Lecture Global marketing management (7th edition): Chapter 1 - Masaaki Kotabe, Kristiaan Helsen

Chapter globalization imperative, in this chapter, the following content will be discussed: Why global marketing is imperative, globalization of markets: convergence and divergence, evolution of global marketing, appendix: theories of international trade and the multinational enterprise.

Chapter Overview

1 Why Global Marketing is Imperative

2 Globalization of Markets: Convergence and

Divergence

3 Evolution of Global Marketing

4 Appendix: Theories of International Trade and the

Multinational Enterprise

• Products have been traded across borders

throughout recorded civilization, extending back

beyond the Silk Road that once connected East

with West from Xian (China) to Rome (Italy)

• Total world merchandise trade volume grew from $6

trillion in 2000 to $16.3 trillion in 2008

• Despite the sharp drop of world merchandise

exports down to $12.5 trillion in 2009, total

merchandise trade volume bounced back to

US$15.2 trillion in 2010 and grew steadily to

• Big Emerging Markets (BEMs): In the next ten to twenty years, BEMs such as the CEA (China, HK

area, Taiwan), India, CIS (Russia, Central Asia,

Caucasus states), S Korea, Mexico, Brazil,

Argentina, S Africa, Central Europe region, Turkey, and ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore,

Thailand, Vietnam) will provide many opportunities

in global business

1 Why Global Marketing is Imperative

• Saturation of domestic markets: Domestic-market saturation in the industrialized parts of the world and marketing opportunities overseas are evident in

global marketing

• Emerging markets

• Unfavorable domestic economy

• Global competition: Competition around the world and proliferation of the Internet have been on the

rise and are now intensifying

1 Why Global Marketing is Imperative

• Global cooperation: Global competition brings

global cooperation

• Internet revolution: The Internet and electronic

commerce (e-commerce) are bringing major

structural changes to the way companies operate worldwide

• The term global epitomizes both the competitive

pressure and expanding market opportunities

• Whether a company operates domestically or

across national boundaries, it can no longer avoid competitive pressures from around the world

Exhibit 1-1: Change in World’s 100 Largest

Companies and Their Nationalities

2 Globalization of Markets:

Convergence and Divergence

• Per capita income is an important determinant of

consumer buying behavior

• When a country’s per capita income is less than

$10,000, much of the income is spent on food and other necessities, and very little disposable income remains

• As a country’s per capita incomes reaches $20,000, the disposable portion of income increases

dramatically

• This increased disposable income level results in

increased convergent pressures on consumer

buying behavior

2 Globalization of Markets:

Convergence and Divergence

• People with higher incomes tend to enjoy similar

educational levels, desires for material positions,

ways of spending leisure time, and aspirations for

the future

• Globalization does not suffocate local cultures, but rather liberates them from the ideological conformity

of nationalism, with consumers becoming more

receptive to new things

• Consumers also have a wider, more divergent

“choice set” of goods and services to choose from

• In other words, the divergence of consumer needs is taking place at the same time

2 Globalization of Markets:

Convergence and Divergence

• International trade consists of exports and imports

• International business includes international trade and foreign production

• Extensive international penetration of companies is called global reach

• International trade and foreign production activities are managed on a global basis

• Growth of Multinational Corporations (MNCs) and intra-firm trade is a major aspect of global markets

2 Globalization of Markets:

Convergence and Divergence

Who manages international trade?

– Intra-firm trade: Trade between MNCs and their foreign affiliates Comprises 34 percent of world trade

– An additional 33 percent of world trade was

exports between MNCs and their affiliates

– In other words, two-thirds of world trade is

managed one way or another by MNCs

3 Evolution of Global Marketing

What is marketing?

• Marketing involves creating, communicating,

delivering, and exchanging offerings that have value for customers, clients, partners, and society at large

• Marketing involves customer satisfaction and their current and future needs

• Marketing is much more than selling and involves the entire company

• Within marketing strategies, companies are always under competitive pressure to move forward both

reactively and proactively.

3 Evolution of Global Marketing

• Five stages in the evolution of global marketing

(see Exhibit 1-2):

1 Domestic Marketing (domestic focus; home country

customers; ethnocentric orientation).

2 Export Marketing (indirect vs direct exporting; country choice, exports; ethnocentric orientation; home country customers).

3 International Marketing (markets in many countries;

polycentric orientation; use of multidomestic marketing when customer needs are different across national

markets)

3 Evolution of Global Marketing

4 Multinational Marketing (many markets; consolidation

on regional basis; regiocentric orientation;

standardization within regions).

5 Global Marketing (international, multinational &

geocentric orientation; company’s willingness to adopt a global perspective; global products with local

variations).

Exhibit 1-2: Evolution of Global Marketing

3 Evolution of Global Marketing

• Global Marketing refers to marketing activities

that emphasize the following:

1 Standardization efforts.

2 Coordination across markets.

3 Global integration.

3 Evolution of Global Marketing

• Global marketing does not necessarily mean that

products can be developed anywhere on a global

4 Appendix: Theories of International Trade

and the Multinational Enterprise

• Comparative Advantage Theory (see Exhibit 1-3)

– Absolute Advantage

– Comparative Advantage

– Commodity Terms of Trade

– Principles of International Trade

– Factor Endowment Theory

• International Product Cycle Theory (see Exhibit

1-4)

– Economies of Scale

Exhibit 1-3: Comparative Advantage at Work

Exhibit 1-4: International Product Cycle

4 Appendix: Theories of International Trade

and the Multinational Enterprise

4 Appendix: Theories of International Trade

and the Multinational Enterprise

4 Appendix: Theories of International Trade

and the Multinational Enterprise

• Internalization/Transaction Cost Theory

• Resource-Based View and Appropriability