Chapter Objectives

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Global Marketing
CHAPTER 7
Chapter Objectives
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Describe the importance of global marketing from
the perspectives of the individual firm and the
nation. Identify the major components of the
environment for global marketing. Identify the
basic functions of GATT, WTO, NAFTA, FTAA,
CAFTA-DR, and the European Union.
Identify the alternative strategies for entering
foreign markets. Differentiate between a global
marketing strategy and a multidomestic marketing
strategy.
Describe the alternative marketing mix strategies
used in global marketing. Explain the
attractiveness of the United States as a target
market for foreign marketers.
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 Global trade accounts for 27 percent of the
U.S. gross domestic product.  Exporting
Marketing domestically produced goods and
services in foreign countries.  Importing
Purchasing foreign goods and services.
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THE IMPORTANCE OF GLOBAL MARKETING
 Global marketing is a necessity as demand for
U.S. products increases in fast-growing
economies.  Example U.S. exports to China rose
19 percent in a recent year.  U.S. goods
exports worldwide have risen 78 in the last
decade.  Globalization and the Internet allow
every marketer to be an international
marketer.  Services such as PayPal help small
businesses compete with larger firms.  Firms
also rely on foreign sources for raw materials
for their domestic manufacturing operations.
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SERVICE AND RETAIL EXPORTS  Three of every five
dollars of U.S. GDP comes from services.  Exampl
es Banking, entertainment, and communications.
U.S. manufacturing sector has diminished but is
still important.  U.S. is worlds largest
exporter of retailing and services. Most
profitable sector is business and technical
services such as engineering, financial,
computing, and legal services. BENEFITS OF GOING
GLOBAL New insights into customer behavior,
alternative distribution strategies, and advance
notice of new products.  Enhanced ability to
compete effectively with foreign competition
through increased adaptability to local markets.
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THE INTERNATIONAL MARKETING ENVIRONMENT
 As in domestic markets, marketers must pay
attention to local environmental
factors. INTERNATIONAL ECONOMIC
ENVIRONMENT  Important factors nations size,
per-capita income, stage of economic development,
and infrastructure.  India and China together
contribute one-third of the global
GDP.  Exchange rate Price of one nations
currency in terms of another nations
currency. INTERNATIONAL SOCIAL-CULTURAL
ENVIRONMENT  Marketers must understand a
nations culture and language.
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INTERNATIONAL TECHNOLOGICAL ENVIRONMENT  Internet
technologies connect large and small firms to
world markets.  Asia, Europe, and North America
account for 87 percent of worlds Internet
usage. INTERNATIONAL POLITICAL-LEGAL
ENVIRONMENT  Marketers must be aware of
political conditions and legal environment in
each country in which they compete.
International law regulating international
trade. U.S. law regulating international
trade, including trade regulations, tax laws,
and import/export requirements.  Legal
requirements of other nations in which a company
is doing business.
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TRADE BARRIERS  Tariff Tax levied against
imported goods.  Two types revenue tariffs and
protective tariffs. Administrative
barrierssuch as quotas, restrictive standards
for imports, and export subsidiesand import
license controls  Import quotas Trade
restrictions that limit the number of units of
certain goods that can enter a country for
resale.  Embargo, a complete ban on the import
of a product. Other barriers include subsidies,
limits on foreign ownership, extensive regulatory
barriers, and exchange control. DUMPING  Practice
of selling a product in a foreign market at a
price lower than it commands in the producers
domestic market.
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MULTINATIONAL ECONOMIC INTEGRATION
 Increased substantially since World War
II.  Free-trade areaparticipating nations agree
to free trade among themselves, abolishing
tariffs and trade restrictions.  Custom
unionestablishes a free-trade area and uniform
tariffs for nonmember nations.  Common
marketextends customs union by reconciling all
government trade regulations.  Free trade
critics in the U.S. worry about U.S. jobs
outsourced to other nations.
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GATT AND THE WORLD TRADE ORGANIZATION  General
Agreement on Tarrifs and Trade (GATT)
International trade accord that has helped reduce
world tariffs.  1994 Uruguay round reduced
average tariffs by one-third, or more than 700
billion and established World Trade Organization
(WTO).  149 member nations.  Oversees GATT
agreements, mediates disputes, and works to
further reduce trade barriers. THE NAFTA
ACCORD  North American Free Trade Agreement
(NAFTA) Accord removing trade barriers between
Canada, Mexico, and the United States. NAFTA
partners conduct 2.2 billion in trade daily.
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THE FREE TRADE AREA OF THE AMERICAS AND
CAFTA-DR  FTAA would extend NAFTA negotiations
ongoing. Central American Free Trade
Agreement-DR (CAFTA-DR) already in place and its
provisions are being implemented. THE EUROPEAN
UNION  European Union (EU) Customs union that
is moving in the direction of an economic union
by adopting a common currency, removing trade
restrictions, and permitting free flow of goods
and workers throughout the member
nations.  Includes 500 million people in 25
countries.
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GOING GLOBAL
 Globalization affects everyone in the world in
some way.  Marketers may go global is their
domestic market is saturated or they have strong
domestic share.  Example Example Adidas
purchase of Reebok to better compete with Nike
worldwide and its sponsorship of the 2008
Olympics in Beijing.  Most large firms
participate in global commerce.
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FIRST STEPS IN DECIDING TO MARKET GLOBALLY
 Questions to ask  Will our product sell well
in the new target culture? Is our target
market familiar yet with our product, or our
name? Are we comfortable doing business in
this particular place? How well developed is
the infrastructure? Steps to take Prepare
an international business plan. Conduct
research into foreign markets. Evaluate
distribution possibilities. Evaluate methods
for financing the operation. Learn the rules
and regulations in the new country.
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STRATEGIES FOR ENTERING FOREIGN MARKETS Firms
risk and degree of control both increase with
greater involvement. Export-trading
companiesbuy products from domestic producers
and resell them abroad. Export-management
companiesprovide expertise in reaching foreign
buyers, handle necessary paperwork, and ensure
goods meet local legal requirements. Offset
agreementsmall firm teams with international
company and serves as subcontractor on a large
foreign project.
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CONTRACTUAL AGREEMENTS Provide flexibility and
may be good ways to take services
abroad.  Franchise Contractual arrangement in
which a wholesaler or retailer agrees to meet
the operating requirements of a manufacturer or
other franchiser.  Foreign licensing Agreement
that grants foreign marketers the right to
distribute a firms merchandise or to use its
trademark, patent, or process in a specified
geographic area.  Subcontractingproduction of
goods and services assigned to local
companies. Can prevent misunderstanding of
local culture and regulations and provide
protection from import duties.
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INTERNATIONAL DIRECT INVESTMENT  U.S. has
worlds largest direct investment inflows and
outflows. U.S. direct investment abroad is
more than 2.2 trillion. Direct investment in
U.S. is led by United Kingdom, Japan, the
Netherlands, and Germany. Generally high
involvement, high risk. Can acquire an existing
firm in target country, set up an independent
division, or form joint ventures to share risks,
costs, and management with foreign partners.
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FROM MULTINATIONAL CORPORATIONTO GLOBAL MARKETER
 Multinational corporationhas significant
operations and marketing activities outside its
home country. Examples General Electric,
Siemens, Mitsubishi. Important changes since
1960 No longer exclusively U.S.-based. No
longer see foreign operations as appendages but
rely on them for exchanges of ideas, capital,
and technologies. Often employ large foreign
workforces relative to American staffs. Reflect
interdependence of world economies, growth of
international competition, and globalization of
world markets.
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DEVELOPING AN INTERNATIONALMARKETING STRATEGY
Global marketing strategy. Defines a
standard marketing mix and implements it with
minimal modification in all foreign markets.
Brings advantage of economies of scale and saves
money.  Works well for products with strong
universal appeal and luxury products.
Multidomestic strategy. Customization of
marketing strategies to to effectively reach
individual markets. Allows flexibility for
responding to cultural, geographic, and
language differences.
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INTERNATIONAL PRODUCT AND PROMOTIONAL
STRATEGIES  Five basic strategies that center on
whether to extend domestic product and
promotional strategies or adapt one or both.
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INTERNATIONAL DISTRIBUTION STRATEGY Marketers
must decide how to enter a foreign market and how
to distribute the product in the foreign market
through that entry channel. PRICING STRATEGY
Competitive, economic, political, and legal
factors can limit pricing decisions. Must adapt
to local markets Hindustan Lever offers penny
packets of shampoo to customers in India who
cannot afford an entire bottle. COUNTERTRADE  Cou
ntertrade Form of exporting whereby goods and
services are bartered rather than sold for
cash. Example PepsiCo exchanged 3 billion in
cola for vodka, a cargo ship, and tankers from
the former Soviet Union.
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THE UNITED STATES AS A TARGETFOR INTERNATIONAL
MARKETERS
 U.S. is an inviting target for foreign
companies. Large population, more than 300
million. High median family income, almost
54,000. Low risk to foreign marketers due to
political stability, growing economy, and
favorable attitudes toward foreign investment.
Foreign investment continues to grow. Major
U.S. firms owned by foreign interests include
Random House, Arista Records, Pillsbury, and
Ralph Lauren.