Chapter 5 Developing a Global Vision MKTG9 Lamb, Hair, and McDaniel

Chapter 5 Developing a Global Vision MKTG9 Lamb, Hair, and McDaniel
© 2016 Cengage Learning. All Rights Reserved.

© 2016 Cengage Learning. All Rights Reserved.
Chapter 5 Developing a Global Vision LEARNING OUTCOMES 5-1 Discuss the importance of global marketing 5-2 Discuss the impact of multinational firms on the world economy 5-3 Describe the external environment facing global marketers © 2016 Cengage Learning. All Rights Reserved.

Chapter 5 Developing a Global Vision LEARNING OUTCOMES 5-4 Identify the various ways of entering the global marketplace 5-5 List the basic elements involved in developing a global marketing mix 5-6 Discover how the Internet is affecting global marketing © 2016 Cengage Learning. All Rights Reserved.

Discuss the importance of global marketing
Chapter 5 Developing a Global Vision Rewards of Global Marketing and the Shifting Global Business Landscape 5-1 Discuss the importance of global marketing © 2016 Cengage Learning. All Rights Reserved.

Rewards of Global Marketing
Chapter 5 Developing a Global Vision Rewards of Global Marketing Having a global vision means… Recognizing and reacting to international marketing opportunities Using effective global marketing strategies Being aware of threats from foreign competitors Notes: Over the past two decades, world trade has climbed from $200 billion a year to more than $17.8 trillion. Discussion/Team Activity: Discuss ways that small- and medium-sized firms can compete in a global environment with limited resources. © 2016 Cengage Learning. All Rights Reserved.

Importance of Global Marketing to the U. S.
Chapter 5 Developing a Global Vision Importance of Global Marketing to the U. S. The United States derives 14 percent of gross domestic product (GDP) from world trade Since 2009, growing exports have added 6.1 million private sector jobs to the U.S. economy 287,000 small and medium size firms export goods from the U.S. Notes: Gross domestic product (GDP) is the total market value of all final goods and services produced in a country for a given time period (usually a year or a quarter of a year). The U.S. derives about 14 percent of its GDP from world trade, with the impact on the U.S. economy summarized on this slide. France, the United Kingdom, and Germany derive 27, 32, and 50 percent of their respective GDPs from world trade. Only large multinational companies have serious attempted to compete worldwide. However, more smaller companies are now pursuing international markets. © 2016 Cengage Learning. All Rights Reserved.

Negatives of Trade and Globalization
Chapter 5 Developing a Global Vision Negatives of Trade and Globalization Millions of Americans have lost jobs Millions fear losing jobs Threat of outsourcing if workers do not accept pay cuts Vulnerability to operations moving offshore Notes: The negatives of global trade are shown on this slide. Discussion/Team Activity: Discuss examples of the downside of globalization. Debate the ethical issues associated with foreign “sweatshops.” © 2016 Cengage Learning. All Rights Reserved.

Benefits of Globalization
Chapter 5 Developing a Global Vision Benefits of Globalization Expands economic freedom Spurs competition Raises productivity and living standards Offers access to foreign capital, global export markets, and advanced technology Promotes higher labor and environmental standards Acts as a check on government power Notes: Traditional economic theory says that globalization relies on competition to drive down prices and increase product and service quality. Business goes to the countries that operate most efficiently and/or have the technology to produce what is needed. © 2016 Cengage Learning. All Rights Reserved.

Discuss the impact of multinational firms on the world economy
Chapter 5 Developing a Global Vision Multinational Firms 5-2 Discuss the impact of multinational firms on the world economy Notes: Multinational corporations are those heavily engaged in international trade, moving products and services across national boundaries. A multinational company may have several worldwide headquarters. The role of multinational corporations in developing nations is a subject of controversy. Critics claim that the wrong kind of technology is transferred to developing nations. For example, capital-intensive technology does not substantially increase employment. Multinationals sometimes support oppressive regimes if it is in their best interests. Another criticism is that firms take more wealth out than they bring in. © 2016 Cengage Learning. All Rights Reserved.

Stages of Global Business Development
Chapter 5 Developing a Global Vision Stages of Global Business Development 1 2 4 3 Companies operate in one country and sell into others Set up foreign subsidiaries to handle sales Virtual operation Operate an entire line of business in another country Notes: Multinationals often develop their global business in stages, as shown on this slide. © 2016 Cengage Learning. All Rights Reserved.

Are Multinationals Beneficial?
Chapter 5 Developing a Global Vision Pros Cons Account for 19 percent of U.S. private Jobs Provide 25 percent of private wages 74 percent of R&D spending 41 percent of the increase in private labor productivity Technology is capital intensive and does not necessarily increase employment. Support governments that benefit the company, not necessarily the country and its people May take away more wealth than they generate Notes: To counter such criticism, more and more multinationals are taking a proactive role in being good global citizens. Sometimes companies are spurred to action by government regulation, and in other cases multinationals are attempting to protect their good brand names. © 2016 Cengage Learning. All Rights Reserved. 11

Global Marketing Standardization
Chapter 5 Developing a Global Vision Global Marketing Standardization Global Marketing Standardization Production of uniform products that can be sold the same way all over the world. Multidomestic strategy Subsidiaries of multinational firms are allowed to compete independently in domestic markets. Notes: Multinational corporations operate somewhat differently in each country, with a strategy of providing different product features, packaging, and advertising. Communication and technology have made the world smaller, and thus the emergence of global markets for standardized products, as opposed to segmented foreign markets with different products. This concept is global marketing standardization. Even though global marketing standardization should enable companies to lower production and marketing costs, success is based on variation, not on offering the same product everywhere. One method of this type of variation is through a multidomestic strategy. Discussion/Team Activity: Discuss products and services that are successfully marketed as globally standardized products. Examples include Camay soap, Crest toothpaste, Head and Shoulders shampoo, and Pampers diapers. © 2016 Cengage Learning. All Rights Reserved.

Describe the external environment facing
Chapter 5 Developing a Global Vision External Environment Facing Global Marketers 5-3 Describe the external environment facing global marketers © 2016 Cengage Learning. All Rights Reserved.

External Environment Facing Global Marketers
Chapter 5 Developing a Global Vision External Environment Facing Global Marketers Economic Development Culture Political Structure Natural Resources Notes: Many of the same external environmental factors that operate in domestic markets also apply to global markets. Demographic Makeup © 2016 Cengage Learning. All Rights Reserved.

Chapter 5 Developing a Global Vision Culture Culture The common set of values shared by its citizens that determine what is socially acceptable. Notes: Culture underlies the family, the educational system, religion, and the social class system. A company with no understanding of a country’s culture is doomed to failure. Furthermore, cultural blunders lead to misunderstandings and perceptions of rudeness or even incompetence. Language is an important aspect when translating product names, slogans, production instructions, and promotional messages. Each country has its own unique customs and traditions that determine business practices and influence negotiations. © 2016 Cengage Learning. All Rights Reserved.

Chapter 5 Developing a Global Vision 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 Notes: Making successful sales presentations abroad requires a thorough understanding of the country’s culture. © 2016 Cengage Learning. All Rights Reserved. 16

Less Developed Country Complex, sophisticated industries
Chapter 5 Developing a Global Vision Economic Factors Developed Country Less Developed Country Complex, sophisticated industries Basic industries Notes: The second factor in the external environment is the level of economic development in countries where a global marketer operates. In general, complex and sophisticated industries are found in developed countries, and more basic industries are found in less developed nations. © 2016 Cengage Learning. All Rights Reserved.

The Global Economy “If America sneezes, then the rest of the world catches a cold.” Understanding and forecasting growth and demand globally requires understanding countries around the world. © 2016 Cengage Learning. All Rights Reserved.

Economic Development: China and India
Chapter 5 Developing a Global Vision 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, but among highest levels of income disparity Both India and China have exploded in spending power, particularly in the upper classes Notes: Because of their cultural diversity, market success in China and India is rarely possible without finely segmenting the local market in each country. Relations between the United States and China have not always been smooth. China is committed to protecting its businesses and asserting new global strength, which has resulted in several legislative stalemates with the United States. © 2016 Cengage Learning. All Rights Reserved. 19

Political Structure and Actions
Chapter 5 Developing a Global Vision Political Structure and Actions No private ownership Minimal individual freedom Little central government Maximum personal freedom Notes: Government policies run the gamut from no private ownership and minimal individual freedom to little central government and maximum personal freedom. As rights of private property increase, government-owned industries tend to decrease. The least regulated and most efficient economies and concentrated among countries with well established common-law traditions, including Australia, Canada, New Zealand, the United Kingdom, and the United States. Others are Singapore and Hong Kong. © 2016 Cengage Learning. All Rights Reserved.

Chapter 5 Developing a Global Vision Legal Considerations Tariff Quota Boycott Exchange Control Market Grouping Trade Agreement A tax levied on goods Entering a country Limit on the amount of a product entering a country Exclusion of products from a country Foreign exchange must be sold to a control agency Common trade alliance An agreement to stimulate international trade Discussion/Team Activity: Discuss examples of each of the legal considerations described above. © 2016 Cengage Learning. All Rights Reserved.

Political and Legal Considerations
Chapter 5 Developing a Global Vision 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 And created a new trade organization: The World Trade Organization Notes: The Uruguay Round, adopted in 1994 and signed by 151 nations, is an agreement to lower trade barriers worldwide. The agreement has reduced tariffs by one-third worldwide and should raise global income by $235 billion annually. The agreement covers services, intellectual property rights, and trade-related investment measures such as exchange controls. The Uruguay Round made the following changes in world trading practices: • Protection of patents, copyrights, and trademarks for 20 years. • Licensing standards for professionals cannot discriminate against foreign applicants. • Reduction in farm subsidies in Europe, opening new opportunities for U.S. exports. • The phase-out of strict quotas limiting imports from developing countries. • A new trade agreement, the World Trade Organization (WTO), replaced the old General Agreement on Tariffs and Trade (GATT). Discussion/Team Activity: 1. Discuss the impact of counterfeit products on global trade. © 2016 Cengage Learning. All Rights Reserved.

Chapter 5 Developing a Global Vision Doha Round Began in 2001 Highly contentious from the beginning Stalemate over lowering tariffs on industrial goods in exchange for cutting U.S. farm subsidies. More protectionism has made talks increasingly difficult. © 2016 Cengage Learning. All Rights Reserved.

Political and Legal Considerations
Chapter 5 Developing a Global Vision Political and Legal Considerations CAFTA-DR NAFTA European Union Agreements and Organizations Notes: The trend toward globalization has resulted in the creation of additional agreements and organizations, specifically the Dominican Republic-Central America Free Trade Agreement, the North American Free Trade Agreement, the European Union, the World Bank, and the International Monetary Fund. NAFTA, ratified in 1993, created the world’s largest free trade zone. The agreement includes Canada, the United States, and Mexico. The main impact of NAFTA has been the opening of Mexican markets to U.S. companies. The real question is whether NAFTA can continue to deliver rising prosperity in its member countries. The newest trade agreement—the Dominican Republic-Central America Free Trade Agreement—was instituted in It will reduce tariffs to CAFTA countries—the US, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. The European Union was ratified in 1993 by twelve member countries in Europe. The EU currently has 27 member states. The Greek financial crisis in early 2010 highlighted financial problems in other EU nations such as Hungary, Italy, Portugal, and Spain. The EU Commission and the courts have not always been kind to U.S. multinationals. Discussion/Team Activity: Access the NAFTA Website at for more information. Discuss the pros and cons of NAFTA as it affects the U.S. economy. © 2016 Cengage Learning. All Rights Reserved.

5.1 Chapter 2 Strategic Planning for Competitive Advantage Members of the G-20 Notes: The Group of Twenty (G20) is a forum for international economic development that promotes discussion between industrial and emerging-market countries on key issues related to global economic stability. © 2016 Cengage Learning. All Rights Reserved.

Chapter 5 Developing a Global Vision Demographic Makeup Marketing Considerations: Population density Urban or rural Age Notes: Population density information alone is not particularly useful to marketers. They also need to know if populations are urban or rural, the level of personal income and distribution of wealth, and the age demographics. Discussion/Team Activity: What marketing opportunities exist in developing countries where population growth is occurring? © 2016 Cengage Learning. All Rights Reserved.

Chapter 5 Developing a Global Vision Natural Resources Shortages in natural resources create: International dependencies Shifts of wealth Inflation and recession Export opportunities if resources are abundant Stimulus for military intervention Notes: Petroleum shortages have created wealth for oil-producing countries such as Norway, Saudi Arabia, and the United Arab Emirates. Petroleum is not the only natural resource that affects international marketing. Warm climate and lack of water mean that many of Africa’s countries will remain importers of foodstuffs. The United States, on the other hand, must rely on Africa for many precious metals. © 2016 Cengage Learning. All Rights Reserved.

Identify the various ways of entering the
Chapter 5 Developing a Global Vision Global Marketing by the Individual Firm 5-4 Identify the various ways of entering the global marketplace © 2016 Cengage Learning. All Rights Reserved.

Chapter 5 Developing a Global Vision Why “Go Global?” Earn additional profits Leverage a unique product or technological advantage Possess exclusive market information Saturated domestic markets Excess capacity Utilize economies of scale Notes: Many firms form multinational partnerships—called strategic alliances—to assist them in penetrating global markets; strategic alliances are examined in Chapter 7. © 2016 Cengage Learning. All Rights Reserved.

5.2 Risk Levels for Five Methods of Entering the Global Marketplace
Chapter 5 Developing a Global Vision Risk Levels for Five Methods of Entering the Global Marketplace Notes: Exhibit 5.3 diagrams the risk levels for entering the global marketplace. Five methods of entering global markets are shown on this slide, in order of risk. Exporting is usually the least complicated and least risky alternative for entering the global marketplace, however it also has the lowest rate of return. On the other hand, direct investment offers the highest rate of return, but is accompanied by the highest risk. © 2016 Cengage Learning. All Rights Reserved.

Entering the Global Marketplace
Chapter 5 Developing a Global Vision Entering the Global Marketplace Licensing and Franchising 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 Export Sell domestically produced products to buyers in other countries Direct Investment Active ownership of a foreign company/manufacturing facility Discussion/Team Activity: Discuss examples of companies that have entered the global marketplace in each of the ways described on this slide. © 2016 Cengage Learning. All Rights Reserved.

Export Intermediaries
Chapter 5 Developing a Global Vision 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. Notes: Instead of selling directly to foreign buyers, a company may decide to sell to intermediaries located in its domestic market. Three types of intermediaries are described on this slide. © 2016 Cengage Learning. All Rights Reserved.

List the basic elements involved in developing a global marketing mix
Chapter 5 Developing a Global Vision The Global Marketing Mix 5-5 List the basic elements involved in developing a global marketing mix © 2016 Cengage Learning. All Rights Reserved.

The Global Marketing Mix
Chapter 5 Developing a Global Vision 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. Notes: 1. Firms seeking to enter into foreign trade must still adhere to the principles of the marketing mix. 2. Information gathered on foreign markets through research is the basis for the four Ps of global marketing strategy: product, place (distribution), promotion, and price. © 2016 Cengage Learning. All Rights Reserved. 34

Product and Promotion Chapter 5 Developing a Global Vision One Product, One Message Product Adaptation Promotion Invention Same Message Change Notes: An important decision is to alter the product or the promotion for the global market. One Product, One Message: Global marketing standardization means developing a single product for all markets and promoting it the same way worldwide. However, even a same product/same message strategy may require changes to suit local needs. Product Invention: This refers to creating a new product or drastically changing an existing product. For example, consumers in different countries use products differently, requiring different product characteristics. Product Adaptation: Products, including packaging, are slightly altered to meet local conditions. Promotion Adaptation: The same basic product is maintained, but the promotional strategy is altered to position the product effectively in different countries. Promotion varies in different countries. Language barriers, translation problems, and cultural differences create headaches. © 2016 Cengage Learning. All Rights Reserved.

Chapter 5 Developing a Global Vision Place (Distribution) Adequate distribution is necessary for success in global markets Lack of distribution infrastructure and cultural differences create problems Logistics and shipping costs have been a growing challenge for U.S. companies looking to move production overseas. Global trade has added to strains and charges for all forms of transportation. © 2016 Cengage Learning. All Rights Reserved.

Chapter 5 Developing a Global Vision Pricing Must consider transportation and insurance costs, taxes and tariffs Determine what customers will spend Ensure that foreign buyers will pay price May need to simplify a product to lower price Don’t assume that low-income countries are willing to accept lower quality © 2016 Cengage Learning. All Rights Reserved.

Chapter 5 Developing a Global Vision Exchange Rates… reflect he price of one’s currency in terms of another country’s currency. Floating Exchange Rates… comprise a system in which prices of different currencies move up and down based on the demand for and the supply of each currency. © 2016 Cengage Learning. All Rights Reserved.

Chapter 5 Developing a Global Vision Dumping 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. Notes: Dumping is regarded as a form of price discrimination that can potentially harm the importing nation’s competing industries. © 2016 Cengage Learning. All Rights Reserved.

Chapter 5 Developing a Global Vision Dumping Dumping may occur as a result of exporter business strategies that include: Trying to increase an overseas market share Temporarily distributing products to overseas markets to offset slack demand at home Lowering unit costs by exploiting large-scale production Attempting to maintain stable prices during periods of exchange rate fluctuations © 2016 Cengage Learning. All Rights Reserved.

Chapter 5 Developing a Global Vision 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. Notes: A common type of countertrade is straight barter. A second form is the compensation agreement where a company provides technology and equipment for a plant, and agrees to take full or partial payment in goods produced by that plant. © 2016 Cengage Learning. All Rights Reserved.

Discover how the Internet is affecting
Chapter 5 Developing a Global Vision The Impact of the Internet 5-6 Discover how the Internet is affecting global marketing © 2016 Cengage Learning. All Rights Reserved.

The Impact of the Internet
Chapter 5 Developing a Global Vision The Impact of the Internet Opening an e-commerce site puts a company in the international marketplace The Internet-based economy remains hindered by brick and mortar rules, regulations, and habits Notes: The promise of “borderless commerce” and the global “Internet economy” are still being restrained by the old brick-and-mortar rules, regulations, and habits. For example, Lands’ End is not allowed to mention its unconditional refund policy on its e-commerce site in Germany because German retailers, which normally do not allow returns after fourteen days, sued and won a court ruling blocking mention of it. © 2016 Cengage Learning. All Rights Reserved.

Chapter 5 Developing a Global Vision Social Media Global marketers use social media: Because it is popular around the world To understand customers For global brand building Notes: 1. Because Facebook, YouTube, and other social media are popular around the world, firms both large and small have embraced social media marketing. 2. Global marketers use social media not only for understanding consumers but also to build their brands as they expand internationally. © 2016 Cengage Learning. All Rights Reserved.

The Nederlander Organization
Chapter 5 Developing a Global Vision Chapter 5 Video The Nederlander Organization The Nederlander Organization is a theatre management company that manages a global network of Broadway style theatres. In this video clip, top management discusses how the Nederlander Organization grew from a small mid-west theatre management company into a global brand that helps successful producers move from Broadway to a global tour circuit. CLICK TO PLAY VIDEO © 2016 Cengage Learning. All Rights Reserved. 45

Scripps Networks Interactive Understanding Buyers and Markets
Chapter 5 Developing a Global Vision Part 1 Video Scripps Networks Interactive Understanding Buyers and Markets Scripps Networks Interactive is a major media company responsible for popular channels such as the Food Network, Cooking channel, HGTV, and Travel Channel. Controlling these networks also means developing retail products, social media connections, advertising, app development, and Web development. This clip discusses how Scripps views its connectivity with viewers online and how advertising partnerships may change through that connectivity. CLICK TO PLAY VIDEO © 2016 Cengage Learning. All Rights Reserved. 46

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