© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin REACHING GLOBAL MARKETS 7 7 C HAPTER

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Describe the nature and scope of world trade from a global perspective and its implications for the United States Explain the effects of economic protectionism and the implications of economic integration for global marketing practices. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Understand the importance of environmental factors (cultural, economic, and political) for global marketing efforts Describe alternative approaches firms use to enter and compete in global markets AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO :

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Identify specific challenges marketers face when crafting worldwide marketing programs. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin NOW THE WORLD CAN BREATH EASIER…ONE NOSE AT A TIME REACHING GLOBAL MARKETS

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin World Trade Flows Global perspective DYNAMICS OF WORLD TRADE

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin FIGURE 7-1 FIGURE 7-1 Illustrative world trade flows for manufactured goods and commodities (billions of dollars)

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Global perspective (cont)  Countertrade Countertrade  Trade feedback effect Trade feedback effect United States perspective  Gross domestic product Gross domestic product  Balance of trade Balance of trade Competitive Advantage of Nations DYNAMICS OF WORLD TRADE

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Competitive Advantage of Nations  Factor conditions  Demand conditions  Related supporting industries  Company strategy, structure, and rivalry  Economic Espionage Economic Espionage DYNAMICS OF WORLD TRADE

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Countertrade is the process of using barter rather than money for making global sales. Countertrade

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The trade feedback effect is the phenomenon of imports affecting exports and vice versa. Trade Feedback Effect

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The gross domestic product is the monetary value of all goods and services produced in a country during one year. Gross Domestic Product

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The difference between the monetary value of a nation’s exports and imports is called the balance of trade. Balance of Trade

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Economic Espionage Act makes the theft of trade secrets by foreign entities a federal crime in the United States. Economic Espionage Act

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 1. What is the trade feedback effect? A: The phenomenon in which a country’s imports affect its exports and vice versa.

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 2. What variables influence why some companies and industries in a country succeed globally while others lose ground or fail? A: Factor conditions; demand conditions; related and supporting industries; and company strategy, structure, and rivalry.

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Decline of Economic ProtectionismProtectionism EMERGENCE OF A BORDERLESS ECONOMIC WORLD

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Decline of Economic Protectionism (cont)Protectionism  Tariffs Tariffs  Quota Quota  World Trade Organization World Trade Organization Rise of Economic Integration European Union EMERGENCE OF A BORDERLESS ECONOMIC WORLD

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Rise of Economic Integration (cont) North American Free Trade Agreement Asian Free Trade Agreements EMERGENCE OF A BORDERLESS ECONOMIC WORLD

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Protectionism is the practice of shielding one or more sectors of a country’s economy from foreign competition through the use of tariffs or quotas. Protectionism

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Tariffs are a government tax on goods and services entering a country. Tariffs

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A quota is a restriction placed on the amount of a product allowed to enter or leave a country. Quota

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The World Trade Organization is a permanent institution that sets rules governing trade between its members. World Trade Organization

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A New Reality: Global Competition among Global Companies for Global Customers Global Competition  Strategic alliances Strategic alliances EMERGENCE OF A BORDERLESS ECONOMIC WORLD

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A New Reality: Global Competition (cont) Global Companies  Multidomestic marketing strategy Multidomestic marketing strategy  Global marketing strategy Global marketing strategy Global Consumers Emergence of Networked Global Marketplace EMERGENCE OF A BORDERLESS ECONOMIC WORLD

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Global competition exists when firms originate, produce, and market their products and services worldwide. Global Competition

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Global strategic alliances are agreements among two or more independent firms to cooperate for the purpose of achieving common goals. Strategic Alliances

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Multinationals using a multidomestic marketing strategy have as many different product variations, brand names, and advertising programs as countries in which they do business. Multidomestic Marketing Strategy

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A global marketing strategy is the practice of standardizing marketing activities when there are cultural similarities and adapting them when cultures differ. Global Marketing Strategy

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Global consumers consist of customer groups living in many countries or regions of the world who have similar needs or seek similar features and benefits from products or services. Global Consumers

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 1. What is protectionism? A: It is the practice of shielding one or more sectors of a country’s economy from foreign competition through the use of tariffs or quotas.

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 2. The North American Free Trade Agreement was designed to promote free trade among which countries? A: United States, Canada, and Mexico

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 3. What is the difference between a multidomestic marketing strategy an a global marketing strategy? A: A multidomestic marketing strategy means that firms have as many different product variations, brand names, and advertising programs as countries in which they do business. A global marketing strategy standardizes marketing activities when there are cultural similarities and adapts them when cultures differ.

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Cultural Diversity  Cross-cultural analysis Cross-cultural analysis Values Customs  Foreign Corrupt Practices Act Foreign Corrupt Practices Act Cultural Symbols  Semiotics Semiotics A GLOBAL ENVIRONMENTAL SCAN

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A cross-cultural analysis involves the study of similarities and differences among consumers in two or more nations or societies. Cross-Cultural Analysis

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A society’s values represent personally or socially preferable modes of conduct or states of existence that are enduring. Values

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Customs are the norms and expectations about the way people do things in a specific country. Customs

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Foreign Corrupt Practices Act makes it a crime for U.S. corporations to bride an official of a foreign government or political party to obtain or retain business in a foreign country. Foreign Corrupt Practices Act

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Cultural symbols are things that represent ideas and concepts. Cultural Symbols

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Semiotics is concerned with the correspondence between symbols and their role in the assignment of meaning for people. Semiotics

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Cultural Diversity (cont) Language  Back translation Back translation Cultural ethnocentricity  Consumer ethnocentrism Consumer ethnocentrism A GLOBAL ENVIRONMENTAL SCAN

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin In back translation, a translated word or phrase is retranslated into the original language by a different interpreter. Back Translation

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Consumer ethnocentrism is the tendency to believe that is inappropriate or immoral to purchase foreign-made products. Consumer Ethnocentrism

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Economic Considerations Stage of Economic Development Economic Infrastructure Consumer Income and Purchasing Power A GLOBAL ENVIRONMENTAL SCAN

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Economic Considerations (cont) Currency exchange rates A GLOBAL ENVIRONMENTAL SCAN

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A currency exchange rate is the price of one country’s currency expressed in terms of another country’s currency. Currency Exchange Rate

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Political-Regulatory Climate Political Stability Trade Regulations A GLOBAL ENVIRONMENTAL SCAN

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1. Semiotics involves the study of _________________________ _________________________ _________________________. cultural symbols and their role in the assignment of meaning for people Concept Check

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 2. When foreign currencies can by more U.S. dollars, are U.S. products more or less expensive for a foreign consumer? A: Less expensive.

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Exporting Licensing Joint Venture Direct Investment GLOBAL MARKET-ENTRY STRATEGIES

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Exporting is producing goods in one country and selling them in another. Exporting

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Under licensing, a company offers the right to a trademark, patent, trade secret, or other intellectual property for a royalty or fee. Licensing

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin When a foreign company and a local firm invest to create a local business, it is called a joint venture. Joint Venture

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Direct Investment entails a domestic firm actually investing in and owning a foreign subsidiary or division. Direct Investment

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 1. What mode of entry could a company follow if it has no previous experience in global marketing? A: Indirect exporting through intermediaries.

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 2. How does licensing differ from a joint venture? A: In licensing, the firm offers the right to a trademark, patent or trade secret, in return for a fee or royalty. In a joint venture, a foreign and a local firm to produce some product or service. The two companies share ownership, control, and profits of the new entity.

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Product and Promotion Strategies  Product extension  Product adaptation  Product invention CRAFTING A WORLDWIDE MARKETING EFFORT

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Distribution Strategy CRAFTING A WORLDWIDE MARKETING EFFORT

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Pricing Strategy  Dumping Dumping  Gray market Gray market CRAFTING A WORLDWIDE MARKETING EFFORT

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Dumping is when a firm sells a product in a foreign country below its domestic price or below its actual cost. Dumping

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A gray market is a situation where products are sold through unauthorized channels of distribution. Gray Market

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 1. Products may be sold globally in three ways. What are they? A: Product extension, product adaptation, and product invention.

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 2. What is dumping? A: Dumping is when a firm sells a product in a country below its domestic price or below its actual cost.