Global MarketingChapter 19

BackgroundEstablished in 1893 in Atlanta pharmacy.1900: Coke was available in foreign countries.1940s: built bottling plants abroad to supply soldiers.Growth fueled by strong marketing: Id like to buy the world a Coke TV ad.Now in emerging markets.

Coca-Cola Successfully Going GlobalCase StudyHow They Did ItBalances brand building and global standardization with local adaptation.Consistent positioning, packaging, and taste.Brands, flavors, ads, price, distribution, and promotions are adapted to local markets.Sprite: a global success.

Global Marketingin the Twenty-First CenturyFaster communication, transportation, and financial flowsInternational trade boomingIntensifying global competitionForeign competition in home markets

Looking at the Global Marketing EnvironmentEconomic communities are free trade zonesEuropean Union (EU)North American Free Trade Agreement (NAFTA)European Free Trade Association (EFTA)

The International Trade SystemRegional Free Trade Zones

Global Market PlaceForeign trade represents 43% of Canadas GDP. USA accounts for 80% of our business.NAFTA has been very good for Canada.Multilateral trade negotiations by the free world nations to negotiate tariff reductions is known as GATT agreements (general agreements on tariffs & trade).Foreign Investment Review Agency (F.I.R.A.) is now known as Investment Canada

Global Marketingin the Twenty-First CenturyEra of free tradeGovernment assistanceTeam CanadaGlobal is riskyEconomicsRegulationsTariffsTrade barriersCorruption

Global Marketingin the Twenty-First CenturyGlobal FirmA firm that, by operating in more than one country, gains R&D, financial, marketing, and production advantages that are not available to purely domestic competitors

Global Marketing Environment:The International Trade SystemCommon trade restrictions:TariffsQuotasEmbargosExchange controlsNon-tariff barriers

The International Trade SystemBarriers to international trade:Tariff: a tax levied by a government against certain imported products; designed to protect domestic manufacturers and raise revenue; also known as import dutiesQuota: a limit on the amount of goods that an importing company will accept in certain product categoriesEmbargo: a ban on the import of a certain productFigure 19.1 p.628

Major Decisions in International Marketing

Economic EnvironmentIndustrial structureSubsistence economiesRaw-material exporting economiesIndustrializing economiesIndustrial economiesService economies

Income distribution

The International Trade System Two factors in the economic environment influence attractiveness:Types of economies:Subsistence economies: most people engage in simple agriculture, consume their output and trade for basic needs; few opportunities for tradeRaw-material-exporting economies: rich in one or more natural resources but poor in other needs; good markets for large equipment and infrastructure, with a small wealthy upper class, but low-income for most of the populationFigure 19.1

The International Trade System Types of economies:Industrializing economies: manufacturing accounts for 10% to 20% of the economy, needs raw materials to fuel growing industry, mostly due to favorable labor costs; good markets for increasing middle classIndustrial economies: major exporters of manufactured goods, investment funds, technology, and expertiseIncome distribution:How income is distributed within the economy will influence the size and attractiveness of international marketsFigure 19.1

The International Trade System Political-legal environment: four factors influence attractiveness of international markets:Attitudes toward international buyingGovernment bureaucracyPolitical stability (ie Venezuela)Monetary regulationsCounter trade: international trade involving the direct or indirect exchange of goods for other goods instead of cash; includes barter, compensation (buyback), and counter purchaseFigure 19.1

Cultural EnvironmentEvery country has:FolkwaysNormsTaboos

Business behaviourPersonal distanceDirect vs. diplomaticLack of promotionMeeting and greeting

The International Trade System Cultural environment: two directions of influenceImpact of culture on marketing strategy: companies need to be careful when translating their marketing programs to different cultures to avoid offense; not all products will sellFigure 19.1

Deciding Whether to go InternationalMust become awareReasons:Global competitorsCounterattackHigher profitsShrinking domestic marketReduce market dependenceWeigh risks and assess global ability

The Decision to go InternationalReasons for entering international markets:Growth opportunities outside of domestic marketsAs a counterattack against competition at homeReduce dependence on existing marketsNeed a larger customer base to achieve economies of scaleFactors to consider:Marketing objectivesVolume of foreign sales

Figure 19.1

How many countriesTypes of countries to enter

Indicators of Market Potential:Demographic CharacteristicsSize of populationRate of population growthDegree of urbanizationPopulation densityAge structure and composition of the population

Indicators of Market Potential:Geographic CharacteristicsPhysical size of a countryTopographical characteristicsClimate conditions

Indicators of Market Potential:Economic FactorsGNP per capitaIncome distributionRate of growth of GNPRatio of investment to GNP

Indicators of Market Potential:Technological FactorsLevel of technological skillExisting production technologyExisting consumption technologyEducation levels

Indicators of Market Potential:Socio-cultural FactorsDominant valuesLifestyle patternsEthnic groupsLinguistic fragmentation

Indicators of Market Potential:National Goals and PlansIndustry prioritiesInfrastructure investment plans

Indicators of Market PotentialTable 19.1 p.637

Sheet1

Indicators of Market Potential

Demographic characteristicsGeographic characteristicsEconomic factors

Size of populationPhysical size of countryGNP per capita

Rate of population growthTopographical characteristicsIncome distribution

Degree of urbanizationClimate conditionsRate of growth of GNP

Population densityRatio of investment to GNP

Age structure/composition

Technological factorsSociocultural factorsNational goals and plans

Level of technological skillDominant valuesIndustry priorities

Existing production technologyLifestyle patternsInfrastructure investment plans

Existing consumption technologyEthnic groups

Education levelsLinguistic fragmentation

Sheet2

Sheet3

Deciding How to Enter Markets:Market Entry Strategies p.638 fig 19.2

Market Entry Strategies Exporting:Entering a foreign market by selling goods produced in the companys home country, often with little modificationIndirect exporting: selling through independent, international marketing intermediaries; Direct exporting: handling their own export program, may use local distributors or company personnelFigure 19.2The simplest and least risky way to enter foreign marketsMay be a temporary effort or sustained

Market Entry Strategies Joint venturing:Entering a foreign market by joining with domestic or foreign companies to produce or market products or servicesLicensing: entering into an agreement with a foreign licensee for the right to use a manufacturing process, trademark, patent, trade secret, or other item of value for a fee or royaltyOffers quick entry but involves more risk as the company may lose some control over their business; may create a competitorFigure 19.2May be a requirement for entering a foreign market; China

Market Entry Strategies Joint venturing:Contract manufacturing: a company contracts with manufacturers in a foreign market to produce the product or provide its service; also known as outsourcingManagement contracting: the domestic firm supplies (exports) management services to a foreign manufacturerJoint ownership: a company joins with investors in a foreign market to create a local business in which they share ownershipFigure 19.2More risky due to control and profit repatriation issues

Market Entry Strategies Direct investment:Entering a foreign market by developing foreign-based assembly or manufacturing facilitiesThe highest amount of commitment, risk, control and potential for profit of the market entry strategiesPolitical stability of the foreign country is a major concern; new governments may nationalize (seize the assets of) whole industriesFigure 19.2Creates jobs within the markets the company want to sell to

Deciding on Global Marketing Program p.715Standardized marketing mix or adapted marketing mix?Marketing concept appliesWorld brandsAdapt only if local wants cannot be changed or avoidedMatter of degree

Think globally but act locally = GLOCALStandardize where possible, adapt where necessary.Q: Why has Starbucks enjoyed success in China, when other major chains have failed? (see the article)

Global Marketing ProgramsStandardized marketing mix: using the same marketing mix elements for all of the companys international markets Adapted marketing mix: adjusting the marketing mix elements to better suit each international target market enteredEssentially five options when attempting to make product and promotion decisions for foreign markets:Fig 19.3 p.642

Deciding on Global Marketing Program: PromotionMessageColorsCommunication adaptation strategyMedia availability

Deciding on Global Marketing Program: PriceHigher than domesticForeign subsidiariesCurrenciesInfluence of the internetMoving towards standardizing

Questions to considerWhen it comes to international marketing, it is always best to adapt the marketing mix. Comment

What factors should my firm consider when expanding overseas?

Direct Investment is the best method to expand overseas. Comment

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