International Marketing

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International Marketing
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Why International Marketing Has Developed . . .
Economic Trends
Demographic Trends
Comparative Advantage
GROWTH OF INTERNATIONAL MARKETING
Leads to outsourcing

• Political Trends
• alliances
• trade agreements

Technology Trends
Cultural and Social Trends
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Colgate Marketers Try New Tactics in Rural India

• Sales growth of selected products in rural India,
  in millions of metric tons
• Toilet soap (45)
• Shampoo (325)
• Toothpaste (93)
• Laundry Detergent (64)

• Percentage of rural households that use
• Electricity 39
• Piped water 18
• Flush toilet 7
• Wood as cooking fuel 77

Literacy rate ??
Update 2007 PG single size products in Mexico,
incr profit
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2007 update
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Economic, Social Political Arguments for Free
Trade

• Product specialization (economies of scale)
• Enlarged markets for company
• Access to new suppliers products
• Larger variety of products to choose
• Competition/lower prices to consumers
• Caution Politics are more powerful than
  economics

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Economic, Social Political Arguments Against
Free Trade

• Protection of an infant industry
• Buy domestic only restrictions (political)
• Need to keep money at home encourage capital
  accumulation
• Maintenance of standard of living real wages

• Conservation of natural resources
• Industrialization of a low-wage nation
• Employment protection
• National defense
• Retaliation bargaining position

Dumping
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Barriers to Trade, Strangle Trade

• Customs administrative procedures
• Tariff classifications (taxes levied on imports)
• Quotas government-set limits on the quantity of
  goods that can be imported over time.
• Patent Restrictions licensing requirements
• Standards (Safety Inspections)
• labeling marking standards
• packaging
• Insurance rates valuation
• subsidies to companies

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What Worries Poor Countries
Miller, Scott. In Trade Talks, the Gloves Are
Off. WSJ, A12, July 15, 2003.
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Farm Subsidies
Prairie Plutocrats. WSJ, A18, Feb. 1, 2002.
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What Worries Rich Countries
Miller, Scott. In Trade Talks, the Gloves Are
Off. WSJ, A12, July 15, 2003.
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Commercial Corruption

• Least Corrupt Most
  Corrupt
• 1. Iceland 70. Egypt/Poland/
• 2. Finland/New Zealand /Saudi Arabia
  
• 4. Denmark 78. China
• 16. Germany
• 17. USA 126. Russia
  
• 18. France 152. Nigeria
• 32. Taiwan 156.
  Haiti/Turkmenistan
• 40. Hungary/Italy 158.
  Bangladesh/Chad

Source Transparency.0rg (July2006)
Surveys-Indices, 2005, Perceptions of 158
countries by employees of multinational firms,
institutions experts.
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Commercial Corruption GDP

• Number Population Gross
  Domestic Product
• of Countries (in millions)
  (trillions of U.S. dollars)
• Free 27 942
  (17) 18.8 (81)
• Partly Free 22 395 ( 7)
  1.1 ( 5)
• Mostly Not Free 13 1,645 (30) 1.9 (
  8)
• Not Free 20 1,974 (36)
  1.1 ( 5)
• Not surveyed 109 546 (10)
  0.2 ( 1)
• __________________________________________________
  __
• 191 5,502
  23.1
• Source Freedom House (Research Institute), 1995
  Survey Findings

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Global EnvironmentConsumer Ethnocentrism

• Affirmative Consumers should be discouraged
  (ex., peer pressure) from purchasing foreign
  products . . (because it adversely affects this
  nations productivity.)
• Negative Consumers should not be discouraged
  from purchasing foreign goods . . (because
  competition will force domestic manufacturers to
  become more efficient and produce higher quality
  products.)

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Consumer Ethnocentrism Made In America

• Consumers that believe American made products
  are better than foreign products by education.
• No college 61
• Some college 45
• College graduate 39
• (Am. Demographics (1986)

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Sweatshops an exploitation of labor and/or a
political and social issue

• Issue Sweatshops Are Better Than No Shops!
• destroying jobs will not alleviate
• poverty ()
• decreases cost of goods (/-)
• human dignity issue, social value(-)

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Kids at Work a political, social economic
issue

• Estimated percentages of children who work
  selected countries (1995)
• Kenya 42
• Bangladesh 30
• Haiti 25
• Turkey 24
• Pakistan 17
• Mexico
  7

Visit www.freethechildren.org or
www.coopamerica.org
Estimated total 246 million
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World Regional Trade Alliances

• GATT -- Dumping
• OECD
• WTO
• OPEC
• NAFTA
• NATO
• CAFTA
• MERCOSUR

Facilitate free trade among members
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Regional Trade Alliances, Markets, and Agreements

• The Common Market of the Southern Cone
  (MERCOSUR)
• An alliance that promotes the free circulation
  of goods, services, and production factors, and
  has a common external tariff and commercial
  policy among member nations in South America

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Regional Trade Alliances, Markets, and Agreements
The North American Free Trade Agreement (NAFTA)
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Regional Trade Alliances, Markets, and Agreements
Pacific Rim Nations
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Global Demographic Forces
Market Size and Growth 6,100,000,000 in 2000
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European Com. Population at a Glance

• Population Growth
• (in millions) 2000 2020
  2000-2020
• Belgium 10.0 10.1 0.1
• Denmark 5.1 4.8
  -0.3
• France 57.2 58.3 1.1
• Germany 59.5 54.7 -4.8
• Greece 10.4 10.7 0.3
• Ireland 4.3 5.2 .9
• UK 56.4 56.1
  -0.3
• Spain 42.2 45.4
  3.2
• Italy 58.6 57.5
  -1.1

Estimated 2 growth Overall
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Population Growth Rates1994 to 2020

• Europe 2
• Peru 10-
• Russia Columbia 19.9
• Canada 2-9.9
• Argentina U.S.A
• Austria China 20
• Brazil

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Some FactsSource CIA World Factbook (2004)
Percentage living on 1 dollar per day Indonesia
8, India 35, China 25
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GlobalEconomic Forces
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A Comparative Economic Analysis

• Country GDP POP Per Capita GDP
• Japan
  34,344
• USA(99) 9.2 trillion 276 million 32,900
• Germany
  25,724
• France
  24,433
• Britain
  24,231
• India 1.2 trillion 919.9 million 1,360
• Iran 0.3 trillion 66.1 million 4,720
• Australia(99) .4 tril
  9,255

SourceWSJ 30May2001,B4
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International Financial Exchanges

• Exchange Rates - indicate the value of one
  nations money in terms of the money of another
  nation
• Foreign Exchange Market - Manufacturers and
  foreign traders want payment in their own
  currencies. Money is exchanged (bought and sold)
  through this market
• Balance of Payments - The flow of funds between
  nations. A favorable balance of payments
  (surplus) exists when more funds come into a
  country than go out.
• Balance of Trade - a total accounting of the
  goods and services bought from and sold to other
  countries

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Balance of Trade Deficit/Surplus

• US (1997) (1999) (2005)
• Exports 932.3 663 bil x
• Imports 1,050 912 bil x
• Deficit 113.7 249 bil. 759bil.

Imports
Exports
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Record Deficit
Ip, Greg. Trade Gap Widens to Record Level.
WSJ, A2, Feb 21, 2003.
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Trans-Atlantic Services Surplus
In Billions Of Dollars
King, Neil Jr. EU Seeks Changes in U.S.
Regulation of Services. WSJ, A3, Feb. 25, 2003.
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Exports and GNP

• Exports as a Percentage of GNP
• USA 7-11
• Japan 13
• United Kingdom 21
• Germany 27
• Canada 29

US imports in 1994 are only slightly bigger now
(11) than they were in 1880 (8).
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Expensive Manpower
Rhoads, Christopher. In Deep Crisis, Germany
Starts To Revamp Vast Welfare State. WSJ, A1,
July 10, 2003.
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Labor Costs
Average Manufacturing Sector Wages in U.S. Dollars
Rhoads, Christopher. Burden of History. WSJ,
A1, December 6, 2002
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Payroll Taxes

• Germany
• France
• Hungary
• Poland
• U K
• U.S.
• Ireland

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48.0
46
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31.1
29.4
24.5
Source EU states are urged to cut taxes, WSJ,
12May2004, A13
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Wake-up Call Customer-service Era Arrives in
Germany, Phone Giant Trying to Change

• of employees per 10,000 phone lines

Economic issue Productivity
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Competitive Index
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Global Social Forces
Cultural values
Religious beliefs
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Examples of Cultural Differences

• A Doggie Bag, Sil Vous Plait (WSJ,5Oct06,D1)
• A free lunch from last nights dinner the
  American Dietetic Assoc. 2002 survey indicates
  91 of Americans take leftovers home occasionally
  32 do it on a regular basis.
• England renaissance era referenced that hosts
  used oversized napkins in those days because they
  ate with their hands but also to provide a huge
  container for leftovers
• SW China Guizhou Province - tables are set with
  chopsticks, napkins doggie bags with a drawing
  of a pooch.

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Examples of Cultural Differences

• Singapore People do not like to waste food or
  money. Taking leftovers is expected.
• Bangkok leftovers are the norm, even scalding
  hot soup is poured into clear plastic bags tied
  with a red rubber band. (WSJ,5Oct06,D1)
• Japan discourages public self expression - 20
  read internet blogs ex. demon wife diaries
  (WSJ. 5Oct.2006,B1)
• Some governments are wary of public criticism.
  Bangkok has monarchy laws Singapore prohibits
  outdoor demonstrations politicians have
  defamation lawsuits to protect their reputations
  from slander.

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Women Hope to improve

• NESCO puts womens illiteracy in Pakistan at
  84.8. Women are barred from engineering and
  medical schools by laws restricting the number of
  female students.

• Tanzania 92 of mens
• Australia 91
• USA 75 (80-2000)
• China 59
• Japan 50 Biggest disparity among
  industrial countries.
• Women perform 60 of worlds work, own 1 of
  worlds land earn 10 of worlds income.

Source WSJ,29Aug1995,A1
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Beer Consumption Per Capita in Liters/InhabitantS
ource World Drink Trends 2000 Ed.
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Comparative Consumption
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Housing Space Per Person

• in square meters
• U.S.
• Germany
• Britain
• Japans target
• France
• Japan

61.8
37.2
35.2
32.0
30.7
25.0
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• Global Corporations operate throughout the world
  as a single entity

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The Fifteen Largest Global Public Corporations
Company Country Business Revenue (
mil.)

• General Electric United States Electrical
  Equip. 90,840
• HSBC Group United Kingdom Banking 48,404
• Royal Dutch/Shell Group Netherlands Energy 128,1
  08
• Ford Motor Company United States Autos
  Trucks 145,348
• General Motors United States Autos
  Trucks 178,174
• Exxon United States International Oil 120,279
• Toyota Japan Automobiles 95,181
• IBM United States Computer Syst. 78,505
• Travelers Group United States Insurance
  37,609
• Citicorp United States Banking 34,697
• Nippon Tel Tel Japan Telecomm. 77,019
• Chase Manhattan United States Banking 30,381
• ING Group Netherlands Financial Serv. 38,724
• ATT United States Telecomm. 51,319
• Philip Morris United States Tobacco 56,114

Composite ranking based on revenues, assets,
profits, and market value. Source The World
Super Fifty, Forbes, July 27, 1998, p. 118.
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Brands that Span the Globe
Branch, Shelly. ACNielsen Gives 43 Brands Global
Status. WSJ, B8, Oct. 31, 2001.
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Customization Versus Globalization of Marketing
Strategy

• Globalization

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Customization Versus Globalization of
International Marketing Strategies

• Customization

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Strategy DecisionsFor Multinational Markets

• Standardized--------------------------Customized
• Marketing Strategy Criteria
• ltSimilarity of Cultures and Customer Behavior?
• ltAccess to shared media product ?
• ltAvailable distribution ?, Buying Power ?, etc...

Successful companies realize a simple truthAll
consumers are not alike
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Alternative Methods of Market Entry and Risk
Levels
Indirect Exporting
Direct Exporting
Direct Investment
Licensing
Joint Ventures
Via domestic export management companies
Franchise or technical contracts
Wholly-owned facilities in host country
Joint ownership of foreign facilities
Via in-house dept. overseas sales
office independent distress
Moderate Risk
Maximum Risk
Minimum Risk
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China Admitted to World Trade Org.

• 60 of 17,000 McDonalds are franchisees
• 66 of 12,000 KFCs

• New franchising system in China
• Offers protection to foreign companies
• China sets and enforces protection rules

WSJ, 1-25-05
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Global Economy

• Ideal goods, services, skills and ideas move
  freely across geographic borders.
• Reality produces global cutthroat competition
  and constant churning forces that may result in
  economic turmoil for some.
• Constant changes such as...
• - Growth and retrenchment.
• - Hiring and firing.
• - Optimism and fear ALL AT THE SAME TIME!

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GlobalEconomy

• Dark Side Of Freer Global Markets
• - Political Backlash From Middle Class (Workers)
  
• Over Growing Job Insecurity
• Freer Global Markets Increase Income Gaps Between
  and Within Nations

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Corporate Bribery...

• 1994 - Foreign Companies used bribes to edge US
  competitors on 45 billion of business deals (US
  Commerce Dept.)
• Major Competitors France 1 , Germany 2,
  Britain, Japan
• Result Foreign Corrupt Practices Act-1994
• Updated 1998 Economic Espionage Act

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WSJ, spring 2007