Global Markets

1
Global Markets
2
World Trade

• U.S., Europe, Canada, China, Japan together are
  about 2/3 of world trade
• Not all trade is for money
• Countertrade The practice of using barter
  rather than money for making global sales
• Popular with Eastern European nations (rice for
  corn)
• Volvo of North America traded Volvos for oil with
  Siberia, then sold oil for cash and paid for U.S.
  ads

3
World Trade

• The argument for free trade Trade Feedback
  Effect
• As exports rise, its national output and income
  rise, leading to more imports. This demand for
  imports stimulates exports of other countries.
  Increased demand for exports increases their
  economic activity, creating more income,
  stimulating their need for more imports.

4
World Trade

• U.S. Perspective
• World leader of Gross Domestic Product (GDP)
• Monetary value of all goods and services produced
  in a country during one year
• Among leaders in world exports
• Aerospace, chemical, office equipment,
  information technology, pharmaceutical,
  telecommunications, professional services
• Has decreased over the last 30 years
• World imports have increased

5
World Trade

• U.S. Perspective
• Balance of Trade
• The difference between monetary value of a
  nations exports and imports
• U.S. has balance of trade deficit
• Imports have exceeded exports since 1975
• Imports and exports are 10 to 15 times what it
  was in 1970s

6
World Trade

• U.S. Perspective
• Canada, Mexico, and Japan are largest importers
  of U.S. goods (44)
• Canada, China, Mexico, and Japan are largest
  exporters to U.S.
• Japan, South Korea, and China are about 80 of
  the total U.S. balance of trade deficit

7
Borderless Economic World

• Trends influencing landscapes of global marketing
• Decline of economic protectionism by individual
  countries
• Formal economic integration and free trade among
  nations
• Global competition among global companies for
  global customers
• Networked marketspace

8
Borderless Economic WorldDecline of Economic
Protectionism

• Protectionism is the practice of shielding one or
  more industries within a countrys economy from
  foreign competition through the use of tariffs or
  quotas.
• Tariffs are a government tax on goods or services
  entering a country, primarily serve to raise
  prices on imports.
• Average tariff on manufactured goods is 4
• Substantial effect on world trade and prices
• Japan tariff on U.S. rice imports costs Japanese
  consumers 6 billion annually

9
Borderless Economic World Decline of Economic
Protectionism

• Quotas are restrictions placed on amount of a
  product allowed to enter or leave a country.
• Mandated or voluntary, legislated or negotiated
  by govt
• U.S. has sugar quota to protect domestic producers

10
Borderless Economic World Decline of Economic
Protectionism

• General Agreement on Tariffs and Trade
• International treaty that limits barriers and
  promotes world trade through reduction of tariffs
• Did not address nontariff trade barriers, caused
  disputes among nations
• World Trade Organization
• Created to address more broad trade issues
• 147 member countires, 90 of world trade
• Sets rules to govern member trade
• Hear and decide trade disputes among members

11
Borderless Economic WorldRise of Economic
Integration

• Countries with similar economic goals formed
  trade groups or signed agreements to promote free
  trade
• European Union
• 25 member countries eliminated barriers to trade
  across borders
• 380 million consumers, combined GDP larger than
  the U.S.
• 12 countries adopted a common currency, the euro
• Dont have to market products nation by nation
  any longer (same product, same price)

12
Borderless Economic World Rise of Economic
Integration

• North American Free Trade Agreement
• Lifted many trade barriers between Canada,
  Mexico, and U.S.
• 400 million consumers
• Negotiations to create a 34 country free trade
  area including U.S., Canada, Mexico, Latin
  America, Caribbean countries
• Stimulated trade flows among members as well as
  cross-border retailing, manufacturing, and
  investment

13
Borderless Economic World Rise of Economic
Integration

• Asian Free Trade Agreements
• Japan, Hong Kong, Singapore, South Korea, Taiwan,
  Thailand, Malaysia, and Indonesia
• Less formal, but have reduced tariffs among these
  countries

14
Borderless Economic WorldGlobal Competition
Among Global Companies for Global Consumers

• Created by lack of borders among trade
• Global Competition exists when firms originate,
  produce, and market products and services
  worldwide
• Soft drinks, cosmetics, cereals
• Pepsi vs. Coca-Cola

15
Borderless Economic World Global Competition
Among Global Companies for Global Consumers

• Global Companies
• International Firms market their
  products/services in foreign countries the same
  as they do in their home country
• Avon sells their products using the same
  marketing strategy in Asia, Europe, and South
  America pretty much the same as they do in the
  U.S.

16
Borderless Economic World Global Competition
Among Global Companies for Global Consumers

• Global Companies
• Multinational Firms view the world as consisting
  of unique parts and markets to each part
  differently
• Multidomestic marketing strategy have as many
  different product variations, brand names, and
  advertising programs as countries in which they
  do business
• Basically the same product idea, just different
  brand names, product variations, and marketing
  strategies
• Mr. Clean is Mr. Proper in Europe, Africa, and
  Middle East

17
Borderless Economic World Global Competition
Among Global Companies for Global Consumers

• Global Companies
• Transnational Firms view the world as one market
  and emphasizes cultural similarities across
  countries or universal customer needs and wants
  more than differences
• Global marketing strategy practice of
  standardizing marketing activities when there are
  cultural similarities and adapting them when
  cultures differ
• Global brand a brand marketed under same name
  in multiple countries with similar centrally
  coordinated marketing programs

18
Borderless Economic World Global Competition
Among Global Companies for Global Consumers

• Global Consumers
• Consist of consumer groups living in many
  countries or regions of the world who have
  similar needs or seek similar features and
  benefits from products or services

19
Borderless Economic WorldEmergence of a
Networked Global Marketplace

• Internet technology
• Exchange of goods, services, and information from
  companies anywhere to customers anywhere at any
  time and at a lower cost

20
Global Environmental Scan

• Three kinds of uncontrollable environmental
  variables that are very different than domestic
  markets
• Cultural Diversity
• Economic Considerations
• Political-Regulatory Climate

21
Global Environmental ScanCultural Diversity

• To create beneficial exchange relationships with
  global consumers, marketers must be sensitive to
  cultural differences of different societies
• Cross-cultural Analysis
• The study of similarities and differences among
  consumers in two or more nations or societies,
  involves understanding of values, customs,
  symbols, and languages

22
Global Environmental ScanCultural Diversity

• Values
• Represent personally or socially preferable modes
  of conduct or states of existence that tend to
  persist over time
• McDonalds does not sell beef in India
• Cultural values influence behavior

23
Global Environmental ScanCultural Diversity

• Customs
• What is considered normal and expected about the
  way people do things in a specific country
• Japanese women give Japanese men chocolate on
  Valentines Day
• Business gifts are expected in many countries
• Japanese business executives listen more in
  negotiations
• Germans dress up more, muted business suits are
  appropriate for most meetings

24
Global Environmental ScanCultural Diversity

• Cultural Symbols
• Things that represent ideas and concepts
• Important because different objects may mean
  different things in different countries
• Semiotics is the study of symbols
• North Americans think superstitious about 13,
  Japanese think the same way about 4
• A thumbs-up sign is positive in U.S., offensive
  in Russia and Poland

25
Global Environmental ScanCultural Diversity

• Language
• Must know the language and also the slang
• About 100 official languages, but about 3,000
  different languages are spoken
• Principal languages globally are English, French,
  and Spanish
• Back translation is where a translated word or
  phrase is retranslated into the original language
  by a different interpreter to catch errors

26
Global Environmental ScanCultural Diversity

• Cultural Ethnocentricity
• The belief that aspects of ones culture are
  superior to anothers
• Consumer Ethnocentrism
• Tendency to believe that it is inappropriate,
  indeed immoral, to purchase foreign-made products
• Unpatriotic, harm domestic industries, cause
  domestic unemployment
• Makes global marketing more difficult

27
Global Environmental ScanEconomic Considerations

• Includes
• Compare economic development
• Assessment of economic infrastructure
• Measurement of consumer income
• Recognition of currency exchange rates

28
Global Environmental Scan Economic Considerations

• Stage of Economic Development
• Two classifications of economic development
• Developed countries have somewhat mixed economies
• Private enterprise dominates, substantial public
  sectors as well
• U.S., Canada, Japan, most of Western Europe
• Developing countries are moving from agriculture
  to industrial economy
• Already made the move (Brazil, China, Israel)
• Locked in pre-industrial (Sri Lanka, Tanzania)

29
Global Environmental Scan Economic Considerations

• Economic Infrastructure
• A countrys communications, transportation,
  financial, and distribution systems

30
Global Environmental Scan Economic Considerations

• Consumer Income and Purchasing Power
• Household income varies between nations
• As middle-income households increase, the greater
  the nations purchasing power tends to be

31
Global Environmental ScanEconomic Considerations

• Currency Exchange Rates
• Price of one countrys currency expressed in
  terms of another countrys currency.
• When foreign currencies can buy more U.S.
  dollars, U.S. products are less expensive for the
  foreign consumer

32
Global Environmental ScanPolitical-Regulatory
Climate

• Political Stability
• Internal political problems
• Terrorism
• War
• Trade Regulations
• Rules that govern business practices (these are
  trade barriers)
• All commercials in Malaysia have to be made in
  Malaysia
• Auto replacement parts in Japan have to be
  Japanese

33
Global Market-Entry Strategies

• Exporting
• Licensing
• Joint Venture
• Direct Investment

34
Global Market-Entry StrategiesExporting

• Exporting is producing goods in one country and
  selling them in another country.
• Allows a company to make the least number of
  changes to product, organization, corporate goals
• Provides less local employment than other ways of
  entry

35
Global Market-Entry StrategiesExporting

• Indirect Exporting is when a firm sells its
  domestically produced goods in a foreign country
  through an intermediary.
• Little commitment, little risk, little profit
• Ideal for those with no overseas contacts
• Direct Exporting is when a firm sells its
  domestically produced goods in a foreign country
  without intermediaries.
• Believe that they will have large amount of sales
• More risk, potentially more profit
• Main entry strategy for small-medium companies

36
Global Market-Entry StrategiesLicensing

• Licensing is where a company offers the right to
  a trademark, patent, trade secret, or other
  similarly valued item of intellectual property in
  return for a royalty or a fee.
• Low risk, capital-free entry into foreign country
• Foreign licensee gets competitive advantage,
  foreign country gets employment opportunity

37
Global Market-Entry Strategies Licensing

• Disadvantages
• Lose control of product
• Reduces potential profits
• Creates its own competition
• Reputation may be harmed

38
Global Market-Entry Strategies Licensing

• Contract manufacturing
• U.S. company contract with foreign firm to
  manufacture products according to stated
  specifications, then sold in that country or
  shipped to U.S. to be sold
• Contract Assembly
• U.S. company send products to foreign country and
  they assemble them into final product
• In both, the U.S. firm gets lower work wages and
  the foreign country gets employment

39
Global Market-Entry Strategies Licensing

• Franchising
• Fastest growing market-entry strategy
• McDonalds is a global franchiser

40
Global Market-Entry StrategiesJoint Venture

• Joint ventures are where a foreign company and a
  local firm invest together to create a local
  business.
• Share ownership, control, profits
• Advantages
• One company doesnt have to enter market alone
  (may not have the resources alone)
• Foreign govt may require a joint venture
• Disadvantages
• Disagreements between the two companies

41
Global Market-Entry StrategiesDirect Investment

• Direct Investment is where a domestic firm
  invests in and owns a foreign subsidiary or
  division.
• Big commitment from company
• Usually follows one of the other market-entry
  strategies

42
Worldwide Marketing Program

• Product
• Product extension is selling the same product in
  all countries
• Works when target market is alike, shares same
  needs and uses for product
• Coca-Cola, Levis, Gillette razors Levi's
  webpage
• Product adaptation is when the product is changed
  is some way to make it more appropriate for a
  foreign country.
• Gerber baby food (rabbit meat in Poland),
  Maybelline make-up

43
Worldwide Marketing Program

• Product
• Product invention is when a totally new product
  is created for a certain country.
• Promotion
• Identical promotional strategy is usually used
  for product extension and product adaptation
  strategies.
• Can adapt message for certain countries
• Can use a dual adaptation strategy by modifying
  both product and promotional strategies

44
Worldwide Marketing Program

• Distribution (Place)
• Usually determined by the foreign countrys stage
  of economic development
• Pricing
• Some countries impose considerable restraints on
  pricing
• German officials told Wal-Mart that prices were
  too low
• Economic factors (production costs, selling,
  tariffs, transportation) affect global pricing

45
Worldwide Marketing Program

• Pricing
• Can receive fines/penalties
• Dumping is when a firm sells a product in a
  foreign county below its domestic price or below
  its actual cost.
• Used to build market share
• Cant be sold domestically, want to get rid of
• Foreign companies can set large tariffs if they
  suspect this