Part 2 Understanding Buyers and Markets 5 Consumer

Part 2: Understanding Buyers and Markets 5. Consumer Behavior 6. Business-to-Business (B 2 B) Marketing 7. Serving Global Markets Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Chapter 7 Serving Global Markets Copyright © 2006 by South-Western, a division of Thomson

Chapter Objectives 1. Describe the importance of international marketing from the perspectives of the individual firm and the nation. 2. Identify the major components of the environment for international marketing. 3. Outline the basic functions of GATT, WTO, NAFTA, and the proposed FTAA, and the European Union. 4. Compare the alternative strategies for entering international markets. 5. Differentiate between a global marketing strategy and a multidomestic marketing strategy. 6. Describe the alternative marketing mix strategies used in international marketing. 7. Explain the attractiveness of the U. S. as a target market foreign marketers. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3

The Importance of Global Marketing n Global marketing is rapidly becoming a necessity n For 20 years, U. S. exports have grown about 10 percent annually n The Internet makes it possible for every marketer to become an international marketer n International Trade accounts for at least 25% of U. S. GDP üExporting: Marketing domestically produced goods and services abroad üImporting: Purchasing foreign goods, services, and raw materials Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 4

n Figure 7. 1 üTop 10 U. S. Trading Partners Copyright © 2006 by

n Table 7. 1 üThe World’s 10 Largest Marketers Ranked by Sales Copyright ©

n Service and Retail Exports üU. S. is a big exporter of services and retailing üU. S. is the world’s largest exporter of services üOver $145 billion is spent annually by foreign nationals visiting the U. S. üThe most profitable U. S. service exports are business and technical services üFinancial services industry is going global via the Internet üEntertainment is another major service export Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7

n Benefits of Going Global üAdditional revenues üNew insights into consumer behavior üAlternative distribution strategies üAdvance notice of new products üPositioned well to compete effectively with foreign competitors Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8

The International Marketplace n Market Size üOver 6 billion people (1. 2 billion people in China) üGoods and services need to be adapted to meet needs in developing countries üUrban population increasing faster than a rural üAs a nation develops, an increasingly affluent, educated, and cosmopolitan middleclass emerges üMarketers in developing countries may face infrastructure challenges Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 9

n Buyer Behavior üBehavior differs among both nations and market segments within each nation üChange marketing mix, or change local buyer behavior Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 10

üBuyer Behavior Research Must Focus on: w Demand: Do foreign consumers need the company’s good or service? w Competitive environment: How do supplies currently reach the market? w Economic environment: What is the state of the nation’s economic health? w Social-cultural environment: How do cultural factors affect business opportunities? w Political-legal environment: Do any legal restrictions complicate entering the market? w Technological environment: To what degree are technological innovations used by consumers in the market? Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 11

The International Marketing Environment International economic environment International technological environment International Marketing mix International social-cultural environment International political-legal environment Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 12

n International Economic Environment üA nation’s size, per-capita income, and stage of economic development determine its desirability for international expansion üOther considerations include: w Country infrastructure w Exchange rate implications Soft currencies Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 13

n International Social-Cultural Environment üA nation’s culture, including language, education, religious attitudes, and social values, must be considered üExamples: w Movies must often be adapted foreign markets w Restaurant menus are often printed in several languages üThe use of pictures can also help when language is a problem Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 14

n Table 7. 2 üThe World’s Most Frequently Spoken Languages Copyright © 2006 by

n International Technological Environment üThe Internet transcends political, economic, and cultural barriers, reaching into every corner of the Globe üIt is critical to understand how the Web is reshaping social and cultural values üOther challenges: w Genetic reengineering w Genetically modified organisms (GMOs) Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 16

n International Political-Legal Environment üMarketers must know the current laws and regulations for each country in which they operate üU. S. businesses impacted by International Law, U. S. Law, and Host country Laws üPolitical conditions often influence international marketing üPolitical risk assessment (PRA) ü Friendship, Commerce, and Navigation (FCN) treaties üISO certification requirements Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 17

n Trade Barriers üTariffs are taxes levied against imported goods w Revenue Tariffs designed to raise funds for the importing government w Protective Tariffs are usually higher and are designed to raise the retail price of an imported product to match or exceed that of a similar domestic product Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 18

üAdministrative Barriers w Import Quotas w Embargos w Subsidies w Exchange Controls üDumping The controversial practice of selling a product in a foreign market at a price lower than what it commands in the producer’s domestic market Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 19

Multinational Economic Integration n Free trade area: area Region in which participating nations agree to the free trade of goods among themselves, abolishing tariffs and trade restrictions üCustoms union üCommon market n GATT: GATT International trade accord that has helped reduce world tariffs n World Trade Organization (WTO): succeeds GATT to oversee agreements, mediate disputes, and reduce trade barriers Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 20

n NAFTA Accord removing trade barriers among Canada, Mexico, and the United States n The Free Trade Area of the Americas Proposed free trade area stretching the length of the entire Western hemisphere and designed to extend free trade benefits to additional nations in North, Central, and South America n European Union Customs union that is becoming a true economic union by adopting a common currency and permitting free flow of goods and workers throughout the member nations Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 21

n Figure 7. 5 üThe 25 Members of the European Union Copyright © 2006

Going Global Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All

First Steps in Deciding to Market Globally n Secure top management’s support n Research the export process and potential markets üSources for Analyzing Foreign Markets Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 24

n Strategies for Entering International Markets üThree basic strategies for entering international markets include: w Exporting w Contractual agreements like franchising, licensing, and subcontracting w International Direct Investment Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 25

n Figure 7. 7 üLevels of Involvement in International Marketing Copyright © 2006 by

n Contractual Agreements üFranchising: A contractual arrangement where a wholesaler or retailer (the Franchisee) agrees to make some payment and to meet the operating requirements of a manufacturer or other franchiser in exchange for the right to use the firm’s name and to market its goods or services üForeign Licensing: an 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. üSubcontracting: a contractual agreement where a firm hires a local company to produce goods or services in a specific geographic area. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 27

n International Direct Investment üAn additional strategy for entering global markets üRequires direct investment in foreign firms, production, and/or marketing facilities üU. S. firms have invested nearly $2. 2 trillion overseas üForeign firms have invested nearly $2. 1 trillion in the U. S. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 28

From Multinational Corporation to Global Marketer n A multinational corporation is a firm with significant operations and marketing activities outside its home country n Examples: General Electric, Siemens, Toyota, Exxon. Mobil Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 29

Developing an International Marketing Strategy n Global marketing strategy Standardized marketing mix with minimal modifications that a firm uses in all of its domestic and foreign markets. n Multi-domestic marketing strategy Application of market segmentation to foreign markets by tailoring the firm’s marketing mix to match specific target markets in each nation Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 30

n International Product and Promotional Strategies Same Promotion Same Product Adaptation New Product Straight Extension Wrigley’s gum Coca-Cola Eastman Kodak Cameras and Film Product Adaptation Campbell’s soup Exxon gasoline Product Invention Nonelectric sewing machines Manually operated washing machines Different Promotion Adaptation Bicycles/motorcycles Outboard motors Dual Adaptation Coffee Some clothing Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 31

n Figure 7. 9 üThe World’s 10 Most Valuable Brands Copyright © 2006 by

n International Distribution Strategy üDecide on a method of entering the foreign market üDecide how to distribute the product within the foreign market through that entry channel n International Pricing Strategy üCompetitive, economic, political, and legal constraints often limit pricing decisions üMust adapt to local markets and change when conditions change n Countertrade form of exporting whereby goods and services are bartered rather than sold for cash. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 33

The U. S. as a Target for International Marketers n The U. S. is an inviting target for many foreign marketers n It offers a large population with high levels of discretionary income, political stability, a generally favorable attitude toward foreign investment and a relatively stable economy Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 34