Chapter 8 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,...

Chapter 8

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

GLOBAL MARKETING

1

2© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Chapter 8 Global Marketing

Objectives

1. Describe the importance of global marketing from the perspectives of the individual firm and the nation.

2. Identify the major components of the environment for global marketing.

3. Outline the basic functions of GATT, WTO, NAFTA, FTAA, CAFTA-DR, and the European Union.



Objectives

4. Identify the alternative strategies for entering foreign markets.

5. Differentiate between a global marketing strategy and a multidomestic marketing strategy.

6. Describe the alternative marketing mix strategies used in global marketing.

7. Explain the attractiveness of the United States as a target market for foreign marketers.



Introduction

▮ Global trade accounts for 25 percent of the U.S. gross domestic product

▮ Exporting - Marketing domestically produced goods and services in foreign countries

▮ Importing - Purchasing foreign goods and services



Figure 8.1 - Top U.S. Trading Partners—Total Trade Including Exports and Imports



Table 8.1 - World’s Ten Largest Marketers (Ranked by Annual Sales)


Chapter 8 Global MarketingThe Importance of Global

Marketing▮ Demand for foreign products is increasing

in fast-growing economies▮ Globalization and the Internet allow every

marketer to be an international marketer



Service and Retail Exports

▮ Nearly four of every five dollars in the nation’s gross domestic product comes from services

▮ United States is the world’s largest exporter of services and retailing• Profitable exports include services such as

engineering, financial, computing, legal services, insurance, and entertainment



Benefits of Going Global

▮ Additional revenue▮ New insights into customer behavior▮ Alternative distribution strategies▮ Advance notice of new products▮ A major key to achieving success in foreign

markets• Ability to adapt products to local preferences

and culture


Chapter 8 Global MarketingInternational Economic

Environment▮ Factors that determine a nation’s prospects

as a host for international business expansion• Size• Per-capita income• Stage of economic development


Chapter 8 Global MarketingInternational Economic

Environment▮ Infrastructure is an important economic

factor to consider when planning to enter a foreign market

▮ Changes in exchange rates can complicate international marketing• Exchange rate - Price of one nation’s currency

in terms of another country’s currency



International Social-Cultural Environment▮ To be effective, marketers must understand

a nation’s culture▮ Language plays an important role in global

marketing



International Technological Environment▮ The Internet transcends political, economic,

and cultural barriers to reach every corner of the globe

▮ Technology presents challenges for global marketers that extend beyond the Internet and other telecommunication innovations



International Political-Legal Environment▮ Global marketers must stay abreast of laws

and trade regulations in each country in which they compete

▮ Firms set up internal political risk assessment units

▮ The political environment involves labor conditions in different countries



International Political-Legal Environment▮ International law• U.S. has friendship, commerce, and

navigation (FCN) treaties with other governments

• Europe has pushed for mandatory ISO certification to standardize quality levels

http://www.iso.org/



International Political-Legal Environment▮ U.S. law• Various trade regulations, tax laws, and import

and export requirements affecting international marketing

• Export Trading Company Act of 1982 exempts exporters from antitrust regulations

• Foreign Corrupt Practices Act makes it illegal to bribe a foreign official in an attempt to solicit new or repeat sales abroad



International Political-Legal Environment▮ Legal requirements of host nations• Example: Despite China’s many advances in

recent years, the Chinese government continues to censor the Internet



Trade Barriers

▮ Barriers fall into two major categories• Tariff - Tax levied against imported goods• Administrative barriers

▮ GATT and WTO agreements have eliminated many tariffs on many products• Countries frequently use nontariff barriers to

boost exports and control the flows of imported products



Tariffs

▮ Two types of tariffs• Revenue tariffs - Designed to raise funds for

the importing government• Protective tariffs - Designed to raise the retail

price of an imported product to match or exceed that of a similar domestic product



Other Trade Barriers

▮ Import quotas - Limit the number of units of products in certain categories that can cross a country’s border for resale

▮ Embargo - Complete ban on the import of specified products

▮ Subsidies - Government financial support of a private industry

▮ Exchange control - Method used to regulate international trade among importing organizations by controlling access to foreign currencies



Dumping

▮ Controversial practice of selling a product in a foreign market at a price lower than what it receives in the producer’s domestic market


Chapter 8 Global MarketingMultinational Economic

Integration▮ Free-trade area in which participating

nations agree to free trade among themselves, abolishing tariffs and trade restrictions

▮ Custom union establishes a free-trade area and uniform tariffs for nonmember nations

▮ Common market extends a customs union by seeking to reconcile all government regulations affecting trade



General Agreement on Tariffs and Trade (GATT)▮ International trade accord that has helped reduce

world tariffs▮ In 1994, Uruguay round produced several

important outcomes• Reduced farm subsidies• Increased protection for patents, copyrights, and

trademarks• Included services under international

trading rules• Phased out import quotas on textiles and clothing from

developing nations



World Trade Organization (WTO)

▮ Succeeded GATT ▮ Oversees GATT agreements▮ Serves as a forum for trade negotiations▮ Mediates trade disputes▮ Monitors national trade policies ▮ Works to reduce trade barriers throughout

the world



World Trade Organization (WTO)

▮ WTO has made slow progress toward its major policy initiatives• Liberalizing world financial services• Telecommunications• Maritime markets



North American Free Trade Agreement (NAFTA) ▮ Accord removing trade barriers among

Canada, Mexico, and the United States▮ Particularly important to U.S. marketers

because Canada and Mexico are two of its largest trading partners



The Free Trade Area of the Americas and CAFTA-DR▮ Proposed free trade area stretching the

length of the entire Western hemisphere ▮ Designed to extend free trade benefits to

additional nations in North, Central, and South America• Central American Free Trade Agreement–DR

(CAFTA-DR) - Trade agreement among the United States, Central American nations, and the Dominican Republic



European Union (EU)

▮ Customs union that is moving in the direction of an economic union by:• Adopting a common currency• Removing trade restrictions• Permitting free flow of goods and workers

throughout the member nations

▮ Goal is to remove all barriers to free trade among its members



Figure 8.2 - The 27 Members of the European Union



Going Global

▮ Reasons for marketers to go global• Saturation of the target market • Strong domestic market share• Globalization of customers• New customers in emerging markets• Globalization of competitors• Reduced trade barriers• Advances in technology• Enhanced customer responsiveness


Chapter 8 Global MarketingStrategies for Entering Foreign

Markets▮ Three basic choices• Importing and exporting• Contractual agreements such as franchising,

licensing, and subcontracting• International direct investment



Figure 8.3 - Levels of Involvement in Global Marketing



Importing and Exporting

▮ Decision to import, or bring in foreign goods to sell domestically or use as component parts, depends on:• Ability of supplier to maintain quality• Flexibility in filling orders that vary• Response time in filling orders• Total costs



Importing and Exporting

▮ First-time exporters can reach foreign customers through:• Export-trading companies • Export-management companies• Offset agreement



Franchising

▮ Contractual arrangement in which a wholesaler or retailer agrees to meet the operating requirements of a manufacturer or other franchiser

▮ Benefits are risk reduction, standardized operations, and greater recognizability

▮ Success depends on ability to adapt to local customer preferences



Foreign Licensing

▮ Agreement that grants foreign marketers the right to distribute a firm’s merchandise or to use its trademark, patent, or process in a specified geographic area

▮ Gives access to local partner’s marketing information and distribution channels, and protection from legal barriers

▮ Allows quick entry into a foreign market with a known product



Subcontracting

▮ Contractual agreements that assign the production of goods or services to local or smaller firms

▮ Can prevent mistakes involving local culture and regulations

▮ Can provide protection from import duties



International Direct Investment

▮ High involvement and high risk are the major characteristics

▮ Firms choosing this method often have a competitive advantage

▮ Several forms• Acquisition• Joint venture



From Multinational Corporation to Global Marketer▮ Multinational corporation - Significant

operations and marketing activities outside its home country• Examples: General Electric, Siemens, Mitsubishi

▮ Important changes since 1960• No longer exclusively U.S. based• Multinationals no longer think of their foreign

operations as mere outsourcing appendages



From Multinational Corporation to Global Marketer▮ Employ large foreign workforces relative to

American staffs▮ Reflect interdependence of world

economies, growth of international competition, and globalization of world markets



Developing an International Marketing Strategy▮ Global marketing strategy - Standardized

marketing mix with minimal modifications that a firm uses in all of its domestic and foreign markets• Can effectively market some goods and services

to segments in many nations that share cultures and languages

• Can be highly effective for luxury products that target upscale consumers everywhere

• Major benefit is its low cost to implement



Developing an International Marketing Strategy▮ Multidomestic marketing strategy -

Application of market segmentation to foreign markets by tailoring the firm’s marketing mix to match specific target markets in each nation



Figure 8.4 - Alternative International Product and Promotional Strategies


Chapter 8 Global MarketingInternational Distribution

Strategy▮ Marketers must set up proper channels and

anticipate extensive physical distribution problems

▮ A distribution decision involves two steps• The firm must decide on a method of entering

the foreign market• It must determine how to distribute the

product within the foreign market through that entry channel



Pricing Strategy

▮ Competitive, economic, political, and legal factors can limit pricing decisions

▮ Adaptation to local markets▮ Emergence of commodity marketing

organizations



Countertrade

▮ Form of exporting whereby goods and services are bartered rather than sold for cash

▮ May be imposed in less developed nations that lack sufficient foreign currency to obtain goods and services they want

▮ Way to control balance-of-trade problems



The United States as a Target for International Marketers▮ U.S. is an inviting target for foreign

companies▮ Increasingly, foreign multinationals invest in

U.S. assets as they seek to produce goods locally and control distribution channels



Strategic Implications of Marketing in the 21st Century▮ Marketers are pioneers in bringing new

technologies to developing nations▮ Greatest competitive advantage belongs to

marketers who capitalize on the similarities of their target markets and adapt to the differences

▮ New and better products in developing markets will create and maintain relationships for the future



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Chapter 8 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,...

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