:06 PM
Facebook | USC OWEO http://usc.facebook.com/group.php?gid=2215093058
Page 412
1 post by 1 person. Updated on Nov 1, 2006 at 12:40 AM.
Members edit
This group has 61 members at USC. See All
Jimbo Megan Brian Caitie Taylor

Bohan Alex Fine Ramer Dawson Hannon Matsumoto
The Wall
Displaying 3 wall posts. Write Something | See All
Travis van der Bell wrote

at 9:25pm on November 1st, 2006
OWEO's Code of Excellence is in the pictures

section, be sure to check it out and if you don't
think you can handle the Code of Excellence, we
don't want you at OWEO
Message - Report - Delete
Jessie Burr wrote

at 9:21am on October 31st, 2006
great job w/ the website! it looks tight

Paul Loeb wrote

at 11:20pm on October 30th, 2006
ha i love it
about blog developers jobs terms privacy advertise

a Mark Zuckerberg production
Facebook © 2006
2 of 2 11/6/06 11:06 PM
Facebook | Group Members http://usc.facebook.com/s.php?k=20004&id=2215093058
Page 413
Group Members
Search
Displaying members of USC OWEO.
My Profile edit
My Friends
All 61 Members 4 Officers 1 Admin 45 Haven't Replied 1 2 3 4 5 6 7 next
My Photos
My Shares
My Notes Name: Taylor Matsumoto Send Message
Networks: USC '09 Poke Him!
My Groups
UC Davis View Friends
My Events
My Messages View Photos
My Account Remove Friend
My Privacy
Name: Brendan 'Sweet Cheeks' Shields-Shimizu Send Message

Network: USC '07 Poke Him!
Residence: Delta Chi 112 View Friends
Field: Theatre
View Photos
Remove Friend
Name: Jeff Williams Send Message

Fresno, CA View Friends
Residence: Delta Chi PENTHOUSE
View Photos
Remove Friend
Name: Jessie Burr Send Message

Network: USC '07 Poke Her!
Residence: Ellendale View Friends
Fields: Health Promotion and Disease Prevention Studies
View Photos
French
Remove Friend
1 of 3 11/6/06 11:03 PM
Page 414
Name: Derek Wood Send Message
Fields: Political Science View Friends
Business Administration
Remove Friend
Name: Caitie Hannon Send Message

Residence: Alpha Chi Omega 23 View Friends
Fields: Musical Theatre
View Photos
French
Remove Friend
Name: Lizzy Friedman Send Message

Residence: Ellendale View Friends
Field: Business Administration
View Photos
Remove Friend
Name: Craig Schinnerer Send Message

Field: International Relations View Friends
View Photos
Remove Friend
Name: Paige Reilly Send Message

Fields: American Studies and Ethnicity View Friends
Music Industry
View Photos
Remove Friend
Name: Brian Dawson Send Message

Residence: Delta Chi View Friends
View Photos
Remove Friend
I'll find something to put here.
2 of 3 11/6/06 11:03 PM
Page 415
1 2 3 4 5 6 7 next

Facebook © 2006
3 of 3 11/6/06 11:03 PM
Facebook | Group Members http://usc.facebook.com/s.php?k=20004&id=2215093058&s=10
Page 416
Group Members
Search
My Profile edit
My Friends
All 61 Members 4 Officers 1 Admin 45 Haven't Replied prev 1 2 3 4 5 6 7 next
My Photos
My Shares
My Notes Name: Liz Fischbeck Send Message
Networks: USC '06 Poke Liz!
My Groups
The Virtual Tourist View Friends
My Events Los Angeles, CA
Residence: MARDIGRAS
Fields: Spanish
My Privacy Psychology
Name: John Murphy Send Message

Residence: 30th St. View Friends
Field: Finance
View Photos
Remove Friend
Name: Paul Loeb Send Message

Los Angeles, CA View Friends
Residence: Delta Chi THEPAD#3
View Photos
Fields: Business Administration
Remove Friend
Music Industry
Officer Title: Advisor
Name: Megan Ramer Send Message

Residence: Delta Gamma View Friends
View Photos
Remove Friend
Name: Ashley Hinrichsen Send Message

Residence: Alpha Phi TEXASROOM View Friends
View Photos
Forensics and Criminality
Remove Friend
Name: Jessica Turpin Send Message

Residence: Ellendale #209 View Friends
Fields: Creative Writing
View Photos
Art History
Remove Friend
1 of 2 11/6/06 11:03 PM
Page 417
Name: Max Shapiro Send Message
View Photos
Remove Friend
Name: James Turnwall Send Message

Fields: Philosophy View Friends
Economics
View Photos
Remove Friend
Name: Kristen Farugia Send Message

Residence: The Tower APT#12 View Friends
View Photos
Remove Friend
Name: Emily Cook Send Message

Residence: Alpha Chi Omega THREESOME View Friends
Field: Communication
View Photos
Remove Friend
I'll find something to put here. prev 1 2 3 4 5 6 7 next

Facebook © 2006
2 of 2 11/6/06 11:03 PM
Page 418
Group Members
Search
My Profile edit
My Friends
My Photos
My Shares
My Notes Name: Cosmonaut Paul Giuliano Send Message
My Groups
National Aeronautics and Space Administration (NASA) View Friends
My Events Los Angeles, CA
Fields: Astronautical Engineering
Italian
My Privacy
Name: Brittany Burton Send Message

Networks: USC '08 Poke Her!
Anchorage, AK View Friends
Residence: Delta Delta Delta
View Photos
Field: Public Relations
Remove Friend
Name: Michael Marzouk Send Message

Residence: Theta Xi HAREM View Friends
Fields: Accounting
View Photos
Remove Friend
Name: Corey Hall Send Message

Fields: Business Administration View Friends
East Asian Languages and Cultures
View Photos
Remove Friend
1 of 3 11/6/06 11:04 PM
Page 419
Name: Matt Worchesek Send Message
Networks: USC Alum '06 Poke Him!
UC Hastings Grad Student View Friends
Residence: Delta Chi 202
View Photos
Remove Friend
Name: Ross Franken Send Message

Field: Aerospace Engineering View Friends
View Photos
Remove Friend
Name: Jimbo Bohan Send Message

Fields: Accounting
View Photos
Remove Friend
Name: Mano Camatsos Send Message

Fields: Philosophy View Friends
Public Policy and Management
View Photos
Remove Friend
Name: Ben Teresi Send Message

Officer Title: Secretary
View Photos
Remove Friend
Name: Travis van der Bell Send Message

Residence: Delta Chi BEERCLOSET View Friends
View Photos
Classics
Remove Friend
Officer Title: Vice President
I'll find something to put here.
2 of 3 11/6/06 11:04 PM
Page 420
prev 1 2 3 4 5 6 7 next

Facebook © 2006
3 of 3 11/6/06 11:04 PM
Page 421
Group Members
Search
My Profile edit
My Friends
My Photos
My Shares
My Notes Name: Sam Plimpton Send Message
My Groups
Fields: Communication View Friends
My Events Music Industry
My Messages Remove Friend
My Account
My Privacy Name: Esther Shpak Send Message
Russian
View Photos
Remove Friend
Name: Andrew Skotzko Send Message

Residence: Delta Chi 207
View Photos
Fields: Entrepreneurship
Remove Friend
Music
Name: Jimmy Danella Send Message

Network: USC Alum '05 Poke Him!
Field: Mechanical Engineering View Friends
View Photos
Remove Friend
Name: Tommy Braunschweiler Send Message

Residence: Delta Chi PENTHOUSE View Friends
Fields: Biological Sciences
View Photos
International Relations
Remove Friend
1 of 2 11/6/06 11:05 PM
Page 422
Name: Brian Abraham Send Message
Field: Computer Engineering & Computer Science
View Photos
Remove Friend
Name: Mark Meehan Send Message

Copenhagen Business '06 View Friends
Orange County, CA
View Photos
Residence: Delta Chi
Remove Friend
Name: Geoff Larson Send Message

Field: Mechanical Engineering
View Photos
Remove Friend
Name: Russell Holm Send Message

Residence: Delta Chi 209.HOLE
View Photos
Fields: International Relations
Remove Friend
Political Science
Name: Brad Stone Send Message

View Photos
Remove Friend

Facebook © 2006
2 of 2 11/6/06 11:05 PM
Page 423
Group Members
Search
My Profile edit
My Friends
My Photos
My Shares
My Notes Name: Nick Tarzan Turner Send Message
My Groups
My Events Residence: Delta Chi 118
Field: Writing for Screen and Television
My Privacy
Name: Sam Bakke Send Message
Theatre
View Photos
Remove Friend
Name: Amy McWethy Send Message

Bakersfield, CA View Friends
Residence: Alpha Chi Omega THESTUDY
View Photos
Remove Friend
Name: Matt Stephens Send Message

Orange County, CA View Friends
Residence: Delta Chi
View Photos
Fields: facebook
Remove Friend
Tuba
Name: Kevin Chang Send Message

Residence: Webb Tower 903 View Friends
View Photos
Remove Friend
Name: Stan Holt Send Message

Residence: Founders View Friends
Fields: PPD
View Photos
Psychology
Remove Friend
Name: Paras Desai Send Message

Residence: Trojandale 1 View Friends
Fields: International Relations
View Photos
Political Science
Remove Friend
Name: Vic Lakhani Send Message

Fields: Economics View Friends
View Photos
Remove Friend
1 of 2 11/6/06 11:05 PM
Page 424
Name: Joe Neuhaus Send Message
Networks: USC Alum '05 Poke Him!
Field: Theatre
View Photos
Remove Friend
Name: Max Doyle Send Message

Blair Academy '06 View Friends
Residence: Century
View Photos
Field: International Relations (Global Business)
Remove Friend

Facebook © 2006
2 of 2 11/6/06 11:05 PM
Page 425
Group Members
Search
My Profile edit
My Friends
My Photos
My Shares
My Notes Name: Alex Fine Send Message
My Groups
Residence: Pardee Tower View Friends
My Events Field: Theatre
My Privacy
Name: Spencer Matthews Send Message

Residence: Pardee Tower 105
View Friends
Field: Theatre
View Photos
Remove Friend
Name: Rachna Patel Send Message

The Walt Disney Company Add to Friends
Los Angeles, CA
Psychology
Name: Whitney Bossin Send Message

Residence: 30th St. COURT View Friends
Fields: Communication
View Photos
Add to Friends
1 of 2 11/6/06 11:05 PM
Page 426
Name: Keith vanden Parker View Profile
Networks: USC '07 View Photos
Greece
Residence: Delta Chi PENTHOUSE
Fields: Business Administration with Global Business
Officer Title: President
Name: Joe Thompson Send Message

Orange County, CA View Friends
Residence: Ellendale
View Photos
Fields: Building Science
Add to Friends
Civil Engineering
Name: Jordan Siperstein Send Message

Residence: Troy Hall East View Friends
Field: Astronautical Engineering
View Photos
Add to Friends
Name: Kevin Corbett Send Message

Field: Business Administration View Friends
View Photos
Add to Friends
Name: Brian Reaper Hageman Send Message

Residence: Tuscany 202 View Friends
Fields: Astronautical Engineering
View Photos
Dance
Add to Friends
Name: Holly Marie Send Message

Fields: Broadcast Journalism View Friends
Add to Friends

Facebook © 2006
2 of 2 11/6/06 11:05 PM
Page 427
Group Members
Search
My Profile edit
My Friends
All 61 Members 4 Officers 1 Admin 45 Haven't Replied prev 1 2 3 4 5 6 7
My Photos
My Shares
My Notes Name: Holly Marie Send Message
My Groups
Fields: Broadcast Journalism View Friends
My Events International Relations
My Messages Add to Friends
My Account
My Privacy
I'll find something to put here. prev 1 2 3 4 5 6 7

Facebook © 2006
1 of 1 11/6/06 11:06 PM
Welcome 8/4/07 3:50 PM
OWEO: Website
Page 428
OWEO
Welcome to the USC OWEO Website

I hope that the information on this site is helpful to everybody interested in working
overseas during the summers of their undergraduate education at The University of
Southern California.
This is the website for the USC chapter of the Overseas Work Experience
Organization, which is an officially recognized USC group. USC OWEO was founded
in September 2006 by Keith Parker as a means of spreading knowledge to the USC
undergraduate student body about the benefits of traveling abroad for work during
summer breaks, as well as information about how one would go about doing this.
Meetings are held in the USC Philosophy building (or in the courtyard). Official
membership is open only to undergraduate students currently enrolled at USC, and is
free. Just send me an email or join the USC OWEO Facebook group and you'll be on
the official OWEO membership list and we’ll keep you up to date on everything that’s
happening.
Share on Facebook
file:///Users/Keith/Desktop/University%20Books/Groups/OWEO/Website/USC%20OWEO%20Online/Welcome.html Page 1 of 2

Welcome 8/4/07 3:50 PM
OWEO: Website
Page 429 Share on Facebook
Site Created by Keith Parker ©2006
file:///Users/Keith/Desktop/University%20Books/Groups/OWEO/Website/USC%20OWEO%20Online/Welcome.html Page 2 of 2

Introduction 8/4/07 3:50 PM
OWEO: Website
Page 430
Introduction to Working Overseas
“In today's business world,

knowledge of overseas working
practices is more important than
ever. The Overseas Work
Experience Organization is
dedicated to the dissemination
of knowledge about working
abroad as a step towards a more
successful career in any field.
The OWEO will provide
members with the valuable
information needed for finding
work overseas, as well as the
steps that should be taken for
getting the most out of an
overseas work experience.” Photo by Keith Parker
-Keith Parker
Many People Are Worried...
USC OWEO Officers ...that they need to first make all of their plans for
Keith Parker overseas work beforehand, without considering the
President and possibility of just flying out to a new country and
Founder finding work on arrival. First of all, if you are
looking for an office job or internship overseas, this
Travis Bell isn’t the group or the site for you. This group
Vice President advocates a work experience that is, in my opinion,
more culturally enlightening than that of most
Ben Teresi internships or office jobs overseas. This is not to say
Secretary
that these jobs are not beneficial, as professional-
If you have any questions oriented jobs do provide people with valuable work
about anything, feel free to experience. It just isn’t what this group is about. The
contact Keith by email by work that people in this group have found has been
clicking here focused mostly in the service industry, with low pay
Common Jobs: but much more contact with the local environment.
• Bartender For example, Travis, Ben and I all worked at a youth
• Waiter/ hostel called The Pink Palace in Greece during the
Waitress summer of 2006. Our daily jobs were focused on
• Hostel Work serving guests in a variety of ways during their stay
file:///Users/Keith/Desktop/University%20Books/Groups/OWEO/Website/USC%20OWEO%20Online/Introduction.html Page 1 of 2

Introduction 8/4/07 3:50 PM
OWEO: Website
Page 431 • Hostel Work serving guests in a variety of ways during their stay
• Teaching at the backpacker’s resort. This put us in contact
English with backpackers from all over the world and also
• Tour Guides gave us an insight into the business practices of a
• Pub Crawls Greek company at the Micro-level.
Many people find work similar to the aforementioned hostel job by buying tickets to a
location of interest for them, then finding a job on arrival. This has worked for a large
number of people. This shows that even if somebody hasn’t found a job overseas by the
time that summer rolls around, all is not lost. While this approach might not work for
everybody, it is usually very effective. Nonetheless, it is important to be very motivated
upon arrival to a new place in order to find a job. In my personal experience, I have
used this method in Italy, Greece, Maui and Thailand. I found a good job in each
country, but never at first. Everywhere I have gone, it has taken up to a week of
constant searching and persistence to find work. Every business I’ve worked for
overseas didn’t need new employees when I arrived; after approaching owners and
managers multiple times daily, I eventually was offered a position. Furthermore, finding
work on arrival often results in a more unique work experience than if a job was found
beforehand, as many jobs that are found on-location through word-of-mouth aren’t
posted anywhere online. For many, though, planning ahead is necessary to eliminate the
stress associated with finding work on arrival and the possibility that work just isn’t
available upon arrival.
In the Information page of this site there are many links that you may find helpful in
deciding on an area to look for work. There are also links to sites dedicated to securing
jobs in various locations before you even book your ticket. I hope you find these links
helpful and that you are successful in working abroad.
Cheers,
Keith Parker
file:///Users/Keith/Desktop/University%20Books/Groups/OWEO/Website/USC%20OWEO%20Online/Introduction.html Page 2 of 2

Resources 8/4/07 3:50 PM
OWEO: Website
Page 432
Resources for Finding Work Abroad
Photos: Left: The beach on Koh Phi Phi in Thailand by Keith Parker; RIght: Dr. George’s
‘Fire Dance’ at The Pink Palace in Κέρκυρα, Greece by David ‘Swede’ Zak
To Begin...
...It is important to know about the country you wish to visit. It wouldn’t be good
to arrive somewhere and find out that there was a recent extreme anti-American
outbreak. Looking for work in a place where the average wage rate in the service
industry is low enough that locals are hired for pennies an hour wouldn’t help either.
Furthermore, although English has become very widespread, it is important to make
sure that the place you are traveling to has a fair amount of English speakers if you
don’t speak the language. Overall, you want to make sure that the location you had in
mind is actually as appealing as you image it to be.
The US Department of State International Travel Site

This is a great site for basic travel information for
those who haven’t spent very much time overseas.
Among the many travel resources on this site are: Travel Warnings, Country Consular
Information Sheets, and Document Requirements for every recognized country in the
world.
file:///Users/Keith/Desktop/University%20Books/Groups/OWEO/Website/USC%20OWEO%20Online/Resources.html Page 1 of 5

OWEO: Website
Page 433
The Lonely Planet WorldGuide
A great resource for understanding what a country is all about. This
site contains photo galleries, cultural information, general resources,
and more.
Securing Work...
...For those looking to securing a job before heading out to your destination, there
are many resources available to you, most of which provide a means for finding work
in a specific region. Here are a few to get you started.
Lonely Planet’s i-to-i

Everyone always dreams of the glamorous life, working abroad. i-to-i are all
about enabling that in a feel-good way, and this time they're offering 15% off
TEFL online courses - teach English abroad and earn while you travel!
Student Traveler
This site offers some good places to start when looking for places to
teach, work, or study abroad. Lists aren’t very extensive, but the
businesses on the list offer many jobs and are very informative and reliable.
Transitions Abroad
Offers a wide variety of resources including job offerings and the best
places to look for work. Information on this site might be a little
overwhelming, but hidden in all of it are many valuable resources.
Backpacker’s Job Search

Currently this site focuses on job opportunities in Australia and New
Zealand, though the site plans to expand and include opportunities
worldwide.
Backpacker Board New Zealand

This site hosts a extensive list of jobs in New Zealand, as well as
information on obtaining a Working Holiday Visa for New Zealand.
Bug Europe
Includes information about working in different European Countries, as well
as links to job listings for many of these countries.
On Your Own...

OWEO: Website
Page 434
...Stories about backpackers’ experiences overseas. You’ll be able to find some stories
about working abroad on some of these sites, but many of them are simply about
backpacking. Inspiration or just enjoyable reading.
The Backpacker
Backpacking and travel stories from around the world. Also on the site
are reviews for travel services, hostels, and ratings for bars and different
beers submitted by travelers. Great travel guides and backpacking articles.
Wise Nomad
Backpacking stories and general discussions about traveling and the
backpacking culture. Blogs, area-specific travel stories and advice
written by travelers.
Lonely Planet: The Thorn Tree

A very large discussion board for stories and information on
everything about backpacking around the world.
Books...
...Here are a few books about traveling I would recommend. Some of these books
are more informative, while others are entertaining and inspiring. I hope these
recommendations help you in your overseas work experience.
Delaying The Real World by Colleen Kinder

For the new college graduate who's not quite ready to join
the ranks of the entry-level, here's a guide to help them
"think outside the cubicle" as it presents a wide range of job
and travel opportunities for the free-spirited
twentysomething who yearns to create a long- or short-
term adventure. By highlighting job opportunities
appropriate for young people because of the time, energy,
and commitment (or lack thereof) involved, this is
specifically targeted to the post-college crowd.

OWEO: Website
Page 435
The Global Citizen by Elizabeth Kruempelmann
If your dreams of career success include jobs in Prague or
Munich, if you want to learn Mandarin while living in China,
or if your travel plans always require a passport, then The
Global Citizen is for you. Written by Monster.com's former
international career mentor, Elizabeth Kruempelmann, The
Global Citizen is an international life and career planner that
walks you through the ins and outs of working, studying,
volunteering, or living in a foreign country.
The Back Door Guide to Short-Term Job

Adventures by Michael Landes
Summer jobbers, college grads, and anyone trying to
reinvigorate or redirect a stalled career needs a short-term
job adventure. Whether river guiding in Alaska, restoring a
medieval castle in the south of France, or creating a
successful organic farm, THE BACK DOOR GUIDE TO
SHORT-TERM JOB ADVENTURES offers a comprehensive
list of life-enriching experiences. From internships to
seasonal work to volunteer jobs and adventures abroad, this
best-of-the-best guide from short-term job expert Michael
Landes contains more than 1, 000 opportunities to work,
play, learn, help, create, experience, and grow worldwide.
Tales from Nowhere by Don George (Editor)

Lonely Planet's annual anthology contains 30 thrilling and bizarre
stories. In some of them, the authors intentionally traveled to
"Nowhere" but experience unintended consequences. In others, the
writers stumbled on "Nowhere" by accident and recounted the
adventures that ensued.
The Art of Travel by Alain de Botten

An experienced traveler and the author of five books, including
How Proust Can Change Your Life, De Botton here offers nine
essays concerning the art of travel. Divided into five sections
"Departure," "Motives," "Landscape," "Art," and "Return" the
essays start with one of the author's travel experiences,
meander through artists or writers related to it, and then
intertwine the two.

OWEO: Website
Page 436
Work Your Way Around the World by Susan Griffith
This guide for the working traveler explains how to find
temporary work around the world, not only in advance, but
also when on the spot while traveling. It incorporates
hundreds of first-hand accounts from people who have
actually done the jobs with the finest hard factual
information to offer authoritative advice on how to find
work. Work Your Way Around the World gives information
on all the main areas of temporary work including the
tourist industry, agriculture, teaching English, childcare, and
voluntary work, plus insiders' information on how to work a
passage or to earn money by using your initiative when you
spot a local opportunity.
The Best of Keith’s Travel Photography by Keith

Parker
This is a collection of my travel photos over the years, with
pictures of backpacking through Thailand, Indonesia,
Malaysia, Singapore, Greece, Italy, Spain, France, England,
The Netherlands, Germany, Czech Republic, Slovakia,
Hungary, and Maui. There’s also a few photos from
California and Alaska.

World Map 8/4/07 3:51 PM
OWEO: Website
Page 437
Google World Map
World Map
Use this map however you want. The Pink Palace’s Location is marked in Greece.
file:///Users/Keith/Desktop/University%20Books/Groups/OWEO/Website/USC%20OWEO%20Online/World%20Map.html Page 1 of 1

Photos 8/4/07 3:51 PM
OWEO: Website
Page 438
Photo Gallery
On this page are just a few of the photos taken by OWEO officers working
overseas at The Pink Palace in Κέρκυρα, Greece. Enjoy.
file:///Users/Keith/Desktop/University%20Books/Groups/OWEO/Website/USC%20OWEO%20Online/Photos.html Page 1 of 1

Movie 8/4/07 3:51 PM
OWEO: Website
Page 439
The Pink Palace, Κέρκυρα, Greece
As mentioned numerous times throughout this site, The Pink Palace is a hostel/resort in
Corfu Greece that serves the more adventurous European Backpackers. All three
officers in this group, Keith, Travis, and Ben, worked there. It was only after we spent a
summer there (Keith’s second summer there) that we decided to put this group
together. This is promotional clip for The Pink Palace made by the Europe’s Famous
Hostel’s website, just to give you an idea of the place that inspired this group.
file:///Users/Keith/Desktop/University%20Books/Groups/OWEO/Website/USC%20OWEO%20Online/Movie.html Page 1 of 2

Movie 8/4/07 3:51 PM
OWEO: Website
Page 440
file:///Users/Keith/Desktop/University%20Books/Groups/OWEO/Website/USC%20OWEO%20Online/Movie.html Page 2 of 2

University Notes - Senior Year, 1st Semester

Caricato da

Informazioni sul documento

Descrizione originale:

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

University Notes - Senior Year, 1st Semester

Caricato da

Copyright:

Formati disponibili

Table of Contents

Keith Parker’s Notes from USC

Senior Year, First Semester

BUAD-351: Economics for Business

IR-439: Political Economy of Eurasia

MRKT-465: Global Marketing Management

Instructor: Ken Robidoux

You are working in an increasingly complex world characterized by explosive growth in

Whether making a presentation, performing a communication audit, or creating and

Lehman/DuFrane. Business Communication. University of Southern California

BUAD 302 OBJECTIVES

Keith Parker, University of Southern California

Business Communication Strategy – Theory

Business Communication Strategy – Application

Keith Parker, University of Southern California

Listening/Respect for Colleagues

Keith Parker, University of Southern California

Oral Assignments Reminders

Written Assignment Reminders

Written Assignment Preparation

Keith Parker, University of Southern California

Career Planning and Placement Center Information Session

The Marshall School of Business grading policy is rather explicit:

In order to avoid substantial disparities across courses, instructors in the School of

• The grade on any individual assignment will be determined by its overall

Keith Parker, University of Southern California

A Working Definition of “A” Quality Work

Keith Parker, University of Southern California

Plagiarism is the unacknowledged and inappropriate use of the ideas or wording

To avoid having your writing marked by illegitimate assistance, ask yourself

Students with Disabilities: Any student requesting academic accommodations based on a

Retention of Graded Papers: Returned paperwork, unclaimed by a student, may be

Class Cancellation: Only official notices written on Management Communication

Keith Parker, University of Southern California

Assignments & Special Activities* Date

Career Center Orientation Wednesday 9/6

Presentation # 1 (ELC) Monday - 9/11

Mock Interview (takes place on Saturday/Sunday) 9/23-24; 9/30-31

ELC – Hi-Fly Wednesday 9/27

Résumé Monday - 10/2

Presentation # 2 (ELC) Monday - 10/16

PowerPoint Training (HOH 401) Monday - 10/23

Presentation # 3 (ELC) Monday - 11/06

Q&A (ELC) Wednesday - 11/08

Presentation # 4 (ELC) Monday - 11/27

Keith Parker, University of Southern California

BUAD 302 – Fall 06 – Robidoux

• Select a topic of interest to you and the audience

Elements of an Effective Introduction

Techniques for gaining Audience Attention and Interest

Use Transitional Sign Posts

Elements of an Effective Summary

Keith Parker, University of Southern California

To: BUAD 302 Students

If you have any questions, please feel free to contact me at robidoux@marshall.usc.edu

Keith Parker, University of Southern California

To: BUAD 302 Students

DUE: Wednesday 10/18/06

Protocol for this Presentation

Keith Parker, University of Southern California

USC Student Government

Dear USC Student Government,

Keith Parker, Student