Transcript Chapter 7ax

McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.
LEARNING OBJECTIVES (LO)
AFTER READING CHAPTER 7, YOU SHOULD BE ABLE TO:
LO1
LO2
LO3
Describe the nature and scope of world
trade from a global perspective and its
implications for the United States.
Identify the major trends that have
influenced the landscape of global
marketing in the past decade.
Identify the environmental factors that
shape global marketing efforts.
7-2
LEARNING OBJECTIVES (LO)
AFTER READING CHAPTER 7, YOU SHOULD BE ABLE TO:
LO4
LO5
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.
7-3
MATTEL’S GLOBAL MARKETING IS
MORE THAN CHILD’S PLAY
Slide 7-5
LO1
DYNAMICS OF WORLD TRADE
WORLD TRADE FLOWS

Global Perspective
• Countertrade
• Trade Feedback Effect

United States Perspective
• Gross Domestic Product (GDP)
• Balance of Trade
7-5
DYNAMICS OF WORLD TRADE
• World Trade Flows
– Dollar value of world trade has more
than doubled in past decade and will
exceed $12.5 trillion in 2009
– Manufactured gods and commodities
account for 75 percent of world trade
– Service industries represent the other
25 percent
Slide 7-6
DYNAMICS OF WORLD TRADE
• World Trade Flows
– Reflects interdependencies among industries,
countries, and regions
– Manifests in country, industry, and regional
exports and imports
Slide 7-6
DYNAMICS OF WORLD TRADE
• Global Perspective
– U.S., Europe, Canada, China, and Japan
account for more than two-thirds of
world trade
– Approximately 15 – 20 percent of world
trade involves countertrade
– A country’s imports affect its exports,
and vise versa – trade feedback effect
Slide 7-6
DYNAMICS OF WORLD TRADE
• United States Perspective
– Gross domestic Product (GDP)
– Balance of Trade
– Exports vs. Imports
– Three largest importers of U.S. goods
and services are Canada, Mexico, and
Japan
– The four largest exporters to U.S. are
Canada, China, Mexico, and Japan
Slide 7-6
FIGURE 7-1 World trade flows for goods
and commodities within and between
geographic regions ($ billions U.S.)
7-10
DYNAMICS OF WORLD TRADE
LO1
COMPETITIVE ADVANTAGE OF NATIONS

Porter’s “Diamond”
• Factor Conditions
• Demand Conditions
• Related and Supporting Industries
• Company Strategy, Structure, and Rivalry

Economic Espionage Act (1996)
7-11
DYNAMICS OF WORLD TRADE
• Competitive Advantage of Nations –
Porter’s “Diamond”
– Factor Conditions
• Reflect a nation’s ability to turn its
natural resources, education, and
infrastructure into a competitive
advantage
– Demand conditions
• Include both the number and
sophistication of domestic customers
for an industry’s product
Slide 7-6
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 worldclass suppliers that accelerate
innovation
– Company Strategy, Structure, and Rivalry
• Factors include conditions governing
the way a nation’s businesses are
organized and managed, along with the
intensity of domestic competition
Slide 7-6
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 7-6
Concept Check
1. What is the trade feedback effect?
A: The phenomenon in which a
country’s imports affect its exports
and vice versa.
Slide 7-11
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
industries; and (4) company strategy,
structure, and rivalry.
Slide 7-12
MARKETING IN A BORDERLESS
ECONOMIC WORLD
•
Decline of Economic Protectionism
(Trends)
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
Slide 7-13
MARKETING IN A BORDERLESS
ECONOMIC WORLD
TREND 1—DECLINE OF ECONOMIC PROTECTIONISM
• Decline of Economic Protectionism
– Practice of shielding one or more
industries within a country’s economy from
foreign competition, usually through tariffs
and quotas
Slide 7-13
LO3
MARKETING IN A BORDERLESS
ECONOMIC WORLD
TREND 1—DECLINE OF ECONOMIC PROTECTIONISM

Protectionism

Tariffs

Quotas

General Agreement on
Tariffs and Trade (GATT)

World Trade Organization (WTO)
7-20
FIGURE 7-3 Protectionism hinders world
trade through tariffs and quotas policies of
countries, raising prices and limiting supply
7-21
LO3
MARKETING IN A BORDERLESS
ECONOMIC WORLD
TREND 2—RISE OF ECONOMIC INTEGRATION

European Union
• Euro

North American Free Trade
Agreement (NAFTA)

Asian Free Trade Agreements
7-22
Euro Launch TV Ad
What are the benefits of economic integration?
QuickTime™ and a
YUV420 codec decompressor
are needed to see this picture.
7-23
FIGURE 7-4 The European Union in 2007
consists of 27 countries with more than
500 million consumers
7-24
LO3
MARKETING IN A BORDERLESS
ECONOMIC WORLD
TREND 3—GLOBAL COMPETITION
• A New Reality: Global Competition
among Global Companies for Global
Consumers

Global Competition
• Divisions or Subsidiaries

Strategic Alliances
7-25
MARKETING IN A BORDERLESS
ECONOMIC WORLD
TREND 3—GLOBAL COMPANIES
• A New Reality: Global Competition
among Global Companies for Global
Consumers
 Global Companies
• International Firms • Transnational Firms
Extention of domestic
Marketing Strategy
• Multinational Firms
 Multidomestic
Marketing Strategy
World is one market
Global Marketing
Strategy
Global Brand
Slide 7-21
FIGURE 7-A Global companies and
marketing strategy
7-27
LO3
MARKETING IN A BORDERLESS
ECONOMIC WORLD
TREND 3—GLOBAL CONSUMERS

Global Consumers
7-28
MARKETING MATTERS
The Global Teenager—A Market of 500 Million
Voracious Consumers with $100 Billion to Spend
7-29
MARKETING IN A BORDERLESS
ECONOMIC WORLD
• Emergence of a Networked Global
Marketspace (Internet-based
Technology)
– 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
Slide 7-23
Nestlé Website for Peru
What is a global marketspace?
Slide 7-25
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.
Slide 7-26
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 7-27
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.
Slide 7-28
A GLOBAL ENVIRONMENTAL SCAN
LO3
CULTURAL DIVERSITY

Cross-Cultural Analysis

Values

Customs
• Foreign Corrupt
Practices Act (1977)
7-35
FIGURE 7-B Cultural appreciation
7-36
A GLOBAL ENVIRONMENTAL SCAN
Cultural Diversity
 Customs
What is considered normal and
expected about the way people
do things
Foreign Corrupt Practices Act (1977)
Slide 7-29
A GLOBAL ENVIRONMENTAL SCAN
Cultural Diversity
 Cultural Symbols
Things that represent ideas and
concepts
Semiotics – study of the correspondence between
symbols and their role in the assignment
of meaning to people
Slide 7-29
LO3
A GLOBAL ENVIRONMENTAL SCAN
CULTURAL DIVERSITY

Cultural Symbols
• Semiotics
#13
7-39
A GLOBAL ENVIRONMENTAL SCAN
Cultural Diversity
 Cross-Cultural Analysis
Study of similarities and differences
 Values
Personally or socially preferable
modes of conduct
Slide 7-29
LO3
A GLOBAL ENVIRONMENTAL SCAN
CULTURAL DIVERSITY

Language
• Unintended Meanings
• Back Translation
7-41
McDonald’s in Hong Kong and Kuwait
What global market-entry strategy and
why?
Slide 7-46
Hewlett-Packard
Why use multilingual ads in a single country?
Slide 7-33
LO3
A GLOBAL ENVIRONMENTAL SCAN
CULTURAL DIVERSITY
Consumer Ethnocentrism
7-44
A GLOBAL ENVIRONMENTAL SCAN
• Economic Considerations
 Stage of Economic Development
• Developed Countries – mixed economies
• Developing Countries – in process
of moving from agricultural to
industrial economy
Slide 7-34
LO3
A GLOBAL ENVIRONMENTAL SCAN
ECONOMIC CONSIDERATIONS

Stage of Economic Development
• Developed Countries: Japan
• Developing Countries:
 Made the Move:
 Remain Locked:
Brazil
Tanzania
• Bottom of the Pyramid
7-46
A GLOBAL ENVIRONMENTAL SCAN
• Economic Considerations
 Measurement of Consumer Income and
Purchasing Power
 Recognition of Currency Exchange Rates
Price of one country’s currency expressed
in terms of another country’s currency
Foreign currencies versus the U.S. dollar
Slide 7-36
FIGURE 7-5 A comparison of the purchasing
power differences around the world
7-49
LO3
A GLOBAL ENVIRONMENTAL SCAN
POLITICAL-REGULATORY CLIMATE

Political Stability

Trade Regulations
7-50
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
Slide 7-41
FIGURE 7-6 Alternative global market-entry
strategies
7-52
GLOBAL MARKET-ENTRY
STRATEGIES
1.
2.
3.
4.
Exporting
Licensing
Joint Venture
Direct Investment
The amount of financial commitment,
risk, marketing control, and potential
profit increases as firm moves from
exporting to direct investment
Slide 7-42
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
intermediaries
•
More risk, but more profit potential
Slide 7-42
GLOBAL MARKET-ENTRY
STRATEGIES
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
Slide 7-42
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
McDonald's is premier global franchisor – more than
70% of stores are franchised and over 70% of sales
come from non-U.S. operations
Slide 7-42
GLOBAL MARKET-ENTRY
STRATEGIES
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
– Disadvantages
•
•
Two companies may disagree about policies or
courses of action
Government bureaucracy may bog down the effort
Slide 7-42
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
•
Financial commitments and risks (political, currency,
etc.) involved
Slide 7-42
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 7-49
Concept Check
2. How does licensing differ from a
joint venture?
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.
Slide 7-50
LO5
CRAFTING A WORLDWIDE
MARKETING PROGRAM
PRODUCT and PROMOTION STRATEGIES

Product Extension

Product Adaptation

Product Invention
7-63
CRAFTING A WORLDWIDE
MARKETING PROGRAM
• Product and Promotion Strategies
– Product Extension
• Selling virtually same product in other
countries
– Product Adaptation
• Changing product to make more
appropriate for country’s climate or
consumer preferences
– Product Invention
• Inventing totally new products designed
to satisfy common needs across
countries
Slide 7-51
CRAFTING A WORLDWIDE
MARKETING PROGRAM
LO5
PROMOTION STRATEGIES

Identical Message



Communication Adaptation


Same product
Adapted product
Adapt promotion
Dual Adaptation


Adapt product
Adapt promotion
7-65
FIGURE 7-7 Five product and promotion
strategies for global marketing
Slide 7-52
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
distribution channels increase as its
economic structure increases
Slide 7-51
FIGURE 7-8 Channels of distribution in
global marketing
7-69
CRAFTING A WORLDWIDE
MARKETING PROGRAM
LO5
DISTRIBUTION AND PRICING STRATEGIES

Channels Usually Long and Complex

Countries Impose Pricing Constraints

Prices May Be Too High or Too Low
• Dumping
• Gray Market
7-70
CRAFTING A WORLDWIDE
MARKETING PROGRAM
• 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)
Slide 7-51
Concept Check
1. Products may be sold in three
ways. What are they?
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
product (product invention).
Slide 7-56
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.
Slide 7-57
Countertrade
Countertrade is the practice of
using barter rather than money
for making global sales.
7-74
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.
7-76
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
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.
7-78
Tariffs
Tariffs are a government tax on
goods or services entering a
country, primarily serving to
raise prices on imports.
7-79
Quota
A quota is a restriction placed on
the amount of a product allowed
to enter or leave a country.
7-80
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.
7-82
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.
7-84
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.
7-86
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.
7-88
Values
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
Customs are what is considered
normal and expected about the
way people do things in a specific
country.
7-90
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.
7-92
Semiotics
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.
7-94
Consumer Ethnocentrism
Consumer ethnocentrism is the
tendency to believe that it is
inappropriate, indeed immoral, to
purchase foreign-made products.
7-95
Bottom of the Pyramid
Bottom of the pyramid is the
largest but poorest socioeconomic
group in the world consisting of
4 billion people who reside in
developing countries and live on
less than $2 per day.
7-96
Microfinance
Microfinance is the practice of
offering small, collateral-free
loans to individuals who otherwise
would not have access to the
capital necessary to begin small
businesses or other incomegeneration activities.
7-97
Currency Exchange Rate
A currency exchange rate is
the price of one country’s currency
expressed in terms of another
country’s currency.
7-98
Exporting
Exporting is a global market-entry
strategy in which a company
produces goods in one country
and sells them in another country.
7-99
Joint Venture
Joint venture is a global marketentry strategy in which a foreign
company and a local firm invest
together to create a local business
in order to share ownership,
control, and profits of the new
company.
7-100
Direct Investment
Direct investment is a global
market-entry strategy that entails
a domestic firm actually investing
in and owning a foreign subsidiary
or division.
7-101
Dumping
Dumping occurs when a firm
sells a product in a foreign country
below its domestic price or below
its actual cost.
7-102
Gray Market
A gray market is a situation
where products are sold through
unauthorized channels of
distribution. Also called parallel
importing.
7-103