1. Principles of Marketing19
Principles of Marketing
The Global Marketplace

2. Learning Objectives
After studying this chapter, you should be able to:
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 organizations
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3. Chapter Outline Global Marketing Today
Looking at the Global Marketing Environment
Deciding Whether to Go Global
Deciding Which Markets to Enter
Deciding How to Enter the Market
Deciding on the Global Marketing Program
Deciding on the Global Marketing Organization
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4. Global Marketing Today
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
The global firms sees the world as one market
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5. Global Marketing Today
Global firms ask a number of basic questions
What market position should we try to establish in our own country, in our economic region, and globally?
Who will our global competitors be, and what are their strategies and resources?
Where should we produce or source our product?
What strategic alliances should we form with other firms around the world?
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6. Looking at the Global Marketing Environment
The International Trade System
Restrictions on trade between nations include:
Tariffs
Quotas
Exchange controls
Non-tariff trade barriers
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7. Looking at the Global Marketing Environment
The International Trade System
Tariffs are taxes on certain imported products designed to raise revenue or to protect domestic firms
Quotas are limits on the amount of foreign imports a country will accept in certain product categories to conserve on foreign exchange and protect domestic industry and employment
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8. Looking at the Global Marketing Environment
The International Trade System
Exchange controls are a limit on the amount of foreign exchange and the exchange rate against other currencies
Nontariff trade barriers are biases against bids or restrictive product standards that go against American product features
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9. Looking at the Global Marketing Environment
The International Trade System
The World Trade Organization and GATT
The General Agreement on Tariffs and Trade (GATT) is a 59-year-old treaty designed to promote world trade by reducing tariffs and other international trade barriers
Uruguay Round reduced merchandise tariffs by
30 percent and set up the World Trade Organization to enforce GATT rules
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10. Looking at the Global Marketing Environment
The International Trade System
The World Trade Organization and GATT
World Trade Organization
Enforces GATT rules
Mediates disputes
Imposes trade sanctions
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11. Looking at the Global Marketing Environment
The International Trade System
Regional Free Trade Zones
Economic communities are free trade zones created by nations to work toward common goals in the regulation of international trade
European Union (EU)
North American Free Trade Agreement (NAFTA)
Caribbean Free Trade Agreement (CAFTA)
South American Community of Nations (CSN)
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12. Looking at the Global Marketing Environment
Economic Environment
Economic factors reflect a country’s attractiveness as a market
Industrial structure
Income distribution
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13. Looking at the Global Marketing Environment
Economic Environment
Industrial Structure
Subsistence economies
Raw material exporting economies
Industrializing economies
Industrial economies
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14. Looking at the Global Marketing Environment
Economic Environment
Industrial Structure
Subsistence economies have a large majority of people engaged in agriculture. They consume most of their output and barter the rest for simple goods and services. They offer few market opportunities.
Raw material exporting economies are rich in one or more natural resources. They are good markets for large equipment, tools, supplies, and trucks. If there is a wealthy upper class, then they are also a market for luxury goods.
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15. Looking at the Global Marketing Environment
Economic Environment
Industrial Structure
Industrializing economies have manufacturing that represents
10 percent to 20 percent of the economy and needs imports of raw textile materials, steel, and heavy machinery and fewer imports of finished textiles, paper products, and automobiles. These economies create a rich upper class and a small but growing middle class that demand new types of imported goods.
Industrial economies are major exporters of manufactured goods, services, and investment funds. They trade among themselves and export to other economies. They represent an attractive market for all types of goods and services.
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16. Looking at the Global Marketing Environment
Economic Environment
Income Distribution
Low-income households
Middle-income households
High-income households
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17. Looking at the Global Marketing Environment
Political-Legal Environment
Country’s attitude toward international buying
Government bureaucracy
Political stability
Monetary regulations
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18. Looking at the Global Marketing Environment
Political-Legal Environment
Country’s attitude toward international buying involves the country’s receptiveness to foreign business
Monetary regulations involve the stability of exchange rates and currency limitations
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19. Looking at the Global Marketing Environment
Political-Legal Environment
Countertrade is a non-cash payment
Barter is the exchange of goods or services
Compensation or buyback is the sale of a plant or equipment and the payment in resulting products
Counterpurchase is when the seller receives payment and agrees to spend some of the money in the other country
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20. Looking at the Global Marketing Environment
Cultural Environment
Impact of Culture on Marketing Strategy
Business norms
Cultural preferences, traditions, and behaviors
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21. Deciding Whether to Go Global
Factors to consider
Global competition in the home market
Stagnant or shrinking home market
Foreign markets with more opportunity
Expansion of customers to international markets
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22. Deciding Which Markets to Enter
Define international marketing objectives and policies
Foreign sales volume
How many countries to market to
Types of countries to market to based on:
Geography
Income and population
Political climate
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23. Deciding Which Markets to Enter
Rank potential global markets based on:
Market size
Market growth
Cost of doing business
Competitive advantage
Risk level
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24. Deciding How to Enter the Market
Ways to enter global markets include:
Exporting
Joint venturing
Direct investment
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25. Deciding How to Enter the Market
Exporting is when the company produces its goods in the home country and sells them in a foreign market. It is the simplest means involving the least change in the company’s product lines, organization, investments, or mission.
Indirect exporting
Direct exporting
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26. Deciding How to Enter the Market
Exporting
Indirect exporting is when the firm works through an independent international marketing intermediary. This requires less investment and risk since the firm does not require an overseas organization or network.
Direct exporting is when the firm handles its own exports. This requires a greater investment and risk.
Domestic export department
Send home-based salespeople abroad
Use of foreign distributors
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27. Deciding How to Enter the Market
Joint venturing is when a firm joins with foreign companies to produce or market products or services
Licensing
Contract manufacturing
Management contracting
Joint ownership
Joint venturing differs from exporting in that the company joins with a host country partner to sell or market abroad
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28. Deciding How to Enter the Market
Joint Venturing
Licensing is when a firm enters into an agreement with a licensee in a foreign market. For a fee or royalty, the licensee buys the right to sue the company’s process, trademark, patent, trade secret, or other item of value
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29. Deciding How to Enter the Market
Joint Venturing
Contract manufacturing is when a firm contracts with manufacturers in the foreign market to product its product or provide its service. Benefits include faster startup, less risk, and the opportunity to form a partnership or to buy out the local manufacturer.
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30. Deciding How to Enter the Market
Joint Venturing
Management contracting is when the domestic firm supplies management skill to a foreign company that supplies capital. The domestic firm is exporting management services rather than products.
Joint ownership is when one company joins forces with foreign investors to create a local business in which they share joint ownership and control. Joint ownership is sometimes required for economic or political reasons.
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31. Deciding How to Enter the Market
Direct investment is the development of foreign-based assembly or manufacturing facilities and offers a number of advantages:
Lower costs
Raw material
Labor
Government incentives
Logistics
Control
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32. Deciding on the Global Marketing Program
Standardize marketing mix involves selling the same products and using the same marketing approaches worldwide
Adapted marketing mix involves adjusting the marketing mix elements in each target market, bearing more costs but hoping for a larger market share and ROI
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33. Deciding on the Global Marketing Program
Product Strategies
Straight product extension means marketing a product in a foreign market without any change
Product adaptation involves changing the product to meet local conditions or wants
Product invention consists of creating something new for a specific country market
Maintain or reintroduce earlier products
Create new products
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34. Deciding on the Global Marketing Program
Promotion Strategies
Companies can either adopt the same communication strategy they use at home or change it for each market
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35. Deciding on the Global Marketing Program
Price Strategies
Uniform pricing is the same price in all markets but does not consider income or wealth where the price may be too high in some markets or not high enough in other markets
Market-based pricing is the price that markets can pay but does not consider actual costs
Standard markup pricing is a price based on a percentage of cost but can cause problems in countries with high costs
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36. Deciding on the Global Marketing Program
Distribution Strategies
Whole-Channel View
Seller’s headquarters organization supervises the channel and is also a part of the channel
Channels between nations move the products to the borders of the foreign nations
Channel within nations move the products from their foreign point of entry to the final customers
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37. Deciding on the Global Marketing Program
Distribution Strategies
Differences Within Countries
Numbers and types of intermediaries
Size and character of retail units
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38. Deciding on the Global Marketing Organization
Typical management of international marketing activities include:
Organize and export department with a sale manager and staff
Create an international division organized by geography, products, or operating units
Become a complete global organization
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39. The End