Transcript Chapter 1

The Global Marketplace
ROAD MAP: Previewing the Concepts
• Discuss how the international trade system,
economic, political-legal, and cultural
environments affect a company’s international
marketing decisions.
• Describe three key approaches to entering
international markets.
• Explain how companies adapt their marketing
mixes for international markets.
• Identify the three major forms of international
marketing organization.
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Global Marketing in the 21st Century
• The world is shrinking rapidly with the
advent of faster communication,
transportation, and financial flows.
• International trade is booming and
accounts for 25% of U.S. GDP.
• Global competition is intensifying.
• Higher risks with globalization.
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U.S. Globalization
Many U.S.
companies
have made
the world
their market.
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Major International Marketing Decisions
15-5
Looking at the Global Marketing
Environment
The International Trade System:
Restrictions—tariffs, quotas, embargos, exchange
controls, and non-tariff trade barriers.
The World Trade Organization and GATT:
Helps Trade—reduces tariffs and other international
trade barriers.
Regional Free Trade Zones:
Groups of nations organized to work toward common
goals in the regulation of international trade.
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Discussion Question
• What types of U.S. companies would
like to see higher tariffs and what
types would like to see lower tariffs or
no tariffs? Why is this the case?
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Industrial Structure
• Shapes a country’s product and service needs,
income levels, and employment levels.
Subsistence Economies
Raw Material Exporting Economies
Industrializing Economies
Industrial Economies
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Political-Legal Environment
Attitudes Toward International Buying
Government Bureaucracy
Political Stability
Monetary Regulations
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Cultural Environment
• Sellers must examine the ways consumers
in different countries think about and use
products before planning a marketing
program.
• Business norms vary from country to
country.
• Companies that understand cultural
nuances can use them to advantage when
positioning products internationally.
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Cultural Differences
When Nike learned
that this stylized
“Air” logo resembled
“Allah” in Arabic
script, it apologized
and pulled the shoes
from distribution.
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Deciding Whether to Go Global
• Reasons to consider going global:
– Foreign attacks on domestic markets
– Foreign markets with higher profit
opportunities
– Stagnant or shrinking domestic markets
– Need larger customer base to achieve
economies of scale
– Reduce dependency on single market
– Follow customers who are expanding
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Deciding Which Markets to Enter
• Before going abroad, the company should try to define
its international marketing objectives and policies.
What Volume of Foreign Sales is Desired?
How Many Countries to Market In?
What Types of Countries to Enter?
Choose Possible Countries and Rank Based on
Market Size, Market Growth, Cost of Doing
Business, Competitive Advantage, and Risk Level
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Colgate Goes to China
Using aggressive promotional and educational programs, Colgate has
expanded its market share from 7% to 35% in less than a decade.
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Market Entry Strategies
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Market Entry Strategies
• Exporting:
– Indirect: working through independent
international marketing intermediaries.
– Direct: company handles its own exports.
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Market Entry Strategies
• Joint Venturing:
– Joining with foreign companies to produce or
market products or services.
• Approaches:
– Licensing
– Contract manufacturing
– Management contracting
– Joint ownership
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Joint Ownership
KFC entered Japan through a joint ownership venture with Japanese
conglomerate Mitsubishi.
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Market Entry Strategies
• Direct Investment:
– The development of foreign-based assembly
or manufacturing facilities.
– This approach has both advantages and
disadvantages.
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Deciding on the Global Marketing
Program
• Standardized Marketing Mix:
– Selling largely the same products and using
the same marketing approaches worldwide.
• Adapted Marketing Mix:
– Producer adjusts the marketing mix elements
to each target market, bearing more costs but
hoping for a larger market share and return.
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Marketing Mix Adaptation
In India, McDonald’s serves chicken, fish, and vegetable burgers, and the
Maharaja Mac—two all-mutton patties, special sauce, lettuce, cheese,
pickles, onions, on a sesame-seed bun.
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Five Global Product and
Promotion Strategies
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Global Product Strategies
• Straight Product Extension:
– Marketing a product in a foreign market
without any change.
• Product Adaptation:
– Adapting a product to meet local conditions or
wants in foreign markets.
• Product Invention:
– Creating new products or services for foreign
markets.
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Global Promotion Strategies
• Can use a standardized theme globally,
but may have to make adjustments for
language or cultural differences.
• Communication Adaptation:
– Fully adapting an advertising message for
local markets.
• Changes may have to be made due to
media availability.
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Global Pricing Strategies
• Companies face many problems in setting their
•
international prices.
Possible approaches include:
– Charge a uniform price all around the world.
– Charge what consumers in each country will pay.
– Use a standard markup of costs everywhere.
• International prices tend to be higher than
•
domestic prices because of price escalation.
Companies may become guilty of dumping –a
foreign subsidiary charges less than its costs or
less than it charges in its home market.
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International Pricing
Twelve European Union countries have adopted the euro as a common
currency, creating “pricing transparency” and forcing companies to
harmonize their prices throughout Europe.
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Whole-Channel Concept for
International Marketing
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Deciding on the Global
Marketing Organization
• Organize an export department
• Create international divisions
– Geographical organizations
– World product groups
– International subsidiaries
• Become a global organization
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Rest Stop: Reviewing the Concepts
1. Discuss how the international trade system,
economic, political-legal, and cultural
environments affect a company’s international
marketing decisions.
2. Describe three key approaches to entering
international markets.
3. Explain how companies adapt their marketing
mixes for international markets.
4. Identify the three major forms of international
marketing organization.
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Katy Haas
Coordinator, Alianzas
www.alianzas.us
Index
• Why Enter a Free Trade Agreement?
• What is NAFTA?
• Background of NAFTA
• Reaction after Implementation
• The Mexican Peso Crisis
• What about America’s Farmers?
15-31
• Impact on:
– Employment
– Immigration
– Environment
• Trucking industry
• Missouri’s role
• NAFTA’s future
• Conclusion
“Mexico is the most
important country to
the United States in
the 21st century”
--President George W. Bush
Sept. 5, 2001
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Mexico production
(in tons)
Why Enter a Free Trade
Agreement?
9
6
Corn
Sugar
3
0
3
5
7
9
United States production
(in tons)
Levels of Economic
Integration
Type of Bloc
Free-trade
area
Customs
union
Common
market
Economic
union
Free Trade
among the
Members
Common
External
Tariffs
Free Movement of Factors
of Production (Example:
free labor movement
between countries)
Harmonization* of All
Economic Policies - Fiscal,
Monetary, etc. (Example:
common currency)
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*If the policies are not just harmonized by separate governments, but
have a unified government with binding commitments on all members,
then you reach political integration and have “full economic integration”.
What is NAFTA?
Effective as of January 1,
1994
A trade agreement between
CANADA, MEXICO, and the
UNITED STATES which
provides for the elimination
of tariffs on North American
goods shipped among the
three countries.
Background of
NAFTA
An Introduction
Salinas
Clinton
Zedillo
Marcos
Expectations and Goals
MEXICO: Lower inflation and foreign debt; create more well-paying jobs for
Mexicans, thus producing less incentive for Mexicans to work illegally in the
U.S.; Mexico would become a richer market for American exporters.
UNITED STATES: Would solidify an expanding trade relationship, which
would spur job creation at home and help to continue the revolutionary shift
throughout Latin America away from state controlled markets toward freer
markets.
Would exert presidential authority, improve inter-American relations and
advance the cause of global trade liberalization.
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Reaction After
Implementation
How the Countries
Were Affected
Immediately
How They Are
Affected Now
Top U.S.
and
1. Motor Vehicles
2. Oil/Natural Gas
3. Motor Vehicle Parts
4. Semiconductors
5. Electronic Parts
1. Aircraft
2. Electronic Computing Equipment
3. Motor Vehicle Parts
4. Motor Vehicles
5. Semiconductors
6. Aircraft/Space/Missile Parts
7. Chemicals
8. Plastics
9. Airplane Engines/Parts
10. Refined Petroleum Products
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NAFTA Pros
+Goods/Services at lower cost
+Most underdeveloped countries gain the
most (i.e. standards of trade increased)
+Tariffs reduced
+Jobs created
+Mexico’s economy is growing again
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NAFTA Cons
– Fuel for peso crisis
– Benefits Mexico more than the U.S.
– U.S. deficit with trading partners
– Loss of low-wage American jobs to
Mexico
– Environmental problems
– Traffic congestion and delays along the
borders
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The Mexican Peso Crisis
Was NAFTA to Blame?
Wages in United States and Mexico
What about America’s
Farmers?
BENEFITS: More export opportunities. Since
NAFTA was approved in 1993, U.S.
agricultural exports to Mexico have nearly
doubled.
DISADVANTAGES: Face regulations that
increase the costs of production while
foreign competitors gain from cheap
production and labor.
Impact on:
Employment
• Was U.S. workers’ loss Mexican workers’
gain?
• Maquiladora - Primarily foreign-owned
assembly plants
• Jobs lost to Mexico vs. Jobs supported
by exports to Mexico and Canada
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Impact on:
Immigration
• In the 1990s, U.S. population grew
13.2%, with 60% growth of Mexican
immigrants.
• Among Latinos nationwide, 26% are
between the ages of 25-40.
• Remittances from Mexicans working in the
U.S.: $6.65 billion (for 2001 through 3rd
quarter)
• Increase in Mexican migrants led to
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increase in Border Patrol staff
Impact on:
Environment
NAFTA Environmental Agreements:
North American Agreement on
Environmental Cooperation (NAAEC) commission to enforce environmental law.
Border Environment Cooperation
Commission and the North American
Development Bank - commission to address
pollution problems along the U.S.-Mexican
border
Trucking Industry
The areas of concern
include: vehicle safety,
driver training,
environmental issues
and possible illegal drug
trafficking.
A recent investigation determined that the average 18-wheeler in Mexico is
40% overloaded, carrying a gross vehicle weight of more than 120,000
pounds. If U.S. truckers operated at a similar overcapacity, interstate
highways would have a life span of 14 years, as opposed to their 40-year
design life.
Missouri’s Role
Millions of
Dollars
Missouri's Exports Under NAFTA
3500
3000
2500
2000
1500
1000
500
0
1993 1994 1995 1996 1997 1998 1999
Mexico
Canada
Missouri’s Role (continued)
Between 1994 and 1999, Missouri exports to
NAFTA partners increased 63.4%.
Canada and Mexico are Missouri’s first- and
second-largest export markets, respectively,
accounting for 50.5% of Missouri’s total exports
1999.
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MidContinent
Internationa
l
1.Trade
A trade pattern
2. A system of connecting
highways and rail
Corridor
routes
3. An opportunity to
strengthen economic
development in a
region
Missouri and Employment
Percent
Unemployment Rate in Missouri,
1993-1999
8
7
6
5
4
3
2
1
0
6.5
4.9
4.8
4.6
4.2
4.2
3.4
1993 1994 1995 1996 1997 1998 1999
The Missouri-Mexico
Partnership
• The Missouri Department of Economic
Development moved its hub to
Monterrey
• Branch office in Guadalajara
• For the past 12 years, the Missouri
Department of Agriculture’s
headquarters has been in Guadalajara
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NAFTA’s Future
Where is it going and what effects will it
have?
U.S.-Central American Free
Trade Agreement
Free Trade Area of the
Americas (FTAA)
Conclusion