7 CHAPTER Global Marketing Chapter Objectives 1 Describe

7 CHAPTER Global Marketing Chapter Objectives 1 Describe the importance of global marketing from the perspectives of the individual firm and the nation. 2 Identify the major components of the environment for global marketing. 3 Identify the basic functions of GATT, WTO, NAFTA, FTAA, CAFTA-DR, and the European Union. 4 Identify the alternative strategies for entering foreign markets. 6 Describe the alternative marketing mix strategies used in global marketing. Differentiate between a 5 global marketing strategy 7 and a multidomestic marketing strategy. Explain the attractiveness of the United States as a target market foreign marketers.

CHAPTER 7 Global Marketing • Global trade accounts for 27 percent of the U. S. gross domestic product. • Exporting Marketing domestically produced goods and services in foreign countries. • Importing Purchasing foreign goods and services.

CHAPTER 7 Global Marketing THE IMPORTANCE OF GLOBAL MARKETING • Global marketing is a necessity as demand for U. S. products increases in fast-growing economies. • Globalization and the Internet allow every marketer to be an international marketer. • Services such as Pay. Pal help small businesses compete with larger firms. • Firms also rely on foreign sources for raw materials for their domestic manufacturing operations.

CHAPTER 7 Global Marketing SERVICE AND RETAIL EXPORTS • Three of every five dollars of U. S. GDP comes from services. • U. S. manufacturing sector has diminished but is still important. • U. S. is world’s largest exporter of retailing and services. • Most profitable sector is business and technical services such as engineering, financial, computing, and legal services. BENEFITS OF GOING GLOBAL • New insights into customer behavior, alternative distribution strategies, and advance notice of new products. • Enhanced ability to compete effectively with foreign competition through increased adaptability to local markets.

CHAPTER 7 Global Marketing THE INTERNATIONAL MARKETING ENVIRONMENT • As in domestic markets, marketers must pay attention to local environmental factors. INTERNATIONAL ECONOMIC ENVIRONMENT • Important factors: nation’s size, per-capita income, stage of economic development, and infrastructure. • Exchange rate Price of one nation’s currency in terms of another nation’s currency. INTERNATIONAL SOCIAL-CULTURAL ENVIRONMENT • Marketers must understand a nation’s culture and language.

CHAPTER 7 Global Marketing INTERNATIONAL TECHNOLOGICAL ENVIRONMENT • Internet technologies connect large and small firms to world markets. INTERNATIONAL POLITICAL-LEGAL ENVIRONMENT • Marketers must be aware of political conditions and legal environment in each country in which they compete. • International law regulating international trade. • U. S. law regulating international trade, including trade regulations, tax laws, and import/export requirements. • Legal requirements of other nations in which a company is doing business.

CHAPTER 7 Global Marketing TRADE BARRIERS • Tariff Tax levied against imported goods. • Two types: revenue tariffs and protective tariffs. • Administrative barriers—such as quotas, restrictive standards for imports, and export subsidies—and import license controls • Import quotas Trade restrictions that limit the number of units of certain goods that can enter a country for resale. • Embargo, a complete ban on the import of a product. • Other barriers include subsidies, limits on foreign ownership, extensive regulatory barriers, and exchange control. DUMPING • Practice of selling a product in a foreign market at a price lower than it commands in the producer’s domestic market.

CHAPTER 7 Global Marketing MULTINATIONAL ECONOMIC INTEGRATION • Increased substantially since World War II. • Free-trade area—participating nations agree to free trade among themselves, abolishing tariffs and trade restrictions. • Custom union—establishes a free-trade area and uniform tariffs for nonmember nations. • Common market—extends customs union by reconciling all government trade regulations. • Free trade critics in the U. S. worry about U. S. jobs outsourced to other nations.

CHAPTER 7 Global Marketing GATT AND THE WORLD TRADE ORGANIZATION • General Agreement on Tarrifs and Trade (GATT) International trade accord that has helped reduce world tariffs. • 1994 Uruguay round reduced average tariffs by one-third, or more than $700 billion and established World Trade Organization (WTO). • 149 member nations. • Oversees GATT agreements, mediates disputes, and works to further reduce trade barriers. THE NAFTA ACCORD • North American Free Trade Agreement (NAFTA) Accord removing trade barriers between Canada, Mexico, and the United States. • NAFTA partners conduct $2. 2 billion in trade daily.

CHAPTER 7 Global Marketing THE FREE TRADE AREA OF THE AMERICAS AND CAFTA-DR • FTAA would extend NAFTA; negotiations ongoing. • Central American Free Trade Agreement-DR (CAFTA-DR) already in place and its provisions are being implemented. THE EUROPEAN UNION • European Union (EU) Customs union that is moving in the direction of an economic union by adopting a common currency, removing trade restrictions, and permitting free flow of goods and workers throughout the member nations. • Includes 500 million people in 25 countries.

CHAPTER 7 Global Marketing GOING GLOBAL • Globalization affects everyone in the world in some way. • Marketers may go global is their domestic market is saturated or they have strong domestic share. • Most large firms participate in global commerce.

CHAPTER 7 Global Marketing FIRST STEPS IN DECIDING TO MARKET GLOBALLY • Questions to ask: • Will our product sell well in the new target culture? • Is our target market familiar yet with our product, or our name? • Are we comfortable doing business in this particular place? • How well developed is the infrastructure? • Steps to take: • Prepare an international business plan. • Conduct research into foreign markets. • Evaluate distribution possibilities. • Evaluate methods for financing the operation. • Learn the rules and regulations in the new country.

CHAPTER 7 Global Marketing STRATEGIES FOR ENTERING FOREIGN MARKETS • Firm’s risk and degree of control both increase with greater involvement. • Export-trading companies—buy products from domestic producers and resell them abroad. • Export-management companies—provide expertise in reaching foreign buyers, handle necessary paperwork, and ensure goods meet local legal requirements. • Offset agreement—small firm teams with international company and serves as subcontractor on a large foreign project.

CHAPTER 7 Global Marketing CONTRACTUAL AGREEMENTS • Provide flexibility and may be good ways to take services abroad. • Franchise Contractual arrangement in which a wholesaler or retailer agrees to meet the operating requirements of a manufacturer or other franchiser. • Foreign licensing Agreement that grants foreign marketers the right to distribute a firm’s merchandise or to use its trademark, patent, or process in a specified geographic area. • Subcontracting—production of goods and services assigned to local companies. • Can prevent misunderstanding of local culture and regulations and provide protection from import duties.

CHAPTER 7 Global Marketing INTERNATIONAL DIRECT INVESTMENT • U. S. has world’s largest direct investment inflows and outflows. • Direct investment in U. S. is led by United Kingdom, Japan, the Netherlands, and Germany. • Generally high involvement, high risk. • Can acquire an existing firm in target country, set up an independent division, or form joint ventures to share risks, costs, and management with foreign partners.

CHAPTER 7 Global Marketing FROM MULTINATIONAL CORPORATION TO GLOBAL MARKETER • Multinational corporation—has significant operations and marketing activities outside its home country. • Important changes since 1960: • No longer exclusively U. S. -based. • No longer see foreign operations as appendages but rely on them for exchanges of ideas, capital, and technologies. • Often employ large foreign workforces relative to American staffs. • Reflect interdependence of world economies, growth of international competition, and globalization of world markets.

CHAPTER 7 Global Marketing DEVELOPING AN INTERNATIONAL MARKETING STRATEGY • Global marketing strategy. • Defines a standard marketing mix and implements it with minimal modification in all foreign markets. • Brings advantage of economies of scale and saves money. • Works well for products with strong universal appeal and luxury products. • Multidomestic strategy. • Customization of marketing strategies to to effectively reach individual markets. • Allows flexibility for responding to cultural, geographic, and language differences.

CHAPTER 7 Global Marketing INTERNATIONAL PRODUCT AND PROMOTIONAL STRATEGIES • Five basic strategies that center on whether to extend domestic product and promotional strategies or adapt one or both. Straight Extension Promotion Adaptation Product Adaptation Dual Adaptation Product Invention

CHAPTER 7 Global Marketing INTERNATIONAL DISTRIBUTION STRATEGY • Marketers must decide how to enter a foreign market and how to distribute the product in the foreign market through that entry channel. PRICING STRATEGY • Competitive, economic, political, and legal factors can limit pricing decisions. • Must adapt to local markets: Hindustan Lever offers “penny packets” of shampoo to customers in India who cannot afford an entire bottle. COUNTERTRADE • Countertrade Form of exporting whereby goods and services are bartered rather than sold for cash.

CHAPTER 7 Global Marketing THE UNITED STATES AS A TARGET FOR INTERNATIONAL MARKETERS • U. S. is an inviting target foreign companies. • Large population, more than 300 million. • High median family income, almost $54, 000. • Low risk to foreign marketers due to political stability, growing economy, and favorable attitudes toward foreign investment. • Foreign investment continues to grow. • Major U. S. firms owned by foreign interests include Random House, Arista Records, Pillsbury, and Ralph Lauren.