INTERNATIONAL MARKETING

OM3ACastillo, Princess MaryChua-Chioco, ErnessonLogronio, CamilleNacario, Krista CzarinaPunsalan, KrisandreyaRebagoda, AngelicaVelasco, Marjorie

Definition

• The process of conceptualizing and then conveying a final product or service worldwide with the hopes of reaching the international marketing community. Proper global marketing has the ability to catapult a company to the next level, if they do it correctly. Different strategies are implemented based on the region the company is marketing to. For example, the menu at McDonald's varies based on the location of the restaurant. The company focuses on marketing popular items within the country.

• Global marketing is especially important to companies that provide products or services that have a universal demand such as automobiles and food.

GLOBALIZATIONGlobalization – refers to the processes by which goods,

services, capital, people, information, and ideas flow across national borders.

Global markets are the result of several fundamental changes, such as reductions or eliminations of trade barriers by country governments, the decreasing concerns of distance and time with regard to moving products and ideas across countries, the standardization of laws across borders, and globally integrated production processes.

Growth of the Global Economy: Globalization of Marketing and

Production• Changes in the technology, especially

communications technology, have been the driving force for growth in global markets for decades.

• Today, communication is instantaneous.

Globalization of production also known as offshoring, refers to manufacturers’ procurement of goods and services from around the globe to take advantage of national differences in the cost and quality of various factors of production (e.g., labor, energy, land, capital)

Growth of the Global Economy: Globalization of Marketing and

Production• Many goods and services are provided from

other countries, an activity known as offshoring. (e.g.: Call Center in Delhi, India, experts provide information to an internet service provider in the U.K.

• The growth of global markets also has been facilitated by organizations that are designed to oversee their functioning. Perhaps the most important of these organizations is represented by the General Agreement on Tariffs and Trade (GATT)

Growth of the Global Economy: Globalization of Marketing and

Production

World Bank Group is dedicated to fighting poverty and improving the living standards of people in the developing world.

Assessing Global Markets

Because different countries, with their different stages of globalization, offer marketers a variety of opportunities, firms must assess the viability of various potential market entries.

1. Economic Analysis

• Three Major Economic Factors1. The general economic environment.

2. The population, size and growth rate.

3. Real income

Components of Market Assessment

Market Assessment

Economic Analysis

Infrastructure and Technology Government Actions

Socio-Cultural Analysis

Evaluating the General Economic Environment

Generally, healthy economies provide better opportunities for global marketing expansions, and there are several ways a firm can measure the relative health of a particular country’s economy. Each way offers a slightly different view, and some may be more useful for some products and services than for others.

• Trade Deficit – this happens whrn the country imports more goods than it exports.

• Trade Surplus – a higher level of exports than imports, because it signals a greater opportunity to export products to more to more markets.

• Gross Domestic Product (GDP) – the most widely used of these measures, is defined as the market value of the goods and services produced by a country in a year.

• Gross National Income (GNI) - consists of GDP plus the net income earned from investments abroad (minus any payments made to nonresidents who contribute to the domestic economy).

• Another frequently used measure of an overall economy is the purchasing power parity (PPP), a theory that states that if the exchange rates of two countries are in equilibrium, a product purchased in one will cost the same in the other, if expressed in the same currency.

Economic Analysis

Economic Analysis

General

Economic

Environment

Market Size

And

Population Growth

Real Income

Big Mac Index (January 11, 2012)

Evaluating Market Size and Population Growth Rate • Global population has been growing dramatically since the turn

of the century.

China’s single-child policy means that there are four grandparents and two parents for every child, making the children’s market very attractive.

Evaluating Real Income

2. Analyzing Infrastructure and Technological CapabilitiesThe next component of any market

assessment is an infrastructure and technological analysis. Infrastructure is defined as the basic facilities, services, and installations needed for a community or society to function, such as transportation and communications systems, water and power lines , and public institutions like schools, post offices, and prisons.

Four Components Essential to the Development of An Efficient Marketing

System1. There must be a system to transport goods throughout the

various markets and to consumers in geographically dispersed market places.

2. Distribution Channels must exist to deliver products in a timely manner and at a reasonable cost.

3. The communications system must be sufficiently developed to allow consumers access to information about the products and services available in the market place.

4. The commercial infrastructure consists of the legal, banking, and regulatory systems that allow markets to function.

3. Analyzing Government Actions• Government actions, as well as the actions of non-

governmental political groups, can significantly influence firms’ ability to sell goods and services, because they often result in laws or other regulations that either promote the growth of the global market or close off the country and inhibit growth.

Quota

Boycott

Exchange Control

Trade Agreement

Tariff

Government Actions

Actions

Gov’t Ac-tions

Gov’tActions

• Tariff (also called a duty) is a tax levied on a good imported into a country.

• Quotas – a quota designates the maximum quantity of a product that may be brought into a country during a specified time period.

• Boycott – pertains to a group’s refusal to deal commercially with some organization to protest against its policies. Boycotts might be called by governments or non-governmental organizations, such as trade unions or environmental groups.

• Exchange Control – refers to the regulation of a country’s currency exchange rate, the measure of how much one currency is worth in relation to another.

The decline of the value of the U.S. dollar against the Euro and other important world currencies has made imports to the U.S. more expensive, and exports from the U.S. less expensve.

• Trade Agreements - Marketers must consider the trade agreements to which a particular country is a signatory or the trading bloc to which it belongs . It is an inter-governmental agreement designed to manage and promote trade activities for a specific region, and a trading bloc consists of those countries that have signed the particular trade agreement.

* Some major trade agreements cover two-thirds of the world’s international trade: the European Union (EU), the North American Free Trade Agreement (NAFTA), Central America Free Trade Agreement (CAFTA), Mercosur, and the Association of Southeast Asian Nations (ASEAN)

Trade Agreements

• The EU is an economic and monetary union that currently contains 25 countries.

• The EU represents a significant restructuring of the global market place. By dramatically lowering trade barriers between member nations within the union, the complexion of the global market place has changed.

Analyzing Socio-cultural FactorsCulture, or the set of values, guiding beliefs,

understandings, and ways of doing things shared by members of a society, exist on two levels:

- Visible Artifacts (e.g., behavior, dress symbols, physical settings, ceremonies).

- Underlying Values (thought processes, beliefs, and assumptions).

“Geert Hofstede’s Cultural Dimensions Concept”

1. Power Distance – Willingness to accept social inequality as natural.

2. Uncertainty Avoidance – The extent to which the society relies on orderliness, consistency, structure, and formalized procedures to address situations that arise in daily life.

3. Individualism – Perceived obligation to and dependence on groups.

4. Masculinity – The extent to which the dominant values are male oriented. A lower masculinity ranking indicates that men and women are treated equally in all aspects of society; a higher masculinity ranking suggests that men dominate in positions of power.

5. Time Orientation – Short-versus long term orientation. A country that tends to have a long-term orientation values long-term commitments and is willing to accept a longer time horizon for, say, the success of a new product introduction.

• Business relationships

Business relationships in China often are formalized by just a “handshake”, and trust and honor are often more important than legal arrangements.

Choosing a Global Entry Strategy

When a firm has concluded its assessment analysis of the most viable markets for its products and services, it must then conduct an internal assessment of its capabilities.

Entry Strategies Exporting – Producing goods in one country and

selling them in another. This entry strategy requires the least financial risk but also allows for only a limited return to the exporting firm.

Franchising– A contractual agreement between a firm, the franchisor, and another firm or individual, the franchisee. A franchising contract allows the franchisee to operate a business a retail product or services firm or “B2B provider” using the name and business format developed and supported by the franchisor.

Examples of Franchising McDonald’s Pizza Hut Starbucks Domino Pizza KFC Holiday Inn

Strategic Alliances – refer to collaborative relationships between independent firms, though the partnering forms do not create an equity partnership; that is, they do not invest in one another.

Examples:

- Air Canada - Air New Zealand

- ANA (Japan) - Asiana Airlines (South Korea)- Austrian - BMI (UK)- United (US) - LOT Polish Airlines- Varig (Brazil) - Lufthansa (Germany)- US Airways- Singapore Airlines

Joint Venture – Formed when a firm entering a new market pools its resources with those of a local firm to form a new company in which ownership, control, and profits are shared.

Direct Investment – Requires a firm to maintain 100 percent ownership of its plants, operation facilities, and offices in foreign country, often through the formation of wholly owned subsidiaries.

Choosing a Global Marketing Strategy

Target Market: Segmentation, Targeting and Positioning

Reasons for STP:

1. Firms considering a global expansion have much more difficulty understanding the cultural nuances of other countries.

2. Subcultures within each country also must be considered.

3. Consumers often view products and their role as consumers differently in different countries.

The Global Marketing Mix• Global Product or Services Strategies:

1. Sell the same product or service in both the home country market and the host country.

2. Sell a product or service similar to that sold in home country but include minor adaptations.

3. Sell totally new products or services. • Global pricing Strategies:

Determining the selling price in the global market-place is an extremely difficult task. Many countries still have rules governing the competitive marketplace, including those affect pricing.

• Global Distribution Strategies:

Global distribution networks form complex value chains that involve middlemen, exporters, importers, and different transportation systems. These additional middlemen typically add cost and ultimately increase the final selling price of a product. As a result of these cost factors, constant pressure exists to shorten distribution channels wherever possible.

• Global Communication Strategies:

The major challenge in developing a global communication strategy is identifying the elements that need to be adapted to be effective in the global market place.

Differences in language, customs and culture also complicate marketers’ ability to communicate with the customers in various countries. Language can be particularly vexing for advertisers.

Ethical Issues in Global Marketing

• Many developed countries produce almost two tons of household and industrial waste per person per year that requires proper disposal.

Environmental Concerns:

- The various environmental concerns that exist, people throughout the world are worried about the amount of waste being generated, especially in developed countries.

Global Labor issues:

- Concerns about working conditions and wages paid to factory workers in developing countries, have become increasingly prominent.

• When Western firms enter foreign markets, they must be cognizant of the host country’s culture.

Impact on Host Country Culture:

- The final ethical issue involves “Cultural Imperialism”, or the belief that one’s own culture is superior to that of other nations. Cultural imperialism can take the form of an active, formal policy or a more subtle general attitude.

Summing Up1. What factors aid the growth of globalization?

- Technology, particularly in communications, has facilitated the growth of global markets.

2. How does a firm decide to enter a global market?

- First, firms must assess the general economic environment. Second, firms should assess a country’s infrastructure. Third, firms must determine whether the proposed country has a political and legal environment that favors the business. Fourth, firms should be cognizant of the cultural and sociological differences between their home and host countries and adapt to those differences to ensure successful business relationship.

3. What ownership and partnership options do firms have for entering a new global market?

- Direct Investment, Joint Venture, Strategic Alliance, Domestic Franchise Agreements and Exporting.

4. How do ethical issues impact global marketing practices?

- Firms must be cognizant of the impact their businesses have on the environment. When producing merchandise or employing service personnel in another country, they must be certain that the working conditions and wages are fair and adequate, even if the workers are employed by third party. Finally, marketers must be sensitive to the impact their business has on the culture of the host country.

Source:

http://www.businessdictionary.com/definition/global-marketing.html#ixzz2JhKICkuX

PhD Grewal, Dhruv and PhD Levy, Michael. 2008. Marketing. McGraw-Hill/Irwin