Download Chapter 18 Marketing in A Global Economy

Marketing in a
Global Economy
Chapter 18
How Popular Is American Fast
Food in China?
What is the number one fast food restaurant in China?
Video: KFC is #1 China!
The U.S. and International Trade
• The United States has the world’s largest
economy.
• In a recent year, the U.S. produced $14 trillion
in goods and services, one-fifth (20%) of the
world’s total production.
• Only the European Union and China approach
the output of the United States.
Worldwide Interdependence
• International trade is the sale of goods and
services to people in other countries.
• One –third of all world production is sold outside
of the country in which it is produced.
• Economic interdependence means that most
countries need to get some of their goods and
services from other nations.
• Very few, if any, countries are truly self-sufficient.
Imports Vs. Exports
• Imports are products or services purchased from
another country.
• Exports are products or services that are sold to other
countries.
• A country’s balance of trade is the difference between
the country’s exports and imports. Frameworks 4.1
• A trade surplus occurs when a nation exports more than it
imports.
• A trade deficit occurs when a nation imports more than it
exports. The United States has a negative balance of trade.
United States Exports
• United States
exports include
goods such as
airplanes, steel,
weapons,
electronics,
automobiles,
and
information
technology.
United States Exports
• Agriculture, including all agriculture products, is
the largest export category of the United States.
The United
States is the
world’s largest
producer of
corn and many
other
agriculture
products. Why?
Video: American Steel
“Steel - the so called
"backbone of America" - is
suffering. The credit crisis
has hit the industry hard.
Steel plants across the
country are hanging on
until the federal stimulus
package kicks in with its
over $100 billion for
building things like
highways, bridges, and
power grids, and its
promise to get workers
back into their hard hats.”
Absolute Vs. Comparative Advantage
• Absolute advantage occurs when a country
has special natural resources or talents that
allow it to produce an item at the lowest cost
possible.
• Comparative advantage is the value that a
nation gains by selling the goods that it
produces most efficiently.
Absolute Advantage
• Brazil grows roughly a
third of the world's
coffee.
• Its climate and terrain is
well suited for the
cultivation of coffee.
• Coffee can only be
grown in the earth’s
equatorial region.
Comparative Advantage
• The United States sells 41% of
the world’s total military
equipment exports.
• The United States has
specialized in the manufacture
of military equipment resulting
in a comparative advantage.
• China, France,
Russia, Germany,
and the United
Kingdom also
export military
equipment.
Why Businesses Are Going Global
• The global marketplace makes all the people and
businesses in the world potential customers, as
well as potential employees or employers.
• Companies move into foreign markets to gain sales
and increase profits.
• Increasing global demand for products encourages
international trade.
• Improvements in transportation, communication,
technology, and banking have made it easier to
serve foreign markets.
How Businesses Get Involved
• Indirect exporting is the process in which
marketing businesses with exporting experience
represent the exporting company and arrange
for sale of products in other countries.
• Direct exporting involves having the company
take complete responsibility for marketing its
products in other countries.
• Businesses often hire customs brokers, licensed
specialists who know the laws, procedures, and
tariffs required for importation.
How Businesses Get Involved
• With foreign production a company owns and
operates production facilities in another country.
How Businesses Get Involved
• Foreign investment consists of owning all or part
of an existing business in another country.
• The United States is the leading host country for
foreign investments.
“Roads and bridges built by U.S. taxpayers are
starting to be sold off, and so far foreign-owned
companies are doing the buying.
On a single day in June, an Australian-Spanish
partnership paid $3.8 billion to lease the Indiana Toll
Road. An Australian company bought a 99-year lease on
Virginia's Pocahontas Parkway, and Texas officials
decided to let a Spanish-American partnership build and
run a toll road from Austin to Seguin for 50 years.” –
USA Today
How Businesses Get Involved
• In a joint venture independent companies
develop a relationship to cooperate in common
business activities.
“PSA Peugeot Citroen (a
French Company) and China
Changan Automobile Group pledged
to assemble Citroen cars in China by
2012 in a joint venture that will also
introduce a new brand to the fastgrowing market.
The carmakers will
together invest $1.2 billion to
increase and upgrade capacity at
Changan’s plant in Shenzhen, China
creating shared output of 200,000
vehicles a year.” - Bloomberg
Doing Business in China
• In China, they have seen the
future, and it is Shanghai. The
sprawling metropolis may turn
out to be the world capital of the
21st Century.
Shanghai is more than just the
biggest city in the world's biggest
country; it is a great experiment
in urban living, and it could affect
the way we all live.
Multinational Companies
• A multinational company is a business that has
operations throughout the world and that
conducts planning for worldwide markets.
In November 2009, Disney received approval from the Chinese
government to build a Disneyland resort in the Pudong district of Shanghai.
The resort is expected to open in 2013.
The World’s Largest Employers
Company
Home Country
No. of Employees
Wal-Mart Stores
United States
1,900,000
China National Petroleum
China
1,086,966
U.S. Postal Service
United States
796,199
Sinopec
China
681,900
Siemens
Germany
475,000
McDonald’s
United States
465,000
Deutsche Post
Germany
463,350
Carrefour
France
456,295
Agricultural Bank of China
China
452,464
Understanding International Markets
• Businesses must recognize that important
differences exist among prospective customers in
other countries.
The vintage Gerber
baby food jar on the
left has a plain
label. The modern
jar on the right has
a photo of the jar’s
contents. Why was
the label changed?
Information Needed for International Markets
Consumer
Characteristics
Economic
Environment
Culture and
Customs
Technology
Market
Information
Needs
Political and
Legal Structure
Culture and Customs
• Differences in language and culture make international
trade more challenging than doing business at home.
What is common practice in one country may take on a
different meaning elsewhere.
• Example: Gift giving is considered part of business
etiquette in Asia, but may seem like an illegal bribe in
the U.S.
Culture and Customs
The Chevrolet Nova was produced by General Motors from 1962 until 1988. While the car
was very successful in the United States, exports of the vehicle were less than expected.
The name Nova translated into Spanish as no go. Consumers in Spanish speaking
countries were reluctant to purchase a car named the “No Go.”
Culture and Customs
The French perfume manufacturer of Champs-Elysees used one print ad in France and
another version, with the model more conservatively dressed, in ads used in Middle
Eastern countries.
Understanding International Markets
• The preindustrial economy is based on agriculture
and raw material development through activities
such as mining, oil production, and harvesting
timber.
Mining for gold in the
Democratic Republic of
the Congo, a
preindustrial economy,
is done by hand.
Understanding International Markets
• In an industrial economy, the primary business
activity is the manufacturing of products.
India and China are countries that are rabidly
developing industrial economies.
Understanding International Markets
• A postindustrial economy is based on a mix of
business and consumer products and services
produced and marketed in the global marketplace.
• These countries have a very high standard of living.
Sweden
Denmark
Switzerland
Understanding International Markets
• Conditions of the Economy
– Gross Domestic Product (GDP) is the total value of
goods and services produced within a country during a
year.
– Gross National Product (GNP) is the total value of all
goods and services produced by a country during the
year, it includes foreign investments. It is a broader
measure and includes the production of multinational
companies.
– A growing GDP and GNP is a sign of a strong economy.
Frameworks 4.8
Understanding International Markets
• Conditions of the Economy
– A country’s standard of living is a measure of the
quality of life for its citizens.
• It is based on factors such as housing, food, education,
clothing, transportation, and employment opportunities.
• A country’s standard of living is calculated by dividing the total
income of the country (GDP) by its population. This is known
as GDP per capita.
• A country with a high standard of living produces and sells
larger quantities of goods and services, meaning more jobs,
higher wages, and better markets for businesses.
Frameworks 4.8
Understanding International Markets
• Conditions of the Economy
– Productivity is the average output by workers for a
specific period of time.
– Productivity shows the efficiency of a country’s work
force and the technology used in production.
– Productivity can increase as a result of having a more
educated workforce, more efficient operations, and
increased use of technology to support work
procedures.
Frameworks 4.8
Understanding International Markets
• Americans are the most productive workers in the world.
• Each U.S. worker produces $63,885 of wealth per year,
more than their counterparts in all other countries.
• Ireland comes in second at $55,986, ahead of Luxembourg,
$55,641; Belgium, $55,235; and France, $54,609. – CBS
News
Understanding International Markets
• Purchasing power is the amount of goods and
services that can be purchased with a specific
amount of money.
• The consumer price index (CPI) is the change in
the cost of a specified set of goods over time.
• Inflation occurs when prices increase faster than
the value of goods and services.
• A recession is a period of time in which the
economy slows resulting in lower production,
employment , and income.
Frameworks 4.8
Trade Agreements & Alliances
• Governments make agreements with each other to set
up trade alliances that establish guidelines for
international trade. Some alliances in the interest of
worldwide free trade are:
– World Trade Organization
– North American Free Trade Agreement
– European Union
The World Trade Organization
• The WTO is a global coalition of 135 governments
that makes the rules governing international trade.
• The WTO was formed in 1995 as the successor to
the General Agreement on Tariffs and Trade
(GATT).
North American Free Trade Agreement
• NAFTA is an international trade agreement
among the United States, Canada, and
Mexico. It went into effect on January 1,
1994.
The NAFTA Initialing
Ceremony, October 1992.
From left to right: (Standing)
Mexican President Salinas, US
President Bush, Canadian
Prime Minister Mulroney,
(Seated) Jaime Serra Puche,
Carla Hills, Michael Wilson.
The European Union
• The EU is Europe's trading bloc. It was
established by the Maastricht Treaty, which
called not only for free trade among member
nations, but also for a single European
currency and a central European bank.
The European
Union’s currency is
known as the Euro.
Trade Agreements & Alliances
• Depicted on this map are two major trading
blocks or markets - NAFTA and the EU.
Customization vs. Globalization
• When marketing products in foreign countries, companies
must make product and promotion decisions.
• Customization means creating completely new
products for specific countries.
• Globalization occurs when a company does not
change anything about its product or promotion.
• Product Adaptation is changing a product to make it
more appropriate for a country's preferences.
• Promotion Adaptation involves changing the
promotion to meet foreign customers' way of thinking.
Promotion Adaptation
Rugged individualism is NOT a desired characteristic in most Asian countries,
so tobacco manufacturers tailor their ads to the Asian market where social
sophistication and financial success are greatly desired.
Largest Global Public Corporations
Rank
Company
Revenues ($
millions)
Profits ($
millions)
1
Exxon Mobil
339,938.0
36,130.0
2
Wal-Mart Stores
315,654.0
11,231.0
3
Royal Dutch
Shell
306,731.0
25,311.0
4
BP
267,600.0
22,341.0
5
General Motors
192,604.0
-10,567.0
6
Chevron
189,481.0
14,099.0
7
DaimlerChrysler
186,106.3
3,536.3
8
Toyota Motor
185,805.0
12,119.6
9
Ford Motor
177,210.0
2,024.0
10
ConocoPhillips
166,683.0
13,529.0
11
General Electric
157,153.0
16,353.0
Trade Barriers to Foreign Markets
• A nation's government may impose trade
barriers or restrictions when it wants to limit
trade. There are three main types of trade
barriers:
• tariffs
• quotas
• embargoes
Frameworks 4.10
Trade Barriers
• A tariff (sometimes called a duty) is a tax
on imports.
• Tariffs may be used to produce revenue for a
country.
• Another type of tariff is a protective tariff, which
is generally high. Its purpose is to increase the
price of imported goods so that domestic
products can compete with them.
Frameworks 4.10.2
Trade Barriers
• An import quota limits either the quantity or
monetary value of a product that may be
imported.
• Example: In the late 1980’s the U.S. threatened
to place a quota on the number of Japanese
autos that could be imported to the U.S. As a
result, many Japanese autos are assembled in
the United States today.
Frameworks 4.10.2
Trade Barriers
• A subsidy is money provided to a business to
assist in the development and sale of products.
• Example: The U.S. subsidizes some U.S.
industries such as the manufacture of electric
vehicles and some agriculture operations.
France subsidizes it’s movie industry.
• The free trade movement is an effort to end
this type of protection.
Frameworks 4.10.2
Trade Barriers
• An embargo is a total ban on specific goods
coming into and leaving a country. Embargoes are
usually used for political reasons.
• Example: The United States has lead a United
Nations imposed embargo on Iran in an attempt to
stop that country’s development of nuclear
weapons.
Frameworks 4.10.2
Trade Barriers
The United States embargo
against Cuba is an economic,
commercial, and financial embargo
imposed on Cuba since 1962. The
embargo was enacted after the
Castro regime confiscated the
properties of US citizens. The
Castro regime was also accused of
executing numerous U.S. citizens.
The embargo also bans most travel
to Cuba.
Frameworks 4.10.2
Video: Embargo Of Iran
“The Islamic Republic of
Iran announced this week
that it has already starting
enriching uranium at its
nuclear facility at Natanz,
giving the Obama
administration ammunition
in its drive to pressure
Russia and China into
imposing tough new
sanctions against Iran.”
Frameworks 4.10.2
50
End of Chapter 18: Marketing in a Global Economy
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