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Chapter 8 GLOBAL MARKETING © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1 Chapter 8 Global Marketing The Importance of Global Marketing ▮Demand for foreign products is increasing in fast-growing economies ▮Globalization and the Internet allow every marketer to be an international marketer © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2 Chapter 8 Global Marketing Service and Retail Exports ▮Nearly four of every five dollars in the nation’s gross domestic product comes from services ▮United States is the world’s largest exporter of services and retailing • Profitable exports include services such as engineering, financial, computing, legal services, insurance, and entertainment © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3 Chapter 8 Global Marketing 1. What are the benefits of going global? Copyright © 2013 by South Western, a division of Cengage Learning. All rights © 2014 Cengage Learning. All reserved. Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 8 Global Marketing Benefits of Going Global ▮Additional revenue ▮New insights into customer behavior ▮Alternative distribution strategies ▮Advance notice of new products ▮New marketing techniques ▮Gain invaluable experience ▮To leverage core competencies ▮New markets © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5 Chapter 8 Global Marketing 2. What are the various influences in the international marketing environment? Copyright © 2013 by South Western, a division of Cengage Learning. All rights © 2014 Cengage Learning. All reserved. Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 8 Global Marketing International Economic Environment ▮Factors that determine a nation’s prospects as a host for international business expansion • Size • Per-capita income • Stage of economic development © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7 Chapter 8 Global Marketing International Economic Environment ▮Infrastructure is an important economic factor to consider when planning to enter a foreign market ▮Changes in exchange rates can complicate international marketing • Exchange rate - Price of one nation’s currency in terms of another country’s currency © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8 Chapter 8 Global Marketing International Social-Cultural Environment ▮To be effective, marketers must understand a nation’s culture ▮Language plays an important role in global marketing © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9 Chapter 8 Global Marketing Copyright © 2012 by South Western, a division of Cengage Learning. All rights © 2014 Cengage Learning. All reserved. Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 8 Global Marketing International Technological Environment ▮The Internet transcends political, economic, and cultural barriers to reach every corner of the globe ▮Technology presents challenges for global marketers that extend beyond the Internet and other telecommunication innovations © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11 Chapter 8 Global Marketing International Political-Legal Environment ▮Global marketers must stay abreast of laws and trade regulations in each country in which they compete ▮Firms set up internal political risk assessment units ▮The political environment involves labor conditions in different countries © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12 Chapter 8 Global Marketing International Political-Legal Environment ▮International law • U.S. has friendship, commerce, and navigation (FCN) treaties with other governments • Europe has pushed for mandatory ISO certification to standardize quality levels © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13 Chapter 8 Global Marketing International Political-Legal Environment ▮U.S. law • Various trade regulations, tax laws, and import and export requirements affecting international marketing • Export Trading Company Act of 1982 exempts exporters from antitrust regulations • Foreign Corrupt Practices Act makes it illegal to bribe a foreign official in an attempt to solicit new or repeat sales abroad © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14 Chapter 8 Global Marketing International Political-Legal Environment ▮Legal requirements of host nations • Example: Despite China’s many advances in recent years, the Chinese government continues to censor the Internet © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15 Chapter 8 Global Marketing Trade Barriers ▮Barriers fall into two major categories • Tariff - Tax levied against imported goods • Administrative barriers ▮GATT and WTO agreements have eliminated many tariffs on many products • Countries frequently use nontariff barriers to boost exports and control the flows of imported products © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16 Chapter 8 Global Marketing Tariffs ▮Two types of tariffs • Revenue tariffs - Designed to raise funds for the importing government • Protective tariffs - Designed to raise the retail price of an imported product to match or exceed that of a similar domestic product © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17 Chapter 8 Global Marketing Other Trade Barriers ▮Import quotas - Limit the number of units of products in certain categories that can cross a country’s border for resale ▮Embargo - Complete ban on the import of specified products ▮Subsidies - Government financial support of a private industry ▮Exchange control - Method used to regulate international trade among importing organizations by controlling access to foreign currencies © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18 Chapter 8 Global Marketing Dumping ▮Controversial practice of selling a product in a foreign market at a price lower than what it receives in the producer’s domestic market © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19 Chapter 8 Global Marketing Multinational Economic Integration ▮Free-trade area in which participating nations agree to free trade among themselves, abolishing tariffs and trade restrictions ▮Custom union establishes a free-trade area and uniform tariffs for nonmember nations ▮Common market extends a customs union by seeking to reconcile all government regulations affecting trade © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20 Chapter 8 Global Marketing General Agreement on Tariffs and Trade (GATT) ▮International trade accord that has helped reduce world tariffs ▮In 1994, Uruguay round produced several important outcomes • Reduced farm subsidies • Increased protection for patents, copyrights, and trademarks • Included services under international trading rules • Phased out import quotas on textiles and clothing from developing nations © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21 Chapter 8 Global Marketing World Trade Organization (WTO) ▮Succeeded GATT ▮Oversees GATT agreements ▮Serves as a forum for trade negotiations ▮Mediates trade disputes ▮Monitors national trade policies ▮Works to reduce trade barriers throughout the world © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22 Chapter 8 Global Marketing World Trade Organization (WTO) ▮WTO has made slow progress toward its major policy initiatives • Liberalizing world financial services • Telecommunications • Maritime markets © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 23 Chapter 8 Global Marketing 3. What are the various free trade areas in the world? Copyright © 2013 by South Western, a division of Cengage Learning. All rights © 2014 Cengage Learning. All reserved. Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 8 Global Marketing North American Free Trade Agreement (NAFTA) ▮Accord removing trade barriers among Canada, Mexico, and the United States ▮Particularly important to U.S. marketers because Canada and Mexico are two of its largest trading partners © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 25 Chapter 8 Global Marketing The Free Trade Area of the Americas and CAFTA-DR ▮Proposed free trade area stretching the length of the entire Western hemisphere ▮Designed to extend free trade benefits to additional nations in North, Central, and South America • Central American Free Trade Agreement–DR (CAFTA-DR) - Trade agreement among the United States, Central American nations, and the Dominican Republic © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 26 Chapter 8 Global Marketing European Union (EU) ▮Customs union that is moving in the direction of an economic union by: • Adopting a common currency • Removing trade restrictions • Permitting free flow of goods and workers throughout the member nations ▮Goal is to remove all barriers to free trade among its members © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 27 Chapter 8 Global Marketing Figure 8.2 - The 27 Members of the European Union © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 28 Chapter 8 Global Marketing 4. What are the various strategies for entering international markets? Copyright © 2013 by South Western, a division of Cengage Learning. All rights © 2014 Cengage Learning. All reserved. Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 8 Global Marketing Strategies for Entering Foreign Markets ▮Three basic choices • Importing and exporting • Contractual agreements such as franchising, licensing, and subcontracting • International direct investment © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 30 Chapter 8 Global Marketing Importing and Exporting ▮Decision to import, or bring in foreign goods to sell domestically or use as component parts, depends on: • • • • Ability of supplier to maintain quality Flexibility in filling orders that vary Response time in filling orders Total costs © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 31 Chapter 8 Global Marketing Importing and Exporting ▮First-time exporters can reach foreign customers through: • Export-trading companies • Export-management companies • Offset agreement © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 32 Chapter 8 Global Marketing Franchising ▮Contractual arrangement in which a wholesaler or retailer agrees to meet the operating requirements of a manufacturer or other franchiser ▮Benefits are risk reduction, standardized operations, and greater recognizability ▮Success depends on ability to adapt to local customer preferences © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 33 Chapter 8 Global Marketing Foreign Licensing ▮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 ▮Gives access to local partner’s marketing information and distribution channels, and protection from legal barriers ▮Allows quick entry into a foreign market with a known product © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 34 Chapter 8 Global Marketing Subcontracting ▮Contractual agreements that assign the production of goods or services to local or smaller firms ▮Can prevent mistakes involving local culture and regulations ▮Can provide protection from import duties © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 35 Chapter 8 Global Marketing International Direct Investment ▮High involvement and high risk are the major characteristics ▮Firms choosing this method often have a competitive advantage ▮Several forms • Acquisition • Joint venture © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 36 Chapter 8 Global Marketing Figure 8.3 - Levels of Involvement in Global Marketing © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 37 Chapter 8 Global Marketing 5. What are the stages in the internationalization process? Copyright © 2013 by South Western, a division of Cengage Learning. All rights © 2014 Cengage Learning. All reserved. Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 8 Global Marketing Stages in the internationalization process ▮Domestic firm ▮International firm ▮Multinational firm (MNC) © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 39 Chapter 8 Global Marketing 6. Differentiate between a global marketing strategy and a multidomestic marketing strategy? Copyright © 2013 by South Western, a division of Cengage Learning. All rights © 2014 Cengage Learning. All reserved. Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 8 Global Marketing Developing an International Marketing Strategy ▮Multidomestic marketing strategy Application of market segmentation to foreign markets by tailoring the firm’s marketing mix to match specific target markets in each nation © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 41 Chapter 8 Global Marketing Stages in the internationalization process ▮Domestic firm ▮International firm ▮Multinational firm (MNC) ▮Global corporation © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 42 Chapter 8 Global Marketing Developing an International Marketing Strategy ▮Global marketing strategy - Standardized marketing mix with minimal modifications that a firm uses in all of its domestic and foreign markets • Can effectively market some goods and services to segments in many nations that share cultures and languages • Can be highly effective for luxury products that target upscale consumers everywhere • Major benefit is its low cost to implement © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 43 Chapter 8 Global Marketing Stages in the internationalization process ▮Domestic firm ▮International firm ▮Multinational firm (MNC) ▮Global corporation ▮Transnational corporation © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 44