Download Chapter 06 Serving Global Markets

Chapter 06
Serving Global Markets
Exploring alternative distribution
strategies
Generating additional revenue
and spreading risks
Global marketers are well
positioned to compete
Learning Objective 01
Importance of Global Marketing
New insights into consumer
behaviour
•
•
•
The size, per capita income of
a nation, stage of economic
development provides
prospects for international
expansion
The infrastructure of a country
(transportation, banking,
communications etc.) also
pays an important role
Changes in exchange rate,
domestic economic indexes
such as inflation, growth also
have varying impact on trade
International Economic
Environment
•
•
•
A nation’s culture, language,
education, religious attitudes
and social values does have
an important impact on
international marketing efforts
Language plays a very
important role in many fronts
Cultural differences will have a
significant impact in developing
communication messages,
customer service,
communicating with local staff,
distributors and other local
support groups in carrying out
a successful operation
International Social – Cultural
Environment
•
•
•
•
Economies of scales of
operations
Enhanced reputation building
global brands
Technology has opened up many
opportunities for companies to
open up their operations across
the world
The internet transcends political,
economic and cultural barriers
reaching out to the globe
Provides an opportunity for
developing nations to be
competitive with developed nations
Technology do pose many
challenges beyond innovation and
communications that marketers are
expected to handle
International Technological
Environment
•
•
•
•
Global marketers must stay abreast
of laws and trade regulations of
countries they engage with
Companies will need to carry out
political risk assessments of
countries they deal with
The legal environment entails
international laws, Canadian law
and legal requirements of host
nations
International business agreements
set terms for various aspects of
commercial relations with other
countries. ISO certification is an
example of a similar arrangement
International Political-Legal
Environment
Learning Objective 02
International Marketing Environment
Trade barriers affect global marketing. They fall into two
main categories
Tariffs – Taxes levied against imported goods
• Revenue Tariffs – taxes designed to raise funds
for the importing government
• Protective Tariffs – Taxes designed to raise the
retail price of an imported product to match or
exceed that of a similar domestic tariff
Trade Barriers
Other Trade Barriers
• Import Quotas – trade restrictions that limit the number of units of certain goods that can enter a
country for resale
• Embargo – a complete ban on the import of a product
• Subsidies – government financial support of a private industry
• Exchange control –regulate importing goods by controlling access to foreign currencies
Copyright © 2013 Nelson Education Ltd.
Learning Objective 03
Multinational Economic Integration
Learning Objective 05
Global Marketing Strategies and Multi-Domestic Marketing
Strategies – Multi Domestic to Global Marketing
Could be set up as
•
•
•
•
•
Customs Union
Common Market
Establishment of a
free trade area plus
a uniform tariff for
trade with nonmember unions
Extension of a
customs union by
seeking to reconcile
all government
regulations affecting
trade
The Free Trade Area of the
Americas
• Includes 34 countries of all
North and South America
• This will be the largest free
trade zone. It offers low to
non-existent tariffs,
streamlines customs no
quotas, no subsidies or
other barriers
NAFTA
An agreement between
Canada, US and Mexico
that removes trade
restrictions among the
three nations.
This is only an
economic cooperation
GATT & the World Trade
Organization
GATT sponsored several
rounds of major tariff
negotiations reducing
worldwide tariffs
WTO, a 153 member
organization succeeds GATT
It overseas GATT agreements,
serves as a forum for
negotiations, settle disputes
•
•
The European Union
Customs union that is moving in
the direction of an economic
union by adopting a common
currency, removing trade
restrictions and permitting free
flow of goods and workers
throughout the member nations
It offers many benefits as well as
challenges to marketers that
hope to engage with its member
countries
Global Marketing Strategy
Standardized marketing mix
with minimal modifications
that a firm uses in all of its
domestic and foreign
markets
• Brings out economies of
scales to production and
marketing
• Works effectively in targeting
certain segments that share
cultures and languages
•
•
Effective strategy for luxury
goods
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
• Most firms find that this is
necessary to compete in
global markets since each
market/segments differ due
to cultural and other
differences
International Product and Promotions Strategies – Five Strategy
Options
Same Product
Promotion
Strategy
Free Trade Area
Region in which
participating nations
agree to the free
trade of goods
among themselves
abolishing tariffs and
trade restrictions
Multinational Corporations
A firm with significant operations and marketing activities outside its
home country
Same
Promotion
Straight
Extension
Different
Promotion
Promotions
Adaptation
International
Distribution Strategy
•
•
Decide entry
method
Set up channels
and physical
distribution
options
Copyright © 2013 Nelson Education Ltd.
Product Strategy
Product
New Product
Adaptation
Product
Product
Adaptation
Invention
Dual
Adaptation
Counter Trade
International Pricing
Strategy
•
PEST will place
limitations on
pricing
•
Pricing decisions will
also depend on how
prices are quoted
•
Form of
exporting
whereby goods
and services
are bartered
rather than sold
EXPORTING AND
IMPORTING
CONTRACTUAL
AGREEMENTS
INTERNATIONAL DIRECT
INVESTMENTS
Low
DEGREE OF RISK
Moderate
High
High
DEGREE OF CONTROL
Moderate
Low
Learning Objective 04
Strategies for Entering International Markets
Franchising
Foreign
Licensing
Subcontracting
•
Importing – a firm that brings in goods produced abroad to sell domestically or to be used as
components in its products
•
Exporting – involves a continuous effort in marketing a firm’s merchandise to consumers in other
countries. This would be a first step in the internationalization process. Can reach customers with
the use of export trading companies, export management companies or off set agreements
A contractual arrangement in which a wholesaler or retailer agrees to meet the operating requirements of a
manufacturer or other franchiser. It reduces the risk since it is often a proven concept. Standardized operations
reduce costs. It maintains a fair balance between local preferences and standard practices
Refers to agreements that grant foreign marketers the right to distribute firm’s merchandise or to use
its trademark, patent or process in a specified geographic area. It provides benefits such as access to
local partner’s marketing resources etc. Allows market entry when there are embargos on imports
Refers to contractual agreements that assign the production of goods or services to local or smaller
firms. Manufacturers often subcontract a local company to produce their goods. It protects against
import duties and will be able to compete with local offerings
Acquisitions
•
Joint Ventures
Overseas
Divisions
•
•
•
•
Direct investments in foreign firms, production and marketing facilities are another form of market
entry
This method of entry is a high risk option but would offer many competitive advantages
Direct investment could take several forms
o A company can acquire an existing firm
o It can enter into a joint venture agreement with another firm
o It can set up an independent division in a foreign country
Each of these methods will pose its advantages and disadvantages
The company should select the method considering the level of control required, risk it is willing to
take and barriers that it would encounter as they engage in international marketing efforts
Copyright © 2013 Nelson Education Ltd.