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The practice of selling a product in a foreign market at a price lower than what it commands in the producer’s domestic market is called dumping. Critics of free trade often argue that foreign governments give substantial support to their own exporting companies. Government support may permit these firms to extend their export markets by offering lower prices abroad. In retaliation for this kind of interference with free trade, the United States adds import tariffs to products that foreign firms dump on U.S. markets to bring their prices in line with those of domestically produced products. That is the current situation in the U.S. steel industry. However, businesses often complain that charges of dumping must undergo a lengthy investigative and bureaucratic procedure before the government assesses import duties.
Some 9,000 U.S. apple growers in 30 states recently asked the U.S. Commerce Department to impose a penalty tariff of up to 90 percent on apple juice concentrate from China. They hoped to stop the unfair Chinese practice of selling concentrate in the U.S. market at prices below the cost of production or the home market price. Not only did the number of shipments of concentrate rise from 1 percent to 18 percent of the total U.S. market, the price of the imported concentrate fell more than half. U.S. marketers were forced to cut their prices by 50 percent to meet competition. With the U.S. economy growing and so many foreign countries in recessionary periods, many domestic industries will continue to see increased foreign competition and a decline in domestic market share.
U.S. firms that claim dumping threatens to hurt their business can file a complaint with the U.S. International Trade Commission (ITC). Between 1990 and 1995, nearly 300 cases were filed. If the ITC agrees, it can assess fines that, in theory, equalize the price for the goods in question. The ITC rejected about half of the claims filed.
The United States has long been the champion of free trade throughout the world, but recently with shrinking economies of industrialized foreign nations and a growing number of developing countries that are struggling to stabilize their economies, U.S. legislators have been pressured to protect domestic industries from troubles abroad. But protecting business at home typically penalizes consumers since prices typically rise under protectionist regulations. For example, the United States recently slapped a 30 percent import tax on frozen orange juice concentrate; duties on imported glassware, porcelain, and china as high as 38 percent; rubber boots and shoes, 20 percent; luggage, 16 percent; and canned tuna, 12.5 percent. While this may or may not create a competitive environment for domestic producers, it seldom reduces product prices for the consumer.
Tariffs can be classified as either revenue or protective tariffs. Revenue tariffs are designed to raise funds for the importing government. Most early U.S. government revenue came from this source. Protective tariff, which are usually higher than revenue tariffs, are designed to raise the retail price of an imported product to match or exceed that of a similar domestic product. Some
countries use tariffs in a selective manner to discourage certain consumption practices and thereby reduce access to their local markets. For example, the United States has tariff on luxury items like Rolex watches and Russian caviar.
In the past, it was believed that a country should protect its infant industries by using tariffs to keep out foreign- made products. Some foreign goods did enter, but high tariffs made domestic products competitive in price. Recently, it has been argued that tariffs should be raised to protect employment and profits in domestic U.S. industries. For example, the U.S. steel industry has been unsuccessful in lobbying the government to protect domestic steel producers by imposing tariffs on the rising number of imports of low-quality steel into the United States. Weak currencies in Japan, Brazil, South Korea, and Russia have stifled demand for steel in these countries, while the strong dollar in the United States has increased demand for construction materials of all kinds, especially steel. When foreign steel started arriving in the U.S. market at $50 a ton less than domestic steel, the U.S. steel industry cried for protection. But U.S. policy makers have backed away—at least temporarily—as they consider the impact of such tariffs on the current global recession.34
In 1988, the United States passed the Omnibus Trade and Competitiveness Act to remedy what it perceived as unfair international trade conditions. Under the so-called Super 301 provisions of the law, the United States can now single out countries that unfairly impede trade with U.S. domestic businesses. If these countries do not open their markets within 18 months, the law requires retaliation in the form of U.S. tariffs or quotas on the offenders’ imports into this country.
Some nations limit foreign ownership in the business sectors. In the United States, for example, non-U.S. citizens cannot own more than 25 percent of the voting stock in a U.S-based airline; they cannot hold controlling interest in a U.S. television station or network; nor can they fish for mackerel—the only fish in surplus in U.S. waters.35
Tariffs also can be used to gain bargaining clout with other countries, but they risk adversely affecting the fortunes of domestic companies. For example, Australia and New Zealand, two of the world’s largest producers of lamb exports (primarily wool), were outraged when the U.S. International Trade Commission (ITC) placed tariffs up to 40 percent on lamb imports to protect U.S. sheep producers. The ITC ruled that lamb imports were “a substantial cause of threat of serious injury” to the domestic sheep industry. The decision did not make prices any more competitive; instead, it merely reduced the amount of lamb products the United States imports. Even more serious is that the decision undercut the Clinton administration’s efforts to get other countries to open their markets. Although some import relief had been expected, it was never expected to be so severely protectionist.36
In recent years, scores of trading nations have agreed to abolish tariffs on 500 high technology products such as computers, software, calculators, fax machines, and related goods. Elimination of such tariffs means as much as $100 million in annual savings to communication giants like IBM.
The social-cultural context often exerts a more pronounced influence on marketing decision making in the international sphere than in the domestic arena. Learning about cultural and societal differences among countries is paramount to a firm’s success abroad. Marketing strategies that work in the United States often fail when directly applied in other countries. In many cases, marketers must redesign packages and modify products and advertising messages to suit the tastes and preferences of different cultures.
Even a seemingly simple marketing strategy, like that for Ben & Jerry’s Homemade, Inc. in the United Kingdom may yield surprising results. in the U.S. market, the premium ice-cream company implemented an unconventional, limited-marketing strategy and a business philosophy of “caring capitalism.” Its genuine image; all-natural, high-quality product; playful attitude; social consciousness;
and low-key founders appealed to the American public. This approach, however, did not travel well across the Atlantic. Haagen-Dazs preceded Ben & Jerry’s by five years in the U.K. market, effectively using high-profile advertising to promote the brand as the ultimate super-premium ice cream. Although Ben & Jerry’s marketers hoped to capitalize on their U.S. counterculture image, they discovered that British consumers were largely unaware of their existence. This problem was compounded by their late arrival in the British Isles. The firm originally had planned an inexpensive product launch, but it found itself funding a high-priced venture based on product sampling to improve brand awareness. Costs increased further when the company had to expand the number of “scoop shops” and “scoop carts” dispensing Ben & Jerry’s ice cream to British buyers.
As a nation, the United States is becoming older and more affluent. The birthrate is falling, and subculture populations are rising. People express concerns about the environment, buying ecologically friendly products that reduce pollution. They value the time at home with family and friends, watching videos and eating microwavable snacks. These types of events help to shape marketings’ social-cultural environment—the relationship between marketing and society and its culture.
Marketers must cultivate sensitivity to society’s changing values and demographic shifts such as population growth and age distribution changes. These changing variables affect consumers’ reactions to different products and marketing practices. For example, people are more health conscious today than they were a generation ago. They watch their diets, eating more fruits and vegetables and limiting fat consumption. As a result, both food companies and restaurants have added low-fat or fat-free versions of many items. In fact, an entirely new line of frozen, meatless sandwiches and dinner entrees emerged to meet the demands of vegetarians and nutrition- conscious consumers. Gardenburgers, the first entrant in the meatless sandwich line, was launched with the support of a $12 million TV and print advertising campaign. BocaBurgers and Harvest Burgers now compete aggressively with Gardenburgers in their marketing efforts. Staying abreast of changing consumer tastes is a necessary task of new-product marketers. Says BocaBurger’s vicc president of marketing Kate Torres, 1Years ago, it was enough to just be on the shelves, and people who didn’t eat meat would come and find you. Today, that’s changing. More and more consumers are aware of healthy alternatives, but they need to be informed about brands.”25
Another social-cultural trend has raised the importance of cultural diversity. The United States is a mixed society composed of various submarkets, each with its unique values, cultural characteristics, consumer preferences, purchasing behaviors, and differences in age and place of residence. Some companies find it highly profitable to target these submarkets. Many firms have found success selling many different products, from ethnic foods to music, to small, well-defined groups of customers. Ford Motor Co., for example, recently spent $1 million on its first advertising campaign specifically targeting Hispanic consumers. The new campaign theme, which carries the headline, “I am not a stereotype,” appeared in popular Spanish-language magazines. Each version in the campaign features average Hispanic consumers talking about their collective identity and concerns, and what it means to be Hispanic. Ford marketers hope to connect with the heart of the Hispanic community by recognizing their unique heritage.
Creative marketers of products for the U.S. population of the 21st century must take into consideration all the segments of their market. G+.J USA Publishing targets not just women, but women in various life stages with magazines such as those shown in Figure 2. 11 that are edited specifically for teens, active women, expecting and new moms, home enthusiasts, and household decision makers.