Global Marketing Mix and Finance Math

PLEASE NOTE THE FOLLOWING:

1. Each question is worth 40 points. I suggest using concise language, however; please use an essay format.

2. I suggest you choose those questions regarding topics that interest you most. Please be sure to identify which question, you are answering in your response; and please include your name in the name of the document you submit.

3. Please limit the resulting document to a total of five pages, single-spaced, 12-point font or bigger.

(1) Global Marketing Mix

Firms cannot reasonably expect to standardize all elements of their marketing program across the entire world. Indeed, there are probably diminishing returns upon reaching a certain level of standardization and uniformity worldwide. “The key in global strategy is to find the best balance between local adaptation and global standardization. So global marketing is not a blind adherence to standardization of all marketing elements for its own sake, but a different, global approach to developing marketing strategy and programs that blends flexibility with uniformity.” Global marketing comprises all the elements of the marketing mix – product, price, promotion/advertising, and distribution – conducted across the firms markets worldwide.

(i) Applying the global marketing approach is said to result in cost reduction, enhanced customer preference, improved program effectiveness, and increased competitive leverage. Please explain how this is true. That is, please explain how having a global marketing strategy leads to each of these particular benefits.

(ii) Global advertising is a key approach for economies of scope and generally minimizing the costs of doing business globally. Please describe a strategic approach that firms should follow in order to succeed with global advertising, based on your understanding of chapter 6. You can frame your answer in terms of advertising strategy, execution, and media.

(iii) Ultimately the firm should seek to create and maintain a global brand name. E.g., Coca-Cola, Sony, and BMW all have succeeded by having brand names that are recognized worldwide. What are the advantages of having a global brand name?

Problems:

Show your work for complete credit. 20 points

a. If the rate of inflation in the UK is 6% and the rate of inflation in the US is 4%, given a spot rate of USD 1.46=1 GBP, what is the expected forward rate one year hence? What is the expected rate of appreciation/depreciation for the USD?

b. Suppose a manufacturer of tractors secures a sale to a Chinese company of 480 million USD for delivery in 45 days. If market interest in China is 6.5% and market interest in the US is 3.0 %, spot rate is RMB 6.831=1USD, calculate the expected forward rate and rate of appreciation/depreciation at the time of delivery. Show how the manufacturer can use a forward market hedge to lock in his/her profit.

c. Explain the factors that determine foreign exchange rates and their link to financial markets. In terms of balancing mechanisms, how does covered interest arbitrage ensure market equilibrium?