nf1208: we talk about marketing exchange [1.1] and [0.4] we start off with the 
fact that you can trade products or services [0.6] for money [0.3] or some 
other kind of exchange so not all marketing is about commercial things [0.7] 
there are for example marketing initiatives of various charities [0.5] the 
marketing [0.2] of various religions the marketing of other institutions [0.4] 
and what happens in that case [0.5] if it's a charity marketing to you [0.4] 
the exchange that [0.2] they are doing is that [1.7] basically they're 
receiving money [0.2] from you for charitable purposes what you get back in 
that kind of exchange is something different it's a feel-good factor it's [0.3] 
feeling that you've supported your your nominated charity or whatever [0.4] so 
it's not always just [0.3] products and services [0.3] for money [0.7] although 
quite often what we're talking about is commercial exchange [2.1] but when you 
look at a marketing textbook you quite often see a diagram that looks like that 
[0.8] and it's got [1.4] those kind 
of arrows but it almost infers that this is a one-off [0.6] kind of exchange [1.
0] yeah what i've just been talking in market analysis to various people about 
is the fact that [0.4] there are very few businesses [0.3] where we're actually 
talking about [0.4] something which can happen only once [1.5] in fact [0.2] i 
don't know if anybody's just been in the the last lecture has anybody think of 
any example of a business [0.5] where it [0.2] only needs to happen once [10.2] 
right you haven't come up with the one that we we normally get sommit-, 
somebody's just given me the the classic which is [0.2] funerals [1.2] which is 
you know [0.3] you sell it once and it doesn't matter if the person comes back 
to you [0.4] of course the the answer to this is [0.4] who's the customer [1.8] 
you know the the family of of the person who died [0.3] and hopefully [0.6] 
you're not unfortunate enough to loove more lose more than one member of your 
family but i-, but if [0.4] somebody else dies in the future you've been happy 
with the funeral director you may go back to them and er 
and if not you'd go to somebody else [0.3] so there's virtually no business 
when we're talking about one-off exchange [0.4] almost always [0.3] we're 
talking about [0.4] dealing with somebody repeat business [0.6] so the firms [0.
3] want to build up an ongoing relationship with you [0.4] that's what all of 
branding is about [0.4] so when we say that you're building up [0.2] 
identifiable brands with a set of values that you associate with them and so on 
it's all about people being able to [0.5] identify with a set of brand values 
[0.4] hopefully that they will become loyal to and will go back to time and 
time again [0.3] the reason for that is obviously that the [0.4] the costs 
involved in communicating with somebody and persuading them to buy your product 
the first time [0.9] are much higher [0.3] than for repeat business [0.5] so if 
you go back to buyer behaviour [0.2] h-, how many of you have done buyer 
behaviour [2.7] no oh well you don't go back to buyer behaviour then [0.3] how 
many have done market analysis [1.1] okay you'll have done some buyer 
behaviour in there [0.2] you've done enough for our purposes [0.7] in buyer 
behaviour [1.2] if you remember you've got various types of buying decision [0.
3] you've got habitual ones you've got complex decisions [0.5] in industrial 
buying behaviour [0.4] and this is where a lot of the the marketing 
relationship stuff comes from [0.6] you have [1.4] complex [0.2] new purchase 
decisions [0.7] and you have rebuys [0.3] you remember you have a straight 
rebuy and you have a modified rebuy [0.3] the straight rebuy i-, is the 
simplest of all [0.3] because once you'd you've [0.3] got the purchasing in 
place you've gone through this process of deciding what to buy you've looked at 
the specifications you've got the purchasing in place [0.7] the likelihood is 
[0.5] that you just go through the process over and over again then to buy it 
[0.8] so it becomes much simpler [0.6] it becomes less expensive for the firm 
involved to communicate [0.4] what the benefits of the product are [0.4] why 
you should buy it and so on because you've already gone through that process 
you're just [0.4] turning the handle 
on it again [0.6] so [0.4] the repeat [0.2] part of marketing [0.4] the 
continued exchange the continued purchase [0.4] is actually the one where the 
firms [0.2] start to gain back some of the profits some of the benefits [0.3] 
of having you persuaded [0.4] persuaded you to buy their product or service [0.
8] a one-off [0.2] sale [0.9] is good to create trial to get you interested to 
to make you aware of the benefits [0.4] but actually doesn't deliver as much of 
the return to the firm [1.0] but that's how it tends to be depicted in the in 
the marketing textbooks [0.3] it looks like we're s-, talking about a one-off 
static exchange [0.5] and we're not we're largely talking about relationships 
[0.7] if you take that a stage further and say [0.6] let's think about [0.3] 
international marketing relationships [0.3] what does it do for our view of the 
environment and of those other things that we were talking about last week [2.
5] we find that it all starts to look somewhat different [7.6] in any marketing 
or 
strategy textbook you're going to find a diagram that looks something like this 
[1.7] Kotler [0.5] has come up with this [1.3] split into macroenvironment [0.
3] proximate environment that's the the middle circle [0.4] and the inside 
circle which is the firm and the channel intermediaries [1.5] that's called the 
the micro [0.2] environment [1.1] Porter's done something similar looking at 
all the various stakeholders [0.5] out there in the market who have an 
influence on the firm [0.6] typically we use this kind of diagram to say [0.3] 
those external things in the outer [0.2] ring or or square or whatever it is [0.
3] political physical economic legal technological sociocultural [0.4] the 
basis of pest analysis [0.7] which you have you should have come across [2.1] 
anybody looking recognizing at this stage yes [0.9] so you you you monitor the 
political economic legal technological social [0.5] changes in the en-, in the 
environment [0.4] what influences there are [0.5] those things [0.4] create the 
opportunities and threats for the business so those external things create the 
opportunities and threats [1.5] which [0.4] depending on the microenvironment 
the firm and its channels [0.3] and what strengths and weaknesses it has there 
it may or may not be able to exploit [0.3] so it may or may not [0.3] be able 
to capitalize on an opportunity [0.3] depending on what the capabilities of the 
firm are [3.9] so we start off [0.3] with the outer ring the the the pest 
analysis the macro level [0.6] and quite often in a stakeholder analysis of the 
firm [1.0] we tend to view that as being uncontrollable [0.2] so those are just 
things out there in the environment which change [0.6] and which the firm has 
relatively little control over [2.5] the middle level [2.7] according to 
classic industrial economics Porter's type view [1.6] the competitors [0.5] 
there's some kind of relationship with [0.4] so a firm may be reacting to what 
its competitors have done [0.3] or it may be trying to pre-empt its competitors 
[0.5] we spoke last week about firms going into places like Eastern Europe [1.
0] and we looked at Nestlé [0.4] who were prepared to cut the prices on 
Nescafé [0.3] so that 
they could actually get into the market faster [0.7] and gain the best 
distribution channels get their brand known [0.7] all of those kind of moves 
were done to pre-empt their competitors so they wanted to get the first mover 
advantage [1.5] you talk of various other firms [0.5] er i was talking to 
Rothmans [0.2] Tobacco [0.5] about their approach to Eastern Europe [0.4] and 
they said well look we've got to accept that we're not as big as some of the 
players in this market we've got people like [0.5] Philip Morris we've got [0.
6] er British American Tobacco we've got R-J Reynolds with Camel and Marlboro 
and so on [0.6] er [0.3] those firms are much bigger than us [0.3] and so 
whilst they were going into the markets very early on [0.6] being first movers 
[0.3] trying to establish manufacturing joint ventures [0.2] something like 
Rothmans much smaller was saying well we're interested [0.4] we'd like to go 
into the market [0.5] but we're not [0.7] we're not [0.4] leaders [0.2] 
normally we're more cautious than that our approach is normally to react to 
what our competitors 
have done [1.5] and so [0.4] we're looking at what they're doing [0.4] and part 
of what makes that market attractive to us part of the market research we're 
taking into account [0.3] is the fact that if our competitors have found 
opportunities there [0.4] if they've decided it's worth manufacturing there [0.
3] that almost increases its attractiveness to us [0.4] because we add that to 
the information we've got about the market [0.3] and we say [0.6] it's 
obviously somewhere that's attractive to go because our larger rivals who we 
know are [0.6] more inclined to take risks have already done it [0.2] so it 
makes it attractive to us [0.9] so they in a sense were reacting to the 
competitors [0.6] but [0.3] there's some kind of [0.3] relationship there [0.6] 
and according to Porter and Kotler the only thing that the firm can really [0.
7] control [1.1] is itself [0.2] is the firm within the firm [0.5] although 
Kotler has actually put channels in there as well because he believes the 
relationship with the channels should be so cooperative [0.3] that it should be 
in the the 
central part of it [1.6] so that if you like is the traditional or the classic 
marketing [0.3] strategy view of the environment and the stakeholders in it [1.
7] but there are different views [0.6] which come from different origins [0.5] 
because that view [1.2] is one that's based on the economics [0.9] perspective 
which says that [0.3] we're operating in this very competitive environment and 
it's what we call a zero-sum environment [0.5] how many people have have come 
across zero-sum before [1.8] no [1.2] zero-sum [0.5] is basically [3.2] the 
view that says [0.4] you can only gain at somebody's expense [1.3] so [0.5] if 
our firm is going to gain [1.0] an advantage in a market [1.7] say we call that 
plus-one [12.9] so firm A [2.8] say firm A is is Nestlé we've just been 
talking about them and firm A decides to go into Poland [4.8] and it gains er a 
first mover advantage over its competitors say firm B is [1.3] i don't 
know Procter and Gamble or or one of its rival firms [0.6] it can only do that 
[0.4] at the expense of [0.2] of firm B [1.0] that's a zero f-, sum view 
because plus-one-minus-one [1.3] equals zero [0.9] so zero-sum [0.4] one firm 
can only gain at the expense of the other [1.0] the opposite view to that [1.9] 
and that's zero-sum [3.7] is win-win [5.5] win-win [1.6] says that both firm A 
and firm B can gain [0.8] they can both benefit at the same time [0.5] under 
certain circumstances [0.6] the circumstances in which both firms could gain 
would be [0.6] if they have complementary capabilities of some sort [0.7] so 
for example [1.5] in international marketing terms [0.4] if one of the firms [0.
3] has got [0.5] access to some kind of scarce resource [1.3] that the other 
one hasn't [0.5] and the scarce resource [0.9] which as the economists call 
scarce resource [0.5] in international marketing quite often is local market 
knowledge and information [1.0] so you imagine you're going into [0.5] Poland 
[0.4] or you're going into China or you're going into India and it's a market 
which is not your home market [1.0] you have a number of [0.3] problems that 
you're going to overcome [1.3] just knowing where to locate yourself [0.3] 
knowing [0.2] what the customers want knowing what kind of environmental issues 
there are that you ought to be taking into account what kind of threats there 
are for you what kind of opportunities exist [2.3] then the firm [0.6] going 
into the market for the first time is relatively unlikely [0.3] for example to 
understand the culture to speak the language to have enough people who it could 
send out to the market to to set up its operation [0.6] how does it go about 
doing market research [0.4] is it going to use a local agency and if so which 
one [0.5] er what kind of questions are you going to be asking in the market 
you may not even have enough information to know where to start [0.5] if you 
talk to some of the firms back to Rothmans again [0.4] about going into Eastern 
Europe [1.1] they said when they very first started looking at Eastern Europe 
they knew that 
there was potential [0.7] because [0.5] basically they'd started receiving 
orders [0.2] so [0.2] they were being very reactive they got [0.2] unsolicited 
orders [0.4] from Poland for large quantities of cigarettes [0.4] and they 
realized that those markets were actually amongst [0.6] the few remaining 
attractive markets [0.2] in the world [0.4] for tobacco manufacturers [0.5] 
because [0.2] smoking is declining [0.3] in in most countries [0.2] but in 
Eastern Europe [0.8] not only was there a lot of potential because there 
weren't that many Western brands there [0.4] but peop-, [0.2] there were more 
people [0.6] smoking as time went on [0.5] so that for them was was a major 
opportunity [1.0] but they didn't know anything about it [0.5] they had to even 
go out and buy maps [0.5] to work out where the new boundary i mean there m-, i 
know that sounds crazy but we're we're talking about [0.8] nineteen-ninety [0.
7] and in nineteen-ninety nineteen-eighty-nine ninety [0.5] the geographic map 
[0.5] of [0.6] Eastern and central Europe was changing fairly rapidly [0.4] in 
fact i remember that i was trying to [0.2] print off a 
map of where the boundaries were [0.3] and look at which markets firms were 
investing in and looking at the opportunities [0.3] and i couldn't find in any 
graphics package [0.6] a map which had the right borders on [0.6] because most 
of them had got to the stage [0.4] by about nineteen-ninety-one if you got 
Harvard Graphics or Freelance or whatever [0.4] of having [0.3] central Europe 
right [0.4] so they largely had [1.5] well [0.4] they had Hungary and Poland 
right [0.4] they quite often had Czechoslovakia which since then had split up 
into Czech and and Slovak Republics [0.5] they didn't have all of former Soviet 
Union right if they had it [0.6] split down at all from from Soviet Union they 
had it named Commonwealth of Independent States which it was for a brief period 
of time [0.4] but they hadn't then broken it down to [0.5] Ukraine Belarus and 
all the other states which had come out of of the former Soviet empire [1.1] so 
it's very difficult to get any kind of accurate market information [0.5] firms 
like Rothmans were looking at the factors in the 
environment looking at that macroenvironment and saying [0.6] we don't really 
know where to start [0.3] in fact what they did was [0.3] having identi-, i 
mean they they did something quite straightforward which is to look at [0.8] 
location of the countries how far east they were and say well you know if we're 
going to progress even further east [0.4] which ones are the [0.3] stepping 
stones and which ones are the ultimate targets [0.4] and let's look at the 
level of opportunity versus risk in each of the markets [0.4] and what they did 
was they said that [0.4] [0.5] in terms of how far through the transition to 
market economy they were [0.6] it was clear that Czech Republic Hungary and 
Poland were in the first tier of markets which were [0.4] transforming [0.6] 
that they were privatizing that their [0.2] inflation rates were coming down 
and so on [1.3] that the further east you went [0.3] if you then went into 
Ukraine [0.3] it was a stage further behind [0.3] and if you then went into 
Russia [0.4] it was a stage further behind again not just in terms of the 
transformation process [0.4] but in terms of how much risk there was that that 
process would ever take place [1.0] the other side of the coin [0.4] if you 
said that [0.5] it got more uncertain as you went further east [0.4] i think 
i've got a map here to show you [3.8] show you what the market looked like [6.
6] so if you're going to look at a map of Eastern Europe they started off by 
saying [0.9] Czech Republic Poland and Hungary [1.1] on this side here were the 
[0.5] the the first markets that they may wish to get into [1.5] because they 
were in a sense nearer [0.2] geographically [0.6] because [0.3] they were 
further through the transformation process to market economy [0.5] the further 
east you got [0.4] through Ukraine Belarus [0.8] and into [0.6] we we've got it 
split here into European Russia and Asian Russia [0.2] because [0.4] there's 
some parts of Russia that actually fall in Europe there are some parts like 
Kazakhstan Azerbaijan which formally form into Asia [0.5] it's another 
complication [0.8] 
it was getting [0.4] less certain [0.7] but what's the other obvious thing you 
could say about those countries [1.5] just looking at that map [0.4] in terms 
of the opportuni-, opportunity for a consumer firm like a tobacco firm [2.2] so 
the risks go up as you get further east [1.3] what about the size of the 
markets [6.3] getting smaller getting bigger [0.3] 
sm1209: bigger [0.3] 
nf1208: bigger [0.3] a lot bigger [0.3] massively much bigger [0.7] so when you 
start off saying that [0.4] as a gateway [0.2] if you're trying to get 
experience into Eastern Europe [2.1] you'd start off looking at Hungary [0.6] 
and Czechoslovakia which were at the time the most advanced [0.4] they've got a 
[1.3] a population of something like ten-million each [0.5] Poland with a 
population of i think thirty-three-million [0.6] was [0.5] getting more 
interesting [0.2] for the consumer goods firms and for the tobacco firms 
because we're talking about how many people out of each of those markets [0.3] 
would be able to afford their brands anyhow so we're only talking about a 
proportion of the market [0.8] Ukraine [0.7] i think fifty-six 
fifty-seven-million [0.2] if i if i remember rightly [0.4] Russia [0.8] three-
billion-plus [0.9] so a lot more [0.5] so for all the consumer good firms [0.5] 
it was Russia that was the eventual target that's where they wanted to be [1.0] 
but the level of uncertainty [0.3] was higher [0.6] so what they wanted to do 
was to gain some experience in the markets that [0.9] were nearer at hand which 
were further through the process [0.3] and use that to get into [1.0] the 
Ukrainian market and then into the Russian market later [2.8] under this [2.8] 
zero-sum [0.2] view of the world [2.8] assessing the attractiveness of those 
markets was going to be about looking at [0.3] what was happening politically 
[0.6] so we've said that the pest analysis they'd be saying [0.5] er [0.9] in 
those cases very high political risk so [0.6] is this [0.7] transformation to 
market economy going to continue or not [0.6] i mean it looked very likely at 
various stages that the the the communists might get back into [0.5] 
Russia and still [0.2] looks possible that that they may do so [0.6] at one 
point [1.4] i'm trying to remember the sequence of years now [0.4] there was a 
leftist government voted back into Poland so whilst Poland had been going 
through the the process very well [0.6] they actually voted in a government who 
looked like they were going back more towards communism [0.9] so there were 
some question mark against [0.5] how far through the process Poland were going 
[1.1] in d-, under physical you'd be looking at things like we've said there [0.
4] the geography of it [0.3] er [0.2] where are the main centres of population 
if you were a consumer goods firm [1.4] are you going to be aining only for the 
cities or are you going to en-, aim for one region of somewhere like Russia i 
mean trying to get distribution of all of Russia at once is going to be a major 
task [0.3] probably you need to start off with some of the main centres of 
population [0.7] unless you can get things listed under the state distribution 
system where [0.5] 
they will then take control of getting it all out to the market because if 
you're trying to do it physically [0.5] that's a major thing [0.4] economic [1.
8] risks threats that we've we've mentioned are for example the inflation rates 
hyperinflation [0.4] Ukraine [0.4] in nineteen-ninety-three to nineteen-ninety-
four [0.4] had an inflation rate of seven-thousand-eight-hundred per cent per 
annum [1.9] which meant if you were dealing in a local economy [0.3] you had to 
change the prices of your products from one day to the next [0.4] which also 
meant [0.3] that the value of of wages for people in that market were going 
down in terms of what it actually meant in real terms [0.3] to the point where 
[0.3] a week's wages wouldn't buy you a loaf of bread it certainly wouldn't buy 
you sort of Western coffee brands [0.5] or or packets of Western cigarettes [1.
2] legally [1.5] the laws were changing so rapidly [0.2] so frequently [0.4] 
that they didn't [0.8] actually formally put out notices o-, [0.2] to 
businesses any more they just published the new [0.4] decreases they called 
them in in the 
n-, the newspapers [1.0] and you just had to monitor what was happening in the 
press oh the law on VAT has changed again today the law on on repatriating 
profits has changed again today [0.4] we're no longer allowed to export 
agricultural produce [0.5] one of the earliest entrants into Ukraine [0.3] was 
I-C-I [1.2] because of its interest in agrochemicals [0.5] and it had been very 
[0.3] proactive in setting up a joint venture with local pe-, Ukraine is very 
strong on agriculture [0.3] it was the [0.4] centre of agricultural production 
for most of the Soviet Union because it's very fertile [0.6] er [1.0] firms 
like I-C-I had been in fast thinking well agrochemicals and and and Ukraine 
have got to go together [0.4] and then the law changed to prevent them from 
exporting any of the produce out of [0.3] Ukraine [0.5] which really reduced 
the attractiveness of the market but they'd already invested [0.8] 
technologically [0.4] we've talked about that v-, very [0.4] poor [0.6] 
development or or expenditure in infrastructure over a period of time meant [0.
4] significant lags [0.3] but 
those are being caught up very fast [0.3] because the knowledge is there it was 
just the capital that wasn't [0.5] socioculturally [1.0] very ethnically split 
[0.4] in a lot of those markets [0.4] hence some of the problems we've seen 
with ethnic conflicts [1.4] once the process of of [0.6] taking away 
totalitarian control and breaking up to smaller units has [0.2] has started [1.
3] it's sort of [0.2] tempting for each subgroup w-, and each religious group 
to say [0.5] well actually we don't feel that we're even and this is what 
happened to Czechoslovakia [0.3] we don't even feel that we're necessarily one 
country maybe we feel that we're a Czech republic and a Slovakian republic 
separately [0.5] now in that case it was done [0.6] without [0.5] any major 
conflicts but in other markets you say well [0.2] if you're assessing 
opportunities and threats [1.2] has it all finished are we at the end point or 
are we still somewhere in the process look at what's happening now with [0.6] 
with the Kosovan rebels and and so on and Kosovo saying it's separate to Serbia 
[1.2] 
and you've got to say that [0.7] if you're looking at opportunities and threats 
socioculturally there are still quite a lot of [0.2] issues unresolved in that 
region [1.6] so the classic view would say [0.3] that's a stakeholder analysis 
and you split it down into opportunities and threats and say [0.4] do we or 
don't we go into that market [2.7] do we want to be in there before our 
competitors are we prepared to wait and see what they do [0.6] incidentally [0.
6] when we said [0.8] reacting to your competitors going into a market [0.3] 
and taking into account [0.7] the fact that they've got into the market and 
it's obviously viewed as attractive could be part of your market research [0.3] 
and it also has a name in economic theory so for anybody who [0.4] wants to 
trace this back [0.4] that's a classic case of oligopolistic reaction theory [0.
8] i know it sounds good [0.5] you know monopoly is is when you have [0.3] er 
it's a game yes [0.3] [laughter] but it's also when you have one firm who 
dominates a market [0.5] well oligopoly is when there's [0.6] a few strong 
firms who dopera-, [0.4] 
dominate a market [0.4] so in the food industry for example you've got Unilever 
[0.2] Procter and Gamble Nestlé [0.6] in er computing you would have [0.7] i 
don't know [1.5] 
sm1210: 
nf1208: certainly in the ninete-, late nineteen-eighties they've had I-C-I I-C-
L Digital [0.2] wor-, so you'd have a few strong players [0.4] in virtually all 
of the mature markets that you want to think about [0.3] there are some 
dominant players [1.1] and all of those firms in addition to looking at the [0.
7] opportunities and and threats in the market [0.3] are also looking at each 
other [0.8] and so when we say that they're they're likely to react you know 
one firm has gone into a market that makes it attractive [0.3] but it'll also 
be saying [0.4] what happens if we don't [0.7] that's back to one of the 
questions we posed last week [0.5] what happens [1.0] with the then big six 
accounting firms now big four [0.5] if [0.6] you don't enter the market when 
everybody else does [0.8] or is it the big four big five [2.3] 'cause Price 
Waterhouse Coopers have become one 
now [2.6] that [0.7] maybe your customers in that market will start trading 
with somebody else [0.4] maybe if your brand's not in the market [0.3] you 
won't build up share in that [0.2] in that country [1.6] an oligopolistic 
reaction theory says once the market leader [0.2] once the first firm in any 
given industry sector [0.3] with a few strong players in has gone in into the 
market [0.7] most of the others are likely to follow in very quickly [0.4] so 
there's likely to be one [0.5] person one firm who enter fast [0.6] and then 
the rest come in not long afterwards [0.6] so there is definitely a clustering 
effect that's happening in all of the markets [4.2] the different view [0.4] of 
all of this [0.4] the win-win view [0.4] says [1.5] maybe it's not just about 
reacting to or monitoring what's happening in that outer environment [0.3] 
maybe firms can actually strike up relationships [0.5] relationships [0.8] with 
their channels with their competitors with their publics their stakeholders [0.
5] political relationships legal relationships [0.4] so they can have 
relationships all around [0.4] 
that diagram [0.2] that's why there's an arrow [0.2] drawn on it because i've 
i've [1.6] demonstrated this before with the same slide [0.5] that you could 
for example [1.0] and this is based on [0.8] sociological roots not economic 
roots [0.4] say that [0.6] it's not as hard and fast as that [1.0] according to 
this diagram [0.4] there's a very firm border [0.3] a solid border round the 
firm [1.3] but accord-, according to some sociological theories [0.4] the 
border round the firm [0.5] isn't [1.0] a very definite thing [1.0] it's a 
fuzzy thing [0.3] there's a soft boundary between the firm [0.9] so that people 
within the firm the firm's made up with lots of different people [0.2] who 
might have lots of different views or lots of different interests [1.1] that 
they [0.4] will strike up different relationships so for example [0.6] you've 
got somebody in your warehouse you've got somebody in your marketing department 
you've got somebody in your production facility [0.3] who may have [0.5] very 
frequent contact [0.2] with their 
opposite numbers and one of your customers or one of your channel 
intermediaries [0.5] they f-, [0.4] then formed relationships which exist 
across the boundary of the firm [0.7] it might not just be one relationship it 
could be a whole lot of relationships which exist there [3.0] and at that point 
it becomes [0.4] very difficult to say where the actual [0.4] boundary the ou-, 
[0.2] the outer rim of the firm is what is it that you therefore control [0.6] 
according to this diagram you only control the firm [0.3] so what is it you 
actually control [0.4] and what is [0.4] outside [0.2] external to the firm [1.
4] what we're saying is [0.8] or what the normal view is that you only control 
[0.5] the ac-, the extent of your resources [0.9] Pfeffer and Salancik nineteen-
seventy-eight [0.3] if you want to go back to it [0.4] that you have [0.4] 
control [0.5] over the resources of the firm but [0.3] very little control 
outside of that [0.6] but you may have relationships outside of that not 
control but relationships [0.3] relationships 
with your channel [1.0] i've just been talking today to to the market analysis 
groups about [0.3] having cooperative relationships with your channels [0.6] 
cooperation in relationships is one of the key themes [0.5] of industrial 
marketing [0.6] it's one of the key themes of services marketing [0.5] it's one 
of the key themes of [1.2] various parts of strategy literature [0.3] so when 
we talked about win-win there [0.4] win-win has become the major [4.3] become 
the major focus for certain areas of marketing in recent years [1.5] 
relationship marketing industrial marketing services marketing [1.0] and [0.5] 
all of the [0.4] joint ventures strategic alliances literature [0.4] say that 
[0.4] it's not necessarily zero-sum you don't necessarily have to gain 
something at somebody's expense [0.7] you may both be able to cooperate 
together [0.3] some some people call it collaborate [0.4] to actually gain 
access to things that the other player doesn't have [0.5] so for example [0.4] 
the growth of strategic alliances we 
pointed to at the end of last week [0.4] in international markets [0.6] largely 
seems to be about the fact that when firms go into these uncertain [0.3] mega 
markets [0.7] that they [0.3] need to get access to all of that local [0.3] 
knowledge [0.6] people who speak the language people who know how it works 
people who can help them to understand the market [0.7] and that is a scarce 
resource [1.2] so if you look at it from the side of the [0.8] partners [0.2] 
in that kind of relationship [1.1] you're finding that [1.1] the local firm in 
the market [0.4] is getting [0.5] well what are they getting [0.3] if you've 
got a Western investing firm who is coming into the market [0.8] what is the 
local partner likely to gain from them [0.6] assuming they're not operating 
that internationally themselves [5.1] 
sm1211: the knowledge and experience [0.3] 
nf1208: yeah [0.7] they're going to gain [1.3] the knowledge of the partner of 
how to operate 
internationally which will benefit them long term if that's their ambition [1.
1] what about resources [0.3] 
sf1212: get er [0.2] technology is that 
nf1208: yes [0.8] yes so so they may have [1.3] i don't know superior 
production or superior technologies in some way [0.2] superior [0.6] research 
and development capability [0.7] anything else [3.4] 
sm1213: financing [0.2] 
nf1208: yeah [0.9] that's going to be one of the major ones because [0.7] quite 
often [0.2] the ability to expand internationally is constrained by not having 
[0.2] the money upfront to be able to do it so if you've got a partner who 
comes in who's got money [1.0] then that's opens up your opportunities [1.1] 
anything else [2.0] 
sm1214: reputation [0.8] 
nf1208: yes so you can you could gain strong brands [1.6] which may help you in 
the market [3.7] what about the side of the investing firm [0.7] the firm who's 
going into the market [0.6] we've mentioned [0.4] language 
cultural things what else might they gain by linking up with a local partner [1.
2] 
sf1215: distribution abroad [0.4] 
nf1208: yes [0.3] so [0.5] we we said that the the main problem may be 
distribution [0.6] but if the local partner already knows that or already has 
that established [0.8] certainly going to cut down the the time that it takes 
you get into [0.2] get into the market may improve your effectiveness [0.5] 
anything else [6.6] things like workforce [0.3] so they may have a set of 
production facilities already [1.0] and people who work there [0.4] and an 
understanding of what the H-R policies are in the market [1.4] and whether or 
not those are and we we talked about technology and brand reputation in there 
[0.3] maybe you may need to change some of those things a bit [0.3] to make 
sure that you're working to the level that you want to to [0.5] protect your 
brand reputation [0.3] maybe not maybe it's ahead of [0.4] of where you are [0.
8] er [1.3] but already [0.2] those 
facilities exist and that's likely to cut down the time of getting into the 
market [1.3] so we've sort of got our head around [0.2] interorganizational 
relationships as we call them cooperation between [0.4] two firms who maybe 
otherwise would be competing [0.4] but who have complementary capabilities [0.
4] and therefore can work together [0.9] as i say there's a lot of joint 
ventures alliances literature around that area [0.4] and one of the best 
articles if you want something to to read in that area [0.4] is [0.3] Gary 
Hamel [0.4] er [1.7] Hamel Prahalad and Doz nineteen-eighty-nine it's in 
Harvard Business Review [0.2] i think it's on your reading list and it's called 
Collaborate with Your Competitors and Win [0.6] and it's all about [0.6] in 
circumstances where two firms have complementary capabilities [0.7] then they 
could work together [0.4] fairly productively and you can think of all kinds of 
examples where that might happen [0.3] you've got a small firm with 
technological ideas [0.2] but no money [0.7] and a larger investing firm may 
link up with them to get [0.3] the 
ideas [0.4] er [0.3] and put money in in return [1.0] obviously all kinds of 
issues but there are complementary capabilities [2.0] we've talked [0.7] about 
channel intermediaries and we've talked about [1.0] being cooperative with your 
[0.9] intermediaries it's in both your best interests to get things effectively 
to the market to sell them effectively to [0.4] er understand each other's 
products and to work together well [1.0] industrial marketing [0.6] works along 
similar lines by saying [1.3] well let well let's go back those of you who've 
done market analysis what are the characteristics of industrial buyers [1.6] 
compared to consumer ones [2.4] 
sm1216: 
sf1217: [0.9] 
nf1208: bigger sorry [0.4] 
sf1217: more than one decision maker 
nf1208: yeah more than one decision maker larger [3.0] how many of them [1.1] 
sm1218: fewer [0.4] 
nf1208: so fewer [0.7] customers likely if you're talking about [0.5] final 
consumers you're talking 
about a very large number of customers [0.3] industrial you tend to be talking 
about [0.6] fewer [0.6] you tend to be talking about [0.7] more professional [0.
2] in that they might often go through a a formal process of [0.2] 
specifications and so on [0.4] as you say more people involved in the decision 
making unit [0.5] er [0.6] quite often more stages [0.2] involved in the 
process [2.3] therefore it's another one of the markets where we actually 
stress the benefits of long term relationships [0.4] and we've long said that 
you could work together quite closely with your industrial customers and 
develop cooperative relationships [1.5] i also mentioned relationship marketing 
[1.5] how many people have come across relationship marketing [2.0] no [0.5] 
it's one of the [0.8] latest sort of [0.6] themes and and and [0.9] topics 
that's coming out of the the marketing research [0.4] and also very much er in 
interest of of firms [0.4] because until recently [0.4] the only way in which 
you could have relationships that were that close [0.2] were with for example 
channels or with 
industrial customers [0.4] where there weren't many of them [0.4] because the 
amount of time and the amount of contact it took [0.3] meant that it wasn't 
possible to do that [0.2] for example with the consumer market because there 
were just too many customers [0.5] but advances in technology [0.6] database 
marketing for example knowing more about your customers through loyalty schemes 
[0.3] knowing who they are where they are what their interests are [0.5] has 
opened up [0.6] a whole set of [0.6] possibilities in terms of relationships 
which didn't previously exist so relationship marketing [0.8] means that [0.9] 
those benefits of cooperation [0.5] and building up long term loyalty [0.3] 
have actually transferred across from industrial markets and channels [0.4] to 
[0.3] consumer markets via technology [1.3] and the roots of relationship 
marketing are also in services marketing [0.2] which i mentioned [0.3] because 
services marketing if you remember the fact that [0.4] services tend to be [0.
7] well okay that's er that's another blast from the past [0.6] characteristics 
of services 
marketing compared to products [0.5] services are [1.6] 
sm1219: you can't store them [0.2] 
nf1208: you can't store them [1.0] 
sm1219: intangible 
nf1208: intangible yeah [2.3] what were the other two [0.6] [laugh] 
sm1219: [0.7] er er 
nf1208: heterogeneous yeah 
sm1219: 
nf1208: var-, variable 
sm1219: [0.4] 
nf1208: that's right that's that's that's the key one really so the [0.3] 
[sniff] [0.8] we've got the fact that they're [0.8] variable [0.5] so depending 
on whether the waiter in your restaurant has had a bad day or not [0.4] m-, the 
service may be different [0.7] we've got er [4.2] perishable [0.6] if you don't 
use your service [0.2] now if you don't sell a seat on your airline [0.3] today 
[0.3] you can't keep it in your warehouse and sell it next week it's a one-off 
opportunity and it may be gone that's why you get variable pricing of services 
[1.1] 
we've got [0.5] er [3.0] inseparable [0.7] and inseparable is the one that 
we're actually trying to get to here inseparable [0.9] is the fact that the 
service deliverer [1.2] is [2.0] the person who you're going to come into 
contact with quite often [0.4] so you can't sort of separate out the good [0.6] 
and sell it down through a channel [0.8] the service is delivered face to face 
quite often [0.7] so [0.5] what your perception of the service is in a 
restaurant is going to be very much down to er the quality of the waiters [0.3] 
waiter or waitresses in that restaurant [2.3] that becomes relevant [0.4] when 
you talk about relationship marketing [0.5] because [2.5] a lot of this 
relationship quality [0.3] is about [0.8] delivering value [0.7] delivering 
value in services is going to be sort of quite challenging because it is so 
variable because it is face to face [0.4] and you've got to come up with ways 
of delivering [0.4] the best quality [0.4] in that relationship in order to 
develop it long term [0.5] so the sorts of issues that come out there are [0.5] 
well okay [0.4] er [0.7] how do you build up long-standing 
relationships do you have to prioritize some parts of the service offer if you 
can't do everything well [0.6] do firms necessarily want all of the services or 
do they want to opt into some things or others or do they want to pay for the 
whole lot [0.3] so you get into [0.4] variable service offers a-, and all kinds 
of issues around that 
nf1208: the final demonstration of win-win or another demonstration of win-win 
that we're talking about today is international marketing [0.5] so we've had 
international marketing [0.9] having [8.6] i'll come back to explain some of 
the issues in here in a moment but let's just [0.4] go through the slide [5.9] 
we've had the interorganizational network [0.5] we've had [0.4] relationships 
with [1.5] other organizations so joint ventures and strategic alliances 
getting into markets [0.3] links with other businesses [0.6] and so for example 
[1.1] we've talked about [0.5] business to 
business services so the accounting firms and we've talked about firms going 
into Eastern Europe [0.3] and saying that [0.4] some of the multinational 
organizations who went in had very strong links to their [0.3] accounting firms 
their business suppliers [0.7] largely because they were so uncertain about 
what was happening legally and what else was happening in the market [1.4] 
interorganizational network could be other international firms therefore [0.3] 
it could be [0.4] firms in the local market [0.5] so local partners [0.4] and 
also [0.5] from that [0.3] Porter Kotler diagram we just saw it could be with 
other stakeholders it doesn't need to be with your competitors [0.4] it could 
be with your suppliers [0.4] or it could be with your channel intermediaries it 
could be with [0.3] upstream or downstream firms [0.5] but relationships 
between organizations [1.6] from the sociology [0.4] literature we've just 
talked about there [2.5] we have what you call the intra [0.3] organizational 
network [0.3] so within the organization [1.1] the last one was between 
organizations this is within [0.9] and if we've said that the organization is 
is comprised of a lot of people who may have relationships across the borders 
of it [0.3] may have relationships within the boundaries of the firm [0.6] 
you're saying that [0.8] the firm's not just a black box with a firm boundary 
the firm is made up of lots of people with lots of different interests [0.7] 
some with ability to [0.3] communicate well with your [0.3] their counterparts 
in other organizations some who for whatever reason [0.4] may not match back to 
industrial marketing again [0.3] in terms of their personality their background 
their characteristics their experience and so on [1.8] again applying the 
intraorganizational relationship aspect to it to the [0.3] Eastern European 
example we had there [2.4] intraorganizationally within the organization the 
type of relationships that have become important or the type of people who have 
become important [0.5] are for 
example the diaspora [0.4] diaspora for for those who haven't come across the 
word [0.4] are the displaced people [0.6] so those people who had actually 
moved out of the Eastern European region [1.4] over the [0.2] past however many 
years of its history where it [0.3] that they felt that it's not a a a good 
place to be [1.6] are now getting opportunities to return there [0.2] because 
there's demand of course for people who speak [0.3] various Eastern European 
languages [0.3] various Eastern European languages which [0.2] had been in the 
minority [0.4] so if the Soviet Union said everybody should speak Russian [0.6] 
therefore there wasn't a great deal of of demand for example for Ukrainian [0.
3] or Polish or whatever [0.3] but there is now that they're separate markets 
because part of the sociocultural opportunity [0.4] part of the sociocultural 
[0.7] difficulty if you like for firms is that those markets are saying [0.4] 
you want to do business with us speak to us in our language we don't want you 
to speak Russian [0.5] we want you to speak [0.6] Polish [0.2] Serbo-Croat 
Ukrainian [0.3] and 
however many other different variants of languages there are within the region 
which are a lot [1.1] so the diaspora [0.8] are fulfilling quite an important 
role [0.4] intraorganizationally [0.7] and they are forming relationships 
across the soft boundaries of the firms [0.4] into the networks in those 
markets [0.3] because they speak the right languages [1.8] there's other 
Eastern and central European subsidiaries of the firms [0.5] for example [0.5] 
so when we spoke last week of [0.7] firms looking at [0.7] east and central 
Europe and saying [0.9] which of those markets are the most attractive how do 
we go in do we enter lots of the countries rapidly [0.5] or do we gradually 
build up our expertise in the region [0.7] you're finding for example that [2.
4] i'll come back to this slide in a moment [3.3] you're finding for example 
that firms [1.4] typically [1.1] this is [0.5] one of the the big six 
accounting firms in fact it's Arthur Andersen [0.4] and Arthur Andersen were [1.
8] sorry it's not Arthur Andersen it's Ernst and Young [0.3] 
Ernst and Young were looking at the Eastern European region [0.5] and in 
nineteen-eighty-nine had entered Hungary [0.4] by nineteen-ninety they'd 
entered these grees-, c-, green regions so Czech and Slovak Republic Poland [0.
3] and European Russia [0.6] by nineteen-ninety-one they were in virtually all 
of the rest [0.2] of the region [0.5] so actually their their process of entry 
into the region was very fast [1.7] what that means is that if you're trying to 
gain knowledge or understanding of the region [0.5] you've got some 
subsidiaries in some countries who are gaining the knowledge on a day to day 
basis [0.4] when you come to make a decision about when you invest [0.4] or 
whether to invest in the next countries in line [0.6] you can use the 
information that you're gathering out of your own other subsidiaries [0.3] 
within the region [0.7] because basically [1.1] virtually no firms had relevant 
up to date marketing information [0.4] about east and central Europe [0.8] 
because anybody who did had it under the Soviet Union and is as [0.2] as that 
system 
broke down [0.5] the languages may not apply the state distribution didn't 
apply [0.7] as one of the firms said to me [0.6] think it was I-C-L said [0.9] 
it was difficult to understand the rules of the former Soviet Union [0.3] but 
once you understood them and you knew who to deal with and you knew [0.3] that 
you went via Moscow centrally and and they took it from there [0.5] then it was 
understandable [0.2] but once that broke down [0.3] it was very difficult to 
know where to go next [0.4] and all of the firms were suffering from similar 
problems [0.4] none of them had [0.3] much relevant information prior to 
nineteen-eighty-nine [0.2] and Soviet Union [0.2] prior to nineteen-ninety-one 
[0.7] and so all of them at this point were were [1.4] confronting the same 
sets of issues [1.5] so if you go back to our slide again [6.3] so that 
intraorganizationally [0.2] diaspora are important [0.3] other east and central 
European subsidiaries may be important [0.8] the other thing that may be 
important is the role and 
distance of headquarters [0.3] so one of the other types of relationships 
that's significant [0.5] is [1.3] how much power exists within those 
subsidiaries [0.2] how much control they can make [0.4] over the decisions [0.
5] so can they decide [0.6] there is business potential here we want to invest 
in the market [0.5] or do they have to go back to headquarters [0.2] to get 
that decision signed off [0.4] and at what point do they have to do so do they 
have a certain amount of money they can spend [0.3] and then have to go back [0.
3] or do they have to check everything [0.6] do they have to [1.2] promote and 
and concentrate on a a set of blan-, brands globally [0.6] or do they have 
reasonable local autonomy to do [0.3] what's appropriate for the market [0.3] 
we mentioned Johnson Wax last week [0.8] who were early entrants into east and 
central Europe [0.7] and they were reverting to product formulations that they 
hadn't used in in other markets [0.4] but they still had they still had patents 
on but they weren't using things like liquid starch [2.0] now [0.6] that would 
be something that 
was very specific to [0.4] a country or a number of countries within the region 
[0.6] and the question is whether they can [0.4] come up with that idea [0.3] 
monitoring the environment [0.3] or whether they need to go back and get that 
checked and who by [0.6] and whether it's felt that that's something that they 
want to be associated or [0.2] with or not [1.3] in some cases [0.7] there can 
be different views depending on where you are [0.8] if you're in the market [0.
6] even though it looks very uncertain because if you look at a a sort of [0.4] 
assessment of the market [0.2] you look at the facts and figures and you say 
seven-thousand-eight-hundred per cent inflation [1.7] don't know how quickly 
they're getting through the transformation process [1.0] seem to be changing 
the laws every day [0.8] er stopping us from re-exporting products in certain 
categories what if ours is next [0.4] VAT rates going from nought per cent to 
two-hundred per cent back to n-, to you know a hundred per cent next week [0.8] 
maybe this isn't a market we ought to be operating 
in we could lose a lot of money we could damage our brand reputation [0.4] what 
if we have to withdraw from the market [2.0] that quite often is a view that's 
taken by the headquarters [0.3] because at headquarters they're talking about 
brands and strategic things [0.4] quite often the local market once people get 
themselves there [0.5] they get established into the networks and they begin to 
understand how things happen particularly if they have a local partner [0.3] 
who can gain them access [0.9] and the risks start to look less [0.5] to the 
people who are actually on the ground who understand the market [0.6] 
particularly those who have been in other subsidiaries of the firm within the 
region and are gaining knowledge [1.1] so [0.4] you can find that there are 
decisions [0.6] whether something is an opportunity and whether to capitalize 
on it [0.3] which are viewed very differently by the headquarters and the 
subsidiary [0.5] and a classic example of one of the telecommunications firms 
[0.4] where he'd been out 
prospecting the market for two three years [0.6] bearing in mind the person 
prospecting [0.3] had been round [0.4] Azerbaijan Kazakhstan various parts of 
Russia Ukraine [0.7] and was assessing opportunities and was saying ah i think 
there's a a great opportunity here for us [0.8] it will cost [0.5] i don't know 
what the amount of money was but [0.3] a relatively small amount of money i 
think he was saying something like fifteen-million to invest in this 
opportunity [1.5] then when he went back to the organization to er to 
headquarters to get this sanctioned [0.4] they looked at the market and said [0.
7] forget it there's there's too much corruption [0.3] we don't want to be 
associated with some of the things that are happening i hear that firms are 
paying bribes [0.6] er you know [0.3] we're we're not sure we want to operate 
in the market the potential damage to our brands could be too great [0.4] we 
think in the short term that we should stop looking at that market [0.5] we 
were interested longer term in looking at Russia anyhow [0.3] maybe the 
uncertainty levels in Russia are no higher [0.2] so you should come out of [0.
7] Ukraine it was and go directly to Russia [0.3] and look at the potential 
there because really in terms of [0.6] uncertainty of what's happening in terms 
of bribery it can't be much worse [1.2] and he was actually very disenchanted 
by that because [0.4] he'd been l-, asked to look at what was happening in the 
market and he'd come up with this [0.4] idea that he really thought would work 
[0.7] so there was actually in that case quite a lot of distance between the [0.
4] headquarters and the subsidiary [2.0] okay we've [1.2] also talked about the 
pest analysis [4.0] but we've talked about it as a set of unconnected forces in 
the environment which you monitor [0.2] but you can't control [0.6] so the next 
stage of [0.2] international marketing relationships [0.6] is work that says [0.
5] maybe they're not uncontrollable [0.4] maybe you can have some kind of 
relationship with those stakeholders as well [0.5] that influences what 
happens to your firm influences your success [2.3] some work by Philip Kotler 
[0.8] er called Mega Marketing [0.7] and [1.2] i think the article is nineteen-
eighty-three and it's also in Harvard Business Review [1.0] in addition to the 
traditional four Ps [0.2] he identifies another two that he believes people 
should take into account [0.5] those are politics [1.9] and people [3.5] so if 
you look [4.6] i can't spell [0.2] politics [4.3] people has also been [5.4] 
referred to variously as public relations [0.3] because what he's actually 
saying [0.5] is that in some markets [0.3] and he he applies mega marketing to 
what he calls blocked markets blocked markets are those which [1.0] have not 
been opened to the firm [0.9] previously for various reasons either because of 
their political systems [0.5] or because of the level of income of the people 
in the market [0.3] that they have not been places that it was easy to get into 
[0.5] particularly blocked markets are ones where there has for 
whatever reason been a government block on investing firms or on foreign 
products [0.7] and therefore he believes that [0.9] politics [2.9] so lobbying 
appropriate people in the governments of the countries and working out [0.4] 
how you could deal how you might get access what the the barriers are [0.3] 
becomes quite important [1.0] now i know [1.2] it isn't a particularly good 
example in in le-, in terms of its level of success [0.3] but a few years back 
you may remember that there was various American [0.5] trade delegations went 
over to Japan to talk about [0.3] er some of the barriers that they believed 
were in place by MITI [0.3] which was stopping American and other [0.6] 
products from getting into the Japanese market [0.4] claiming that this was 
sort of [0.8] unfortunate because Japanese products were actually [0.6] coming 
into other markets quite successfully but they always felt that there were 
barriers [0.5] i say it's an unfortunate example because we had people like 
Chrysler and General Motors 
and so on complaining about not getting access [0.5] and a large part of why 
they weren't getting access was nothing to do with barriers that were put up [0.
4] it was to do with the quality of the products and whether they were [0.8] 
seen to be offering benefits in the market anyhow [1.0] but that kind of 
initiative [0.5] trade delegations [0.4] and [0.2] one government [1.1] having 
contact with and lobbying another government [0.4] or firms [0.2] lobbying 
their own government suggesting that they ought to take certain actions are 
becoming an increasing feature [0.3] of international marketing [0.5] think of 
one of the current examples [0.6] membership of the [0.2] the single European 
currency [2.1] and [0.3] some of the U-K businesses i've spoken to feel very 
strongly that the U-K should be in [0.7] and that [0.2] there can only be 
disadvantages to them from not being in [0.6] that being that if Europe is 
going to be a region trading in this [0.2] and the U-K is still going to be 
subject to exchange rates [0.4] so it therefore is taking more risk on exchange 
rates [0.8] its business is 
going to be complicated because it's going to have to start [0.2] trea-, [0.6] 
trading in euros anyhow because everybody else within Europe is going to be [0.
6] it's going to have the pressure to do that [0.2] so it's going to be 
operating two systems instead of one system [1.0] you know virtually everybody 
i speak to in a U-K business says [0.8] well what's the downside explain to me 
again why we didn't want to be in this [0.6] er [0.3] well some kind of 
nationalism and and we want to still have pounds and things [0.3] we're a bit 
concerned whether the Queen's head's on there or not but [0.6] i mean [0.2] 
economically [0.5] business sense the euro [0.9] think i'm getting into my er 
[0.6] holding forth on the euro the euro [0.2] makes a lot of sense [0.5] and a 
lot of [0.2] businesses are concerned at [0.5] what will happen as a 
consequence of not being into the euro early [0.5] therefore are lobbying the 
British government saying [0.6] you know can you tell us what policy is when 
we're going to get into this [0.5] er what the objections are [0.6] similarly 
with the the GATT [0.4] the General 
Agreement on Trade and Tariff the last round in Uruguay [1.2] there was a big 
letter to the press [0.3] from the the C-E-Os of [0.6] i think it was the [0.2] 
the top hundred [0.3] er [0.2] multinational firms [0.3] saying [0.3] can we 
press for a favourable outcome to getting rid of some of the trades and tariffs 
[0.4] for those who who [0.7] weren't aware of this the the General Agreement 
on Trades and Tariffs [0.3] is to allow free trade between nations [0.4] and at 
the seventh round the Uruguay round was the first time that services were 
included [0.5] as well as [0.5] products [0.4] and there were certain 
categories which were real stumbling blocks [0.5] agriculture always has been 
'cause every country is protective of its agriculture [0.5] and its rights to 
export and to protect people from coming into its market [0.7] funnily enough 
[0.2] films became one of the major ones [0.7] there was a big concern about [0.
2] in the film industry [0.5] about [0.4] having free trade and particularly [0.
3] some of the European countries like France being concerned that Hollywood 
having free access into 
their market [1.7] and it looked like the whole thing was going to come apart 
[0.5] but [0.3] a lot of the the C-E-Os were very concerned that this shouldn't 
happen [0.2] so they started lobbying their governments collectively [0.2] and 
if you think of what [0.2] all the different nationalities of the top hundred 
multinational firms [0.3] that's a lot of governments [0.9] to try and [1.5] 
encourage them to press for a favourable outcome to the GATT [0.4] round which 
was favourable in the end [1.1] if we now go back to [3.0] our pest analysis 
slide that we had [2.4] that explains the arrow between political and firm [0.
6] concerns because we're not then saying [0.8] well [0.2] politics is just 
something that's out there and we monitor it [0.4] we're saying [0.4] that 
under certain circumstances firms may actually be able to [0.5] have some kind 
of influence some kind of relationship with political stakeholders [0.3] they 
can lobby [0.8] they can represent a set of interests [0.4] they they can 
lobby their governments who have relationships with other governments [1.8] 
likewise [0.3] economically [0.8] some players are big enough to have an 
influence [0.2] on economic policy [1.2] likewise technologically [0.4] you've 
got some firms like Microsoft who are clearly at the forefront of what's 
happening in technology and standards are being set around them [0.7] so maybe 
it's not [1.3] this uncontrollable set of factors in the environment [0.3] 
maybe there are even patterns of relationships which exist [0.8] not just inter 
and intraorganizationally [0.3] but in the macroenvironment as well [1.1] and 
so the top box on this slide [3.7] represents that view and says [1.0] let's 
understand that the host market [0.3] country that you're going into's [0.4] 
network of relationships too [1.1] and so basically it's an application of [0.
3] pest analysis [0.3] to a specific market and say what type of relationships 
or what issues in relationships in the macroenvironment will be significant [0.
6] talking 
about Eastern Europe again because that's [0.2] just happens to be the example 
i've applied it to [1.1] what kind of issues would be important [0.7] it would 
be very important that the relationships are turbulent [0.5] so if you were 
trying to work out who politically you ought to form relationships with [0.6] 
in Ukraine [0.6] part of the problem would be that it's changing all the time 
[0.8] because every time the economic policy doesn't work [0.6] they elect 
somebody different [0.5] or it's very difficult to know who's the figurehead 
and who really controls the power [1.3] so it'll be turbulent [1.9] it'll also 
be turbulent if you're trying to work out which [0.5] other firms in that 
market you ought to [0.2] collaborate with because [0.5] sometimes [0.3] the 
scarce [2.0] resources the knowledge that you wish to get out of your 
intraorganizational par-, interorganizational partners [0.7] may not be as 
valuable as you would like it to be [0.7] so if you're going in because you 
think they understand the market [0.3] if the whole system is is falling 
apart and it's all turbulent [0.3] they may not understand it much better than 
you do [0.3] and that's been one of the classic problems [0.6] firms going in 
thinking well [0.4] the Ukrainian local partner will understand what's 
happening [0.6] Ukrainian local partners [1.2] didn't necessarily know who 
their customers were [0.9] sounds hard to explain but i'll [1.2] just explain a 
little further why [8.8] in a free market exchange [3.4] and in a marketing 
channel [0.3] kind of relationship you have a producer [0.4] you have a 
customer you may have intermediaries in the middle as we've said [1.1] and the 
government [1.7] in a pest analysis has been shown to be sort of somewhere in 
that outer rim it's somewhere in the pest analysis it's an uncontrollable 
variable [0.7] now what we're saying is [0.4] there may be some possibility of 
having a two-way relationship [0.3] so there may be some ability to lobby that 
government [0.4] so we've got a dotted arrow there we've said [0.4] 
yes maybe there is a relationship [0.4] it's not a direct one [0.5] like you 
have with your customers [0.4] but there's some kind of relationship which 
exists [1.9] but under the [2.2] centrally planned economies [0.2] that we were 
talking about in this example [1.7] the government [0.8] played a very [0.8] 
controlling role [0.3] in the previous system [0.4] the government had direct 
relationships [0.3] both with the producer [0.7] and with the customer [1.2] 
they dictated what should be made [0.2] in what quantity [0.2] where it was 
going to go [1.5] what the firms did was produce it to schedule [0.9] largely 
[1.0] they [1.2] sounds good doesn't it [0.5] they er [5.6] [laughter] it's the 
heating system [0.6] er [0.9] high-tech [1.2] the government and the producer 
had direct relationships [1.7] and the customer who got this all through a 
state system so if it was food stores [0.3] they were called gastronome [0.3] 
and they all stocked exactly the same things [0.2] in the same location [0.2] 
for the same price [0.6] so the relationship between the producer and the 
customer [0.6] wasn't even necessarily a direct one [0.5] the firms just [0.4] 
produced it to schedule it was picked up on lorries [0.3] taken away delivered 
to the state outlets [0.4] and there may not have been in fact there quite 
often wasn't any direct contact between those two at all