Marketing chapter 7a understanding and reaching global consumers and market

DYNAMICS OF WORLD TRADE• World Trade Flows – Reflects interdependencies among industries, countries, and regions – Manifests in country, industry, and regional exports and imports... DY

LEARNING OBJECTIVES (LO)

AFTER READING CHAPTER 7, YOU SHOULD BE ABLE TO:

Describe the nature and scope of world trade from a global perspective and its implications for the United States.

LO1

Identify the major trends that have influenced the landscape of global marketing in the past decade.

LEARNING OBJECTIVES (LO)

AFTER READING CHAPTER 7, YOU SHOULD BE ABLE TO:

Name and describe the alternative approaches companies use to enter global markets.

Explain the distinction between standardization and customization when companies craft worldwide marketing programs.

LO5

Slide 7-5

MATTEL’S GLOBAL MARKETING IS

MORE THAN CHILD’S PLAY

 Global Perspective

DYNAMICS OF WORLD TRADE

WORLD TRADE FLOWS LO1

 United States Perspective

DYNAMICS OF WORLD TRADE

Slide 7-6

• World Trade Flows

– Dollar value of world trade has more

than doubled in past decade and will

exceed $12.5 trillion in 2009

– Manufactured gods and commodities

account for 75 percent of world trade

– Service industries represent the other

25 percent

DYNAMICS OF WORLD TRADE

• World Trade Flows

– Reflects interdependencies among industries, countries, and regions

– Manifests in country, industry, and regional

exports and imports

DYNAMICS OF WORLD TRADE

Slide 7-6

• Global Perspective

account for more than two-thirds of

world trade

DYNAMICS OF WORLD TRADE

• United States Perspective

– Exports vs Imports

and services are Canada, Mexico, and

Japan

FIGURE 7-1 World trade flows for goods

and commodities within and between

geographic regions ($ billions U.S.)

7-10

 Porter’s “Diamond”

DYNAMICS OF WORLD TRADE COMPETITIVE ADVANTAGE OF NATIONS LO1

DYNAMICS OF WORLD TRADE

– Demand conditions

• Include both the number and sophistication of domestic customers for an industry’s product

DYNAMICS OF WORLD TRADE

• Competitive Advantage of Nations –

Porter’s “Diamond”

– Related and Supporting Industries

• Firms and industries seeking leadership

in global markets need clusters of class suppliers that accelerate

world-innovation

– Company Strategy, Structure, and Rivalry

• Factors include conditions governing the way a nation’s businesses are

FIGURE 7-2 Porter’s diamond of national

competitive advantage: 4 key elements on

why some countries become world leaders

7-14

DYNAMICS OF WORLD TRADE

• Competitive Advantage of Nations –

“The Dark Side”

– Economic Espionage

• Clandestine collection of trade secrets

or proprietary information about competitors

– Economic Espionage Act (1996)

• Theft of trade secrets by foreign entities

a federal crime in the U.S.

Slide 7-11

Concept Check

1 What is the trade feedback effect?

A: The phenomenon in which a

country’s imports affect its exports

and vice versa.

Concept Check

2 What variables influence why

some companies and industries

in a country succeed globally while others lose ground or fail?

A: (1) factor conditions; (2) demand

conditions; (3) related and supporting

1 Gradual decline of economic

protectionism by individual countries

2 Formal economic integration and free

trade among nations

3 Global competition among global

companies for global customers

4 Development of networked global

marketplace

• Decline of Economic Protectionism

– Practice of shielding one or more

industries within a country’s economy

from foreign competition, usually through

tariffs and quotas

MARKETING IN A BORDERLESS

ECONOMIC WORLD

TREND 1—DECLINE OF ECONOMIC PROTECTIONISM

Tariffs and Trade (GATT)

7-20

FIGURE 7-3 Protectionism hinders world

trade through tariffs and quotas policies of

countries, raising prices and limiting supply

Euro Launch TV Ad

What are the benefits of economic integration?

QuickTime™ and a YUV420 codec decompressor are needed to see this picture.

FIGURE 7-4 The European Union in 2007

consists of 27 countries with more than

500 million consumers

7-24

• A New Reality: Global Competition

among Global Companies for Global

Consumers

Slide 7-21

 Global Companies

• A New Reality: Global Competition

among Global Companies for Global

Consumers

• International Firms

 Extention of domestic Marketing Strategy

• Multinational Firms

• Transnational Firms

 World is one market

 Global Marketing Strategy

 Global Brand

 Multidomestic Marketing Strategy

MARKETING IN A BORDERLESS

ECONOMIC WORLD

TREND 3—GLOBAL COMPANIES

FIGURE 7-A Global companies and

marketing strategy

MARKETING MATTERS

The Global Teenager—A Market of 500 Million Voracious Consumers with $100 Billion to Spend

– Over ten percent of world trade

– From companies anywhere to customers

anywhere at anytime at a lower cost

– Ninety percent of revenue is from B2B

transactions among a dozen countries in

North America, Western Europe, and

Asia/Pacific Rim

Nestlé Website for Peru

What is a global marketspace?

Slide 7-26

Concept Check

1 What is protectionism?

A: Protectionism is the practice of

shielding one or more industries

within a country’s economy from

foreign competition, using through

the use of tariffs or quotas.

Concept Check

2 The North American Free Trade

Agreement was designed to

promote free trade among which

countries?

A: United States; Canada; and Mexico

Slide 7-28

Concept Check

3 What is the difference between a

multidomestic and a global marketing

strategy?

A: A multidomestic marketing strategy

means that firms have as many different

product variations, brand names, and

advertising programs as countries in

which they do business A global

marketing strategy standardizes

marketing activities when there are

cultural similarities and adapts them

when cultures differ.

A GLOBAL ENVIRONMENTAL SCAN

CULTURAL DIVERSITY LO3

•

 Cross-Cultural Analysis

 Values

 Customs

FIGURE 7-B Cultural appreciation

7-36

A GLOBAL ENVIRONMENTAL SCAN

Cultural Diversity

 Customs

expected about the way people

do things

A GLOBAL ENVIRONMENTAL SCAN

 Semiotics – study of the correspondence between

symbols and their role in the assignment

of meaning to people

A GLOBAL ENVIRONMENTAL SCAN

CULTURAL DIVERSITY LO3

A GLOBAL ENVIRONMENTAL SCAN

A GLOBAL ENVIRONMENTAL SCAN

CULTURAL DIVERSITY LO3

 Language

Slide 7-46

McDonald’s in Hong Kong and Kuwait

What global market-entry strategy and

why?

Hewlett-Packard Why use multilingual ads in a single country?

A GLOBAL ENVIRONMENTAL SCAN

CULTURAL DIVERSITY LO3

Consumer Ethnocentrism

7-44

A GLOBAL ENVIRONMENTAL SCAN

• Economic Considerations

 Stage of Economic Development

of moving from agricultural to

industrial economy

A GLOBAL ENVIRONMENTAL SCAN

ECONOMIC CONSIDERATIONS

LO3

 Stage of Economic Development

• Developed Countries: Japan

A GLOBAL ENVIRONMENTAL SCAN

• Economic Considerations

 Measurement of Consumer Income and

Purchasing Power

 Recognition of Currency Exchange Rates

in terms of another country’s currency

FIGURE 7-5 A comparison of the

purchasing power differences around the

world

7-49

A GLOBAL ENVIRONMENTAL SCAN

POLITICAL-REGULATORY CLIMATE

LO3

 Political Stability

 Trade Regulations

Slide 7-41

Concept Check

Q: When foreign currencies buy

more U.S dollars, are U.S

products more or less expensive for a foreign

consumer?

A: less expensive

FIGURE 7-6 Alternative global market-entry

strategies

The amount of financial commitment,

risk, marketing control, and potential

profit increases as firm moves from

exporting to direct investment

GLOBAL MARKET-ENTRY

STRATEGIES

1 Exporting – producing goods in one

country and selling them in another

– Indirect – selling domestically produced

goods in a foreign country through an intermediary

• Least commitment, risk, and profit

– Direct – selling domestically produced

goods in a foreign country without

GLOBAL MARKET-ENTRY

STRATEGIES

Slide 7-42

2 Licensing – company offers right to a trademark,

patent, trade secret, or other similarly valued items of

intellectual property in return for a royalty or a fee

– Advantages

• Low risk, allowing licensee to gain information that

allows it to start with a competitive Advantage

• Chance to enter a foreign market at virtually no cost

• Foreign country gains employment by having the

product manufactured locally – Disadvantages

• Gives up control of its product and reduces potential

profits

• May be creating own competition

• If licensee is poor choice, the name or reputation of the

company may be harmed

GLOBAL MARKET-ENTRY

STRATEGIES

2 Licensing, cont – two variations of

licensing represent alternative ways to

produce a product in a foreign country

– Contract Manufacturing

– Contract assembly

Third variation of licensing:

– Franchising

• Fastest growing market entry strategy

• More than 35,000 franchises of U.S firms in foreign

countries

GLOBAL MARKET-ENTRY

STRATEGIES

Slide 7-42

3 Joint Venture – foreign company and

local firm invest together to create a local

business Share ownership, control, and

profits of the new company.

– Advantages

• One company may not have financial, physical, or

managerial resources to enter foreign market alone

• Government may require, or strongly encourage a joint

venture before it allows a foreign company to enter its market

GLOBAL MARKET-ENTRY

STRATEGIES

4 Direct Investment – domestic firm

investing in, and owning, a foreign

subsidiary or division Often follows one of

the other three market-entry strategies.

– Advantages

• Cost savings, better understanding of local market

conditions, and fewer local restrictions

– Disadvantages

Levels of Involvement in International Marketing

Concept Check

1 What mode of entry could a

company follow if it has no

previous experience in global

marketing?

A: Indirect exporting through

intermediaries

Slide 7-50

Concept Check

A: In licensing, the firm offers the

right to a trademark, patent, or

trade secret in return for a royalty

or fee In a joint venture, a foreign

and a local firm invest together to

produce some product or service

The two companies share

ownership, control, and profits of

the new entity.

2 How does licensing differ from a

joint venture?

 Product Extension

CRAFTING A WORLDWIDE MARKETING PROGRAM PRODUCT and PROMOTION STRATEGIES LO5

 Product Adaptation

Product Invention

CRAFTING A WORLDWIDE MARKETING PROGRAM

– Product Invention

• Inventing totally new products designed

to satisfy common needs across countries

 Communication Adaptation

CRAFTING A WORLDWIDE MARKETING PROGRAM PROMOTION STRATEGIES LO5

 Dual Adaptation

 Identical Message

Slide 7-52

FIGURE 7-7 Five product and promotion

strategies for global marketing

CRAFTING A WORLDWIDE MARKETING PROGRAM

• Distribution Strategy

– Availability and quality of retailers and

wholesalers as well as transportation,

communication, and warehousing facilities

are determined by a country’s economic

development.

– The sophistication of a country’s

FIGURE 7-8 Channels of distribution in

global marketing

7-69

 Countries Impose Pricing Constraints

CRAFTING A WORLDWIDE MARKETING PROGRAM DISTRIBUTION AND PRICING STRATEGIES LO5

 Channels Usually Long and Complex

 Prices May Be Too High or Too Low

CRAFTING A WORLDWIDE MARKETING PROGRAM

Slide 7-51

• Pricing Strategy

– Dumping – firm sells product in a foreign

country below its domestic price or below

its actual cost (low pricing)

– Gray market – products sold through

unauthorized channels of distribution (high

prices)

Concept Check

A: (1) in the same form as in its home

market (product extension); (2)

with some changes (product

adaptation); and (3) as a totally new

1 Products may be sold in three

ways What are they?

Slide 7-57

Concept Check

2 What is dumping?

A: Dumping is when a firm sells a

product in a foreign country

below its domestic price or

below its actual cost.

Countertrade is the practice of

using barter rather than money

for making global sales

Gross Domestic Product (GDP)

Gross domestic product (GDP)

is the monetary value of all goods

and services produced in a

country during one year

7-75

Balance of Trade

Balance of trade is the practice

of exchanging goods and services for other goods and services

rather than for money

Economic Espionage Act (1996)

The Economic Espionage Act

(1996) is a law that makes the

theft of trade secrets by foreign

entities a federal crime in the

United States

7-77

Protectionism is the practice of

shielding one or more industries

within a country’s economy from

foreign competition through the

use of tariffs or quotas

Tariffs are a government tax on

goods or services entering a

country, primarily serving to

raise prices on imports

7-79

A quota is a restriction placed on

the amount of a product allowed

to enter or leave a country

World Trade Organization (WTO)

The World Trade Organization

(WTO) is a permanent institution that

sets rules governing trade between

its members through panels of trade

experts who decide on trade disputes

between members and issue binding

decisions.

7-81

Global Competition

Global competition exists when

firms originate, produce, and

market their products and

services worldwide

Strategic Alliances

Strategic alliances are

agreements among two or more

independent firms to cooperate

for the purpose of achieving

common goals

7-83

Multidomestic Marketing Strategy

A multidomestic marketing

strategy involves multinational

firms that have as many different

product variations, brand names,

and advertising programs as

countries in which they do

business

Global Marketing Strategy

A global marketing strategy

involves transnational firms that

employ the practice of

standardizing marketing activities

when there are cultural similarities and adapting them when cultures

differ

7-85

Global Brand

A global brand is a brand

marketed under the same name

in multiple countries with similar

and centrally coordinated

marketing programs

Global Consumers

Global consumers are 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

7-87

Cross-Cultural Analysis

Cross-cultural analysis involves

the study of similarities and

differences among consumers in

two or more nations or societies

Values are a society’s personally

or socially preferable modes of

conduct or states of existence

that tend to persist over time

7-89

Customs are what is considered

normal and expected about the

way people do things in a specific

country

Foreign Corrupt Practices Act (1977)

The Foreign Corrupt Practices Act

(1977) is a law, amended by the

International Anti-Dumping and Fair

Competition Act (1998), that makes it

a crime for U.S corporations to bribe

an official of a foreign government or

political party to obtain or retain

business in a foreign country.

7-91

Cultural Symbols

Cultural symbols are things that

represent ideas and concepts

Semiotics is a field of study that

examines the correspondence

between symbols and their role

in the assignment of meaning for

people

7-93

Back Translation

Back translation is the practice

where a translated word or phrase

is retranslated into the original

language by a different interpreter

to catch errors