1 Chapter 19 The Global Marketplace

2 Global Marketing into the Twenty-First Century The world is shrinking rapidly with the advent of faster communication, transportation, and financial flows. International trade is booming and now accounts for a quarter of the United States’ GDP. Between 1996 and 2006, U.S. exports are expected to increase 51%. Global competition is intensifying and few U.S. industries are now safe from foreign competition.

3 Global Marketing into the Twenty-First Century To compete, many U.S. companies are continuously improving their products, expanding into foreign markets, and becoming global firms. Global firms face several major problems: High debt, inflation, and unemployment have resulted in highly unstable governments & currencies, Governments placing more regulations on foreign firms, Protectionist tariffs and trade barriers, Corruption.

4 Major Decisions in International Marketing (Fig. 19.1) Looking at the global marketing environment Deciding whether to go international Deciding which markets to enter Deciding how to enter the market Deciding on the global marketing program Deciding on the global marketing organization

5 Looking at the Global Marketing Environment The International Trade System i.e. Tariff, Quota, Embargo, Exchange Control, and Nontariff Trade Barriers The International Trade System i.e. Tariff, Quota, Embargo, Exchange Control, and Nontariff Trade Barriers The World Trade Organization and GATT Treaty designed to promote world trade by reducing tariffs and other international trade barriers The World Trade Organization and GATT Treaty designed to promote world trade by reducing tariffs and other international trade barriers Regional Free Trade Zones Group of nations organized to work toward common goals in the regulation of international trade Regional Free Trade Zones Group of nations organized to work toward common goals in the regulation of international trade

6 Types of Industrial Structure Subsistence Economies Raw Material Exporting Economies Industrializing Economies Industrial Economies Economic Environment

7 Attitudes Toward International Buying Attitudes Toward International Buying Government Bureaucracy Government Bureaucracy Political Stability Political Stability Monetary Regulations Monetary Regulations At Least Four Political-Legal Factors Should be Considered in Deciding Whether to do Business in a Given Country: Political-Legal Environment

8 Cultural Environment How Customers Think About and Use Products Cultural Traditions, Preferences, and Behaviors Business Norms and Behavior Sellers Must Examine the Following Before Planning a Marketing Program Within a Given Country.

9 Deciding Whether to Go International Reasons companies might consider international expansion: Global competitors attacking the domestic market, Foreign markets might offer higher profit opportunities, Domestic markets might be shrinking, Need an enlarged customer base to achieve economies of scale, Reduce dependency on any one market, Customers might be expanding abroad. Most companies do not act until some situation or event thrusts them into the international market.

10 Deciding Which Markets to Enter Define Organization’s Marketing Objectives and Policies Define Organization’s Marketing Objectives and Policies What Volume of Foreign Sales is Desired? How Many Countries Should the Firm Go Into? What Types of Countries Should be Entered? Rank by Market Size & Growth, Cost of Doing Business, Competitive Advantage, & Risk Level. Rank by Market Size & Growth, Cost of Doing Business, Competitive Advantage, & Risk Level.

11 Discussion Connections Assess China as a market for McDonald’s. What factors make it attractive? What factors make it less attractive? Assess Canada as a market for McDonald’s. In what ways is Canada more attractive than China? In what ways is it less attractive? If McDonald’s could operate in only one of these countries, which one would you choose and why?

12 Deciding How to Enter the Market (Fig. 19.2) Exporting Indirect Direct Exporting Indirect Direct Joint venturing Licensing Contract manufacturing Management Contracting Joint Ownership Joint venturing Licensing Contract manufacturing Management Contracting Joint Ownership Direct investment Assembly facilities Manufacturing facilities Direct investment Assembly facilities Manufacturing facilities

13 Changes in Product, Advertising, Distribution Channels, & Price Standardized Marketing Mix Uses Basically the Same Elements of the Marketing Mix in all the Company’s International Markets. i.e Coca-Cola Adapted Marketing Mix Adjusts the Elements of the Marketing Mix to Each International Target Market. i.e. Japanese Barbie Deciding on the Global Marketing Program

14 Five International Product and Promotion Strategies (Fig. 19.3) 1. Straight Extension 2. Communication Adaptation 3. Product Adaptation 4. Dual Adaptation Don’t Change Product Adapt Product Don’t Change Promotion Adapt Promotion 5. Product Invention Develop New Product

15 International Pricing Companies face many problems in setting their international prices. Possibilities in setting prices include: Chare a uniform price all around the world. Charge what consumers in each country could pay. Use a standard markup of its costs everywhere. International prices tend to be higher than domestic prices because of price escalation. Companies may become guilty of dumping – when a foreign subsidiary charges less than its costs or less than in its home market.

16 Whole-Channel Concept for International Marketing (Fig. 19.4) Seller Seller’s headquarters organization for international marketing Seller’s headquarters organization for international marketing Channels between nations Channels between nations Channels within nations Channels within nations Final user or buyer

17 Deciding on the Global Marketing Organization Export Department International Division Global Organization Degree of Involvement in International Marketing Activities

18 Review of Concept Connections Discuss how the international trade system, 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.