1. Global Markets

2. World Trade
U.S., Europe, Canada, China, Japan together are about 2/3 of world trade
Not all trade is for money
Countertrade – The practice of using barter rather than money for making global sales
Popular with Eastern European nations (rice for corn)
Volvo of North America traded Volvos for oil with Siberia, then sold oil for cash and paid for U.S. ads

3. World Trade The argument for free trade – Trade Feedback Effect
As exports rise, its national output and income rise, leading to more imports. This demand for imports stimulates exports of other countries. Increased demand for exports increases their economic activity, creating more income, stimulating their need for more imports.

4. World Trade U.S. Perspective
World leader of Gross Domestic Product (GDP)
Monetary value of all goods and services produced in a country during one year
Among leaders in world exports
Aerospace, chemical, office equipment, information technology, pharmaceutical, telecommunications, professional services
Has decreased over the last 30 years
World imports have increased

5. World Trade U.S. Perspective Balance of Trade
The difference between monetary value of a nation’s exports and imports
U.S. has balance of trade deficit
Imports have exceeded exports since 1975
Imports and exports are 10 to 15 times what it was in 1970’s

6. World Trade U.S. Perspective
Canada, Mexico, and Japan are largest importers of U.S. goods (~44%)
Canada, China, Mexico, and Japan are largest exporters to U.S.
Japan, South Korea, and China are about 80% of the total U.S. balance of trade deficit

7. Borderless Economic World
Trends influencing landscapes of global marketing
Decline of economic protectionism by individual countries
Formal economic integration and free trade among nations
Global competition among global companies for global customers
Networked marketspace

8. Borderless Economic World Decline of Economic Protectionism
Protectionism is the practice of shielding one or more industries within a country’s economy from foreign competition through the use of tariffs or quotas.
Tariffs are a government tax on goods or services entering a country, primarily serve to raise prices on imports.
Average tariff on manufactured goods is 4%
Substantial effect on world trade and prices
Japan tariff on U.S. rice imports costs Japanese consumers $6 billion annually

9. Borderless Economic World Decline of Economic Protectionism
Quotas are restrictions placed on amount of a product allowed to enter or leave a country.
Mandated or voluntary, legislated or negotiated by gov’t
U.S. has sugar quota to protect domestic producers

10. Borderless Economic World Decline of Economic Protectionism
General Agreement on Tariffs and Trade
International treaty that limits barriers and promotes world trade through reduction of tariffs
Did not address nontariff trade barriers, caused disputes among nations
World Trade Organization
Created to address more broad trade issues
147 member countires, 90% of world trade
Sets rules to govern member trade
Hear and decide trade disputes among members

11. Borderless Economic World Rise of Economic Integration
Countries with similar economic goals formed trade groups or signed agreements to promote free trade
European Union
25 member countries eliminated barriers to trade across borders
380 million consumers, combined GDP larger than the U.S.
12 countries adopted a common currency, the euro
Don’t have to market products nation by nation any longer (same product, same price)

12. Borderless Economic World Rise of Economic Integration
North American Free Trade Agreement
Lifted many trade barriers between Canada, Mexico, and U.S.
400 million consumers
Negotiations to create a 34 country free trade area including U.S., Canada, Mexico, Latin America, Caribbean countries
Stimulated trade flows among members as well as cross-border retailing, manufacturing, and investment

13. Borderless Economic World Rise of Economic Integration
Asian Free Trade Agreements
Japan, Hong Kong, Singapore, South Korea, Taiwan, Thailand, Malaysia, and Indonesia
Less formal, but have reduced tariffs among these countries

14. Borderless Economic World Global Competition Among Global Companies for Global Consumers
Created by lack of “borders” among trade
Global Competition exists when firms originate, produce, and market products and services worldwide
Soft drinks, cosmetics, cereals
Pepsi vs. Coca-Cola

15. Borderless Economic World Global Competition Among Global Companies for Global Consumers
International Firms market their products/services in foreign countries the same as they do in their home country
Avon sells their products using the same marketing strategy in Asia, Europe, and South America pretty much the same as they do in the U.S.

16. Borderless Economic World Global Competition Among Global Companies for Global Consumers
Multinational Firms view the world as consisting of unique parts and markets to each part differently
Multidomestic marketing strategy – have as many different product variations, brand names, and advertising programs as countries in which they do business
Basically the same product idea, just different brand names, product variations, and marketing strategies
Mr. Clean is Mr. Proper in Europe, Africa, and Middle East

17. Borderless Economic World Global Competition Among Global Companies for Global Consumers
Transnational Firms view the world as one market and emphasizes cultural similarities across countries or universal customer needs and wants more than differences
Global marketing strategy – practice of standardizing marketing activities when there are cultural similarities and adapting them when cultures differ
Global brand – a brand marketed under same name in multiple countries with similar centrally coordinated marketing programs

18. Borderless Economic World Global Competition Among Global Companies for Global Consumers
Consist of consumer groups living in many countries or regions of the world who have similar needs or seek similar features and benefits from products or services

19. Borderless Economic World Emergence of a Networked Global Marketplace
Internet technology
Exchange of goods, services, and information from companies anywhere to customers anywhere at any time and at a lower cost

20. Global Environmental Scan
Three kinds of uncontrollable environmental variables that are very different than domestic markets
Cultural Diversity
Economic Considerations
Political-Regulatory Climate

21. Global Environmental Scan Cultural Diversity
To create beneficial exchange relationships with global consumers, marketers must be sensitive to cultural differences of different societies
Cross-cultural Analysis
The study of similarities and differences among consumers in two or more nations or societies, involves understanding of values, customs, symbols, and languages

22. Global Environmental Scan Cultural Diversity
Values
Represent personally or socially preferable modes of conduct or states of existence that tend to persist over time
McDonald’s does not sell beef in India
Cultural values influence behavior

23. Global Environmental Scan Cultural Diversity
Customs
What is considered normal and expected about the way people do things in a specific country
Japanese women give Japanese men chocolate on Valentine’s Day
Business gifts are expected in many countries
Japanese business executives listen more in negotiations
Germans “dress up” more, muted business suits are appropriate for most meetings

24. Global Environmental Scan Cultural Diversity
Cultural Symbols
Things that represent ideas and concepts
Important because different objects may mean different things in different countries
Semiotics is the study of symbols
North Americans think superstitious about #13, Japanese think the same way about #4
A thumbs-up sign is positive in U.S., offensive in Russia and Poland

25. Global Environmental Scan Cultural Diversity
Language
Must know the language and also the slang
About 100 official languages, but about 3,000 different languages are spoken
Principal languages globally are English, French, and Spanish
Back translation is where a translated word or phrase is retranslated into the original language by a different interpreter to catch errors

26. Global Environmental Scan Cultural Diversity
Cultural Ethnocentricity
The belief that aspects of one’s culture are superior to another’s
Consumer Ethnocentrism
Tendency to believe that it is inappropriate, indeed immoral, to purchase foreign-made products
Unpatriotic, harm domestic industries, cause domestic unemployment
Makes global marketing more difficult

27. Global Environmental Scan Economic Considerations
Includes
Compare economic development
Assessment of economic infrastructure
Measurement of consumer income
Recognition of currency exchange rates

28. Global Environmental Scan Economic Considerations
Stage of Economic Development
Two classifications of economic development
Developed countries have somewhat mixed economies
Private enterprise dominates, substantial public sectors as well
U.S., Canada, Japan, most of Western Europe
Developing countries are moving from agriculture to industrial economy
Already made the move (Brazil, China, Israel)
Locked in pre-industrial (Sri Lanka, Tanzania)

29. Global Environmental Scan Economic Considerations
Economic Infrastructure
A country’s communications, transportation, financial, and distribution systems

30. Global Environmental Scan Economic Considerations
Consumer Income and Purchasing Power
Household income varies between nations
As middle-income households increase, the greater the nation’s purchasing power tends to be

31. Global Environmental Scan Economic Considerations
Currency Exchange Rates
Price of one country’s currency expressed in terms of another country’s currency.
When foreign currencies can buy more U.S. dollars, U.S. products are less expensive for the foreign consumer

32. Global Environmental Scan Political-Regulatory Climate
Political Stability
Internal political problems
Terrorism
War
Trade Regulations
Rules that govern business practices (these are trade barriers)
All commercials in Malaysia have to be made in Malaysia
Auto replacement parts in Japan have to be Japanese

33. Global Market-Entry Strategies
Exporting
Licensing
Joint Venture
Direct Investment

34. Global Market-Entry Strategies Exporting
Exporting is producing goods in one country and selling them in another country.
Allows a company to make the least number of changes to product, organization, corporate goals
Provides less local employment than other ways of entry

35. Global Market-Entry Strategies Exporting
Indirect Exporting is when a firm sells its domestically produced goods in a foreign country through an intermediary.
Little commitment, little risk, little profit
Ideal for those with no overseas contacts
Direct Exporting is when a firm sells its domestically produced goods in a foreign country without intermediaries.
Believe that they will have large amount of sales
More risk, potentially more profit
Main entry strategy for small-medium companies

36. Global Market-Entry Strategies Licensing
Licensing is where a company offers the right to a trademark, patent, trade secret, or other similarly valued item of intellectual property in return for a royalty or a fee.
Low risk, capital-free entry into foreign country
Foreign licensee gets competitive advantage, foreign country gets employment opportunity

37. Global Market-Entry Strategies Licensing
Disadvantages
Lose control of product
Reduces potential profits
Creates its own competition
Reputation may be harmed

38. Global Market-Entry Strategies Licensing
Contract manufacturing
U.S. company contract with foreign firm to manufacture products according to stated specifications, then sold in that country or shipped to U.S. to be sold
Contract Assembly
U.S. company send products to foreign country and they assemble them into final product
In both, the U.S. firm gets lower work wages and the foreign country gets employment

39. Global Market-Entry Strategies Licensing
Franchising
Fastest growing market-entry strategy
McDonald’s is a global franchiser

40. Global Market-Entry Strategies Joint Venture
Joint ventures are where a foreign company and a local firm invest together to create a local business.
Share ownership, control, profits
Advantages
One company doesn’t have to enter market alone (may not have the resources alone)
Foreign gov’t may require a joint venture
Disadvantages
Disagreements between the two companies

41. Global Market-Entry Strategies Direct Investment
Direct Investment is where a domestic firm invests in and owns a foreign subsidiary or division.
Big commitment from company
Usually follows one of the other market-entry strategies

42. Worldwide Marketing Program
Product
Product extension is selling the same product in all countries
Works when target market is alike, shares same needs and uses for product
Coca-Cola, Levi’s, Gillette razors Levi's webpage
Product adaptation is when the product is changed is some way to make it more appropriate for a foreign country.
Gerber baby food (rabbit meat in Poland), Maybelline make-up

43. Worldwide Marketing Program
Product
Product invention is when a totally new product is created for a certain country.
Promotion
Identical promotional strategy is usually used for product extension and product adaptation strategies.
Can adapt message for certain countries
Can use a dual adaptation strategy by modifying both product and promotional strategies

44. Worldwide Marketing Program
Distribution (Place)
Usually determined by the foreign country’s stage of economic development
Pricing
Some countries impose considerable restraints on pricing
German officials told Wal-Mart that prices were too low
Economic factors (production costs, selling, tariffs, transportation) affect global pricing

45. Worldwide Marketing Program
Pricing
Can receive fines/penalties
Dumping is when a firm sells a product in a foreign county below its domestic price or below its actual cost.
Used to build market share
Can’t be sold domestically, want to “get rid of”
Foreign companies can set large tariffs if they suspect this