1. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Part 2: Understanding Buyers and Markets 5.Consumer Behavior 6.Business-to-Business (B2B) Marketing 7.Serving Global Markets

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

3. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-3 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.

4. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-4 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 Exporting: Marketing domestically produced goods and services abroad Importing: Purchasing foreign goods, services, and raw materials

5. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-5 Figure 7.1 Figure 7.1 Top 10 U.S. Trading Partners

6. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-6 Table 7.1 Table 7.1 The World’s 10 Largest Marketers Ranked by Sales

7. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-7 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

8. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-8 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

9. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-9 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 Urban population increasing faster than a rural As a nation develops, an increasingly affluent, educated, and cosmopolitan middle- class emerges Marketers in developing countries may face infrastructure challenges

10. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-10 Buyer Behavior Buyer Behavior Behavior differs among both nations and market segments within each nation Change marketing mix, or change local buyer behavior

11. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-11 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?

12. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-12 The International Marketing Environment International Marketing mix International technological environment International economic environment International political-legal environment International social-cultural environment

13. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-13 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

14. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-14 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

15. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-15 Table 7.2 Table 7.2 The World’s Most Frequently Spoken Languages

16. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-16 International Technological Environment International Technological Environment The Internet transcends political, economic, and cultural barriers, reaching into every corner of the Globe It is critical to understand how the Web is reshaping social and cultural values Other challenges:  Genetic reengineering  Genetically modified organisms (GMOs)

17. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-17 International Political-Legal Environment International Political-Legal Environment Marketers must know the current laws and regulations for each country in which they operate 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

18. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-18 Trade Barriers Trade Barriers Tariffs are taxes levied against imported goods  Revenue Tariffs designed to raise funds for the importing government  Protective Tariffs are usually higher and are designed to raise the retail price of an imported product to match or exceed that of a similar domestic product

19. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-19 Administrative Barriers Administrative Barriers  Import Quotas  Embargos  Subsidies  Exchange Controls Dumping Dumping The controversial practice of selling a product in a foreign market at a price lower than what it commands in the producer’s domestic market

20. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-20 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: International trade accord that has helped reduce world tariffs World Trade Organization World Trade Organization (WTO): succeeds GATT to oversee agreements, mediate disputes, and reduce trade barriers

21. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-21 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 European Union European Union Customs union that is becoming a true economic union by adopting a common currency and permitting free flow of goods and workers throughout the member nations

22. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-22 Figure 7.5 Figure 7.5 The 25 Members of the European Union

23. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-23 Going Global

24. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-24 First Steps in Deciding to Market Globally Secure top management’s support Research the export process and potential markets Sources for Analyzing Foreign Markets

25. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-25 Strategies for Entering International Markets Strategies for Entering International Markets Three basic strategies for entering international markets include:  Exporting  Contractual agreements like franchising, licensing, and subcontracting  International Direct Investment

26. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-26 Figure 7.7 Figure 7.7 Levels of Involvement in International Marketing

27. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-27 Contractual Agreements Contractual Agreements Franchising: A contractual arrangement where a wholesaler or retailer (the Franchisee) agrees to make some payment and to meet the operating requirements of a manufacturer or other franchiser in exchange for the right to use the firm’s name and to market its goods or services Foreign Licensing: an agreement that grants foreign marketers the right to distribute a firm’s merchandise or to use its trademark, patent, or process in a specified geographic area. Subcontracting: a contractual agreement where a firm hires a local company to produce goods or services in a specific geographic area.

28. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-28 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.

29. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-29 From Multinational Corporation to Global Marketer A multinational corporation is a firm with significant operations and marketing activities outside its home country Examples: General Electric, Siemens, Toyota, ExxonMobil

30. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-30 Developing an International Marketing Strategy Global marketing strategy Global marketing strategy Standardized marketing mix with minimal modifications that a firm uses in all of its domestic and foreign markets. Multi-domestic marketing strategy Multi-domestic marketing strategy Application of market segmentation to foreign markets by tailoring the firm’s marketing mix to match specific target markets in each nation

31. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-31 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

32. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-32 Figure 7.9 Figure 7.9 The World’s 10 Most Valuable Brands

33. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-33 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 Must adapt to local markets and change when conditions change Countertrade Countertrade form of exporting whereby goods and services are bartered rather than sold for cash.

34. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-34 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