1. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Chapter 7 Serving Global Markets

2. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-2 Chapter Objectives 1.Describe the importance of international marketing from the perspectives of the individual firm and the nation. 2.Identify the major components of the environment for international marketing. 3.Outline the basic functions of GATT, WTO, NAFTA, and the proposed FTAA, and the European Union. 4.Compare the alternative strategies for entering international markets. 5.Differentiate between a global marketing strategy and a multidomestic marketing strategy. 6.Describe the alternative marketing mix strategies used in international marketing. 7.Explain the attractiveness of the U. S. as a target market for foreign marketers.

3. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-3 The Importance of Global Marketing Global marketing is rapidly becoming a necessity For 20 years, U.S. exports have grown about 10 percent annually The Internet makes it possible for every marketer to become an international marketer International Trade accounts for at least 25% of U.S. GDP Importing and Exporting

4. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-4 Service and Retail Exports Service and Retail Exports U.S. is a big exporter of services and retailing U.S. is the world’s largest exporter of services Over $145 billion is spent annually by foreign nationals visiting the U.S. The most profitable U.S. service exports are business and technical services Financial services industry is going global via the Internet Entertainment is another major service export

5. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-5 Benefits of Going Global Benefits of Going Global Additional revenues New insights into consumer behavior Alternative distribution strategies Advance notice of new products Positioned well to compete effectively with foreign competitors

6. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-6 The International Marketplace Market Size Market Size Over 6 billion people (1.2 billion people in China) Goods and services need to be adapted to meet needs in developing countries As a nation develops, an increasingly affluent, educated, and cosmopolitan middle-class emerges Marketers in developing countries may face infrastructure challenges

7. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-7 Buyer Behavior Buyer Behavior Research Must Focus on: Demand: Do foreign consumers need the company’s good or service? Competitive environment: How do supplies currently reach the market? Economic environment: What is the state of the nation’s economic health? Social-cultural environment: How do cultural factors affect business opportunities? Political-legal environment: Do any legal restrictions complicate entering the market? Technological environment: To what degree are technological innovations used by consumers in the market?

8. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-8 The International Marketing Environment International economic environment International technological environment International Marketing mix International social-cultural environment International political- legal environment

9. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-9 International Economic Environment International Economic Environment A nation’s size, per-capita income, and stage of economic development determine its desirability for international expansion Other considerations include:  Country infrastructure  Exchange rate implications Soft currencies

10. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-10 International Social-Cultural Environment International Social-Cultural Environment A nation’s culture, including language, education, religious attitudes, and social values, must be considered Examples:  Movies must often be adapted for foreign markets  Restaurant menus are often printed in several languages The use of pictures can also help when language is a problem

11. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-11 International Technological Environment International Technological Environment The Internet transcends political, economic, and cultural barriers, reaching into every corner of the Globe Other challenges:  Genetic reengineering  Genetically modified organisms (GMOs)

12. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-12 International Political-Legal Environment International Political-Legal Environment U.S. businesses impacted by International Law, U.S. Law, and Host country Laws Political conditions often influence international marketing Political risk assessment (PRA) Friendship, Commerce, and Navigation (FCN) treaties ISO certification requirements

13. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-13 Trade Barriers Trade Barriers Tariffs are taxes levied against imported goods  Revenue Tariffs  Protective Tariffs Administrative Barriers Administrative Barriers  Import Quotas  Embargos  Subsidies  Exchange Controls Dumping Dumping

14. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-14 Multinational Economic Integration Free trade area Free trade area: Region in which participating nations agree to the free trade of goods among themselves, abolishing tariffs and trade restrictions Customs union Common market GATT GATT World Trade Organization World Trade Organization (WTO)

15. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-15 NAFTA NAFTA Accord removing trade barriers among Canada, Mexico, and the United States The Free Trade Area of the Americas The Free Trade Area of the Americas Proposed free trade area stretching the length of the entire Western hemisphere and designed to extend free trade benefits to additional nations in North, Central, and South America See Figure 7.5 in your text for the: See Figure 7.5 in your text for the: The 25 Members of the European Union

16. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-16 What Drives Globalization? Globalization of Customers New Customers in Emerging Markets Globalization of Competitors Reduced Trade Barriers Technology Advances Enhanced Customer Responsiveness

17. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-17 First Steps in Deciding to Market Globally Secure top management’s support Research the export process and potential markets Strategies for Entering International Markets Strategies for Entering International Markets Exporting Contractual agreements like franchising, licensing, and subcontracting International Direct Investment

18. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-18 Contractual Agreements Contractual Agreements Franchising A global strategy for Ruth’s Chris Steak House Foreign Licensing Subcontracting

19. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-19 International Direct Investment International Direct Investment An additional strategy for entering global markets Requires direct investment in foreign firms, production, and/or marketing facilities U.S. firms have invested nearly $2.2 trillion overseas Foreign firms have invested nearly $2.1 trillion in the U.S.

20. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-20 From Multinational Corporation to Global Marketer A multinational corporation is a firm with significant operations and marketing activities outside its home country Developing an International Marketing Strategy Developing an International Marketing Strategy Global marketing strategy Multi-domestic marketing strategy

21. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-21 International Product and Promotional Strategies International Product and Promotional Strategies Same Product Product Adaptation New Product SamePromotion Straight Extension Wrigley’s gum Coca-Cola Eastman Kodak Cameras and Film Product Adaptation Campbell’s soup Exxon gasoline Product Invention Nonelectric sewing machines Manually operated washing machines Different Promotion Promotion Adaptation Bicycles/motorcycles Outboard motors Dual Adaptation Coffee Some clothing

22. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-22 International Distribution Strategy International Distribution Strategy Decide on a method of entering the foreign market Decide how to distribute the product within the foreign market through that entry channel International Pricing Strategy International Pricing Strategy Competitive, economic, political, and legal constraints often limit pricing decisions Countertrade Countertrade Goods and services are bartered rather than sold for cash

23. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-23 The U.S. as a Target for International Marketers The U.S. is an inviting target for many foreign marketers It offers a large population with high levels of discretionary income, political stability, a generally favorable attitude toward foreign investment and a relatively stable economy