4 MKTG CHAPTER Developing a Global Vision

Objectives Discuss the importance of global marketing Discuss the impact of multinational firms on the world economy Describe the external environment facing global marketers Identify ways of entering the global market List the elements involved in developing a global marketing mix

Emerging-Market Companies COMPANY COUNTRY INDUSTRY América Móvil Mexico Telecom services Cemex Building materials China Mobile China CNOOC Oil and gas CVRD Brazil Mining Embraer Aerospace Gazprom Russia Haier Home appliances Hisense Electronics Huawei Telecom equipment Adapted from “Emerging Giants,” Business Week, July 31, 2006.

Go Global Target throughout the world Global vision of multi-national firms Fear? Why?

The Fear 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 Then, why is international marketing so hot?

Did you know?… U.S. exports a fifth of industrial production. One of every 10 jobs in U.S. is supported by exports. U.S. businesses export over $800 billion. Exports account for 25 percent of U.S. economic growth. U.S. is world’s leading exporter of farm products.

Rewards of Global Marketing Recognizing and reacting to international marketing opportunities Using effective global marketing strategies Being aware of threats from foreign competitors Other rewards?

External Environments

Demographics (1) Birthrate Babies born/1000 people in population In U.S, slower since baby boom (declining; grandparents example) Japan & Western Europe is also slower More spending/child (indulged)

U.S. Birthrate 1935-2005

U.S. Demographics (2) U.S. is a Transient society Regional 16% moves each year (40% of those, out of country) A nation of strangers leads to chains Regional Growth Fastest in the West California (most populous; 1/8 Americans) Density Most on the East Coast (Why??) Key for businesses: local area, traffic counts, food

Economic Development (1) What are attractive markets? GNI (Gross National Income): total market value of goods/services produced in an economy Higher GNI Allows more trade Exchange concept = favors richer countries & people Criticism here

Economic Development (2) What are attractive markets? (continued) Lower GNP Developing world Growth Example: U.S. and Canada will take 5x as long to double their population as compared to Nicaragua & Saudi Arabia Less competition (M&M/Mars: Eastern Europe) Challenges Literacy: ¾ world (baby food, U.S. fast food) Low income: 60% of world makes less than $2/day Ethics (Nestle and what other company?)

International Trade MERCOSUR (Latin America) URUGUAY ROUND (>148 nations to reduce tariffs) WTO (replaced GATT) NAFTA CAFTA EU IMF

International Options Exporting/importing (Wal-Mart) Licensing (Sponge Bob) Franchising (McDonalds) Contract manufacturing Joint venture Direct foreign investment

Which are more risky? Export Licensing Contract Manufacturing 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

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.

Global Marketing Mix Strategies One product, one message Change existing product for a new country market (Krispy Crème, anything else?) Message adaptation Price changes (exchange rates, dumping) Barter

Product and Promotion Same One Product Product One Message Adaptation Invention Same Change

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

Developing a Global Marketing Mix PROMOTION One Product, One Message Product Invention Product Adaptation Message Adaptation PLACE Channel Choice Channel Structure Country Infrastructure PRICE Dumping Countertrade Exchange Rates Purchasing Power

Your thoughts? What are your ideas for selling abroad? How difficult is global marketing? What are the potential risks and returns?

Summary Demography International trade Economic development International options Global marketing mix