Thrive in the Marketing Environment: The World Is Flat Chapter Three © 2012 Pearson Education, Inc. publishing as Prentice-Hall

3-2 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Chapter Objectives  Understand the big picture of international marketing and the decisions firms must make when they consider globalization  Explain how international organizations such as the World Trade Organization (WTO), economic communities, and individual country regulations facilitate and limit a firm’s opportunities for globalization  Understand how factors in a firm’s external business environment influence marketing strategies and outcomes in both domestic and global markets  Explain some of the strategies that a firm can use to enter global markets

3-3 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Real People, Real Choices: Decision Time at eBay  Which option should eBay undertake? Option 1: Customize eBay by adding additional categories for artisans’ products, but don’t create a separate brand Option 1: Customize eBay by adding additional categories for artisans’ products, but don’t create a separate brand Option 2: Create a completely separate, custom-branded experience Option 2: Create a completely separate, custom-branded experience Option 3: Create a hybrid model using an independent marketplace and a licensed brand Option 3: Create a hybrid model using an independent marketplace and a licensed brand

3-4 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Take a Bow: Marketing on the Global Stage  World trade: The flow of goods and services among different countries—the value of all the exports and imports of the world’s nations  Countertrade: A type of trade in which goods are paid for with other items instead of with cash

3-5 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Deciding to Go Global  Step 1: “Go” or “no go” - should focus remain on home market or go global?  Step 2: IF “go”, which markets are most attractive?  Step 3: What market-entry strategy is best?  Step 4: How should marketing mix strategies for foreign markets be developed?

3-6 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Deciding to Go Global  “Go” or “no go” Is it in the best interest of the firm to remain in the home market or to go where foreign business opportunities exist? Is it in the best interest of the firm to remain in the home market or to go where foreign business opportunities exist?  Must consider domestic and global market conditions and competitive advantage when making a decision

3-7 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Understand International, Regional and Country Regulations  Initiatives in international regulation and cooperation help trade: General Agreement on Tariffs and Trade (GATT) General Agreement on Tariffs and Trade (GATT) World Trade Organization (WTO) World Trade Organization (WTO)  Protectionism restricts trade: Quotas, embargoes, and tariffs Quotas, embargoes, and tariffs  Economic communities help to promote trade

3-8 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Analyzing the Global Marketing Environment  A company going global must understand local conditions in the targeted country, including: Economic environment Economic environment Competitive environment Competitive environment Technological environment Technological environment Political and legal environment Political and legal environment Sociocultural environment Sociocultural environment

3-9 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. The Economic Environment: Indicators of Economic Health  Key economic indicators: Gross domestic product (GDP): Total dollar value of goods and services a country produces within its borders in a year Gross domestic product (GDP): Total dollar value of goods and services a country produces within its borders in a year Gross national product (GNP): Value of all goods and services produced by a country’s citizens or organizations Gross national product (GNP): Value of all goods and services produced by a country’s citizens or organizations Economic infrastructure: Quality of country’s distribution, financial, and communications systems Economic infrastructure: Quality of country’s distribution, financial, and communications systems

3-10 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. The Economic Environment: Level of Economic Development  Least developed country (LDC) Economic base is often agricultural Economic base is often agricultural  Developing countries Economy shifts emphasis from agriculture to industry Economy shifts emphasis from agriculture to industry  Developed countries Offer wide range of opportunities for international marketers Offer wide range of opportunities for international marketers

3-11 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. The Economic Environment: The Business Cycle  All economies go through periods of: Prosperity Prosperity Recession Recession Recovery Recovery Depression Depression Inflation Inflation

3-12 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. The Competitive Environment: Analyzing the Market and Competition  Competitive intelligence: Gathering and analyzing publicly available information about rivals to develop superior marketing strategies Collected from news media, the internet, and government documents available to the public Collected from news media, the internet, and government documents available to the public

3-13 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. The Competitive Environment: Competition in the Microenvironment  Competition in the microenvironment: Competition for consumer’s discretionary income Competition for consumer’s discretionary income Competition among products to satisfy the same consumer’s needs and wants Competition among products to satisfy the same consumer’s needs and wants Competition among brands offering similar goods and services on the basis of brand reputation or perceived benefits Competition among brands offering similar goods and services on the basis of brand reputation or perceived benefits

3-14 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. The Competitive Environment: Competition in the Macroenvironment  Competition in the macroenvironment (overall structure of industry): Monopoly Monopoly Oligopoly Oligopoly Monopolistic competition Monopolistic competition Perfect competition Perfect competition

3-15 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. The Technological Environment  Technology: Provides firms with important competitive advantages Provides firms with important competitive advantages Profoundly affects marketing activities Profoundly affects marketing activities Can transform industries Can transform industries  Patent Legal document giving inventors exclusive rights to produce and sell a particular invention in that country Legal document giving inventors exclusive rights to produce and sell a particular invention in that country

3-16 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. The Political and Legal Environment: Legal Influences on Business  Local, state, national, and global laws and regulations affect businesses  Purpose of American law: To make sure businesses compete fairly with each other To make sure businesses compete fairly with each other To make sure that businesses do not take advantage of consumers To make sure that businesses do not take advantage of consumers

3-17 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. The Political and Legal Environment: Political Constraints on Business  Retaliatory actions against American businesses sometimes occur as a result of political activity or war  Political constraints on trade are commonly imposed: Economic sanctions Economic sanctions Nationalization Nationalization Expropriation Expropriation

3-18 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. The Political and Legal Environment: Regulatory Constraints on Business  Regulatory constraints on trade often restrict the marketing of goods Local content rules Local content rules  Human rights issues may limit the business opportunities in a foreign country U.S. Generalized System of Preferences (GSP) U.S. Generalized System of Preferences (GSP)

3-19 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. The Sociocultural Environment  Key sociocultural considerations: Demographics Demographics Cultural values Cultural values  Collectivist vs. individualistic cultures Social norms and customs Social norms and customs Language Language Ethnocentrism: The tendency to prefer products from one’s own culture Ethnocentrism: The tendency to prefer products from one’s own culture

3-20 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. When is a Bribe Not a Bribe? Ethical Issues in Global Business  What is considered to be ethical business behavior varies by country  Bribery When someone voluntarily offers payment to get an illegal advantage  Extortion When someone in authority extracts payment under duress

3-21 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. How “Global” Should a Global Marketing Strategy Be?  Company-level decisions - the market entry strategy: Exporting Exporting Contractual agreements: Contractual agreements:  Licensing  Franchising Strategic alliances Strategic alliances  Joint venture Direct investment Direct investment

3-22 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. How “Global” Should a Global Marketing Strategy Be?  Product-level decisions: the marketing- mix strategy: Standardization vs. localization Standardization vs. localization  Standardization: Offer the same products in all markets  Localization: Offer a customized marketing mix for each country

3-23 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. How “Global” Should a Global Marketing Strategy Be?  Tweaking the marketing mix Product decisions: Product decisions:  Straight extension strategy  Product adaptation strategy: –Product invention –Backward invention  Product invention strategy Promotion decisions: Promotion decisions:  Whether or not to modify

3-24 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. How “Global” Should a Global Marketing Strategy Be?  Tweaking the marketing mix Price decisions: Price decisions:  Products are often more expensive to produce for foreign markets –Free trade zones –Gray market goods –Dumping Distribution decisions: Distribution decisions:  Getting the product to remote locations is often difficult

3-25 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Real People, Real Choices: Decision Made at eBay  Robert chose option 3 Why do you think that Robert chose to license the brand “WorldofGood.com” and launch the marketplace on a platform independent from eBay? Why do you think that Robert chose to license the brand “WorldofGood.com” and launch the marketplace on a platform independent from eBay?

3-26 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Keeping It Real: Fast-Forward to Decision Time at Plan-It Marketing  Meet Ryan Garton, director of Consumer Insights at Discover Financial Services  Ryan lacks an integrated approach to evaluating how new product ideas fit with consumers’ desires  The decision to be made: Should the process used to screen new product ideas be changed?

3-27 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America