Lamb Hair Mc Daniel 2010 2011 CHAPTER 5

Lamb, Hair, Mc. Daniel 2010 -2011 CHAPTER 5 Developing a Global Vision

Learning Outcomes LO 1 Discuss the importance of global marketing LO 2 Discuss the impact of multinational firms on the world economy LO 3 Describe the external environment facing global marketers 2

Learning Outcomes LO 4 Identify the various ways of entering the global marketplace LO 5 List the basic elements involved in developing a global marketing mix LO 6 Discover how the Internet is affecting global marketing 3

Rewards of Global Marketing Discuss the importance of global marketing LO 1 4

Rewards of Global Marketing Having a global vision means… u Recognizing and reacting to international marketing opportunities u Using effective global marketing strategies LO 1 u Being aware of threats from foreign competitors 5

Beyond the Book LO 1 Emerging Markets Source: Deloitte's Global Manufacturing Industry Practice, Deloitte Touche Tohmatsu, May 1, 2007 6

Importance of Global Marketing to the U. S. u U. S. exports a fifth of industrial production. u One of every 10 jobs in U. S. is supported by exports. u U. S. businesses export over $800 billion in goods. u Exports account for 25 percent of U. S. economic growth. u U. S. is world’s leading exporter of farm products. LO 1 7

The Fear of Trade and Globalization u Millions of Americans have lost jobs u Millions fear losing jobs u Threat of outsourcing if workers do not accept pay cuts u Vulnerability to operations moving offshore LO 1 8

Benefits of Globalization u Expands economic freedom u Spurs competition u Raises productivity and living standards u Offers access to foreign capital, global export markets, and advanced technology u Promotes higher labor and environmental standards u Acts as a check on government power LO 1 9

Multinational Firms Discuss the impact of multinational firms on the world economy LO 2 10

Stages of Global Business Development 1 Companies operate in one country and sell into others 2 Set up foreign subsidiaries to handle sales 3 Operate an entire line of business in another country 4 Virtual operation LO 2 11

Global Marketing Standardization Production of uniform products that can be sold the same way all over the world. LO 2 12

External Environment Facing Global Marketers Describe the external environment facing global marketers LO 3 13

External Environment Facing Global Marketers Culture Natural Resources Economic and Technological Development Political Structure Demographic Makeup LO 3 14

Culture LO 3 The common set of values shared by its citizens that determine what is socially acceptable. 15

Economic and Technological Development LO 3 Developed Country Complex, sophisticated industries Less Developed Country Basic industries 16

Political Structure and Actions No private ownership Minimal individual freedom LO 3 Little central government Maximum personal freedom 17

Legal Considerations Tariff A tax levied on goods entering a country Quota Limit on the amount of a product entering a country Boycott Exclusion of products from a country Exchange Control Foreign exchange must be sold to a control agency Market Grouping Common trade alliance Trade Agreement An agreement to stimulate international trade LO 3 18

Political and Legal Considerations The Uruguay Round made changes in world trading practices Entertainment, pharmaceuticals, integrated circuits, and software Financial, legal, and accounting services Agriculture Textiles and apparel LO 3 And created a new trade organization: The World Trade Organization 19

Doha Round • Began in 2001 • Highly contentious from the beginning • Failed in summer, 2008 • First multilateral free trade act failure since WWI • Cost of Failure: $100 billion annually LO 3 20

Political and Legal Considerations Agreements and Organizations CAFTA LO 3 NAFTA European Union http: //www. wto. org Online 21

Demographic Makeup Marketing Considerations: u. Population density u. Urban or rural u. Personal income u. Age LO 3 22

Shortages in Natural Resources… …Create: u International dependencies u Shifts of wealth u Inflation and recession u Export opportunities if resources are abundant u Stimulus for military intervention LO 3 23

Natural Resources u. Petroleum u. Foodstuffs u. Precious metal u. Timber u. Water LO 3 24

External Environment Facing Global Marketers Natural Resources • dependence • independence Demography • urban v. rural • young v. old • purchasing power Cultural • values • language • customs • traditions Global Marketing Mix Economic Development Political Structure • tariffs Technological • quotas Development LO 3 • boycotts • exchange controls • market controls • trade agreements 25

Global Marketing by the Individual Firm Identify the various ways of entering the global marketplace LO 4 26

Global Marketing Questions u What are our options in selling abroad? u How difficult is global marketing? u What are the potential risks and returns? http: //www. cat. com Online LO 4 27

Why “Go Global”? LO 4 u Earn additional profits u Leverage a unique product or technological advantage u Possess exclusive market information u Saturated domestic markets u Excess capacity u Utilize “economies of scale” 28

Risk Levels for Global Entry Risk Export Low risk/low return LO 4 Joint t c a r t n Co Venture u n Licensing Ma facturing Direct Investment High risk/ high return Return 29

Entering the Global Marketplace Export Sell domestically produced products to buyers in other countries Licensing Legal process allowing use of manufacturing/patents/knowledge Contract Manufacturing Private-label manufacturing by a foreign country Joint Venture Domestic firm buys/joins a foreign company to create new entity Direct Investment Active ownership of a foreign company/manufacturing facility LO 4 30

Export Intermediaries Buyer for Export Assumes all ownership risks and sells globally for its own account. Export Broker Plays the traditional broker’s role by bringing buyer and seller together. Export Agent Acts like a manufacturer’s agent for the exporter in the foreign market. LO 4 31

The Global Marketing Mix List the basic elements involved in developing a global marketing mix LO 5 32

Product and Promotion LO 5 Same Product Change Product Same Message One Product One Message Product Adaptation Change Message Adaptation Product Invention http: //www. disney. go. com Online 33

Place (Distribution) u Adequate distribution is necessary for success in global markets – Some countries have complicated systems – Lack of distribution infrastructure and cultural differences create problems u Innovative distribution systems can create competitive advantage LO 5 34

Pricing u Must consider transportation and insurance costs, taxes and tariffs u Determine what customers will spend u Ensure that foreign buyers will pay price u May need to simplify a product to lower price u Don’t assume that low-income countries are willing to accept lower quality 5 LO 35

Exchange Rates The price of one’s currency in terms of another country’s currency. LO 5 36

Dumping 1. Trying to increase an overseas market share 2. Temporarily distributing products to overseas markets to offset slack demand at home 3. Lowering unit costs by exploiting largescale production 4. Attempting to maintain stable prices during periods of exchange rate 5 fluctuations LO 37

Countertrade A form of trade in which all or part of the payment for goods or services is in the form of other goods or services. LO 5 38

The Impact of the Internet Discover how the Internet is affecting global marketing LO 6 39

The Impact of the Internet • Opening an e-commerce site puts a company in the international marketplace • Internet Economy remains hindered by brick and mortar rules, regulations, and habits LO 6 40

International Marketing • Coca-Cola is the best global brand in 2009 – Five Creative Coca-Cola Commercials from 2009 • Toyota, also one of the top Global Brands in 2009, offers different ads for different markets: – Australian ad for dual drivetrains LO 6 41