Gilbert A. Churchill, Jr. J. Paul Peter Chapter 3 Global Marketing Challenges Marketing

A Process for Deciding Whether to Enter International Markets Slide 3-1 Source: Betty Jane Punnett and David A. Ricks, International Business (Boston: PWS-Kent Publishing Co., 1992) p. 257 Start Must we? Can we? Should we? Concentrate Domestically Improve Capability Identify Specific Opportunities Select Entry Option No Yes Figure 3.1

Major Trading Partners of the U.S. Slide 3-2 Figure 3.2 Source: U.S. Department of Commerce, Statistical Abstract of the United States, 115th ed. (Washington Government Printing Office, 1995) pp Canada Japan Mexico Europe U.K. Exports = $53 Exports = $51 Exports = $114 Exports = $27 Exports = $19 Imports = $32 Imports = $25 Imports = $49 Imports = $129 Imports = $119 Imports and Exports in Billions of Dollars

Environmental Analysis Issues in Global Markets Slide 3-3a Table 3.1 Environment Economic Environment Stage of Development Buying Power of Consumers Type of Currency; exchange rate Political and Legal Environment Analysis Issues Political Stability Laws limiting international trade Laws of host nations General Agreement on Tariffs and Trade (GATT)

Slide 3-3b Table 3.1 Environment Social Environment Cultural influences on buying behavior Language differences Population sizes and distribution Socioeconomic status Impact on marketing on the culture Ethical considerations such as bribery and human rights Natural Environment Analysis Issues Resources available Impact of resources on natural resources Technological Environment Levels of technological development Available infrastructure Degrees of government involvement in competition Ownership of competitors-local, foreign or government Competitive Environment Environmental Analysis Issues in Global Markets

Economic/Technological Development Type of Society Type of Society Description Traditional Pre-Industrial Takeoff Industrializing Agricultural, Little Upward Mobility, Little Technology, Custom-bound (e.g., Ghana) Social and Economic Change, Rising Middle-class (e.g., Peru, Uganda) New Industries, Healthy Social and Economic Climate (e.g., Thailand, Malaysia) Spread of Technology (e.g., China, Mexico, India, Brazil) Fully Industrial Fully Industrial Exporter, Technology as Driver of New Innovation (e.g., original G-7) Exporter, Technology as Driver of New Innovation (e.g., original G-7) Slide 3-4

Legal Considerations of Global Marketing Tariff - tax levied on imported products Tariff - tax levied on imported products Quota - limit on the amount of specific product that can enter a country Quota - limit on the amount of specific product that can enter a country Boycott (embargo) - a prohibition of trade Boycott (embargo) - a prohibition of trade Exchange Control - laws compelling foreign exchange earnings to be sold to the central bank Exchange Control - laws compelling foreign exchange earnings to be sold to the central bank Per Capita Income - income per person in a particular country Per Capita Income - income per person in a particular country Trade Agreement - agreements to stimulate international trade Trade Agreement - agreements to stimulate international trade Legal Structures Either Encourage or Limit Trade Slide 3-5a

Important Trade Agreements Trade Agreements Trade Agreements Description NAFTA EU ASEAN GATT The North American Free Trade Agreement between Canada, U.S., and Mexico is designed to phase out trade barriers. An agreement between 15 Western European countries to lower trade barriers An agreement between Southeast Asian Nations to lower trade barriers. The General Agreement on Tariffs and Trade is an International framework of rules to lower trade barriers among 110 member nations WTO The World Trade Organization is designed to further negotiations and oversee resolution of disputes related to GATT Slide 3-6

Political Considerations of Global Marketing Dumping - practice of pricing products sold in foreign markets at less than their fair market price in the domestic market Dumping - practice of pricing products sold in foreign markets at less than their fair market price in the domestic market Counter Trade - form of trade in which all or part of the payment for goods and services is in the form of other goods and services Counter Trade - form of trade in which all or part of the payment for goods and services is in the form of other goods and services Devaluation - decreasing the value of the domestic currency in relation to the foreign currency Devaluation - decreasing the value of the domestic currency in relation to the foreign currency Political Structures Slide 3-5b

Examples of Cultural Differences that Could Lead to Marketing Problems Slide 3-7 Table 3.2 Body Language Standing with your hands on your hips is a gesture of defiance in Indonesia. Physical Contact Promptness Eating and Cooking Other Social Customs Patting a child on the head is a grave offense in Thailand or Singapore since the head is revered as the location of the soul. In Latin countries, your host or business associate would be surprised if you arrived at the appointed hour. It is rude to leave anything on your plate when eating in Norway, Malaysia or Singapore. In Sweden, nudity and sexual permissiveness are quite all right, but drinking is really frowned on. Source: William J. Stanton, Michael J. Etzel and Bruce J. Walker, Fundamentals of Marketing, 9th ed.. (New York: McGraw-Hill, 1991), p ©1991 by the McGraw-Hill Companies, Inc., and reproduced by permission of the publisher.

Exporting Slide 3-8 A mode of entry involving production of a product in one country and shipping it to another country for sale. Risk High LowHigh Control Exporting

Licensing Slide 3-9 An agreement in which an organization grants another organization the right to use a trademark, a patented product or a process. Risk High LowHigh Control Exporting Licensing

Joint Ventures Slide 3-10 A business agreement in which two or more organizations share management of an enterprise. Risk High LowHigh Control Exporting Licensing Joint Ventures

Direct Ownership Slide 3-11 A mode of entry involving an organization setting up new facilities or acquiring a foreign firm in the same line of business. Risk High LowHigh Control Exporting Licensing Joint Ventures Direct Ownership

Mechanisms for Serving Global Markets: Some Pros and Cons Slide 3-12 Mechanism Exporting Simple; minimal financial risk Licensing AdvantagesDisadvantages Joint Venture Direct Ownership May be less profitable than other mechanisms Minimal capital outlay; useful for serving countries with export restrictions Difficult to control licensee; when licensing agreement ends, licensee may become a competitor; may be less profitable than other mechanisms Share control with venture partner; partner may learn technology or secrets that it uses to compete with the organization Risk limited to the organization’s share in the venture; foreign partner contributes expertise the organization lacks; useful when the host country limits foreign ownership Maximum control over foreign operations; ability to be close to customers Expensive to set up; requires extensive knowledge of foreign markets and contacts overseas Source: Based in part on information in Philip R. Cateora, International Marketing, 9th ed. (Burr Ridge, Ill: Irwin, 1996) chapter 10. Table 3.3

The Largest Multinational Corporations Annual Revenues Rank* CompanyCountry in Billions of U.S. $ 1 MitsubishiJapan184 2 MitsuiJapan ItochuJapan G.M.U.S SumitomoJapan MarubeniJapan Ford MotorU.S Toyota MotorJapan ExxonU.S Royal DutchBritain/ Shell GroupNetherlands 110 *Ranked by 1995 sales volume. Source: “The Fortune Global 500,” Fortune, 5 August 1996, p. F1. Slide 3-13

Globalization vs Customization Slide 3-14 Globalized Product Customized Product