Articles synopsis paper
elizabethchie
MKTG10_IE_Ch05_PPT.ppt*
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MKTG10
Lamb, Hair, and McDaniel
Chapter 5
Developing a
Global Vision
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Chapter 5 Developing a Global Vision
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Discuss the importance of global marketing
Rewards of Global Marketing and the
Shifting Global Business Landscape
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Chapter 5 Developing a Global Vision
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Rewards of Global Marketing
Recognizing and reacting to international marketing opportunities
Using effective global marketing strategies
Being aware of threats from foreign competitors
Note: Over the past two decades, world trade has climbed from $200 billion a year to more than $18 trillion.
Having a global vision means…
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Chapter 5 Developing a Global Vision
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Notes:
Over the past two decades, world trade has climbed from $200 billion a year to more than $18 trillion.
Discussion/Team Activity:
- Discuss ways that small- and medium-sized firms can compete in a global environment with limited resources.
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Importance of Global Marketing to the U. S.
The United States derives 14 percent of gross domestic product (GDP) from world trade, while France, the United Kingdom, and Germany derive 28, 30, and 46 percent of their respective GDPs from world trade.
Gross domestic product (GDP) is the total market value of all final goods and services (tires are not counted twice) produced in a country for a given time period (usually a year or a quarter of a year)
The main types of goods that the United States exports are automobiles, agricultural goods, machines, airplanes, computers, chemicals, and petroleum products
287,000 small and medium size firms export goods from the U.S.
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Chapter 5 Developing a Global Vision
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Job Outsourcing and Inshoring
Outsourcing (sending U.S. jobs abroad) has been highly controversial for several decades
Outsourcing saves money but has also cost Americans jobs
Millions fear losing jobs
Sometimes there is the threat of outsourcing if workers do not accept pay cuts.
Inshoring is returning production jobs to the United States
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Chapter 5 Developing a Global Vision
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Benefits of Globalization
Expands economic freedom
Spurs competition
Raises productivity and living standards
Offers access to foreign capital, global export markets, and advanced technology
Promotes higher labor and environmental standards
Acts as a check on government power
Traditional economic theory says that globalization relies on competition to drive down prices and increase product and service quality. Business goes to the countries that operate most efficiently and/or have the technology to produce what is needed.
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Chapter 5 Developing a Global Vision
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Discuss the impact of
multinational firms on the world economy
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Multinational Firms
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Chapter 5 Developing a Global Vision
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Multinational Firms
Multinational corporations are those heavily engaged in international trade, moving products and services across national boundaries. A multinational company may have several worldwide headquarters.
The role of multinational corporations in developing nations is a subject of controversy. Critics claim that the wrong kind of technology is transferred to developing nations. For example, capital-intensive technology does not substantially increase employment.
Multinationals sometimes support oppressive regimes if it is in their best interests.
Another criticism is that firms take more wealth out than they bring in.
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Stages of Global
Business Development
1
2
4
3
Companies operate in one country and sell into others
Set up foreign subsidiaries to handle sales
Virtual operation
Operate an entire line of business in
another country
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Chapter 5 Developing a Global Vision
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Notes:
Multinationals often develop their global business in stages, as shown on this slide.
Are Multinationals Beneficial?
Pros
- Account for 19 percent of U.S. private Jobs
- Provide 25 percent of private wages
- 74 percent of R&D spending
- 48 percent of total exports of goods
Cons
- Technology is capital intensive and does not necessarily increase employment
- Support governments that benefit the company, not necessarily the country and its people
- May take away more wealth than they generate
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Multinationals are taking a proactive role in being good global citizens to counter criticism
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Chapter 5 Developing a Global Vision
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Global Marketing Standardization
Global
Marketing
Standardization
Multidomestic
strategy
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Global Marketing
Multinational corporations operate somewhat differently in each country, with a strategy of providing different product features, packaging, and advertising.
Communication and technology have made the world smaller, and thus the emergence of global markets for standardized products, as opposed to segmented foreign markets with different products.
This concept is global marketing standardization.
Even though global marketing standardization should enable companies to lower production and marketing costs, success is based on variation, not on offering the same product everywhere. One method of this type of variation is through a multidomestic strategy.
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Describe the external
environment facing
global marketers
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External Environment
Facing Global Marketers
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External Environment Facing Global Marketers
Natural Resources
Demographic Makeup
Economic Development
Culture
Political Structure
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Culture
Culture
The common set of values shared by its citizens that determine what is socially acceptable.
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Chapter 5 Developing a Global Vision
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Culture
Culture underlies the family, the educational system, religion, and the social class system.
A company with no understanding of a country’s culture is doomed to failure. Furthermore, cultural blunders lead to misunderstandings and perceptions of rudeness or even incompetence.
Language is an important aspect when translating product names, slogans, production instructions, and promotional messages.
Each country has its own unique customs and traditions that determine business practices and influence negotiations.
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Chapter 5 Developing a Global Vision
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Culture
Factors to keep in mind when dealing with different cultures:
1. Language and cultural idioms
2. Customs and traditions
3. Values and expectations of sales presentations
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Chapter 5 Developing a Global Vision
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Economic Factors
Developed
Country
Less Developed
Country
Complex, sophisticated
industries
Basic industries
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Notes:
- The second factor in the external environment is the level of economic development in countries where a global marketer operates.
- In general, complex and sophisticated industries are found in developed countries, and more basic industries are found in less developed nations.
The Global Economy
“If America sneezes, then the rest of the world catches a cold.”
Understanding and forecasting growth and demand globally requires understanding countries around the world.
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Economic Development
- The BRIC (Brazil, Russia, India, and China) countries will play an increasingly important role in the global economy for years to come
- By 2020, Brazil’s market will top $1.6 trillion
- The consumer markets in India and China are together projected to top $10 trillion in 2020
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Chapter 5 Developing a Global Vision
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Economic Development:
China and India
- China and India have two of the highest growth rates in the world
- Have the world’s two largest populations, but among highest levels of income disparity
- Both India and China have exploded in spending power, particularly in the upper classes
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Notes:
- Because of their cultural diversity, market success in China and India is rarely possible without finely segmenting the local market in each country.
- Relations between the United States and China have not always been smooth. China is committed to protecting its businesses and asserting new global strength, which has resulted in several legislative stalemates with the United States.
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Political Structure and Actions
No private ownership
Minimal individual freedom
Little central government
Maximum personal freedom
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Notes:
- Government policies run the gamut from no private ownership and minimal individual freedom to little central government and maximum personal freedom. As rights of private property increase, government-owned industries tend to decrease.
- The least regulated and most efficient economies and concentrated among countries with well established common-law traditions, including Australia, Canada, New Zealand, the United Kingdom, and the United States. Others are Singapore and Hong Kong.
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Legal Considerations
Tariff
Quota
Boycott
Exchange Control
Market Grouping
Trade Agreement
A tax levied on goods
Entering a country
Limit on the amount of a
product entering a country
Exclusion of products from
a country
Foreign exchange must be
sold to a control agency
Common trade alliance
An agreement to stimulate
international trade
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Discussion/Team Activity:
Discuss examples of each of the legal considerations described above.
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Political and Legal Considerations
The Uruguay Round made changes
in world trading practices
Entertainment, pharmaceuticals,
integrated circuits, and software
Financial, legal, and accounting services
Agriculture
Textiles and apparel
And created a new trade organization:
The World Trade Organization
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Notes:
- The Uruguay Round, adopted in 1994 and signed by 159 nations, is an agreement to lower trade barriers worldwide. The agreement has reduced tariffs by one-third worldwide and should raise global income by $235 billion annually. The agreement covers services, intellectual property rights, and trade-related investment measures such as exchange controls.
- The Uruguay Round made the following changes in world trading practices:
• Protection of patents, copyrights, and trademarks for 20 years.
• Licensing standards for professionals cannot discriminate against foreign applicants.
• Reduction in farm subsidies in Europe, opening new opportunities for U.S. exports.
• The phase-out of strict quotas limiting imports from developing countries.
• A new trade agreement, the World Trade Organization (WTO), replaced the old General Agreement on Tariffs and Trade (GATT).
Discussion/Team Activity:
1. Discuss the impact of counterfeit products on global trade.
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Uruguay Round
The Uruguay Round, adopted in 1994 and signed by 151 nations, is an agreement to lower trade barriers worldwide. The agreement has reduced tariffs by one-third worldwide and should raise global income by $235 billion annually. The agreement covers services, intellectual property rights, and trade-related investment measures such as exchange controls.
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Notes:
Making successful sales presentations abroad requires a thorough understanding of the country’s culture.
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Chapter 5 Developing a Global Vision
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Uruguay Round
2. The Uruguay Round made the following changes in world trading practices:
• Protection of patents, copyrights, and trademarks for 20 years.
• Licensing standards for professionals cannot discriminate against foreign applicants.
• Reduction in farm subsidies in Europe, opening new opportunities for U.S. exports.
• The phase-out of strict quotas limiting imports from developing countries.
• A new trade agreement, the World Trade Organization (WTO), replaced the old General Agreement on Tariffs and Trade (GATT).
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Notes:
Making successful sales presentations abroad requires a thorough understanding of the country’s culture.
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Chapter 5 Developing a Global Vision
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Doha Round
- Began in 2001
- Highly contentious from the beginning
- Stalemate over lowering tariffs on industrial goods in exchange for cutting U.S. farm subsidies
- More protectionism has made talks increasingly difficult
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Political and Legal Considerations
CAFTA-DR
NAFTA
European Union
Agreements
and Organizations
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Notes:
- The trend toward globalization has resulted in the creation of additional agreements and organizations, specifically the Dominican Republic-Central America Free Trade Agreement, the North American Free Trade Agreement, the European Union, the World Bank, and the International Monetary Fund.
- NAFTA, ratified in 1993, created the world’s largest free trade zone. The agreement includes Canada, the United States, and Mexico. The main impact of NAFTA has been the opening of Mexican markets to U.S. companies. The real question is whether NAFTA can continue to deliver rising prosperity in its member countries.
- The newest trade agreement—the Dominican Republic-Central America Free Trade Agreement—was instituted in 2005. It will reduce tariffs to CAFTA countries—the US, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua.
- The European Union was ratified in 1993 by twelve member countries in Europe. The EU currently has 28 member states. The Greek financial crisis in early 2010 highlighted financial problems in other EU nations such as Hungary, Italy, Portugal, and Spain. The EU Commission and the courts have not always been kind to U.S. multinationals.
Discussion/Team Activity:
- Access the NAFTA Website at http://www.nafta-sec-alena.org/ for more information.
- Discuss the pros and cons of NAFTA as it affects the U.S. economy.
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Agreements and Organizations
The trend toward globalization has resulted in the creation of additional agreements and organizations, specifically the Dominican Republic-Central America Free Trade Agreement, the North American Free Trade Agreement, the European Union, the World Bank, and the International Monetary Fund.
NAFTA, ratified in 1993, created the world’s largest free trade zone. The agreement includes Canada, the United States, and Mexico. The main impact of NAFTA has been the opening of Mexican markets to U.S. companies. The real question is whether NAFTA can continue to deliver rising prosperity in its member countries.
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Agreements and Organizations
The newest trade agreement—the Dominican Republic-Central America Free Trade Agreement—was instituted in 2005. It will reduce tariffs to CAFTA countries—the US, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua.
The European Union was ratified in 1993 by twelve member countries in Europe. The EU currently has 27 member states. The Greek financial crisis in early 2010 highlighted financial problems in other EU nations such as Hungary, Italy, Portugal, and Spain. The EU Commission and the courts have not always been kind to U.S. multinationals.
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5.1
Members of the G-20
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Chapter 2 Strategic Planning for Competitive Advantage
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Notes:
- The World Bank offers low-interest loans to developing nations.
- The International Monetary Fund (IMF) was founded in 1945, one year after the creation of the World Bank, to promote trade through financial cooperation and eliminate trade barriers in the process.
- The Group of Twenty (G20) is a forum for international economic development that promotes discussion between industrial and emerging-market countries on key issues related to global economic stability.
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The G-20
The World Bank offers low-interest loans to developing nations.
The International Monetary Fund (IMF) was founded in 1945, one year after the creation of the World Bank, to promote trade through financial cooperation and eliminate trade barriers in the process.
The Group of Twenty (G20) is a forum for international economic development that promotes discussion between industrial and emerging-market countries on key issues related to global economic stability.
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Demographic Makeup
Marketing Considerations:
Population density
Urban or rural
Personal Income and distribution of wealth
Age
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Natural Resources
Shortages in natural resources create:
International dependencies
Shifts of wealth
Inflation and recession
Export opportunities if resources are abundant
Stimulus for military intervention
- Petroleum shortages have created wealth for oil-producing countries such as Norway, Saudi Arabia, and the United Arab Emirates.
- Petroleum is not the only natural resource that affects international marketing. Warm climate and lack of water mean that many of Africa’s countries will remain importers of foodstuffs. The United States, on the other hand, must rely on Africa for many precious metals.
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Identify the various ways of entering the
global marketplace
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Global Marketing by
the Individual Firm
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Chapter 5 Developing a Global Vision
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Why “Go Global?”
Earn additional profits
Leverage a unique product or technological advantage
Possess exclusive market information
Saturated domestic markets
Excess capacity
Utilize economies of scale
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Notes:
Many firms form multinational partnerships—called strategic alliances—to assist them in penetrating global markets; strategic alliances are examined in Chapter 7.
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5.2
Risk Levels for Five Methods of Entering the Global Marketplace
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Notes:
- Exhibit 5.2 diagrams the risk levels for entering the global marketplace. Five methods of entering global markets are shown on this slide, in order of risk.
- Exporting is usually the least complicated and least risky alternative for entering the global marketplace, however it also has the lowest rate of return. On the other hand, direct investment offers the highest rate of return, but is accompanied by the highest risk.
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Entering the Global Marketplace
Licensing and Franchising
Legal process allowing use of manufacturing/patents/knowledge
Contract
Manufacturing
Private-label manufacturing
by a foreign country
Joint Venture
Domestic firm buys/joins a foreign company to create new entity
Export
Sell domestically produced products to buyers in other countries
Direct Investment
Active ownership of a foreign company/manufacturing facility
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Discussion/Team Activity:
Discuss examples of companies that have entered the global marketplace in each of the ways described on this slide.
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Export Intermediaries
Instead of selling directly to foreign buyers, a company may decide to sell to intermediaries located in its domestic market.
Buyer for Export
Assumes all ownership risks and sells globally for its own account.
Export Broker
Plays the traditional broker’s role by bringing buyer and seller together.
Export Agent
Acts like a manufacturer’s agent for the exporter in the foreign market.
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List the basic elements
involved in developing
a global marketing mix
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The Global Marketing Mix
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The Global Marketing Mix
The first step in creating a marketing mix is developing a thorough understanding of the global target market…
HOWEVER
…global marketing research is conducted in vastly
different environments.
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Product and Promotion
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One Product,
One Message
Product
Adaptation
Promotion
Adaptation
Product
Invention
Same
Message
Change
Message
Same
Product
Change
Product
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Notes:
An important decision is to alter the product or the promotion for the global market.
- One Product, One Message: Global marketing standardization means developing a single product for all markets and promoting it the same way worldwide. However, even a same product/same message strategy may require changes to suit local needs.
- Product Invention: This refers to creating a new product or drastically changing an existing product. For example, consumers in different countries use products differently, requiring different product characteristics.
- Product Adaptation: Products, including packaging, are slightly altered to meet local conditions.
- Promotion Adaptation: The same basic product is maintained, but the promotional strategy is altered to position the product effectively in different countries. Promotion varies in different countries. Language barriers, translation problems, and cultural differences create headaches.
Product
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An important decision is to alter the product or the promotion for the global market.
One Product, One Message: Global marketing standardization means developing a single product for all markets and promoting it the same way worldwide. However, even a same product/same message strategy may require changes to suit local needs.
Product Invention: This refers to creating a new product or drastically changing an existing product. For example, consumers in different countries use products differently, requiring different product characteristics.
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Product
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Product Adaptation: Products, including packaging, are slightly altered to meet local conditions.
Promotion Adaptation: The same basic product is maintained, but the promotional strategy is altered to position the product effectively in different countries. Promotion varies in different countries. Language barriers, translation problems, and cultural differences create headaches.
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Place (Distribution)
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- Adequate distribution is necessary for success in global markets
Lack of distribution infrastructure and cultural differences create problems
- Logistics and shipping costs have been a growing challenge for U.S. companies looking to move production overseas.
- Global trade has added to strains and charges for all forms of transportation.
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Pricing
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Must consider transportation and insurance costs, taxes and tariffs
Determine what customers will spend
Ensure that foreign buyers will pay price
May need to simplify a product to lower price
Don’t assume that low-income countries are willing to accept lower quality
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Exchange Rates…
reflect he price of one’s currency in terms of another country’s currency.
Floating Exchange Rates…
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Dumping
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The sale of an exported product at a price lower than that charged for the same or a like product in the “home” market of the exporter.
Dumping is regarded as a form of price discrimination that can potentially harm the importing nation’s competing industries.
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Dumping
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Dumping may occur as a result of exporter business strategies that include:
Trying to increase an overseas market share
Temporarily distributing products to overseas markets to offset slack demand at home
Lowering unit costs by exploiting large-scale production
Attempting to maintain stable prices during periods of exchange rate fluctuations
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Countertrade
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A common type of countertrade is straight barter. A second form is the compensation agreement where a company provides technology and equipment for a plant, and agrees to take full or partial payment in goods produced by that plant.
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Discover how the Internet is affecting
global marketing
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The Impact of the Internet
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The Impact of the Internet
Opening an e-commerce site puts a company in the international marketplace
The Internet-based economy remains hindered by brick and mortar rules, regulations, and habits
For example, Lands’ End is not allowed to mention its unconditional refund policy on its e-commerce site in Germany because German retailers, which normally do not allow returns after fourteen days, sued and won a court ruling blocking mention of it.
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Social Media
Global marketers use social media:
- Because it is popular around the world
- To understand customers
- For global brand building
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1. Because Facebook, YouTube, and other social media are popular around the world, firms both large and small have embraced social media marketing.
2. Global marketers use social media not only for understanding consumers but also to build their brands as they expand internationally.
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