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7
CHAPTER
Global Marketing
Chapter Objectives
1 Describe the importance
of global marketing from
the perspectives of the
individual firm and the
nation.
2 Identify the major
components of the
environment for global
marketing.
3 Identify the basic
functions of GATT,
WTO, NAFTA, FTAA,
CAFTA-DR, and the
European Union.
4 Identify the alternative
strategies for entering
foreign markets.
6 Describe the alternative
marketing mix strategies
used in global marketing.
Differentiate between a
Explain the attractiveness
5 global marketing strategy 7 of the United States as a
and a multidomestic
target market for foreign
marketing strategy.
marketers.
CHAPTER 7 Global Marketing
• Global trade accounts for 27 percent of the U.S. gross domestic product.
• Exporting Marketing domestically produced goods and services in foreign
countries.
• Importing Purchasing foreign goods and services.
CHAPTER 7 Global Marketing
THE IMPORTANCE OF GLOBAL MARKETING
• Global marketing is a necessity as demand for U.S. products increases in
fast-growing economies.
• Globalization and the Internet allow every marketer to be an international
marketer.
• Services such as PayPal help small businesses compete with larger
firms.
• Firms also rely on foreign sources for raw materials for their domestic
manufacturing operations.
CHAPTER 7 Global Marketing
SERVICE AND RETAIL EXPORTS
• Three of every five dollars of U.S. GDP comes from services.
• U.S. manufacturing sector has diminished but is still important.
• U.S. is world’s largest exporter of retailing and services.
• Most profitable sector is business and technical services such as
engineering, financial, computing, and legal services.
BENEFITS OF GOING GLOBAL
• New insights into customer behavior, alternative distribution strategies, and
advance notice of new products.
• Enhanced ability to compete effectively with foreign competition through
increased adaptability to local markets.
CHAPTER 7 Global Marketing
THE INTERNATIONAL MARKETING
ENVIRONMENT
• As in domestic markets, marketers must pay attention to local
environmental factors.
INTERNATIONAL ECONOMIC ENVIRONMENT
• Important factors: nation’s size, per-capita income, stage of economic
development, and infrastructure.
• Exchange rate Price of one nation’s currency in terms of another nation’s
currency.
INTERNATIONAL SOCIAL-CULTURAL ENVIRONMENT
• Marketers must understand a nation’s culture and language.
CHAPTER 7 Global Marketing
INTERNATIONAL TECHNOLOGICAL ENVIRONMENT
• Internet technologies connect large and small firms to world markets.
INTERNATIONAL POLITICAL-LEGAL ENVIRONMENT
• Marketers must be aware of political conditions and legal environment in
each country in which they compete.
• International law regulating international trade.
• U.S. law regulating international trade, including trade regulations, tax
laws, and import/export requirements.
• Legal requirements of other nations in which a company is doing
business.
CHAPTER 7 Global Marketing
TRADE BARRIERS
• Tariff Tax levied against imported goods.
• Two types: revenue tariffs and protective tariffs.
• Administrative barriers—such as quotas, restrictive standards for imports,
and export subsidies—and import license controls
• 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.
• Other barriers include subsidies, limits on foreign ownership, extensive
regulatory barriers, and exchange control.
DUMPING
• Practice of selling a product in a foreign market at a price lower than it
commands in the producer’s domestic market.
CHAPTER 7 Global Marketing
MULTINATIONAL ECONOMIC INTEGRATION
• Increased substantially since World War II.
• Free-trade area—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 customs union by reconciling all government
trade regulations.
• Free trade critics in the U.S. worry about U.S. jobs outsourced to other
nations.
CHAPTER 7 Global Marketing
GATT AND THE WORLD TRADE ORGANIZATION
• General Agreement on Tarrifs and Trade (GATT) International trade
accord that has helped reduce world tariffs.
• 1994 Uruguay round reduced average tariffs by one-third, or more than
$700 billion and established World Trade Organization (WTO).
• 149 member nations.
• Oversees GATT agreements, mediates disputes, and works to further
reduce trade barriers.
THE NAFTA ACCORD
• North American Free Trade Agreement (NAFTA) Accord removing
trade barriers between Canada, Mexico, and the United States.
• NAFTA partners conduct $2.2 billion in trade daily.
CHAPTER 7 Global Marketing
THE FREE TRADE AREA OF THE AMERICAS AND
CAFTA-DR
• FTAA would extend NAFTA; negotiations ongoing.
• Central American Free Trade Agreement-DR (CAFTA-DR) already in place
and its provisions are being implemented.
THE EUROPEAN UNION
• European Union (EU) 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.
• Includes 500 million people in 25 countries.
CHAPTER 7 Global Marketing
GOING GLOBAL
• Globalization affects everyone in the world in some way.
• Marketers may go global is their domestic market is saturated or they have
strong domestic share.
• Most large firms participate in global commerce.
CHAPTER 7 Global Marketing
FIRST STEPS IN DECIDING TO MARKET
GLOBALLY
• Questions to ask:
• Will our product sell well in the new target culture?
• Is our target market familiar yet with our product, or our name?
• Are we comfortable doing business in this particular place?
• How well developed is the infrastructure?
• Steps to take:
• Prepare an international business plan.
• Conduct research into foreign markets.
• Evaluate distribution possibilities.
• Evaluate methods for financing the operation.
• Learn the rules and regulations in the new country.
CHAPTER 7 Global Marketing
STRATEGIES FOR ENTERING FOREIGN MARKETS
• Firm’s risk and degree of control both increase with greater involvement.
• Export-trading companies—buy products from domestic producers and
resell them abroad.
• Export-management companies—provide expertise in reaching foreign
buyers, handle necessary paperwork, and ensure goods meet local legal
requirements.
• Offset agreement—small firm teams with international company and serves
as subcontractor on a large foreign project.
CHAPTER 7 Global Marketing
CONTRACTUAL AGREEMENTS
• Provide flexibility and may be good ways to take services
abroad.
• Franchise Contractual arrangement in which a wholesaler or
retailer agrees to meet the operating requirements of a
manufacturer or other franchiser.
• 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.
• Subcontracting—production of goods and services assigned
to local companies.
• Can prevent misunderstanding of local culture and
regulations and provide protection from import duties.
CHAPTER 7 Global Marketing
INTERNATIONAL DIRECT INVESTMENT
• U.S. has world’s largest direct investment inflows and outflows.
• Direct investment in U.S. is led by United Kingdom, Japan, the
Netherlands, and Germany.
• Generally high involvement, high risk.
• Can acquire an existing firm in target country, set up an independent
division, or form joint ventures to share risks, costs, and management with
foreign partners.
CHAPTER 7 Global Marketing
FROM MULTINATIONAL CORPORATION
TO GLOBAL MARKETER
• Multinational corporation—has significant operations
and marketing activities outside its home country.
• Important changes since 1960:
• No longer exclusively U.S.-based.
• No longer see foreign operations as
appendages but rely on them for exchanges of
ideas, capital, and technologies.
• Often employ large foreign workforces relative to American staffs.
• Reflect interdependence of world economies, growth of international
competition, and globalization of world markets.
CHAPTER 7 Global Marketing
DEVELOPING AN INTERNATIONAL
MARKETING STRATEGY
• Global marketing strategy.
• Defines a standard marketing mix and implements it with minimal
modification in all foreign markets.
• Brings advantage of economies of scale and saves money.
• Works well for products with strong universal appeal and luxury
products.
• Multidomestic strategy.
• Customization of marketing strategies to to effectively reach
individual markets.
• Allows flexibility for responding to cultural, geographic, and
language differences.
CHAPTER 7 Global Marketing
INTERNATIONAL PRODUCT AND PROMOTIONAL
STRATEGIES
• Five basic strategies that center on whether to extend domestic product and
promotional strategies or adapt one or both.
Straight Extension
Promotion Adaptation
Product Adaptation
Dual Adaptation
Product Invention
CHAPTER 7 Global Marketing
INTERNATIONAL DISTRIBUTION STRATEGY
• Marketers must decide how to enter a foreign market and how to distribute
the product in the foreign market through that entry channel.
PRICING STRATEGY
• Competitive, economic, political, and legal factors can limit pricing
decisions.
• Must adapt to local markets: Hindustan Lever offers “penny packets” of
shampoo to customers in India who cannot afford an entire bottle.
COUNTERTRADE
• Countertrade Form of exporting whereby goods and services are bartered
rather than sold for cash.
CHAPTER 7 Global Marketing
THE UNITED STATES AS A TARGET
FOR INTERNATIONAL MARKETERS
• U.S. is an inviting target for foreign companies.
• Large population, more than 300 million.
• High median family income, almost $54,000.
• Low risk to foreign marketers due to political stability, growing
economy, and favorable attitudes toward foreign investment.
• Foreign investment continues to grow.
• Major U.S. firms owned by foreign interests include Random
House, Arista Records, Pillsbury, and Ralph Lauren.