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Hult | Pride | Ferrell
Marketing
Foundations 5e
Part 3
Customer
Behavior and
E-Marketing
6: Consumer Behavior
7: Business Buying Behavior
8: International Marketing
9: Digital Marketing and Social
Media
© 2013 South-Western, a part of Cengage Learning
8-2
Learning Objectives
 To understand the nature of global marketing
strategy
 To analyze the environmental forces that affect
international marketing efforts
 To understand several important international
trade agreements
 To identify methods of international market
entry
 To examine various forms of global
organizational structures
 To examine the use of the marketing mix
internationally
© 2013 South-Western, a part of Cengage Learning
8-3
International Marketing
Developing and performing marketing activities
across national boundaries
 International markets provide growth
opportunities
 Many countries offer assistance and research
to encourage international business
• CIBERs: Centers for International Business
Educational Research
 Born Globals: Firms that are international
from their inception
• Often small technology-based firms
• Earn most of their sales outside the U.S.
© 2013 South-Western, a part of Cengage Learning
8-4
Environmental Forces in Global
Markets
Sociocultural
Economic
Technological
Environmental
Forces
Political, Legal,
and Regulatory
Competitive
Ethical and Social
Responsibility
© 2013 South-Western, a part of Cengage Learning
8-5
Environmental Forces
 Environmental forces may be dramatically
different in international markets than in
domestic markets
 Research to understand the needs/desires of
international customers is crucial to global
marketing success
 Proper environmental analysis of
international markets can:
 Generate financial rewards
 Increase market share
 Heighten customer awareness of products
© 2013 South-Western, a part of Cengage Learning
8-6
Sociocultural Forces
Family
Country of
Origin
Religion
Social
Influences
Language
Education
Recreation
© 2013 South-Western, a part of Cengage Learning
Health
8-7
Influence of Sociocultural Factors


Marketing activities are influenced by beliefs and
values regarding family, religion, education, health
and recreation
Can be difficult to:
 Adapt marketing efforts to different preferences,
tastes and idioms
 Transfer marketing symbols, trademarks, logos and
sometimes products to international markets


Consumer preferences for products depends on their
impression of the country of origin
Faster acceptance of a product or service
through:
 Sensitivity to and understanding of cultural
differences
 Cultural similarities
© 2013 South-Western, a part of Cengage Learning
8-8
Discussion Questions
 In what ways do language differences impact
global marketing strategy?
 Can you think of any examples from the
book or from your experiences of
advertisements or product names that did not
translate well into other languages?
© 2013 South-Western, a part of Cengage Learning
8-9
Economic Forces
 Global marketers must understand:
• International trade systems
• Economic stability/instability of nations
• Trade barriers
• Economic disparities between nations
 Instability is a guaranteed constant in the
global business environment
 Developing nations, while poorer, offer
much market potential
© 2013 South-Western, a part of Cengage Learning
8-10
Economic Forces continued
 Many differences between nations exist
 Standards of living
 Availability of credit
 Buying power
 Income distribution
 National resources
 Exchange rates
 Gross domestic product (GDP): The market
value of a nation’s total output of goods and
services for a given period
•
Gives insights into a nation’s wealth and market
potential
© 2013 South-Western, a part of Cengage Learning
8-11
Comparative Analysis of Selected
Countries
Source: The CIA, The World Fact Book, (accessed February 24, 2010).
© 2013 South-Western, a part of Cengage Learning
8-12
Political, Legal and Regulatory
Forces
 Political, legal and regulatory forces are often
intertwined
•
A nation’s legal and regulatory infrastructure
reflect its political situation
 Import Tariff: Any duty levied by a nation on
goods bought outside its borders and brought
into the country
 Quota: A limit on the amount of goods an
importing country will accept for certain
product categories in a specific period of time
 Embargo: A government’s suspension of trade
in a particular product or with a given country;
is generally directed at a specific country or
product
© 2013 South-Western, a part of Cengage Learning
8-13
Trade Controls
 Exchange Controls: Government restrictions
on the amount of a particular currency that can
be bought or sold that can affect international
trade
 Some countries promote international trade
through free trade zones, which are
multinational economic communities that
eliminate trade barriers
 Balance of Trade: The difference in value
between a nation’s exports and its imports
•
Go to US Trade Ticker to see the U.S. trade deficit
grow
 Non-regulatory barriers, like stringent health or
safety requirements, can also inhibit trade
© 2013 South-Western, a part of Cengage Learning
8-14
Think About It
 Did you know that the United States has
multiple embargos in place?
 Click here to access a list of sanctioned
regions published by the U.S. Department of
Commerce
© 2013 South-Western, a part of Cengage Learning
8-15
Ethical and Social
Responsibility Forces
 Accepted business practices vary from
country to country
• Differences exist in ethical standards
• Bribes
• Intellectual property protection
• Different modes of operations
 Bribes are an entrenched part of the business
culture in many nations
• Illegal for U.S. firms, although small gifts are
allowed
© 2013 South-Western, a part of Cengage Learning
8-16
Think About It
 Clothing retailer, The Gap, was accused of
using sweatshop labor in 2003
•
It responded by improving its commitment to
socially responsible actions – click here.
•
Has been featured on many lists of most ethical
and most socially responsible companies
 What do you think about The Gap’s efforts
to be more socially responsible?
© 2013 South-Western, a part of Cengage Learning
8-17
Dealing with Different Cultures
Self-Reference Criterion (SRC)
 The unconscious reference to one’s own cultural
values, experiences and knowledge
•
Usually includes the sense that your culture is best

Formed over a lifetime; worse in those who have
little international travel exposure
Cultural Relativism
 The concept that morality varies from one culture to
another
•

“When in Rome, do as the Romans do”
Most large international businesses will counteract
this urge with international ethics and compliance
programs
© 2013 South-Western, a part of Cengage Learning
8-18
The Least and Most Corrupt
Countries
* The United States is perceived as the 19th least-corrupt nation.
Source: “Transparency International Corruption Perceptions Index 2009,” (accessed March 1, 2010).
© 2013 South-Western, a part of Cengage Learning
8-19
Most Frequently Counterfeited
Goods
Source: “Counterfeit Culture,” CBC News (accessed March 15, 2010).
© 2013 South-Western, a part of Cengage Learning
8-20
Competitive Forces
 Competition is a staple of the global
marketplace
 Technology and interconnectedness have
created unique competitive forces in the
international marketplace
© 2013 South-Western, a part of Cengage Learning
8-21
Competitive Forces continued
Firms that operate internationally should:
 Be aware of the competitive forces in the
countries they target
 Identify the interdependence of countries and the
global competitors in those markets
 Be mindful of a new breed of customers, i.e. the
global customer
© 2013 South-Western, a part of Cengage Learning
8-22
Competitive Forces continued
 Each country has unique competitive aspects
• Shaped by the environmental forces that act upon
it
• Nations establish the infrastructure and rules for
the types of competition that can take place
 The global consumer is changing
international competition
• Increased ability to compare products and prices
around the globe
© 2013 South-Western, a part of Cengage Learning
8-23
The World’s Most Competitive
Countries
Ranking
Nation
1
Switzerland
Sweden
Singapore
United States
Germany
Japan
Finland
Demark
Netherlands
Canada
2
3
4
5
6
7
8
9
10
© 2013 South-Western, a part of Cengage Learning
8-24
Discussion Question
 According to this advertisement, what gives
AT&T a competitive advantage over its
competition?
© 2013 South-Western, a part of Cengage Learning
8-25
Think About It
 View Fortune magazine’s lists of most
admired companies by:
 Location
 Industry
 Best and worst rankings
© 2013 South-Western, a part of Cengage Learning
8-26
Technological Forces
 Technological advances have made
international marketing easier, faster and
more affordable
•
Email
•
Interactive web systems
•
Instant messaging
•
Podcasting
 Technological infrastructure varies by
country
• Many nations are leapfrogging straight into hightechnology
© 2013 South-Western, a part of Cengage Learning
8-27
Regional Trade Alliances,
Markets, and Agreements
Regional trade alliances create opportunities
and impose constraints on international trade

North American Free Trade Agreement (NAFTA)

European Union (EU)

Common Market of the Southern Cone
(MERCOSUR)
Asia-Pacific Economic Cooperation (APEC)
World Trade Organization (WTO)


© 2013 South-Western, a part of Cengage Learning
8-28
North American Free Trade
Agreement (NAFTA)
Agreement that eliminates most tariffs and trade
restrictions on agricultural and manufactured
products to encourage trade among Canada, the
U.S., and Mexico
Controversial but has created new business
opportunities with fewer barriers than before
Click here to access more information on
NAFTA
© 2013 South-Western, a part of Cengage Learning
8-29
European Union (EU)
A union of European nations established in
1958 to promote trade among its members
One of the largest single markets in the world
today
• Twenty-seven countries
Click here to access an interactive map of the
EU
© 2013 South-Western, a part of Cengage Learning
8-30
The Common Market of the Southern
Cone (MERCOSUR)
 South American Common Market
• Argentina
•
•
•
•
Brazil
Paraguay
Uruguay
Bolivia, Chile, Colombia, Ecuador and Peru are
associate members
 Promotes free circulation of goods, services
and production factors
 Common external tariff and commercial
policy among member nations
© 2013 South-Western, a part of Cengage Learning
8-31
Asia-Pacific Economic Cooperation
(APEC)
An international trade alliance that promotes
open trade and economic and technical
cooperation among members
21 member nations
•
Click here to access the APEC homepage
© 2013 South-Western, a part of Cengage Learning
8-32
The World Trade Organization
(WTO)
International organization dealing with the rules
of trade between nations
Officially founded in 1995
Successor to GATT
153 members representing 95% of global trade
Click here to access the WTO homepage
© 2013 South-Western, a part of Cengage Learning
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Modes of Entry Into International
Markets
 Stage 1: No regular export activities
 Stage 2: Export via independent
representatives (agents)
 Stage 3: Establishment of one or more
sales subsidiaries internationally
 Stage 4: Establishment of international
production/manufacturing facilities
© 2013 South-Western, a part of Cengage Learning
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Levels of Involvement in Global
Marketing
© 2013 South-Western, a part of Cengage Learning
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Trading Company
An organization that links buyers and sellers in
different countries
 Is not involved in manufacturing and does
not own assets related to manufacturing
 Acts like a wholesaler; purchases products in
one country for a low price and sells them to
buyers in another country
• Reduces risk to the company wanting to trade
internationally
© 2013 South-Western, a part of Cengage Learning
8-36
Importing and Exporting
Importing
 The purchase of products from a foreign
source
Exporting
 The sale of products to foreign markets
•
•
•
Exporting intermediaries can perform most
marketing functions for minimal effort and cost
Export agents unite buyers and sellers and
collect a commission for arranging sales
Export houses and export merchants purchase
products from different companies and then sell
them abroad
© 2013 South-Western, a part of Cengage Learning
8-37
Licensing
An alternative to direct investment that requires
a licensee to pay commission or royalties on
sales or supplies used in manufacturing
 An attractive alternative when:
 Resources for direct investment are not available
 Product sold is outside the core competency of a
company
 A foreign country is politically unstable
© 2013 South-Western, a part of Cengage Learning
8-38
Franchising
A form of licensing in which a franchiser, in
exchange for a financial commitment, grants the
franchisee the right to market a product in
accordance with the franchiser’s standards
 The franchisee must:
 Pay an initial fee and royalties to the franchiser
 Adhere to all franchise standards
© 2013 South-Western, a part of Cengage Learning
8-39
Top Ten Global Franchises
Franchise
1
2
3
4
5
6
7
8
9
10
Subway
McDonald’s
Hampton Inn/Hampton Inn Suites
Supercuts
H&R Block
Dunkin’ Donuts
Jani-King
Ampm Mini Market
Jan-Pro Franchising Int’l, Inc.
Kumon Math and Reading Centers
© 2013 South-Western, a part of Cengage Learning
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Benefits of International Franchising
 Minimizes risks to franchiser:
 Does not have to put up a large capital
investment
 Revenue stream is fairly consistent because
franchisees pay a fixed fee and royalties
 Retains control of its name and increases
global penetration
 Franchise agreements ensure a standard of
conduct and protect the franchise name
© 2013 South-Western, a part of Cengage Learning
8-41
Contract Manufacturing
 Hiring a foreign firm to produce a designated
volume of the domestic firm’s product or a
component of it to specification
 The final product carries the domestic firm’s
name
 Marketing may be handled by the contract
manufacturer or by the contracting company
© 2013 South-Western, a part of Cengage Learning
8-42
Forms of Contract Manufacturing
Outsourcing
 Contracting noncore operations with an
organization that specializes in that operation
Offshoring
 Moving a business process that was done
domestically to a foreign country
•
The production accomplished in the foreign country
may be performed by the local company or a third
party
Offshore Outsourcing
 Contracting with an organization to perform
business functions in a country other than the
country in which the product will be sold
© 2013 South-Western, a part of Cengage Learning
8-43
Joint Ventures
Joint Venture
 A partnership between domestic and a foreign
firm or government
• Popular in industries requiring large investments
• May be a political necessity because of laws and
regulations
Strategic Alliances
 Partnerships formed to create global competitive
advantages
• Firms may be traditional rivals competing for the
same market
• Firms may compete in some markets while
collaborating in others
© 2013 South-Western, a part of Cengage Learning
8-44
Direct Ownership
Direct Ownership
 A company owns subsidiaries or other
facilities overseas
 Owning facilities may be too expensive for
many firms
Multinational Enterprise (Multinational
Corporation)
 A firm that has operations or subsidiaries in
many countries
• Subsidiaries may be semi-autonomous or part of
a network led by headquarters
© 2013 South-Western, a part of Cengage Learning
8-45
The Ten Largest Global Corporations
Source: “Global 500: 2009,” Fortune (accessed March 1, 2010).
© 2013 South-Western, a part of Cengage Learning
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Organizational Architecture
© 2013 South-Western, a part of Cengage Learning
8-47
Global Organizational Structures
 An organizational structure should best leverage
a firm’s resources and core competencies

Export Departments
• A subunit of the marketing department
• Not present in all firms
 International Divisions
• Centralizes all of the responsibility and
communications related to international operations
 Internationally Integrated Structures
• Firms with internationally integrated structures are
most likely to engage in direct ownership
internationally
• Three most common: product division structure, the
geographic area structure and the global matrix
structure
© 2013 South-Western, a part of Cengage Learning
8-48
Internationally Integrated Structures
 Product Division Structure
•
•
•
The form used by most multinational enterprises
Good for firms that are diversified, yet driven by
domestic operations
Each unit is self-contained
 Geographic Area Structure
•
•
Good for firms with low diversification
Divides the world into logistical areas based on
operations and customers’ characteristics
 Global Matrix Structure
•
•
Designed to achieve global integration, cost
efficiencies, knowledge transfers and local
responsiveness
Most firms do not use this structure
© 2013 South-Western, a part of Cengage Learning
8-49
Customization vs. Globalization of
International Marketing Mixes
 Marketers must realize that similarities and
differences exist across all countries
 Customization
•
•
Adapting marketing strategy and marketing
mixes according to cultural, regional and
national differences
The traditional approach to marketing
 Globalization
•
•
Development of marketing strategies that treat
the entire world as a single entity
Entails producing standardized products,
promotion campaigns, prices and distribution
channels for all markets
© 2013 South-Western, a part of Cengage Learning
8-50
A Global Presence
 Maintaining a global presence creates five
opportunities for creating value:
1. Adapt to local market differences
2. Exploit economies of global scale
3. Exploit economies of global scope
4. Mine optimal locations for activities and
resources
5. Maximize the transfer of knowledge across
locations
© 2013 South-Western, a part of Cengage Learning
8-51
The Marketing Mix Internationally
© 2013 South-Western, a part of Cengage Learning
8-52
The Marketing Mix Internationally
continued
© 2013 South-Western, a part of Cengage Learning
8-53
Important Terms
International marketing
Dumping
Gross domestic product (GDP)
Importing
Import tariff
Exporting
Quota
Trading company
Embargo
Licensing
Exchange controls
Franchising
Balance of trade
Contract manufacturing
Cultural relativism
Outsourcing
© 2013 South-Western, a part of Cengage Learning
8-54
Important Terms continued
North American Free Trade
Agreement (NAFTA)
Offshoring
European Union (EU)
Offshore outsourcing
Common Market of the Southern
Cone (MERCOSUR)
Joint venture
Asia-Pacific Economic
Cooperation (APEC)
Strategic alliances
World Trade Organization (WTO) Direct ownership
General Agreement on Tariffs and Multinational enterprise
Trade (GATT)
Globalization
© 2013 South-Western, a part of Cengage Learning
8-55