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The Global Marketplace
Chapter 15
Rest Stop: Previewing the Concepts
1.
2.
3.
4.
Discuss how the international trade system
and the economic, political-legal, and cultural
environments affect a company’s international
marketing decisions.
Describe three key approaches to entering
international markets.
Explain how companies adapt their marketing
mixes for international markets.
Identify the three major forms of international
marketing organization.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
15 - 2
First Stop
McDonald’s Serves Customers Around the World
•
•
Going Global
Global Presence: Last year,
nearly 65% of McDonald’s
$23.5 billion in sales occurred
outside of the U.S.
McDonald’s has 32,000
restaurants in 100+ countries.
Russian Expansion: It took
14 years to bring McDonald’s
to Russia. Individual stores
required 200+ signatures to
open. Reliable suppliers were
scarce forcing McDonald’s to
manufacture their own buns
and burgers as well as teach
Russians how to grow Russet
Burbank potatoes for fries.
•
•
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
Adaptation is Necessary
Workforce Challenges:
Russian employees did not
understand fast food concept.
Managers were trained at
Hamburger University and new
employees received 16-20
hours of product and service
training. 50,000 customers
flocked to Pushkin Square store
on its first day open.
Russia Today: 240 McDonald’s
exist in 40 cities; lines remain
long in many stores. Russians
are now being introduced to
drive-thru concept, as well as
breakfast menu.
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Global Marketing Today
• Several trends characterize the global
marketplace today:
 The
world is shrinking rapidly with the advent
of faster communication, transportation, and
financial flows.
 International trade is booming.
 Global competition is intensifying.
 Risks associated with globalization are
increasing.
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Global Marketing Today
• Global firm:
A
firm that, by operating in more than
one country, gains R&D, production,
marketing, and financial advantages in
its costs and reputation that are not
available to purely domestic
competitors.
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Global Marketing Today
• Major international marketing decisions:
 Looking
at the global marketing environment.
 Deciding whether to go global.
 Deciding which markets to enter.
 Deciding how to enter the market.
 Deciding on the global marketing program.
 Deciding on the global marketing
organization.
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Looking at the Global Marketing
Environment
• The International Trade System:
 Restrictions
exist on trade between nations—
tariffs, quotas, embargos, exchange controls,
and nontariff trade barriers.
• The World Trade Organization and GATT:
 Helps
trade—reduces tariffs and other
international trade barriers.
 Sets global standards for trade.
 WTO enforces GATT rules by mediating
disputes and enforcing trade sanctions.
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Looking at the Global Marketing
Environment
• Regional Free Trade Zones (or economic
communities):
A
group of nations organized to work toward
common goals in the regulation of
international trade.
• Key economic communities:
 European
Union (EU).
 North American Free Trade Agreement
(NAFTA).
 Latin America and South America also have
free trade zones.
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Looking at the Global Marketing
Environment
• Factors in the economic environment
reflect a country’s market attractiveness:
structure shapes a country’s
product and service needs, income levels,
and employment levels.
 Four types of industrial structure include:
 Industrial
•
•
•
•
Subsistence economies.
Raw material exporting economies.
Industrializing economies.
Industrial economies.
 Income
distribution is a second important
factor.
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Looking at the Global Marketing
Environment
• Nations’ political-legal environments vary
by:
 Attitudes
toward international buying.
 Government bureaucracy.
 Political stability.
 Monetary regulations.
• Many countries barter to pay for
purchases from other countries.
 Barter
involves a direct exchange of goods or
services.
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Looking at the Global Marketing
Environment
• Cultural environment:
 Sellers
must examine the ways consumers
in different countries think about and use
products before planning a marketing
program.
• Mistakes can be embarrassing and costly.
 Business
norms and behavior vary by
country.
 Companies that understand cultural
nuances can use them to their advantage
when positioning products internationally.
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Looking at the Global Marketing
Environment
• Critics worry that marketing strategies may
be negatively impacting global cultures.
 “Americanization”
and a loss of individual
country identity is of concern.
 Backlash against American globalization has
sometimes resulted.
 To succeed abroad, American firms must
adapt to local cultural values and traditions.
• Cultural exchange goes both ways.
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Deciding Whether to Go Global
• Reasons to consider going global:
 Foreign
attacks on domestic markets may be
countered by counterattacks abroad.
 Customers may be expanding globally and
require international servicing.
 Foreign markets may offer growth
opportunities when domestic market is
stagnant.
• Risks must be weighed against the firm’s
ability to operate globally.
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Deciding Which Markets to Enter
• Before going abroad, the company should
try to define its international marketing
objectives and policies.
 What
volume of foreign sales is desired?
 How many countries to market in?
 What types of countries to enter?
• Possible countries should be listed and
•
ranked based on several factors.
The market(s) with the greatest long-run
ROI should be chosen.
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Deciding How to Enter the Market
• Several market entry strategies exist:
 Exporting.
 Joint
venturing.
 Direct investment.
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Deciding How to Enter the Market
• Exporting:
 Entering
a foreign market by selling goods
produced in the company’s home country,
often with little modification.
• Types of exporting:
 Indirect:
• Working through independent international
marketing intermediaries.
 Direct:
• Company handles its own exports.
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Deciding How to Enter the Market
• Joint venturing:
 Entering
foreign markets by joining with
foreign companies to produce or market a
product or service.
• Approaches:
 Licensing.
 Contract
manufacturing.
 Management contracting.
 Joint ownership.
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Deciding How to Enter the Market
• Licensing:
A
method of
entering a foreign
market in which a
company enters
into an agreement
with a licensee in
a foreign market.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
• Contract
manufacturing:
A
joint venture in
which a company
contracts with
manufacturers in a
foreign market to
produce the
product or provide
its service.
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Deciding How to Enter the Market
• Management contracting: • Joint ownership:
A
joint venture in which
the domestic firm
supplies the management
know-how to a foreign
company that supplies
the capital; the domestic
firm exports management
services rather than
products.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
A
joint venture in
which a company
joins investors in a
foreign market to
create a local
business in which
the firm shares joint
ownership and
control.
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Deciding How to Enter the Market
• Direct Investment:
 Entering
a foreign market by developing
foreign-based assembly or manufacturing
facilities.
 Advantages:
•
•
•
•
Lower costs due to cheap labor or raw materials.
Firm may improve image in host country.
Better adaptation of products to country.
Firm keeps full control over the investment.
 Disadvantages:
• Currency risks, market failure, government change.
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Deciding on the Global
Marketing Program
• Standardized global marketing mix:
 Using
basically the same marketing strategy
and mix in all international markets.
• Adapted global marketing mix:
 Adjusting
the marketing strategy and mix
elements to each international target market,
bearing more costs but hoping for a larger
market share and return.
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Deciding on the Global
Marketing Program
• Global product strategies:
 Straight
product extension: Marketing
a product in a foreign market without
any change.
 Product adaptation: Adapting a
product to meet local conditions or
wants in foreign markets.
 Product invention: Creating new
products or services for foreign markets.
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Deciding on the Global
Marketing Program
• Global promotion strategies:
 Firms
can either adopt the same promotion
strategy they used in the home market or
change it for each local market.
 Some global firms use a standardized
advertising theme around the world with minor
adaptations.
 Other firms follow a communication
adaptation strategy by fully adapting an
advertising message for local markets.
 Changes may also have to be made due to
media availability.
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Deciding on the Global
Marketing Program
• Global pricing strategies:
 Companies
face many considerations in
setting their international prices.
• Standard pricing methods ignore cost
differentials and local market conditions.
 International
prices tend to be higher
than domestic prices because of price
escalation.
• Some global firms create simpler or smaller
versions of products to sell abroad.
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Deciding on the Global
Marketing Program
• Global pricing strategies:
 Setting
prices for foreign subsidiaries can be
problematic:
• Charging too much results in higher tariff duties and
lower income taxes.
• Charging too little can result in charges of dumping if
price is less than the product costs or less than is
being charged in the home market.
 The
Internet makes price differences more
obvious and has forced more standardized
pricing.
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Deciding on the Global
Marketing Program
• Global distribution channels:
 International
firms must take a wholechannel view of distributing products to
final consumers and consider:
• Channels between nations.
• Channels within nations.
• The entire global value delivery network.
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Deciding on the Global
Marketing Program
• Global distribution channels differ by:
 The
numbers and types of
intermediaries.
• Size and character of retail units differ as
well, presenting challenges.
 The
transportation infrastructure.
• Coca-Cola has adapted its distribution
methods to meet local Chinese market
needs.
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Deciding on the Global Marketing
Organization
• International marketing efforts can be
managed in three different ways:
 Organizing
an export department.
 Creating international divisions:
• Geographical organizations.
• World product groups.
• International subsidiaries.
 Becoming
a global organization.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
15 - 28
Rest Stop: Reviewing the Concepts
1.
2.
3.
4.
Discuss how the international trade system and
the economic, political-legal, and cultural
environments affect a company’s international
marketing decisions.
Describe three key approaches to entering
international markets.
Explain how companies adapt their marketing
mixes for international markets.
Identify the three major forms of international
marketing organization.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
15 - 29