Global Environment
BA 523 International Marketing
Melike Demirbag Kaplan, PhD
Global Marketing in the 21st Century
 The world is shrinking rapidly with the advent
of faster communication, transportation, and
financial flows.
 International trade is booming and accounts
for 20 percent of GDP worldwide.
 Global competition is intensifying.
 Higher risks with globalization.
A Global Firm
 Operates in more than
one country
 Gains marketing,
production, R&D, and
financial advantages
not available to purely
domestic competitors
 The global firm sees
the world as one
market
Basic Questions
 Global firms ask a number of basic questions:
 What market position should we try to establish
in our own country, in our economic region, and
globally?
 Who will our global competitors be, and what are
their strategies and resources?
 Where should we produce or source our
product?
 What strategic alliances should we form with
other firms around the world?
Key Influences in the Global Marketing
Environment
 The International
Trade System
 Economic
Environment
 Political-Legal
Environment
 Cultural Environment
Key Influences (Trade)
 The International Trade System:
 Restrictions—tariffs, quotas, embargos, exchange controls,
and nontariff trade barriers.
 The World Trade Organization and GATT:
 Helps trade—reduces tariffs and other international trade
barriers.
 Regional Free Trade Zones:
 Groups of nations organized to work toward common goals
in the regulation of international trade.
Tariffs & Quotas
 Tariffs are taxes on certain imported products
designed to raise revenue or to protect
domestic firms
 Quotas are limits on the amount of foreign
imports a country will accept in certain
product categories to conserve on foreign
exchange and protect domestic industry and
employment
Exchange Controls & Nontariff Barriers
 Exchange controls are a limit on the amount
of foreign exchange and the exchange rate
against other currencies
 Nontariff trade barriers are biases against bids
or restrictive product standards that go
against a particular country’s product features
GATT & WTO
 General Agreement on Tariffs and Trade (GATT):
 A 61-year-old treaty
 Designed to promote world trade
 Reduces tariffs and other international trade
barriers
 World Trade Organization
 Enforces GATT rules
 Mediates disputes
 Imposes trade sanctions
Regional free trade
zones such as the
European Union,
NAFTA or CAFTA help
to simplify the
process of going
global.
Economic Environment
Economic factors reflect
a country’s
attractiveness as a
market:
 Industrial structure
 Income distribution
Economic Environment
 Industrial Structure:
 Shapes a country’s product and service needs,
income levels, and employment levels.
 Four types:

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Subsistence economies
Raw material exporting economies
Industrializing economies – Emerging Markets
Industrial economies
Economic Environment
 Income Distribution
 Low-income households
 Middle-income households
 High-income households
 More than half of China’s 1.3 billion consumers
can barely afford rice.
 More than 400 million Chinese live on less than
$2 a day (WB)
 Gucci,Cartier, Lexus and Bentley?
Emerging Markets
What are Emerging Markets?
 Regional economic powerhouses -large
populations, large resource bases, and large
markets
 Adopting open door policies to replace their
traditional state policies that failed to produce
sustainable economic growth.
 World’s fastest growing economies
 By 2020, the five biggest emerging markets' share of world output will
double to 16.1 percent from 7.8 percent in 1992.
 They will also become more significant buyers of goods and services than
industrialized countries
 Critical participants in the world's major political,
economic, and social affairs.
Asia: China, India, Indonesia, Malaysia,
Philippines, Singapore, South Korea, Thailand
Africa and the
Middle East:
Eastern Europe:
South Africa and Israel
The Czech Republic,
Hungary, Greece,
Portugal, Turkey
The Former
Soviet Union:
Latin America:
Russia, Ukraine,
and the Baltic's
Argentina, Brazil, Chile,
Mexico, Venezuela
http://en.wikipedia.org/wiki/Emerging_markets
The 86% Markets
 The developed world - GNP of over $10K per
capita- constitutes only 14% of the world’s
population
 86% of the world – the emerging markets - has
a GNP of less than $10K per capita
 It is this 86% that represents the future of
global commerce
14%
86%
GNP per capita greater than $10K
GNP per capita less than $10K
Political – Legal Environment




Country’s attitude toward international buying
Government bureaucracy
Political stability
Monetary regulations
Demographic Environment
 Increasing
Population
 Net increase of 3
people per
second
 93 million per
year
 98 % occurring
in developing
countries
Aging & Urbanization
Cultural Environment
 The cultural environment refers to factors and
trends related to how people live and behave.
Values
Subgroup
Activities
Beliefs
Ideas
Cultural
Factors
Attitudes
Cultural Environment
 Sellers must examine the ways consumers in
different countries think about and use
products before planning a marketing
program.
 Business norms and behavior vary from
country to country.
 Companies that understand cultural nuances
can use them to advantage when positioning
products internationally.
Understanding Cultures
 Low Context vs. High Context (Hall, 1976)
 Cultural Dimensions Theory (Hofstede, 1980)
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Individualism vs. Collectivism
Masculinity vs. Femininity
Power Distance
Uncertainty Avoidance
Long Term Orientation
LG Kimchi Fridge
If you’ve got kimchi in your fridge, it’s
hard to keep it a secret. Made from
fermented cabbage seasoned with
garlic and chili, kimchi is served with
most meals in Korea. But when it’s
stored inside a normal refrigerator, its
pungent odor taints nearby foods.
That’s why, two decades ago, LG
introduced the kimchi refrigerator,
featuring a dedicated compartment
that isolates smelly kimchi from other
foods. Kimchi refrigerators now have
become a fixture in 65 percent of
Korean homes, and LG is the country’s
top-selling manufacturer.
Importance of Culture
Ignoring cultural
differences can result in
strong consumer backlash.
Nike was forced to pull
these shoes from
distribution after learning
that the stylized shoe logo
resembled “Allah” when
written in Arabic.
Homework
 http://deepblue.lib.umich.edu/bitstream/202
7.42/39704/3/wp320.pdf
 Rethinking Marketing Programs for Emerging
Markets. By: Niraj Dawar and Amitava
Chattopadhyay.