Section 4.2 International Trade Real-World Application

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Section 4.2 International Trade Real-World Application

Global Trade When companies enter the global marketplace they are met with a number of challenges. Among these are cultural, political, and legal factors thatinfluence how and what they can sell.

Directions Read the article below. Then answer the questions that follow.

It is a challenge to persuade a population to adopt novel food tastes, but PepsiCo subsidiary Frito-Lay is making a go of it. Frito-Lay sells chipswith such flavoring as “crispy, fragrant French chicken wings” and “fresh,crispy seafood.” The goal: Make Lay’s the number-one snack in the world’smost crowded country.

Lay’s potato chips didn’t show up [in China] until 1997 because Chinabans potato imports, forcing Frito-Lay to start, quite literally, from theground up, opening two farms to supply big, round, sturdy potatoes shorton sugar (to preserve whiteness). Three years after planting its first spud inChina, Lay’s launched its first entry—“salty flavored”—and saw an instanthit. But in China, Lay’s quickly found that dishes popular in one regiondid not sell as well in others. Shanghai snackers tend to like sweet tastes,southerners prefer salty, westerners go for spicy flavors, and northernersprefer meaty ones, forcing Lay’s to adjust its marketing.

PepsiCo also had to accommodate yin and yang, the Chinese philosophythat nature and life need to balance opposing elements (like light and darkor sweet and sour). It plays out in the local palate: Chinese consider friedfoods to be hot and therefore shun them in the summer because the twohots do not balance; cool would be better.

That discovery last year led to Frito-Lay’s most creative effort in China so far: “cool lemon” potato chips. The yellow, strongly lemon-scentedchips are dotted with greenish lime specks and mint and are sold in apackage featuring images of breezy blue skies and rolling green grass.Lay’s launched them with a TV ad featuring Malaysian pop star AngelicaLee, who asks fans in a stadium, “Can you eat just one?” The campaigntriggered a spike in sales. (China is a particularly good market for TV ads,given that it has 126 TV sets for every 100 households and still offersrelatively few channels, making it harder to zap away from a barrage of (commercials.)

1. What political/legal factor affected the launch of Frito-Lay potato chips in China?

1. What did Frito-Lay do to overcome this political factor and how long did it take it?

1. List and define each of the three types of controls (trade barriers) that restrict the flow of goods and services between nations (from your notes)?

1. Based on your definitions above, which of the three barriers is China using that caused Frito-Lay to make the decision they made?

1. Explain the two cultural factors that influenced the variety of Chinese Lay’s potato chip flavors?

1. Define globalization, adaptation, and customization (from your notes).

1. How would you classify Frito-Lay’s marketing strategy of its Lay’s potato chips inChina—was it globalization, adaptation, or customization? Explain.

1. What factor helped Frito-Lay to decide on TV as a medium for its promotional message?

1. Why do you think Frito-Lay developed the “cool lemon” potato chips?

1. What are some of the creative ways that Frito-Lay marketed the “cool lemon” potato chips?

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