CHAPTER 15 The Global Marketplace Roadmap Previewing the

CHAPTER 15 The Global Marketplace

Roadmap: 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. Copyright 2007, Prentice-Hall Inc. 2

COCA-COLA – Successfully Going Global Background § Established in 1893 in § § Atlanta pharmacy. 1900: Coke was available in foreign countries. 1940 s: built bottling plants abroad to supply soldiers. Growth fueled by strong marketing: “I’d like to buy the world a Coke” TV ad. Now in emerging markets. Copyright 2007, Prentice-Hall Inc. How They Did It § Balances brand building § § § and global standardization with local adaptation. Consistent positioning, packaging, and taste. Brands, flavors, ads, price, distribution and promotions are adapted to local markets. Sprite: a global success. 3

Global Marketing in the 21 st Century § The world is shrinking rapidly with the advent of faster communication, transportation, and financial flows. § International trade is booming and accounts for 20 percent of GDP worldwide. § Global competition is intensifying. § Higher risks with globalization. Copyright 2007, Prentice-Hall Inc. 4

Marketing in Action Globalization by U. S. Firms Coca-Cola has been a leader in

Global Firms A global firm is one that, by operating in more than one country, gains marketing, production, R&D, and financial advantages that are not available to purely domestic competitors. Copyright 2007, Prentice-Hall Inc. 6

Figure 15 -1 Major International Marketing Decisions Copyright 2007, Prentice-Hall Inc. 7

Key Influences in the Global Marketing Environment § The International § Trade System Economic

Looking at the Global Marketing Environment § The International Trade System: – Restrictions—tariffs, quotas, embargos, exchange controls, and nontariff 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. Copyright 2007, Prentice-Hall Inc. 9

Let’s Talk! 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 the case? Copyright 2007, Prentice-Hall Inc. GATT promotes international trade by reducing tariffs. 10

Marketing in Action Explore the European Union! Regional free trade zones such as the European Union help to simplify the process of going global. Explore their Web site for information that could be helpful to a marketer wishing to go global. Map of the European Union as of March 2006 http: //europa. eu. int/index_en. htm Copyright 2007, Prentice-Hall Inc. 11

Economic Environment § Industrial Structure: – Shapes a country’s product and service needs, income levels, and employment levels. § Four types: – Subsistence economies – Raw material exporting economies – Industrializing economies – Industrial economies Copyright 2007, Prentice-Hall Inc. 12

Political-Legal Environment § Attitudes toward international buying § Government bureaucracy § Political stability § Monetary regulations – Countertrade § Barter § Compensation § Counterpurchase Copyright 2007, Prentice-Hall Inc. 13

Cultural Environment § Sellers must examine the ways consumers in § § different countries think about and use products before planning a marketing program. Business norms and behavior vary from country to country. Companies that understand cultural nuances can use them to advantage when positioning products internationally. Copyright 2007, Prentice-Hall Inc. 14

Marketing in Action The Importance of Culture Ignoring cultural differences can result in strong consumer backlash. Nike was forced to pull these shoes from distribution after learning that the stylized shoe logo resembled “Allah” when written in Arabic. Copyright 2007, Prentice-Hall Inc. 15

Impact of Marketing on Culture § A common criticism § of globalization is that it promotes the “Americanization” of foreign countries, and a loss of cultural identity. Globalization proponents argue that the cultural exchange of ideas and values works both ways. Copyright 2007, Prentice-Hall Inc. 16

Deciding Whether to Go International § Reason 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. Copyright 2007, Prentice-Hall Inc. 17

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? Copyright 2007, Prentice-Hall Inc. 18

Deciding Which Markets to Enter § Identify a list of possible countries. § Rank each with respect to market size, market growth, cost of doing business, competitive advantage, and risk. § Goal is to estimate market potential, using these factors as well as demographic and geographic characteristics, and sociocultural, economic, and legal-political factors. Copyright 2007, Prentice-Hall Inc. 19

Marketing in Action Marketing to China Many marketers are attracted to the Chinese market due to its substantial population size and potential for growth. Colgate’s efforts have expanded their market share from 7% to 35% in less than a decade. Copyright 2007, Prentice-Hall Inc. 20

Figure 15 -2 Market Entry Strategies Copyright 2007, Prentice-Hall Inc. 21

Market Entry Strategies § Exporting: – Indirect: § Working via independent international marketing intermediaries.

Market Entry Strategies § Joint Venturing: – Joining with foreign companies to produce or market products or services. § Approaches: – – Licensing Contract manufacturing Management contracting Joint ownership Copyright 2007, Prentice-Hall Inc. Toyoko’s Disneyland Resort is operated under a licensing agreement. 23

Marketing in Action Joint Ownership KFC entered Japan through a joint ownership agreement with

Market Entry Strategies § Direct Investment: – The development of foreign-based assembly or manufacturing facilities. – This approach has both advantages and disadvantages which must be carefully evaluated before making a decision. Copyright 2007, Prentice-Hall Inc. 25

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. Copyright 2007, Prentice-Hall Inc. 26

Marketing in Action Marketing Mix Adaptation In India, Mc. Donald’s serves chicken, fish, and

Figure 15 -3 Global Product and Communication Strategies Copyright 2007, Prentice-Hall Inc. 28

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 foreign markets. Copyright 2007, Prentice-Hall Inc. 29

Marketing in Action Global Product Strategy Coca-Cola’s virtual vendor allows the curious to learn about Coca-Cola’s global product strategy. http: //www 2. coca-cola. com/ Copyright 2007, Prentice-Hall Inc. 30

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 Video Snippet advertising Learn how the people message for at NIVEA approach local markets. creating a global – Changes may communication strategy for the have to be made firm’s brands. due to media availability. Copyright 2007, Prentice-Hall Inc. 31

Marketing in Action Promotion Adaptation Guy Larouche uses similar ads in European and Arabian

Marketing in Action Brand Name Blunders OOPS!!! Not all brand names translate well into English, or from English into a different language. Other Classic Blunders “Coke” translated into Chinese characters was interpreted by the Chinese to mean “Bite the wax tadpole. ” Copyright 2007, Prentice-Hall Inc. Chevy used the “Nova” name verbatim, only to find out that no va means “It doesn’t go” in Spanish. 33

Global Pricing Strategies § Companies face many problems in setting their international prices. – Standard pricing methods such as uniform pricing, standard markup of costs everywhere, or charging what the market will bear ignores cost differentials and local market conditions. Copyright 2007, Prentice-Hall Inc. 34

Global Pricing Challenges § International prices tend to be higher than § § domestic prices because of price escalation. Companies may become guilty of dumping when a foreign subsidiary charges less than its costs or less than it charges in its home market. The Internet makes global price differences obvious and the euro has reduced the amount of price differentiation. Copyright 2007, Prentice-Hall Inc. 35

Marketing in Action Economic Impact of Global Pricing The adoption of the euro as a common currency by several nations has created a “pricing transparency” that is forcing companies to harmonize their prices throughout Europe. Copyright 2007, Prentice-Hall Inc. 36

Figure 15 -4 Whole-Channel Concept for International Marketing Copyright 2007, Prentice-Hall Inc. 37

Global Distribution § International firms must take a whole- channel view of distributing products to final consumers. § Differences in the numbers and types of intermediaries serving each foreign market require time and money to navigate. § Size and character of retail units differ as well, presenting challenges. Copyright 2007, Prentice-Hall Inc. 38

Deciding on the Global Marketing Organization § Organize an export department § Create international divisions – Geographical organizations – World product groups – International subsidiaries § Become a global organization Copyright 2007, Prentice-Hall Inc. 39

Rest Area: Reviewing 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. Copyright 2007, Prentice-Hall Inc. 40