Chapter 05 Global Markets and International Marketing Part Two Using Technology for Customer Relationships in a Global Environment

Copyright © Houghton Mifflin Company. All rights reserved.5 | 2 Chapter Learning Objectives 1.To understand the nature of global markets and international marketing 2.To analyze the environmental forces affecting international marketing efforts 3.To identify several important regional trade alliances, markets, and agreements 4.To examine methods of involvement in international marketing activities 5.To recognize that international marketing strategies fall along a continuum from customization to globalization

Copyright © Houghton Mifflin Company. All rights reserved.5 | 3 Chapter Outline The Nature of Global Marketing Strategy Environmental Forces in International Markets –Sociocultural Forces –Economic Forces –Political, Legal, and Regulatory Forces –Social Responsibility and Ethics Forces –Competitive Forces –Technological Forces

Copyright © Houghton Mifflin Company. All rights reserved.5 | 4 Chapter Outline (cont’d) Regional Trade Alliances, Markets, and Agreements –The North American Free Trade Agreement (NAFTA) –The European Union (EU) –The Common Market of the Southern Cone (MERCOSUR) –Asia-Pacific Economic Cooperation (APEC) –The World Trade Organization (WTO)

Copyright © Houghton Mifflin Company. All rights reserved.5 | 5 Chapter Outline (cont’d) Modes of Entry into International Markets –Importing and Exporting –Licensing and Franchising –Contract Manufacturing –Joint Ventures –Direct Ownership Customization Versus Globalization of International Marketing Mixes

Copyright © Houghton Mifflin Company. All rights reserved.5 | 6 The Nature of Global Marketing Strategy International Marketing –Developing and performing marketing activities across national boundaries –Provides growth opportunities, promotes innovation, fosters marketing of better, less expensive products Some companies enter global markets gradually but others are “born global” and begin international activities almost immediately

Copyright © Houghton Mifflin Company. All rights reserved.5 | 7 Sociocultural Forces Beliefs and values about: –Family –Religion –Education –Health –Recreation

Copyright © Houghton Mifflin Company. All rights reserved.5 | 8 Economic Forces Economic Differences Affecting International Marketing –Standards of living –Credit –Buying power –Income distribution –National resources –Exchange rates Gross Domestic Product (GDP) –The market value of a nation’s total output of goods and services for a given period; an overall measure of economic standing

Copyright © Houghton Mifflin Company. All rights reserved.5 | 9 Source: CIA, The World Fact Book, (accessed Jan. 5, 2007); globalEdge Resource Desk, (accessed Jan. 5, 2007); “Population Explosion!” CLickZ Stats, Apr. 12, 2006,

Copyright © Houghton Mifflin Company. All rights reserved.5 | 10 Source: CIA, The World Fact Book, (accessed Jan. 5, 2007); globalEdge Resource Desk, (accessed Jan. 5, 2007); “Population Explosion!” CLickZ Stats, Apr. 12, 2006,

Copyright © Houghton Mifflin Company. All rights reserved.5 | 11 Political, Legal, and Regulatory Forces Trade Restrictions Affecting International Marketing –Import tariff A duty levied by a nation on goods bought outside its borders and brought in –Quota A limit on the amount of goods an importing country will accept for certain product categories in a specific period of time Border

Copyright © Houghton Mifflin Company. All rights reserved.5 | 12 Trade Restrictions (cont’d) –Embargo A governmental suspension of trade in a particular product or with a given country –Exchange controls Government restrictions on the amount of a particular currency that can be bought or sold –Balance of Trade The difference between the value of a nation’s imports and exports

Copyright © Houghton Mifflin Company. All rights reserved.5 | 13 Social Responsibility and Ethics Forces Differences in legal and ethical standards have caused some companies to establish ethics programs and standards for international business conduct. Differences may revolve around such things as intellectual property, labor conditions, payoffs and bribes, and tips and gifts.

Copyright © Houghton Mifflin Company. All rights reserved.5 | 14 Source: Adapted from”Transparency International Corruption Perceptions Index 2006,” Transparency International, November 6, 2006,

Copyright © Houghton Mifflin Company. All rights reserved.5 | 15 Source:The Global Competitiveness Report 2006–2007, World Economic Forum.

Copyright © Houghton Mifflin Company. All rights reserved.5 | 16 Regional Trade Alliances, Markets, and Agreements The North American Free Trade Agreement (NAFTA) –An alliance that merges Canada, Mexico, and the United States into a single market Eliminates barriers Eases investment Simplifies trade

Copyright © Houghton Mifflin Company. All rights reserved.5 | 17 Regional Trade Alliances, Markets, and Agreements (cont’d) The European Union (EU) –An alliance that promotes trade among its member countries in Europe Market unification Common currency (euro) Economic efficiency

Copyright © Houghton Mifflin Company. All rights reserved.5 | 18 Regional Trade Alliances, Markets, and Agreements (cont’d) The Common Market of the Southern Cone (MERCOSUR) –An alliance that promotes the free circulation of goods, services, and production factors, and has a common external tariff and commercial policy among member nations in South America Paraguay Uruguay Brazil Argentina Chile Bolivia

Copyright © Houghton Mifflin Company. All rights reserved.5 | 19 Regional Trade Alliances, Markets, and Agreements (cont’d) Asia-Pacific Economic Cooperation (APEC) –An alliance that promotes open trade and economic and technical cooperation among member nations throughout the world

Copyright © Houghton Mifflin Company. All rights reserved.5 | 20 Regional Trade Alliances, Markets, and Agreements (cont’d) World Trade Organization (WTO) –An entity that promotes free trade among member nations Provides legal ground rules for international commerce and trade policy General Agreement on Tariffs and Trade (GATT) –An agreement among nations to reduce worldwide tariffs and increase international trade Dumping: selling products at unfairly low prices

Copyright © Houghton Mifflin Company. All rights reserved.5 | 21 Figure 5.1: Levels of Involvement in Global Marketing

Copyright © Houghton Mifflin Company. All rights reserved.5 | 22 International Involvement Importing –The purchase of products from a foreign source Exporting –The sale of products to foreign markets Importing and exporting may be facilitated by –Exporting agencies –Trading companies

Copyright © Houghton Mifflin Company. All rights reserved.5 | 23 International Involvement (cont’d) Licensing –An alternative to direct investment requiring the licensee to pay commissions or royalties on sales or supplies used in manufacturing Franchising –A form of licensing in which the franchiser grants the franchisee the right to market its product in accordance with the franchiser’s standards BIG PACK of Asia

Copyright © Houghton Mifflin Company. All rights reserved.5 | 24 International Involvement (cont’d) Contract Manufacturing –The practice of hiring a foreign firm to produce a designated volume of product to specification Outsourcing –The practice of contracting manufacturing or other tasks to companies in countries where labor and supplies are less Joint Venture –A partnership between a domestic firm and a foreign firm or government Strategic Alliance –A partnership (possibly of traditional rivals) formed to create a competitive advantage on a worldwide basis

Copyright © Houghton Mifflin Company. All rights reserved.5 | 25 Figure 5.2: Projected U.S. Jobs Moving Offshore Source: “Will the New Congress Shift Gears on Free Trade?” The Wall Street Journal, November 18–19, 2006, p. A7.

Copyright © Houghton Mifflin Company. All rights reserved.5 | 26 International Involvement (cont’d) Direct Ownership –A situation in which a company owns subsidiaries or other facilities overseas Multinational Enterprise –A firm that has operations or subsidiaries in many countries

Copyright © Houghton Mifflin Company. All rights reserved.5 | 27 Source: “The Fortune Global 500,” Fortune, July 24, 2006,

Copyright © Houghton Mifflin Company. All rights reserved.5 | 28 Customization Versus Globalization of International Marketing Strategies Customization –Adjusting marketing mixes according to cultural, regional, and national differences Globalization –The development of marketing strategies that treat the entire world (or its major regions) as a single entity Includes standardization of products, promotion campaigns, prices, and distribution channels “Think globally, act locally”

Copyright © Houghton Mifflin Company. All rights reserved.5 | 29 Standardization of International Marketing Easiest marketing mix variables to standardize –Brand name –Product characteristics –Packaging –Labeling More difficult to standardize –Media allocation –Retail outlets –Pricing

Copyright © Houghton Mifflin Company. All rights reserved.5 | 30 International Marketing Requires Strategic Planning Effect of a Firm Having a Global Presence –Provides global competitive opportunities for creating value through adapting to local market differences exploiting economies of global scale and scope. acquiring optimal locations for activities and resources. maximizing the transfer of knowledge across locations.

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Copyright © Houghton Mifflin Company. All rights reserved.5 | 35 After reviewing this chapter you should: 1.Understand the nature of global markets and international marketing. 2.Be able to analyze the environmental forces affecting international marketing efforts. 3.Be able to identify several important regional trade alliances, markets, and agreements. 4.Be able to examine methods of involvement in international marketing activities. 5.Recognize that international marketing strategies fall along a continuum from customization to globalization.