CHAPTER 7 Global Marketing Chapter Objectives 1 Describe the importance of global marketing from the perspectives of the individual firm and the nation. Identify the major components of the environment for global marketing. Identify the basic functions of GATT, WTO, NAFTA, FTAA, CAFTA-DR, and the European Union. 4 Identify the alternative strategies for entering foreign markets. Differentiate between a global marketing strategy and a multidomestic marketing strategy. 6 Describe the alternative marketing mix strategies used in global marketing. Explain the attractiveness of the United States as a target market for foreign marketers. 5 7 2 3

• Importing Purchasing foreign goods and services. • Global trade accounts for _____ % of the U.S. gross domestic product. • Exporting Marketing domestically produced goods and services in foreign countries. • Importing Purchasing foreign goods and services. 27%

The Worlds Most Valuable Brands

THE IMPORTANCE OF GLOBAL MARKETING Why Global Marketing? Global marketing is a necessity as demand for U.S. products increases in fast-growing economies. • Globalization and the Internet allow every marketer to be an international marketer, e.g. PayPal – small businesses • Firms also rely on foreign sources for raw materials for their domestic manufacturing operations.

SERVICE AND RETAIL EXPORTS • Three of every five dollars of U.S. GDP comes from services. • U.S. manufacturing sector has diminished but is still important. • U.S. is world’s largest exporter of retailing and services. • Most profitable sector is business and technical services such as engineering, financial, computing, and legal services. BENEFITS OF GOING GLOBAL • New insights into customer behavior, alternative distribution strategies, and advance notice of new products. • Enhanced ability to compete effectively with foreign competition through increased adaptability to local markets. • Three of every five dollars of U.S. GDP comes from services. • Examples: Banking, entertainment, and communications.

THE INTERNATIONAL MARKETING ENVIRONMENT INTERNATIONAL ECONOMIC ENVIRONMENT • Important factors: nation’s size, per-capita income, stage of economic development, and infrastructure. Exchange rate Price of one nation’s currency in terms of another nation’s currency. INTERNATIONAL SOCIAL-CULTURAL ENVIRONMENT • Marketers must understand a nation’s culture and language. INTERNATIONAL TECHNOLOGICAL ENVIRONMENT • Internet technologies connect large and small firms to world markets. • Asia, Europe, and North America account for 87 % of the world’s Internet usage. INTERNATIONAL POLITICAL-LEGAL ENVIRONMENT • Marketers must be aware of political conditions and legal environment in each country in which they compete. • As in domestic markets, marketers must pay attention to local environmental factors. INTERNATIONAL ECONOMIC ENVIRONMENT • Important factors: nation’s size, per-capita income, stage of economic development, and infrastructure. • India and China together contribute one-third of the global GDP. • Exchange rate Price of one nation’s currency in terms of another nation’s currency. INTERNATIONAL SOCIAL-CULTURAL ENVIRONMENT • Marketers must understand a nation’s culture and language. INTERNATIONAL TECHNOLOGICAL ENVIRONMENT • Internet technologies connect large and small firms to world markets. • Asia, Europe, and North America account for 87 percent of world’s Internet usage. INTERNATIONAL POLITICAL-LEGAL ENVIRONMENT • Marketers must be aware of political conditions and legal environment in each country in which they compete. • International law regulating international trade. • U.S. law regulating international trade, including trade regulations, tax laws, and import/export requirements. • Legal requirements of other nations in which a company is doing business.

TRADE BARRIERS DUMPING • Tariff Tax levied against imported goods. • Two types: revenue tariffs and protective tariffs. • Administrative barriers —such as quotas, restrictive standards for imports, and export subsidies—and import license controls • Import quotas Trade restrictions that limit the number of units of certain goods that can enter a country for resale. • Embargo, a complete ban on the import of a product. • Other barriers include subsidies, limits on foreign ownership, extensive regulatory barriers, and exchange control. DUMPING • Practice of selling a product in a foreign market at a price lower than it commands in the producer’s domestic market.

GATT AND THE WORLD TRADE ORGANIZATION • General Agreement on Tarrifs and Trade (GATT) International trade accord that has helped reduce world tariffs. • World Trade Organization (WTO). 149 member nations, oversees GATT agreements, mediates disputes, and works to further reduce trade barriers. THE NAFTA ACCORD • North American Free Trade Agreement (NAFTA) Accord removing trade barriers between Canada, Mexico, and the United States. THE EUROPEAN UNION • European Union (EU) Customs union that is moving in the direction of an economic union by adopting a common currency, removing trade restrictions, and permitting free flow of goods and workers throughout the member nations. • Includes 500 million people in 25 countries. THE FREE TRADE AREA OF THE AMERICAS AND CAFTA-DR GATT AND THE WORLD TRADE ORGANIZATION • General Agreement on Tarrifs and Trade (GATT) International trade accord that has helped reduce world tariffs. • 1994 Uruguay round reduced average tariffs by one-third, or more than $700 billion and established World Trade Organization (WTO). • 149 member nations. • Oversees GATT agreements, mediates disputes, and works to further reduce trade barriers. THE NAFTA ACCORD • North American Free Trade Agreement (NAFTA) Accord removing trade barriers between Canada, Mexico, and the United States. • NAFTA partners conduct $2.2 billion in trade daily. THE FREE TRADE AREA OF THE AMERICAS AND CAFTA-DR • FTAA would extend NAFTA; negotiations ongoing. • Central American Free Trade Agreement-DR (CAFTA-DR) already in place and its provisions are being implemented. THE EUROPEAN UNION • European Union (EU) Customs union that is moving in the direction of an economic union by adopting a common currency, removing trade restrictions, and permitting free flow of goods and workers throughout the member nations. • Includes 500 million people in 25 countries.

STRATEGIES FOR ENTERING FOREIGN MARKETS • Firm’s risk and degree of control both increase with greater involvement. • Export-trading companies—buy products from domestic producers and resell them abroad. • Export-management companies—provide expertise in reaching foreign buyers, handle necessary paperwork, and ensure goods meet local legal requirements. • Offset agreement—small firm teams with international company and serves as subcontractor on a large foreign project.

CONTRACTUAL AGREEMENTS • Provide flexibility and may be good ways to take services abroad. • Franchise Contractual arrangement in which a wholesaler or retailer agrees to meet the operating requirements of a manufacturer or other franchiser. • Foreign licensing 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. • Subcontracting—production of goods and services assigned to local companies. • Can prevent misunderstanding of local culture and regulations and provide protection from import duties.

INTERNATIONAL DIRECT INVESTMENT • U.S. has world’s largest direct investment inflows and outflows. • U.S. direct investment abroad is more than $2.2 trillion. • Direct investment in U.S. is led by United Kingdom, Japan, the Netherlands, and Germany. • Generally high involvement, high risk. • Can acquire an existing firm in target country, set up an independent division, or form joint ventures to share risks, costs, and management with foreign partners.

FROM MULTINATIONAL CORPORATION TO GLOBAL MARKETER • Multinational corporation—has significant operations and marketing activities outside its home country. • Examples: General Electric, Siemens, Mitsubishi. • Important changes since 1960: • No longer exclusively U.S.-based. • No longer see foreign operations as appendages but rely on them for exchanges of ideas, capital, and technologies. • Often employ large foreign workforces relative to American staffs. • Reflect interdependence of world economies, growth of international competition, and globalization of world markets.

DEVELOPING AN INTERNATIONAL MARKETING STRATEGY • Global marketing strategy. • Defines a standard marketing mix and implements it with minimal modification in all foreign markets. • Brings advantage of economies of scale and saves money. • Works well for products with strong universal appeal and luxury products. • Multidomestic strategy. • Customization of marketing strategies to to effectively reach individual markets. • Allows flexibility for responding to cultural, geographic, and language differences.

INTERNATIONAL PRODUCT AND PROMOTIONAL STRATEGIES • Five basic strategies that center on whether to extend domestic product and promotional strategies or adapt one or both.

INTERNATIONAL DISTRIBUTION STRATEGY • Marketers must decide how to enter a foreign market and how to distribute the product in the foreign market through that entry channel. PRICING STRATEGY • Competitive, economic, political, and legal factors can limit pricing decisions. • Must adapt to local markets: Hindustan Lever offers “penny packets” of shampoo to customers in India who cannot afford an entire bottle. COUNTERTRADE • Countertrade Form of exporting whereby goods and services are bartered rather than sold for cash. • Example: PepsiCo exchanged $3 billion in cola for vodka, a cargo ship, and tankers from the former Soviet Union.

FIRST STEPS IN DECIDING TO MARKET GLOBALLY • Questions to ask: • Will our product sell well in the new target culture? • Is our target market familiar yet with our product, or our name? • Are we comfortable doing business in this particular place? • How well developed is the infrastructure? • Steps to take: • Prepare an international business plan. • Conduct research into foreign markets. • Evaluate distribution possibilities. • Evaluate methods for financing the operation. • Learn the rules and regulations in the new country.