Transcript The International Trade System (continued)

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The Global Marketplace
•Chapter 18
•Powerpoint slides
•Extendit! version
•Instructor name
•Course name
•School name
•Date
Principles of Marketing: 6th Canadian Edition
Learning Objectives
18.2
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• After studying this chapter, you should be able to:
– 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
Principles of Marketing: 6th Canadian Edition
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Opening Vignette: Coca-Cola Worldwide
•
•
•
•
18.3
Started in an Atlanta pharmacy in 1893 by Asa Chandler
Developed familiar red and white logos from the very beginning
Already selling internationally by 1900, now 70% of total sales
Built bottling plants in Europe and Asia during WW2
• Worldwide success the result of strong
marketing: balancing global
standardization with local adaptation
• Advertising budget: $1.1 billion per
year for 200 countries
• Taste, packaging, and positioning of
main brand are standardized
• Products offered, promotion, price, and
distribution are localized to individual
market preferences
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Importance of Global Marketing
18.4
• International trade in Canada is booming
• Canada exports $468.5 billion in 2002, 41% of GDP, more
proportionately than the U.S. or Japan
• Most (82%) of Canadian exports go to the U.S.
• One of three jobs in Canada tied to trade
• Domestic markets limited by small
population size
• Today’s marketing environment
characterized by:
– Faster communication
– Faster transportation
– Faster financial flows
– Stronger familiarity with foreign
culture
• End result: smaller world
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Major Decisions in Global Marketing
• Free trade initiatives mean home
markets are no longer safe from foreign
competition
• Canadian companies forced to compete
globally to protect themselves
• Canadian government actively
promotes international trade
• Major growth will come from emerging
markets; North America population is
relatively stable and the target for
foreign competitors
18.5
• Global firm: a firm
that, by operating in
more than one country,
gains R&D, production,
marketing, and financial
advantages that are not
available to purely
domestic competitors
Figure 18.1
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The International Trade System
18.6
• Barriers to international trade:
• Tariff: a tax levied by a government against
certain imported products; designed to
protect domestic manufacturers and raise
revenue; also known as import duties
• Quota: a limit on the amount of goods that
an importing company will accept in certain
product categories
• Embargo: a ban on the import or the
export of a certain product.
Figure 18.1
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The International Trade System (continued)
18.7
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• Exchange controls: government limits on
the amount it holds of foreign exchange and on
its exchange rate against other currencies
(floating with another currency)
• Non-tariff trade barriers:
– Bias against bids: can be used for large
public projects that are funded as economic
development tools (Bombardier and the
Montreal subway cars), or military spending
– Product standards: writing safety rules
around local products that render foreign
products uncompetitive
Figure 18.1
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The International Trade System (continued)
18.8
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• Trade organizations that exist to foster & regulate world trade:
– General Agreement on Trade and Tariffs (GATT): first formed
in 1948, successive rounds have reduced average world tariffs
from 45% to 5%; currently have 144 member nations
– Formed the World Trade Organization (WTO) to enforce GATT
rules and host further negotiations (who is the next new member?)
• Other trade organizations, unions, or agreements:
– European Union (EU) (how many numbers?), NAFTA (who?),
APEC (where was the latest meeting held?), MERCOSUR
– The purpose in all of these is to foster cooperation and promote
trade between nations
Figure 18.1
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The International Trade System (continued)
18.9
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• Two factors in the economic environment influence
attractiveness:
• Types of economies:
– Subsistence economies: most people engage in simple
agriculture, consume their output and trade for basic needs; few
opportunities for trade
– Raw-material-exporting economies: rich in one or more
natural resources but poor in other needs; good markets for
large equipment and infrastructure, with a small wealthy upper
class, but low-income for most of the population
Figure 18.1
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The International Trade System (continued)
18.10
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• Types of economies:
– Industrializing economies: manufacturing accounts for 10% to
20% of the economy, needs raw materials to fuel growing
industry, mostly due to favourable labour costs; good markets
for increasing middle class (China)
– Industrial economies: major exporters of manufactured goods,
investment funds, technology, and expertise
• Income distribution:
– How income is distributed within the economy will influence
the size and attractiveness of international markets
Figure 18.1
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The International Trade System (continued)
18.11
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• Political-legal environment: four factors influence
attractiveness of international markets:
– Attitudes toward international buying
– Government bureaucracy
– Political stability
– Monetary regulations
• Countertrade: international trade involving the direct or indirect
exchange of goods for other goods instead of cash; includes barter,
compensation (buyback) (buy the result of operation), and
counterpurchase (buy a product from the buyer’s country in a specific
time frame)
Figure 18.1
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The International Trade System (continued)
18.12
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• Cultural environment: two
directions of influence
– Impact of culture on marketing
strategy: companies need to be
careful when translating their
marketing programs to different
cultures to avoid offense
(translated into non purchase); not
all products will sell
– Impact of marketing strategy on cultures: exposure to foreign
products and media causing changes in values, much to the
chagrin of some within local markets (americanisation)
Figure 18.1
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The Decision to go International
18.13
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• Reasons for entering international markets:
–
–
–
–
Growth opportunities outside of domestic markets
As a counterattack against competition at home
Reduce dependence on existing markets
Need a larger customer base to achieve economies of scale
Figure 18.1
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18.14
Deciding which markets to enter
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• Factors to consider:
– Marketing objectives
• Volume of foreign sales it wants to achieve
• The speed of development of its international operations
– How many countries
– Types of countries to enter
Figure 18.1
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18.15
Indicators of Market Potential
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Indicators of Market Potential
Demographic characteristics
Geographic characteristics
Economic factors
Size of population
Rate of population growth
Degree of urbanization
Population density
Age structure/composition
Physical size of country
Topographical characteristics
Climate conditions
GNP per capita
Income distribution
Rate of growth of GNP
Ratio of investment to GNP
Technological factors
Sociocultural factors
National goals and plans
Level of technological skill
Existing production technology
Existing consumption technology
Education levels
Dominant values
Lifestyle patterns
Ethnic groups
Linguistic fragmentation
Industry priorities
Infrastructure investment plans
Table 18.1
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18.16
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Market Entry Strategies
• Many companies begin with indirect exporting, the simplest way to
sell internationally
• Commitment, investment, potential for profit, and risk increases over
time
Figure 18.2
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Market Entry Strategies (continued)
18.17
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• Exporting:
– Entering a foreign market by selling goods produced in the
company’s home country, often with little modification
– Indirect exporting: selling through independent, international
marketing intermediaries;
– Direct exporting: handling their own export program, may use
local distributors or company personnel
– The simplest and
least risky way to
Figure 18.2
enter foreign
markets
– May be a
temporary effort
or sustained
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Market Entry Strategies (continued)
18.18
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• Joint venturing:
– Entering a foreign market by joining with domestic or foreign
companies to produce or market products or services
– May be a requirement for entering a foreign market; China
– Licensing: entering into an agreement with a foreign licensee for
the right to use a manufacturing process, trademark, patent, trade
secret, or other item of value for a fee or royalty (pharmaceutical
company, Coca-Cola)
– Offers quick entry but involves more risk as the company may lose
some control over their business; may create a competitor
Figure 18.2
Principles of Marketing: 6th Canadian Edition
Market Entry Strategies (continued)
18.19
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• Joint venturing:
– Contract manufacturing: a company contracts with
manufacturers in a foreign market to produce the product or
provide its service; also known as outsourcing
– Management contracting: the domestic firm supplies (exports)
management services to a foreign manufacturer
– Joint ownership: a company joins with investors in a foreign
market to create a local business in which they share ownership
– More risky due to
Figure 18.2
control and profit
repatriation
issues
Principles of Marketing: 6th Canadian Edition
Market Entry Strategies (continued)
18.20
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• Direct investment:
– Entering a foreign market by developing foreign-based assembly
or manufacturing facilities
– The highest amount of commitment, risk, control and potential for
profit of the market entry strategies
– Political stability of the foreign country is a major concern; new
governments may nationalize (seize the assets of) whole industries
(Bolivia)
– Creates jobs
within the
markets the
company want to
sell to
Figure 18.2
Principles of Marketing: 6th Canadian Edition
18.21
Global Marketing Programs
• Standardized marketing mix: using the same marketing mix
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elements for all of the company’s international markets
• Adapted marketing mix: adjusting the marketing mix elements
to better suit each international target market entered
• Essentially five options when attempting to make product and
promotion decisions for foreign markets:
Figure 18.3
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Whole Channel Concept
18.22
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• Whole-channel view: designing
international channels that take into account
all the necessary links in distributing the
seller’s products to final buyers, including:
– The seller’s headquarters organization,
– Channels between nations, and
– Channels within nations
Figure 18.4
Principles of Marketing: 6th Canadian Edition
In Conclusion…
18.23
Copyright © 2005 Pearson Education Canada Inc.
• The learning objectives for this chapter were:
– 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
Principles of Marketing: 6th Canadian Edition