The Global Marketplace Chapter 15 Next Exit Prentice Hall, Copyright 2009

Rest Stop: Previewing the Concepts Discuss how the international trade system, and the 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 organization. Prentice Hall, Copyright 2009

The NBA – A “Hot” Global Brand Case Study The NBA – A “Hot” Global Brand Why Go Global? Basketball is the #2 global sport, behind soccer. NBA finals were televised in 215 countries. Going global means growth. 10% of league’s overall revenues and 25% of licensed apparel sales comes from outside United States. Growing presence of foreign born stars adds to the NBA’s global appeal. How Did They Do It? Nine international offices, over 100 international staff and a Hispanic marketing office in Miami, Florida. 132 NBA sponsored international events in the off-season. NBA Europe Live program takes off-season training for the four NBA teams to Europe. International expansion in the future may target China. Prentice Hall, Copyright 2009

Global Marketing Today Several trends characterize the global marketplace today: The world is shrinking rapidly with the advent of faster communication, transportation, and financial flows. International trade is booming. Global competition is intensifying. Risks associated with globalization are increasing. Prentice Hall, Copyright 2009

Global Firm Defined A firm that, by operating in more than one country, gains R&D, production, marketing, and financial advantages in its costs and reputation that are not available to purely domestic competitors. Prentice Hall, Copyright 2009

Figure 15.1 Major International Marketing Decisions Prentice Hall, Copyright 2009

Looking at the Global Marketing Environment The International Trade System: Many restrictions exist: Tariffs Quotas Embargos Exchange controls Nontariff trade barriers E.g., Protectionist regulations prevent the United States and other Western banks from entering China’s huge retail banking market. Prentice Hall, Copyright 2009

Looking at the Global Marketing Environment The World Trade Organization and GATT: Helps trade by reducing tariffs and other international trade barriers Imposes sanctions Mediates global disputes Prentice Hall, Copyright 2009

Looking at the Global Marketing Environment Regional Free Trade Zones: European Union (EU) North American Free Trade Agreement (NAFTA) Prentice Hall, Copyright 2009

Marketing in Action The European Union Regional free trade zones such as the European Union help to simplify the process of going global. Visit http://europa.eu/ and explore the European Union’s Web site for information that could be helpful to a marketer wishing to go global. Prentice Hall, Copyright 2009

Looking at the Global Marketing Environment Economic environment: Industrial structure shapes a country’s product and service needs, income levels, and employment levels. Four types of industrial structure: Subsistence economies Raw material exporting economies Industrializing economies Industrial economies Prentice Hall, Copyright 2009

Looking at the Global Marketing Environment Economic environment: Income distribution is an important factor. Many luxury brand marketers are rushing to take advantage of China’s consumer markets. Prentice Hall, Copyright 2009

Looking at the Global Marketing Environment Political-legal environments vary by: Attitudes toward international buying Government bureaucracy Political stability Monetary regulations Countertrade is a growing practice which takes several forms: Barter Compensation Counterpurchase Prentice Hall, Copyright 2009

Looking at the Global Marketing Environment Before planning a marketing program, sellers must: Understand a nation’s culture Examine the ways in which consumers in different countries think about and use products Mistakes can be embarrassing and costly. Prentice Hall, Copyright 2009

Ignore Culture at Your Peril Marketing in Action Ignore Culture at Your Peril China imposed a nationwide ban on this “blasphemous” ad featuring LeBron James crushing several culturally revered Chinese figures. Prentice Hall, Copyright 2009

Looking at the Global Marketing Environment Cultural environment: Business norms and behavior vary by country. Companies that understand cultural nuances can use them to advantage when positioning products internationally. Prentice Hall, Copyright 2009

Looking at the Global Marketing Environment Cultural environment: Critics contend that large American multinationals are “Americanizing” the world’s cultures. In China, most people never drank coffee prior to Starbucks entry into the market. Prentice Hall, Copyright 2009

Deciding Whether to Go Global Reasons to consider going global: Foreign attacks on domestic markets may be countered by counterattacks abroad. Home market may be stagnant or shrinking while foreign markets offer higher profit opportunities. Customers may be expanding globally and require international servicing. Risks must be weighed against the firm’s ability to operate globally. Prentice Hall, Copyright 2009

Deciding Which Markets to Enter Before going abroad, the company should try to define its international marketing objectives and policies. What volume of foreign sales is desired? How many countries to market in? What types of countries to enter? Possible countries should be ranked based several factors. The market(s) with the greatest ROI should be chosen. Prentice Hall, Copyright 2009

Size isn’t everything though. P&G’s decision to enter the Chinese toothpaste market with Crest makes sense as China is the largest toothpaste market in the world. Size isn’t everything though. What brands or products might NOT succeed in China, despite its enormous market size? Why? Prentice Hall, Copyright 2009

Figure 15.2 Market Entry Strategies Prentice Hall, Copyright 2009

Deciding How to Enter the Market Exporting: Entering a foreign market by selling goods produced in the company’s home country, often with little modification. Types of exporting: Indirect: Working through independent international marketing intermediaries. Direct: Company handles its own exports. Prentice Hall, Copyright 2009

Deciding How to Enter the Market Joint venturing: Joining with foreign companies to produce or market a product or service. Approaches: Licensing Contract manufacturing Management contracting Joint ownership Prentice Hall, Copyright 2009

Deciding How to Enter the Market Licensing: A company enters into an agreement with a licensee in a foreign market, offering the right to use a patent, manufacturing process, trademark, trade secret, or other item of value for a fee or royalty. Prentice Hall, Copyright 2009

Deciding How to Enter the Market Contract manufacturing: A company contracts with manufacturers in a foreign market to produce the product or provide its service. Management contracting: A joint venture in which the domestic firm supplies the management know-how to a foreign company that supplies the capital; the domestic firm exports management services rather than products. Prentice Hall, Copyright 2009

Deciding How to Enter the Market Joint ownership: A joint venture in which a company joins investors in a foreign market to create a local business in which the firm shares joint ownership and control. KFC teamed up with Mitsubishi to enter Japan. Prentice Hall, Copyright 2009

Deciding How to Enter the Market Direct investment: The development of foreign-based assembly or manufacturing facilities. Advantages: Lower costs due to cheap labor or raw materials. Firm may improve image in host country. Better adaptation of products to country. Disadvantages: Currency risks, market failure, government change. Prentice Hall, Copyright 2009

Deciding on the Global Marketing Program Standardized marketing mix: Using basically the same marketing strategy and mix in all international markets. Adapted marketing mix: Adjusting the marketing strategy and mix elements to each international target market, bearing more costs but hoping for a larger market share and return. Prentice Hall, Copyright 2009

Think Global, Act Local Marketing in Action McDonald’s uses the same basic fast-food look, layout, and operating model in all of its restaurants around the world, but adapts its menu to local tastes. Filet-O-Shrimp burgers, Bulgogi Burgers, and the beefless Maharaja Mac are some examples. Prentice Hall, Copyright 2009

Figure 15.3 Five Global Product and Communications Strategies Prentice Hall, Copyright 2009

Deciding on the Global Marketing Program Global promotion strategies: Firms can either adopt the same communication strategy they used in the market or change it for each local market. Some global firms use a standardized advertising theme around the world with minor adaptations. Other firms follow a communication adaptation strategy by fully adapting an advertising message for local markets. Changes may also have to be made due to media availability. Prentice Hall, Copyright 2009

Quick Flick Harley Davidson’s global strategy Click to play video Prentice Hall, Copyright 2009

Other Classic Blunders Marketing in Action Brand Name Blunders OOPS!!! Not all brand names translate well into English, or from English into a different language. Other Classic Blunders “Coke” translated into Chinese characters was interpreted by the Chinese to mean “Bite the wax tadpole.” Chevy used the “Nova” name verbatim, only to find out that no va means “It doesn’t go” in Spanish. Prentice Hall, Copyright 2009

Deciding on the Global Marketing Program Global pricing strategies: Companies face many problems in setting their international prices. Standard pricing methods ignore cost differentials and local market conditions. International prices tend to be higher than domestic prices because of price escalation. Some global firms create simpler versions of products to sell abroad. Prentice Hall, Copyright 2009

Deciding on the Global Marketing Program Global pricing strategies: Setting prices for foreign subsidiaries can be problematic: Charging too much results in higher tariff duties and lower income taxes. Charging too little can result in accusations of dumping if price is less than the product costs or less than is being charged in the home market. Prentice Hall, Copyright 2009

Impact of Global Pricing Marketing in Action Impact of Global Pricing The adoption of the euro as a common currency by several nations has created a “pricing transparency” that is forcing companies to harmonize their prices throughout Europe. Prentice Hall, Copyright 2009

Figure 15.4 Whole-Channel Concept for International Marketing Prentice Hall, Copyright 2009

Deciding on the Global Marketing Program Global distribution channels differ by: The numbers and types of intermediaries. Size and character of retail units differ as well, presenting challenges. The transportation infrastructure. Limitations in the distribution network of China will create challenges for many marketers. Prentice Hall, Copyright 2009

Distribution Can Be Difficult Marketing in Action Distribution Can Be Difficult Nokia developed its own distribution structure for India, including a fleet of distinctive blue Nokia-branded vans which were used to visit remote villages. Prentice Hall, Copyright 2009

Deciding on the Global Marketing Organization International marketing efforts can be managed by: Organizing an export department. Creating international divisions: Geographical organizations World product groups International subsidiaries Becoming a global organization. Prentice Hall, Copyright 2009

Rest Stop: Reviewing the Concepts Discuss how the international trade system, and the 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 organization. Prentice Hall, Copyright 2009

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