Lamb Hair Mc Daniel 2011 2012 CHAPTER 5
Lamb, Hair, Mc. Daniel 2011 -2012 CHAPTER 5 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 1 © Photos. com/Jupiterimages 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 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 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 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 3
Rewards of Global Marketing Discuss the importance of global marketing LO 1 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 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 Chapter 5 u Being aware of threats from foreign competitors Copyright © 2012 by Cengage Learning Inc. All rights reserved 5
Importance of Global Marketing to the U. S. u Derives 12 percent of gross domestic product (GDP) from world trade. u 27 percent of manufacturing jobs in U. S. are supported by exports. u U. S. businesses export over $1. 7 trillion in goods and services annually. u More smaller companies are aggressively pursuing international markets. LO 1 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 6
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 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 7
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 1 u Acts as a check on government power LO Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 8
Multinational Firms Discuss the impact of multinational firms on the world economy LO 2 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 9
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 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 10
Blocking Foreign Investment © i. Stockphoto. com/Joerg Reimann • Many governments, such as China, Russia, and Canada, are blocking foreign purchases of factories, land companies. • The U. S. could be accused of this as well. LO 2 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 11
Global Marketing Standardization Production of uniform products that can be sold the same way all over the world. LO 2 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 12
External Environment Facing Global Marketers Describe the external environment facing global marketers LO 3 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 13
External Environment Facing Global Marketers Culture Natural Resources Economic and Technological Development Political Structure Demographic Makeup LO 3 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 14
Culture © Pool/Getty Images Culture The common set of values shared by its citizens that determine what is socially acceptable. LO 3 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 15
Culture Factors to keep in mind when dealing with different cultures: 1. Language and cultural idioms 2. Customs and traditions 3. Values and expectations of sales presentations LO 3 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 16
Economic and Technological Development Developed Country Complex, sophisticated industries Less Developed Country Basic industries LO 3 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 17
Economic Development: China and India • China and India have two of the highest growth rates in the world. • Have the world’s two largest populations. • Among highest levels of income disparity. • Great linguistic and cultural diversity. LO 3 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 18
Political Structure and Actions No private ownership Minimal individual freedom LO 3 Chapter 5 Little central government Maximum personal freedom Copyright © 2012 by Cengage Learning Inc. All rights reserved 19
Legal Considerations LO 3 Chapter 5 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 Copyright © 2012 by Cengage Learning Inc. All rights reserved 20
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 Chapter 5 And created a new trade organization: The World Trade Organization Copyright © 2012 by Cengage Learning Inc. All rights reserved 21
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 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 22
Political and Legal Considerations Agreements and Organizations CAFTA NAFTA European Union LO 3 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 23
Exhibit 5. 2 Members of G-20 LO 6 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 24
Demographic Makeup Marketing Considerations: u. Population density u. Urban or rural u. Age LO 3 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 25
Natural Resources 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 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 26
Global Marketing by the Individual Firm Identify the various ways of entering the global marketplace LO 4 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 27
Why “Go Global”? 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” LO 4 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 28
Exhibit 5. 3 Risk Levels for Five Methods of Entering the Global Marketplace LO 4 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 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 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 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 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 31
The Global Marketing Mix List the basic elements involved in developing a global marketing mix LO 5 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 32
The Global Marketing Mix The first step in creating a marketing mix is developing a thorough understanding of the global target market… HOWEVER …global marketing research is conducted in vastly different environments. LO 5 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 33
Product and Promotion Same Message Change Message Same Product Change Product One Message Product Adaptation Promotion Adaptation Product Invention LO 5 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 34
Place (Distribution) u Adequate distribution is necessary for success in global markets – Lack of distribution infrastructure and cultural differences create problems u Logistics and shipping costs have been a growing challenge for U. S. companies looking to move production overseas. u Global trade has added to strains and charges for all forms of transportation. LO 5 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 35
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 LO 5 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 36
Exchange Rates The price of one’s currency in terms of another country’s currency. Floating Exchange Rates is… a system in which prices of different currencies move up and down based on the demand for and the supply of each currency. LO 5 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 37
Dumping is… the sale of an exported product at a price lower than that charged for the same or a like product in the “home” market of the exporter. LO 5 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 38
Dumping may occur as a result of exporter business strategies that include: 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 large-scale production 4. Attempting to maintain stable prices during periods of exchange rate fluctuations LO 5 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 39
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 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 40
The Impact of the Internet Discover how the Internet is affecting global marketing LO 6 Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 41
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 6 LO Chapter 5 Copyright © 2012 by Cengage Learning Inc. All rights reserved 42
Beyond the Book Chapter 5 Videos Chapter 5 Method – Developing a Global Vision What is innovative about how method envisions moving into foreign markets? Would method’s strategy for global expansion work for other companies or industries? Which ones? Explain. http: //www. cengage. com/marketing/boo k_content/1439039429_lamb/company_c lips/ch 05. html Copyright © 2012 by Cengage Learning Inc. All rights reserved 43
Beyond the Book Part 1 Videos Chapter 5 The World of Marketing Watch the video about the Putting Lot and think about how it was organized in relation to the first 5 chapters http: //www. cengage. com/marketing/boo k_content/1439039429_lamb/part_videos /part 01. html Copyright © 2012 by Cengage Learning Inc. All rights reserved 44
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