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Assorted trade barriers also affect global marketing. These barriers fall into two major categories: tariffs—taxes levied on imported products— and administrative, or nontariff barriers. Some tariffs impose set taxes per pound, gallon, or unit; others are calculated according to the value of the imported item. Administrative barriers are more subtle than tariffs and take a variety of forms such as customs barriers, quotas on imports, unnecessarily restrictive standards for imports, and export subsidies. Because the GATT and WTO agreements (discussed later in the chapter) eliminated tariffs on many products, countries frequently use nontariff barriers to boost exports and control the flows of imported products.

Global marketers must continually stay abreast of laws and trade regulations in each country in which they compete. Some laws, such as Les Soldes (The Sales) in France, are uncommon to U.S. marketers. Bylaw, retail sales can be held only twice a year—in January or February and again during autumn. At least 30 percent of French clothing sales occur during these two sales seasons.
Political conditions often influence international marketing, as well. Consider the effects of recent political turmoil in Kosovo, Indonesia, and Kenya. Such political unrest sometimes results in acts of violence, such as destruction of a firm’s property. Middle Eastern terrorists have targeted U.S. companies’ offices abroad. IBM and American Express have been subject to terrorist threats and attacks. As a result, many western firms have set up internal political risk assessment (PRA) units or turned to outside consulting services to evaluate the political risks of the marketplaces in which they operate.
The fall of communism and the transformation of state-dominated industries into privately-owned and managed profit-seeking enterprises has been accompanied by a trend toward freer trade among nations. The movement toward capitalism is emphasized by the recent launch of Forbes Global, a new international business periodical, published by the well-known business magazine Forbes. The legal environment for U.S. firms operating abroad results from three forces: (1) international law, (2) U.S. law, and (3) legal requirements of host nations. International law emerges from the treaties, conventions, and agreements that exist among nations. The United States has many friendship, commerce, and navigation (FCN) treaties with other governments. These agreements set terms for various aspects of commercial relations with other countries, such as the right to conduct business in the treaty partner’s domestic market. Other international business agreements concern worldwide standards for various products, patents, trademarks, reciprocal tax treaties, export control, international air travel, and international communication.
Since the 1990s, Europe has pushed for mandatory ISO (International Standards Organization) 9000 ceniflcation—an internationally recognized standard that ensures a company’s goods and services meet established quality levels. A decade later, the standards have crossed the Atlantic Ocean to include a growing number of U.S. businesses. Large multinational corporations were the first to undertake the costly and time-consuming ISO certification process. However, marketers in small businesses have come to realize the advantages of being ISO certified, such as access to more international markets, promotional prestige, and customer confidence of quality—all of which can lead to increased sales. The International Monetary Fund, another major player in the international legal environment, lends foreign exchange to nations that require it in order to conduct international trade. These agreements facilitate the whole process of world marketing. However, there are no international laws for corporations, only for governments. Therefore, marketers include special provisions in contracts, such as which country’s courts have jurisdiction.
The second dimension of the international legal environment, U.S. law, includes various trade regulations, tax laws, and import’export requirements that affect international marketing. One important law, the Export Trading Company Act of 1982, exempts companies from antitrust regulations so they can form export groups that offer a variety of products to foreign buyers. The law seeks to make it easier for foreign buyers to connect with U.S. exporters. It also allows banks to participate directly in such ventures by financing trading activities. Although export trading companies offer many benefits to U.S. companies, relatively few firms have joined forces in these cooperative ventures.

The technological environment must be closely monitored for a number of reasons. For one, creative applications of new technologies give a firm a definite competitive edge. Marketers for Xerox’s new digital color copier target the business market with the ad shown in Figure 2.10. “The Document Company” gives decision makers statistics on the benefits of using its state-of- the-art copier, including a 80 percent improvement in customer recall—a primary objective of promotional or informative messages.
Marketers who monitor new technology and successfully apply it may also enhance customer service. Breakthroughs in electronic communications have brought consumers the convenience of in-home shopping and 24-hour banking at automated teller machines. Some restaurants provide faster service by equipping serving staff with palmtop computers that transmit patrons’ orders to the kitchen staff.
The wide range of software packages and innovative technologies offers many rewards for financial service providers. Merrill Lynch & Co., Wall Street’s largest brokerage firm, recently embraced the power of online financial services. Facing the threat posed by online brokerages like E*Trade Group, Merrill entered the online stock trading business in 1999. The firm has a reputation for superior personal financial service and for relatively high transaction fees—up to several hundred dollars per transaction. With its new online capabilities, fees start at $29.95, matching discount rival Charles Schwab Corp. Future plans will permit unlimited free trading, either with a broker, online, or by phone for a flat fee of up to 2 percent of the account’s assets.23 As its current ads explain, Merrill Lynch is helping to shape the future, not just observe it.
Implementing technology is a huge expense marketers face today, and there is no guarantee that will result in instant success. For the past quarter century, automakers have spent billions of dollars on research and development of an electric car. But when GM first hit the market in 1996, a paltry $10 million was spent on advertising, less than half the typical amount spent to launch a new gasoline model. Four years later, GM had barely 500 of its lease-only EV1 electric car models on the road, and most of those were fleet sales—few were sold to individuals. Honda, Ford, and Toyota have also invested heavily in electric-car development, but all are far from
a profit. Electric cars have not been successful; in fact, Honda stopped production of its EV Plus electric vehicle in 1999. However, car makers have started to produce and market hybrid cars fueled on both gasoline and electricity. Toyota’s Prius model hit the American market in 2000, with a $2 million promotional campaign. Honda is also pushing its Insight hybrid car over the Internet.
Subsequent chapters discuss in more detail how companies apply technologies—such as databases, electronic data interchange, and interactive promotional techniques—to create a competitive advantage.

The technological environment represents the application to marketing of knowledge in science, inventions, and innovations. New technology results in new goods and services for consumers; it also improves existing products, offers better customer service, and often reduces prices through new, cost-efficient production and distribution methods. Technology can quickly make products obsolete—calculators, for example, wiped out the market for slide rules—but it can just as quickly open new marketing opportunities.
As we discussed in Chapter 1, technology is revolutionizing the marketing environment. Technological innovations create not just new products but also entirely new industries. The Internet is transforming the way companies promote and distribute products. Among the new businesses developing as a result of the Net’s success are Web-page designers, new types of software firms, interactive advertising agencies, and companies like CyberCash and First Virtual that allow customers to make secure financial transactions over the ‘Web. Industrial and medical use of lasers, superconductor transmission of electricity, wireless communications products, seeds and plants enhanced by biotechnology; and genetically-engineered proteins that fight disease are just a few more examples of technological advances.
VF Corp., the $5.5 billion apparel maker, has revamped its manufacturing operations with new software applications. The 100-year-old company’s product line includes four brands of jeans, (Lee, Britannia, Wrangler, and Rustler), HealthTex  children’s clothes, and Jantzen swimwear and backpacks. VF apparel is sold through mass-market retail chains like Wal-Mart, Target, and Macy’s. Its 17 brands operated independently of one another until 1997, when integrated information systems brought the family of brands together. Marketers finally had access to company-wide data, Armed with information on customer demographics, such as popular colors and common sizes, marketers are able to identil5i the right mix of products for individual stores. Dubbed the micromarketing system, it allows marketers to predict how many white Wrangler jeans with a 34-inch waist would sell at a particular store in a certain city during the middle of summer. The new software was the key to growth in revenues of over $7 billion.22
Technology can sometimes address social concerns. Texaco marketers, for example, are acutely aware of the need to obtain sustainable growth in the petroleum industry. After 100 years of pumping oil out of California’s Kern River oil field, the reservoir was finally drying up. The company slogan “A World of Energy” was certainly true—there was oil in Kern River, but Texaco could not get it out of the ground. The oil was locked in layers of rock and sand, but using modern technology, Texaco was able to heat the oil and separate it from the earth so it could be pumped to the surface. Marketers now emphasize Texaco’s commitment to meeting future energy needs by bringing new life to dying oil fields. As the ad in Figure 2.8 explains, “Not even a plastic surgeon could work that kind of magic.”

Industry, government, colleges and universities, and other not-for- profit institutions all play roles in the development of new technology. In
search and development efforts by private industry represent a major source of technological innovation. Pfizer, a U.S.-based global pharmaceutical company, discovers, develops, manufactures, and markets innovative medicines for humans and animals. The 150-year-old company is known for developing cures of the future, spending billions each year on research that may defeat cancer, eliminate heart disease, and eradicate Alzheimer’s. In 1998, Pfizer introduced Viagra, a revolutionary treatment for erectile dysfunction, and Trovan, which has become one of the most prescribed antibiotics in the United States. In addition, Pfizer Animal Health continues to provide goods and services that keep animals well, including vaccines, feed additives, and the first arthritis medication in the U.S. specifically for dogs. To maximize the strength of its product lines, Pfizer invested nearly $3 billion in research and development in 2002. Pfizer has also forged ahead in sales and marketing. The firm’s pharmaceutical U.S. sales force, which doubled in just three years, has ranked number one in overall quality for the last four years. The drug giant’s commitment to defeating cardiovascular disease, a leading cause of premature deaths. Another major source of technology is the federal government, including the military. In fact, many consumer products that people take for granted today originated as military projects. Examples include air bags (originally Air Force ejection seats), scratch-resistant sunglasses (developed first as visors for space helmets), digital computers (first designed to calculate artillery trajectories), and the microwave oven (a derivative of radar systems).
Although the United States has long been the world leader in research, competition from rivals in Japan and Europe has intensified in recent years. For the past quarter century, the United States led the way with personal computers, networking systems, and Internet technology. Japanese firms focused on industries where they could capitalize on their ability to transfer technologies into commercial products. For instance, American firms developed the technology for videocassette recorders, but two Japanese companies, Sony and JVC, commercialized the invention into one of the most successful new products of the past two decades. To remain at the leading edge, American firms have taken steps to improve technology transfers from university and military researchers as well as private companies.