Chapter 7 Global Marketing

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Chapter 7
Global Marketing
CHAPTER 7 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.
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CHAPTER 7 Global Marketing
Chapter Objectives
5.
6.
7.
Differentiate between a global marketing strategy and a
multidomestic marketing strategy.
Describe the alternative marketing mix strategies used in
global marketing.
Explain the attractiveness of the United States as a target
market for foreign marketers.
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CHAPTER 7 Global Marketing
Introduction
o Global trade accounts for 30 percent of the U.S. gross
domestic product
o Exporting - Marketing domestically produced goods
and services in foreign countries
o Importing - Purchasing foreign goods and services
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CHAPTER 7 Global Marketing
Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.
CHAPTER 7 Global Marketing
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CHAPTER 7 Global Marketing
The Importance of Global Marketing
o Demand for U.S. products is increasing in fastgrowing economies
o Globalization and the Internet allow every marketer
to be an international marketer
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CHAPTER 7 Global Marketing
Service and Retail Exports
o Nearly four of every five dollars in the nation’s gross
domestic product comes from services
o United States is the world’s largest exporter of services
and retailing
o The entertainment industry is a major service exporter
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CHAPTER 7 Global Marketing
Benefits of Going Global
o Additional revenue
o New insights into customer behavior
o Alternative distribution strategies
o Advance notice of new products
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CHAPTER 7 Global Marketing
Going Global
o Marketers go global because:
o Their domestic market is saturated
o They have strong domestic share
o Globalization of customers
o Globalization of competitors
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CHAPTER 7 Global Marketing
Going Global
o New customers in emerging markets
o Reduced trade barriers
o Advances in technology
o Enhanced customer responsiveness
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CHAPTER 7 Global Marketing
International Economic Environment
o Factors determining a nations prospects as a host for
international business expansion:
o Size
o Per-capita income
o Stage of economic development
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CHAPTER 7 Global Marketing
International Economic Environment
o Infrastructure is important economic factor to
consider when planning to enter a foreign market
o Changes in exchange rates can also complicate
international marketing
o Exchange rate - Price of one nation’s currency in terms
of another country’s currency
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CHAPTER 7 Global Marketing
International Social-Cultural Environment
o To be effective, marketers must understand a nation’s
culture
o Language is an important factor
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CHAPTER 7 Global Marketing
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CHAPTER 7 Global Marketing
International Technological Environment
o Technology presents challenges for global marketers
that extend beyond the Internet and other
telecommunications innovations
o A major issue involving food marketers is genetic
reengineering
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CHAPTER 7 Global Marketing
International Political-Legal Environment
o Marketers must stay abreast of laws and trade
regulations in each country in which they compete
o Firms set up internal political risk assessment unit to
evaluate the political risks of the marketplaces in which
they operate
o The political environment involves labor conditions in
different countries
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CHAPTER 7 Global Marketing
International Political-Legal Environment
o International law
o U.S. has friendship, commerce, and navigation (FCN)
treaties with many nations
o Europe has pushed for mandatory ISO (International
Organization for Standardization) certification to
standardize quality levels
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CHAPTER 7 Global Marketing
International Political-Legal Environment
o U.S. law
o Export Trading Company Act of 1982 exempts
exporters from antitrust laws
o Helms-Burton Act of 1996 strengthened trade sanctions
against Cuba
o Foreign Corrupt Practices Act bans bribes to foreign
officials in exchange for business advantages
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CHAPTER 7 Global Marketing
International Political-Legal Environment
o Legal requirements of host nations
o Example: Despite China’s many advances in recent
years the Chinese government continues to censor the
Internet
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CHAPTER 7 Global Marketing
Trade Barriers
o Barriers fall into two major categories:
o Tariff - Tax levied against imported goods
o Administrative barriers
o GATT and WTO agreements have eliminated many
tariffs to boost exports and control the flows of
imported products
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CHAPTER 7 Global Marketing
Tariffs
o U.S. legislators feel increasing pressure to protect
American industries from foreign competition
o Two types:
o Revenue tariffs
o Protective tariffs
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CHAPTER 7 Global Marketing
Other Trade Barriers
o Import quotas - Trade restrictions that limit the
number of units of certain goods that can enter a
country for resale
o Embargo - A complete ban on the import of a product
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CHAPTER 7 Global Marketing
Dumping
o Practice of selling a product in a foreign market at a
price lower than it commands in the producer’s
domestic market
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CHAPTER 7 Global Marketing
Multinational Economic Integration
o Free-trade area, in which participating nations agree to
free trade among themselves, abolishing tariffs and
trade restrictions
o Custom union establishes a free-trade area and
uniform tariffs for nonmember nations
o Common market extends customs union by
reconciling all government trade regulations
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CHAPTER 7 Global Marketing
General Agreement on Tariffs and Trade
(GATT)
o International trade accord that has helped reduce
world tariffs
o 1994 Uruguay round produced several important
outcomes:
o Reduced farm subsidies
o Increased protection for patents, copyrights, and
trademarks
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CHAPTER 7 Global Marketing
General Agreement on Tariffs and Trade
(GATT)
o Included services under international trading rules
o Phased out import quotas on textiles and clothing from
developing nations
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CHAPTER 7 Global Marketing
World Trade Organization (WTO)
o Replaced GATT
o It oversees GATT agreements
o Serves as a forum for trade negotiations
o Mediates disputes
o Works to further reduce trade barriers
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CHAPTER 7 Global Marketing
World Trade Organization (WTO)
o WTO has made slow progress toward its major policy
initiatives:
o Liberalizing world financial services
o Telecommunications
o Maritime markets
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CHAPTER 7 Global Marketing
North American Free Trade Agreement
(NAFTA)
o Accord removing trade barriers between Canada,
Mexico, and the United States
o NAFTA is particularly important to U.S. marketers
because Canada and Mexico are two of its largest
trading partners
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CHAPTER 7 Global Marketing
The Free Trade Area of the Americas and
CAFTA-DR
o Proposed free trade area stretching the length of the
entire Western hemisphere
o Designed to extend free trade benefits to additional
nations in North, Central, and South America
o Central American Free Trade Agreement–DR
(CAFTA-DR) – Trade agreement among the United
States, Central American nations, and the Dominican
Republic
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CHAPTER 7 Global Marketing
European Union (EU)
o Customs union that is moving in the direction of an
economic union by:
o Adopting a common currency
o Removing trade restrictions
o Permitting free flow of goods and workers throughout
the member nations
o Goal is to remove all barriers to free trade among its
members
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CHAPTER 7 Global Marketing
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CHAPTER 7 Global Marketing
Strategies for Entering Foreign Markets
o Three basic choices
o Importing and exporting
o Contractual agreements such as franchising, licensing,
and subcontracting
o International direct investment
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CHAPTER 7 Global Marketing
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CHAPTER 7 Global Marketing
Importing and Exporting
o Decision to import, or bring in foreign goods to sell
domestically or use as component parts, depends on:
o Ability of supplier to maintain quality
o Flexibility in filling orders that vary
o Response time in filling orders
o Total costs
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CHAPTER 7 Global Marketing
Importing and Exporting
o First-time exporters can reach foreign customers
through
o Export-trading companies
o Export-management companies
o Offset agreement
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CHAPTER 7 Global Marketing
Franchising
o Contractual arrangement in which a wholesaler or
retailer agrees to meet the operating requirements of a
manufacturer or other franchiser
o Benefits are risk reduction, standardized operations,
and greater recognizability
o Success often depends on ability to adapt to local
customer preferences
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CHAPTER 7 Global Marketing
Foreign Licensing
o 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
o Gives access to local partner’s marketing information
and distribution channels, and protection from legal
barriers
o Allows quick entry into a foreign market with a known
product
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CHAPTER 7 Global Marketing
Subcontracting
o Contractual agreements that assign the production of
goods or services to local or smaller firms
o Can prevent mistakes involving local culture and
regulations
o Can provide protection from import duties
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CHAPTER 7 Global Marketing
International Direct Investment
o High involvement and high risk are the major
characteristics
o It can take various forms:
o Acquisition
o Joint ventures
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CHAPTER 7 Global Marketing
From Multinational Corporation
to Global Marketer
o Multinational corporation - Significant operations and
marketing activities outside its home country
o Examples: General Electric, Siemens, Mitsubishi
o Important changes since 1960:
o No longer exclusively U.S. based
o Multinationals no longer think of their foreign
operations as mere outsourcing appendages
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CHAPTER 7 Global Marketing
From Multinational Corporation
to Global Marketer
o Employ large foreign workforces relative to American
staffs
o Reflect interdependence of world economies, growth
of international competition, and globalization of
world markets
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CHAPTER 7 Global Marketing
Developing an International
Marketing Strategy
o Global marketing strategy – Standardized marketing
mix with minimal modifications that a firm uses in all
of its domestic and foreign markets
o Can effectively market some goods and services to
segments in many nations that share cultures and
languages
o Can be highly effective for luxury products that target
upscale consumers everywhere
o Major benefit is its low cost to implement
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CHAPTER 7 Global Marketing
Developing an International
Marketing Strategy
o Multidomestic marketing strategy - Application of
market segmentation to foreign markets by tailoring
the firm’s marketing mix to match specific target
markets in each nation
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CHAPTER 7 Global Marketing
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CHAPTER 7 Global Marketing
International Distribution Strategy
o Marketers must set up proper channels and anticipate
extensive physical distribution problems
o A distribution decision involves two steps:
o The firm must decide on a method of entering the
foreign market
o It must determine how to distribute the product within
the foreign market through that entry channel
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CHAPTER 7 Global Marketing
Pricing Strategy
o Competitive, economic, political, and legal factors can
limit pricing decisions
o Adaptation to local markets
o Emergence of commodity marketing organizations An important development in pricing strategy for
international marketing
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CHAPTER 7 Global Marketing
Countertrade
o Form of exporting whereby goods and services are
bartered rather than sold for cash
o Way to control balance-of-trade problems
o May be imposed in less developed nations that lack
sufficient foreign currency to obtain goods and services
they want
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CHAPTER 7 Global Marketing
The United States as a Target
for International Marketers
o U.S. is an inviting target for foreign companies
o U.S. consumers have a high level of discretionary
income
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