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Chapter 1
Introduction to Global Marketing
Global vs. “Regular” Marketing : Scope of activities are outside the home-country
market.
Global Marketing : The scope of activities outside the home market
Value chain: Marketing, along with all other functional business areas, create value
for the customer
Value Proposition
- Perceived value to the customer
- The firm’s promise to the customer
Customer Perceived Value: Create value for customers by improving benefits or
reducing price
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– Improve the product – Find new distribution channels – Create better communications – Cut monetary and non-monetary costs and prices
Value=Benefits/Price
Global Industries :An industry is global to the extent that a company’s industry position
in one country is interdependent with its industry position in another country
Indicators of globalization:
- Ratio of cross-border investment to total capital investment.
- Proportion of industry revenue generated by all companies that
compete in key world regions.
- Ratio of cross-border trade to worldwide production.
Competitive Advantage : When a company succeeds in creating more value for
customers than its competitors. Single Country Marketing Strategy
- Target Market Strategy
- Marketing Mix (Product/Price/Promotion/Place)
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Global Marketing Strategy
- Global Market Participation
- Marketing Mix Development (4 P’s: Adapt or Standardize?)
- Concentration of Marketing Activities
- Coordination of Marketing Activities
- Integration of Competitive Moves
Standardization Vs. Adaptation
• Globalization (Standardization)
– Developing standardized products marketed worldwide with a
standardized marketing mix
– Essence of mass marketing
• Global localization (Adaptation)
– Mixing standardization and customization in a way that minimizes
costs while maximizing satisfaction
– Essence of segmentation
– Think globally, act locally
McDonald’s Global Marketing
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Management Orientations
• Ethnocentric Orientation
– Home country is superior to others
– Sees only similarities in other countries
– Assumes products and practices that succeed at home will be
successful everywhere
– Leads to a standardized or extensionapproach
• Polycentric Orientation
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– Each country is unique
– Each subsidiary develops its own unique business and marketing
strategies
– Often referred to as multinational
– Leads to a localized or adaptationapproach that assumes products
must be adapted to local market conditions
• Regiocentric Orientation
– A region is the relevant geographic unit. Ex: The NAFTA or European
Union market
– Some companies serve markets throughout the world but on a regional
basis. Ex: General Motors had four regions for decades
• Geocentric Orientation
– Entire world is a potential market
– Strives for integrated global strategies
– Also known as a global or transnational company
– Retains an association with the headquarters country
– Pursues serving world markets from a single country or sources
globally to focus on select country markets
– Leads to a combination of extension and adaptation elements
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Forces Affecting Global Integration& Global Marketing
• Multilateral trade agreements
• Converging market needs and wants and the information revolution
• Transportation and communication improvements
• Product development costs
Driving Forces Affecting Global Integration and Global Marketing
• Quality
– R&D as a percent of sales
• World economic trends
– 2008 global crisis
– Growing middle class in China, India, Brazil, etc.
– Rapid growth in China pre-2008
– Movement to free markets worldwide
• Leverage
– Experience transfers
– Scale economies
– Resource utilization
– Global strategy
Restraining Forces Affecting Global Integration and Global Marketing
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• Management myopia
• Organizational culture
• National controls
• Opposition to globalization
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Chapter 2
The Global Economic Environment
The World Economy — An Overview
• In the early 20th century economic integration was at 10%; today it is
50%
• EU and NAFTA are very integrated
• Global competitors have displaced or absorbed local ones
The new realities:
• Capital movements have replaced trade as the driving force of the
world economy
• Production has become uncoupled from employment
• The world economy, not individual countries, is the dominating factor
• The struggle between capitalism and socialism began in 1917 is over
• E-Commerce diminishes the importance of national barriers and forces
companies to re-evaluate business models
Zeroing in on Economic Systems : Globalization has made it harder to pigeonhole
economies within the four-cell matrix
Also consider:
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- Type of economy: advanced industrial state, emerging or transition
economy, or developing nation?
- Type of Government: Monarchy, dictatorship, tyrant? One-party system?
Dominated by another state? Democracy? Terrorist?
- Trade and capital flows: Free trade, part of trading bloc? Currency board
or exchange controls?
- The commanding heights: Transportation, communications & energy
sectors. State, private, or mixed ownership?
- Services provided by the state or state funded: Pensions, health care,
education.
- Institutions: Country characterized by transparency, standards, absence of
corruption? Standards ignored and court system compromised?
- Markets: Entrepreneurial high risk/high reward? Socialized market?
Government dominated price and wage controls?
Economic Systems
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Market Capitalism
• Individuals and firms allocate resources
• Production resources are privately owned
• Driven by consumers
• Government’s role is to promote competition among firms and ensure
consumer protection
Centrally Planned Socialism
• Opposite of market capitalism
• State holds broad powers to serve the public interest; decides what goods
and services are produced and in what quantities
• Consumers can spend only what is available
• Government owns entire industries and controls distribution
• Demand typically exceeds supply
• Little reliance on product differentiation, advertising, pricing strategy
• China, India, and the former USSR now moving towards some market
allocation and private ownership
Centrally Planned Capitalism
• Economic system in which command resource allocation is used extensively
in an environment of private resource ownership
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Example:
- Swedish government controls 2/3s of all spending; a hybrid of CPS and
capitalism (Market Socialism)
- Swedish government plans move towards privatization
Economic Freedom
• Rankings of economic freedom among countries
– “free” “mostly free” “mostly unfree” “repressed”
• Variables considered include such things as:
– Trade policy
– Taxation policy
– Capital flows and foreign investment
– Banking policy
– Wage and price controls
– Property rights
– Black market
Stages of Market Development
• The World Bank has defined four categories of development using Gross
National Income (GNI) as a base
• BEMs, identified 10 years ago, were countries in Central Europe, Latin
America, and Asia that were to have rapid economic growth
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• Today, the focus is on BRICS: Brazil, Russia, India, China and South Africa
Low-Income Countries GNP per capita of $1,025 or less
Characteristics
– Limited industrialization
– High percentage of population in farming
– High birth rates
– Low literacy rates
– Heavy reliance on foreign aid
– Political instability and unrest
– Concentrated in Sub-Saharan Africa
Lower-Middle-Income Countries GNI per capita: $1,026 to $4,035
Characteristics
– Rapidly expanding consumer markets
– Cheap labor
– Mature, standardized, labor-intensive industries like footwear, textiles
and toys
• 50 bottom-ranked countries are LDCs—least developed countries
• India is the only BRIC nation
Upper-Middle-Income Countries GNP per capita: $4,036 to $12,475
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Characteristics:
– Rapidly industrializing, less agricultural employment
– Increasing urbanization
– Rising wages
– High literacy rates and advanced education
– Lower wage costs than advanced countries
– Also called industrializing or developing economies
– BRICS: Brazil, China, Russia, South Africa
– Other countries: Malaysia, Chile, Venezuela, Mexico
Newly Industrializing Economies (NIEs)
Lower-middle and upper income economies with the highest sustained rates of
economic growth
– Greater industrial output that developing economies
– Exports of manufactured and refined products
– N-11 a new country grouping identified by Goldman Sachs
 NIEs include Egypt, Indonesia, the Philippines, (lower-middle
income) Mexico, and Turkey (upper-middle income)
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Marketing Opportunities in LDCs Characterized by a shortage of goods and
services
Long-term opportunities must be nurtured in these countries
– Look beyond per capita GNP
– Consider the LDCs collectively rather than individually
– Consider first mover advantage
– Set realistic deadlines
Mistaken Assumptions about LDCs
1. The poor have no money.
2. The poor will not “waste” money on non-essential goods.
3. Entering developing markets is fruitless because goods there are too cheap
to make a profit.
4. People in BOP (bottom of the pyramid) countries cannot use technology.
5. Global companies doing business in BOP countries will be seen as exploiting
the poor.
High-Income Countries GNI per capita: $12,476 or more.
Also known as advanced, developed, industrialized, or postindustrial countries
Characteristics:
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– Sustained economic growth through disciplined innovation
– Service sector is more than 50% of GNI
– Households have high ownership levels of basic products
– Importance of information processing and exchange
– Ascendancy of knowledge over capital, intellectual over machine
technology, scientists and professionals over engineers and
semiskilled workers
– Future oriented
– Importance of interpersonal relationships
Balance of Payments
Record of all economic transactions between the residents of a country and
the rest of the world
– Current account–record of all recurring trade in merchandise and
services, and humanitarian aid
i. trade deficit—negative current account
ii. trade surplus—positive current account
– Capital account–record of all long-term direct investment, portfolio
investment, and capital flows
International Finance
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– Foreign exchange makes it possible to do business across the
boundary of a national currency
– Currency of various countries are traded for both immediate (spot) and
future (forward) delivery
– Currency risk adds turbulence to global commerce
Foreign Exchange Market Dynamics
– Supply and Demand interaction
o Country sells more goods/services than it buys
o There is a greater demand for the currency
o The currency will appreciate in value
Managing Economic Exposure
– Economic exposure refers to the impact of currency fluctuations on the
present value of the company’s financial performance.
– Occurs when sales are in a foreign currency
o Nestlé generates 98% of sales outside home country
o Euro zone companies GlaxoSmithKline, Daimler AG, BP, for
example, generate 1/3 of sales in the U.S.
– Numerous techniques and strategies have been developed to reduce
exchange rate risk
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o Hedging involves balancing the risk of loss in one currency with
a corresponding gain in another currency
o Forward Contracts set the price of the exchange rate at some
point in the future to eliminate some risk
Chapter 3
The Global Trade Environment
General Agreement on Tariffs and Trade (GATT) : Treaty among nations to
promote trade among members established in 1947
– Handled trade disputes
– Lacked enforcement power; nicknamed the General Agreement to Talk
and Talk
– Disputes lasted for years
– Replaced by World Trade Organization in 1995
The World Trade Organization: Forum for trade-related negotiations among 153
members
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– Based in Geneva
– Serves as dispute mediator through DSB
– Has enforcement power and can impose sanctions
Preferential Trade Agreements
– Many countries seek to lower barriers to trade within their regions
– PTAs give partners special treatment and may discriminate against
others
– Over 300 PTAs have been notified to the WTO
Hierarchy of PFTs
Free Trade Area
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– Two or more countries agree to abolish tariffs and other barriers to
trade amongst themselves
– Countries continue independent trade policies with countries outside
agreement
– Rules of origin requirements restrict transshipment of goods from the
country with the lowest tariff to another
North America—NAFTAestablished as a free trade area in 1994
• Canada, United States, Mexico
– All three nations pledge to promote economic growth through tariff
reductions and expanded trade and investment
– No common external tariffs
– Restrictions on labor and other movements remain
Customs Union
– Evolution of Free Trade Area
– Includes the elimination of internal barriers to trade (as in FTA)
– AND establishes common external barriers (CETs) to trade
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Examples: The EU and Turkey, the Andean Community,
Mercosur, CARICOM, Central American Integration System
(SICA)
Common Market
– Includes the elimination of internal barriers to trade (as in free trade
area)
– AND establishes common external barriers to trade (as in customs
union)
– AND allows for the free movement of factors of production, such as
labor, capital, and information
Economic Union
– Includes the elimination of internal barriers to trade (as in free trade
area)
– AND establishes common external barriers to trade (as in customs
union)
– AND allows for the free movement of factors of production, such as
labor, capital, and information (as in common market)
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– AND coordinates and harmonizes economic and social policy within the
union
– Full evolution of economic union
• creation of unified central bank
• use of single currency
• common policies on issues such as agriculture, social policy,
transport, competition, mergers, taxation
• requires extensive political unity
• would lead to a central government in time
Latin America: SICA, Andean Community, Mercosur, CARICOM
– Includes the Caribbean, Central, and South America
– History of no growth, inflation, debt, and protectionism has given way to
free markets, open economies, and deregulation
– Some concern for further growth with the rise of left-leaning politicians
Andean Community
– Bolivia, Colombia, Ecuador, Peru
– Customs Union
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– Abolished foreign exchange, financial and fiscal incentives, and export
subsidies
– Established common external tariffs
Common Market of the South (MERCOSUR)
• Argentina, Brazil, Paraguay, Uruguay, Venezuela
• Customs union, seeks to become common market
– Internal tariffs eliminated
– Established common external tariffs up to 20%
– In time, factors of production will move freely through member
countries
• Bolivia, Chile, Ecuador, Peru
– Associate members
– Participate in free trade area but not customs union
CARICOM
• Founded in 1973 by 15 members
• 15 million population
• Stagnant for 20 years
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• Customs Union in 1991
• Caribbean Basin Trade Partnership Act exempts textile and apparel exports
to the U.S. market access from duties and tariffs. Caribbean Basin Initiative
of 20 nations includes CARICOM.
Asia-Pacific: The Association of Southeast Asian Nations (ASEAN)
• Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines,
Singapore, Thailand, Vietnam
• Trading partners U.S., Japan, EU, China
• Geographically close; historically divided
• “ASEAN plus six” (Japan, China, Korea, Australia, New Zealand, India)
working towards an economic community
• China/ASEAN FTA established in 2010 removes 90% of tariffs on traded
goods
Singapore
• World’s 2nd largest container port
• 2nd highest standard of living in the region behind Japan
• 4.2 million people
• 93% literacy rate
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• Over 3,000 companies
• Crime is nearly nonexistent
The European Union (EU)
• Initially began with the 1958 Treaty of Rome
• Objective is to harmonize national laws and regulations so that goods,
services, people, and money could flow freely across national boundaries
• 27 countries
• 500 million people
• $15 trillion GNI
• Euro currency, 1999
• Harmonization of laws and regulations
• Price transparency
• No customs at national borders
The Middle East
• Afghanistan, Bahrain, Cyprus, Egypt, Iran, Iraq, Israel, Jordan, Kuwait,
Lebanon, Oman, Qatar, Saudi Arabia, Syria, the United Arab Emirates,
Yemen
– Primarily Arab, some Persian and Jews
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– 95% Muslim, 5% Christian and Jewish
– Wide variation in Economic Freedom rankings
• Bahrain is 12th, UAE is 28th, Saudi Arabia is 82nd
– Oil prices drive commerce
– 25% of world’s oil in Saudi Arabia
– Arab Spring 2011
Africa
– 54 nations over three distinct areas
 Republic of South Africa
 North Africa
 Black Africa or sub-Saharan Africa
– Mena: Middle East and North Africa
 Viewed as a regional entity
– Regional agreements
 Economic Community of West African States
 East African Cooperation
 South African Development Community
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Chapter 4
Social and Cultural Environments
Society, Culture and Global Consumer Culture
• Culture–ways of living, built up by a group of human beings, that are
transmitted from one generation to another
• Culture has both conscious and unconscious values, ideas, attitudes, and
symbols
• Culture is acted out in social institutions
• Culture is both physical (clothing and tools) and nonphysical (religion,
attitudes, beliefs, and values)
Social Institutions
•
•
•
•
•
Family
Education
Religion
Government
Business
These institutions function to reinforce cultural norms
Material and Nonmaterial Culture
Physical Culture
– Clothing
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– Tools
– Decorative art
– Body adornment
– Homes
Abstract Culture
– Religion
– Perceptions
– Attitudes
– Beliefs
– Values
Global consumer cultures are emerging
– Persons who share meaningful sets of consumption-related symbols
– Pub culture, coffee culture, fast-food culture, credit card culture
Primarily the product of a technologically interconnected world
– Internet
– Satellite TV
– Cell phones
Attitudes, Beliefs, and Values
• Attitude–learned tendency to respond in a consistent way to a given object
or entity
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• Belief–an organized pattern of knowledge that an individual holds to be true
about the world
• Value–enduring belief or feeling that a specific mode of conduct is personally
or socially preferable to another mode of conduct
Religion
• The world’s major religions include Buddhism, Christianity, Hinduism, Islam,
and Judaism and are an important source of beliefs, attitudes, and values.
• Religious tenets, practices, holidays, and history impact global marketing
activities.
Aesthetics
•
•
•
•
The sense of what is beautiful and what is not beautiful
What represents good taste as opposed to tastelessness or even obscenity
Visual–embodied in the color or shape of a product, label, or package
Styles–various degrees of complexity, for example, are perceived differently
around the world
Aesthetics and Color
• Red–associated with blood, wine-making, activity, heat, and vibrancy in
many countries but is poorly received in some African countries.
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• Blue—since the pigment was rare, ancient Egyptians, Chinese, Mayans
associated it with royalty and divinity. Half of interviewees state blue is the
favorite color.
• White–identified with purity and cleanliness in the West, with death in parts of
Asia.
• Gray–means inexpensive in Japan and China, but high quality and
expensive in the U.S
Music
• Found in all cultures
• Rhythm is universal
• Styles are associated with countries or regions: boss a nova & Argentina,
salsa &Cuba, reggae& Jamaica, blues, rap, rock, country & U.S.
• Understand what style is appropriate in advertising; varies by culture and
government regulations
Dietary Preferences
• Domino’s Pizza pulled out of Italy because its products were seen as “too
American” with bold tomato sauce and heavy toppings.
• Subway had to educate Indians about the benefits of sandwiches because
they do not normally eat bread.
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• Although some food preferences are deeply rooted in culture, global dietary
preferences are converging.
• Pasta, pizza, sushi, other ethic foods
Marketing’s Impact on Culture
• Universal aspects of the cultural environment represent opportunities to
standardize elements of a marketing program
• Increasing travel and improved communications have contributed to a
convergence of tastes and preferences in a number of product categories
High- and Low-Context Cultures
• High Context
– Information resides in context
– Emphasis on background, basic values, societal status
– Less emphasis on legal paperwork
– Focus on personal reputation
– Saudi Arabia, Japan
• Low Context
–
–
–
–
Messages are explicit and specific
Words carry all information
Reliance on legal paperwork
Focus on non-personal documentation of credibility
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– Switzerland, U.S., Germany
Hofstede’s Cultural Typology
• Power Distance
• Individualism/Collectivism
• Masculinity
• Uncertainty Avoidance
• Long-term Orientation
Self-Reference Criterion and Perception
• Unconscious reference to one’s own cultural values; creates cultural myopia
• How to Reduce Cultural Myopia:
– Define the problem or goal in terms of home country cultural traits
– Define the problem in terms of host-country cultural traits; make no
value judgments
– Isolate the SRC influence and examine it
– Redefine the problem without the SRC influence and solve for the host
country situation
Diffusion Theory: The Adoption Process
The mental stages through which an individual passes from the time of his or
her first knowledge of an innovation to the time of product adoption or purchase
• Awareness
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•
•
•
•
Interest
Evaluation
Trial
Adoption
Diffusion Theory: Characteristics of Innovations
Innovation is something new; five factors that affect the rate at which
innovations are adopted include:
• Relative advantage
• Compatibility
• Complexity
• Divisibility
• Communicability
Marketing Implications of Social and Cultural Environments
• Cultural factors must be considered when marketing consumer and
industrial products
• Environmental sensitivity reflects the extent to which products must be
adapted to the culture-specific needs of different national markets
Environmental Sensitivity
• Independent of social class and income, culture is a significant influence on
consumption and purchasing
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• Food is the most culturally-sensitive category of consumer goods
– Dehydrated Knorr Soups did not gain popularity in the U.S. market that
preferred canned soups
– Starbucks overcame cultural barriers in Great Britain and today has
over 700 locations
Chapter 5
Political, Legal, and Regulatory
Environments
Political Risk
• Risk of change in political environment or in government policy that would
adversely affect a company’s ability to operate effectively and profitably
• When perceived political risk is high, a country will have a difficult time
attracting foreign direct investment.
• Some examples of political risk include:
• War
• Social unrest, fractionalized by language, ethnic and/or religious
groups
• Orderly political transfer
• Politically motivated violence
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• Change in government/pro-business orientation
• Social conditions (population density and wealth distribution)
• Corruption, nepotism
• Crime
• Labor costs
• Tax discrimination
• Exchange controls, tariff barriers
Taxes
• Government taxation policies
- High taxation can lead to black market growth and cross-border
shopping
• Corporate taxation
- Companies attempt to limit tax liability by shifting location of
income
Seizure of Assets
• Expropriation–governmental action to dispossess a foreign company or
investor
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– Compensation should be provided in a “prompt, effective, and
adequate manner”
• Confiscation occurs when no compensation is provided
• Nationalization–a government takes control of some or all of the enterprises
in an entire industry
– Acceptable according to international law if:
• satisfies public purpose
• includes compensation
• Creeping expropriation–limits economic activities of foreign firms
• May include:
– Limits on repatriation of profits, dividends, or royalties
– Technical assistance fees
– Increased local content laws
– Quotas for hiring local nationals
– Price controls
– Discriminatory tariff and nontariff barriers
– Discriminatory laws on patents and trademarks
International Law
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• The rules and principles that nation-states consider binding among
themselves
• Disputes between nations are issues of public international law
– World Court or International Court of Justice (ICJ);
– Judicial arm of the United Nations
International Court of Justice
• Judicial arm of the United Nations founded in 1947
• Settles disputes between nations
– International conventions
– International custom
– General principles of law
Common Law vs. Civil Law
• The Napoleonic Code of 1804 drew on the Roman legal system and is the
basis for continental European law today. Code law is also known as civil
law.
• U.S. law is rooted in English common law.
Common Law
• Disputes are decided by reliance on the authority of past judicial
decisions
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• Companies are legally incorporated by state authority
• Code law is used in only a few areas; the U.S. Uniform Commercial Code
fully adopted by 49 states, Louisiana still influenced by French civil law
Civil Law
• Legal system reflects the structural concepts and principles of the
Roman Empire
• Companies are formed by contract between two or more parties who are
fully liable for the actions of the company
Islamic Law
• Legal system in many Middle Eastern countries
• Sharia–a comprehensive code governing Muslim conduct in all areas of life,
including business
– Koran–Holy Book; like code law
– Hadith–like common law
• Based on life, sayings, and practices of Muhammad
• Identifies forbidden practices “haram”
Sidestepping Legal Issues
• Get expert legal help
• Prevent conflicts
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– Establish jurisdiction
– Protect intellectual property
– Protect licenses and trade secrets
– Avoid bribery
Jurisdiction
• Refers to a court’s authority to rule on particular types of issues arising
outside of a nation’s borders or to exercise power over individuals or entities
from different countries.
• Employees of foreign companies should understand the extent to which they
are subject to the jurisdiction of host-country courts.
• Courts have jurisdiction if it can be demonstrated that the company is doing
business in the state in which the court sits.
Intellectual Property
• Intellectual property must be registered in each country where business is
conducted
– Patent–gives an inventor exclusive right to make, use, and sell an
invention for a specified period of time
– Trademark–distinctive mark, motto, device, or emblem used to
distinguish it from competing products
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– Copyright–establishes ownership of a written, recorded, performed, or
filmed creative work
Infringement of Intellectual Property
• Counterfeiting–unauthorized copying and production of a product
• Associative Counterfeit/Imitation–product name differs slightly from a wellknown brand
• Piracy–unauthorized publication or reproduction of copyrighted work
Protecting Intellectual Property
• In the U.S., registration is with the Federal Patent Office
• In Europe, applicants use the European Patent Office or register country-bycountry
• Soon the Community Patent Convention will cover 27 countries
• World Intellectual Property Organization
• Governed by the Madrid Agreement and the Madrid Protocol
• Allows trademark owners to seek protection in as many as 74 countries
with a single application and fee
• International Convention for the Protection of Industrial Property
• Paris Convention
• Honored by 100 countries
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• Facilitates multi-country patent registration, ensures that once a
company files, it has a “right of priority” in other countries for one year
from that date
• Patent Cooperation Treaty
• Over 100 countries cooperate with patent applications
• European Patent Convention
• the EU and Switzerland
Antitrust
• Laws are designed to combat restrictive business practices and to
encourage competition
– Enforced by FTC in the U.S., Fair Trade Commission in Japan,
European Commission in European Union
– The Sherman Act of 1890 prohibits certain restrictive business
practices including fixing prices, limiting production, allocating
markets, or any other scheme designed to limit or avoid competition.
Law applies to U.S. companies outside U.S. borders and to foreign
companies operating in the U.S.
Licensing and Trade Secrets
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• Licensing is a contractual agreement in which a licensor allows a licensee to
use patents, trademarks, trade secrets, technology, and other intangible
assets in return for royalty payments or other forms of compensation
• Important considerations
– What assets may be licensed
– How to price assets
– The rights granted
• Trade secrets are confidential information or knowledge that has commercial
value and is not in the public domain and for which steps have been taken to
keep it secret
• To prevent disclosure, use confidentiality contracts
• The Uniform Trade Secrets Act has been adopted by most U.S. states
• NAFTA was first international agreement protecting trade secrets
• TRIPS, Trade-Related Aspects of Intellectual Property Rights signed by
members of GATT
Bribery and Corruption
• Foreign Corrupt Practices Act
– Requires publicly held companies to institute internal accounting
controls that would record all transactions
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– Makes it a crime for a U.S. corporation to bribe an official of a foreign
government or political party to obtain or retain business
– Prohibits payments to third parties when there is reason to believe it
may be channeled to foreign officials
• Omnibus Trade and Competitiveness Act
– Allows for “grease” payments to cut red tape; i.e., getting shipments
trough customs, getting permits
Conflict Resolution
• Litigation
• Formal arbitration
– Settles disputes outside of court
– Groups agree to abide by panel’s decision
• 1958 United Nations Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (New York Convention)
– Most important treaty regarding international arbitration signed by 107
countries
The Regulatory Environment
• Agencies, both governmental and non-governmental, that enforce laws or set
guidelines for conducting business
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• Marketing activities affected by international and regional economic
organizations
Chapter 7
Segmentation, Targeting and Positioning
Market Segmentation
Represents an effort to identify and categorize groups of customers and
countries according to common characteristics
Targeting
• The process of evaluating segments and focusing marketing efforts on a
country, region, or group of people that has significant potential to respond
• Focus on the segments that can be reached most effectively, efficiently, and
profitably
Positioning
• Positioning is required to differentiate the product or brand in the minds of
the target market.
Global Market Segmentation
• Defined as the process of identifying specific segments—whether they be
country groups or individual consumer groups—of potential customers with
homogeneous attributes who are likely to exhibit similar responses to a
company’s marketing mix.
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Contrasting Views of Global Segmentation
• Conventional Wisdom
– Assumes heterogeneity between countries
– Assumes homogeneity within a country
– Focuses on macro level of cultural differences
– Relies on clustering of national markets
– Less emphasis on within-country segments
• Unconventional Wisdom
– Assumes emergence of segments that transcend national boundaries
– Recognizes existence of within-country differences
– Emphasizes micro-level differences
– Segments micro markets within and between countries
Demographic Segmentation
• Income
• Population
• Age distribution
• Gender
• Education
• Occupation
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Psychographic Segmentation
• Grouping people according to attitudes, values, and lifestyles
– SRI International and VALS 2
• Porsche example
– Top Guns (27%): Ambition, power, control
– Elitists (24%): Old money, car is just a car
– Proud Patrons (23%): Car is reward for hard work
– Bon Vivants (17%): Car is for excitement, adventure
– Fantasists (9%): Car is form of escape
• The Euroconsumer:
– Successful Idealists–5% to 20% of the population; consists of persons
who have achieved professional and material success while
maintaining commitment to abstract or socially responsible ideals
– Affluent Materialists–Status-conscious ‘up-and-comers’– many of
whom are business professionals – use conspicuous consumption to
communicate their success to others
– Comfortable Belongers
• 25% to 50% of a country’s population
• conservative
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• most comfortable with the familiar
• content with the comfort of home, family, friends, and community
– Disaffected Survivors
• lack power and affluence
• harbor little hope for upward mobility
• tend to be either resentful or resigned
• concentrated in high-crime urban inner city
• attitudes tend to affect the rest of society
Behavior Segmentation
• Focus on whether people purchase a product or not, how much, and how
often they use it
• User status
• 80/2 Rule or Law of Disproportionality or Pareto’s Law–80% of a company’s
revenues are accounted for by 20% of the customers
• Benefit segmentation focuses on the value equation
• Value=Benefits/Price
• Based on understanding the problem a product solves, the benefit it offers,
or the issue it addresses
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Chapter 8
Importing, Exporting and Sourcing
Export Selling vs. Export Marketing
• Export selling involves selling the same product, at the same price, with the
same promotional tools in a different place
• Export marketing tailors the marketing mix to international customers
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Requirements for Export Marketing
• An understanding of the target market environment
• The use of market research and identification of market potential
• Decisions concerning product design, pricing, distribution and channels,
advertising, and communications
Organizational Export Activities
1. The firm is unwilling to export; it will not even fill an unsolicited export order.
2. The firm fills unsolicited export orders but does not pursue unsolicited
orders. Such a firm is an export seller.
3. The firm explores the feasibility of exporting (this stage may bypass Stage 2).
4. The firm exports to one or more markets on a trial basis.
5. The firm is an experienced exporter to one or more markets.
6. The firm pursues country- or region-focused marketing based on certain
criteria
7. The firm evaluates global market potential for the “best” target markets.
National Policies Governing Exports and Imports
• Most nations encourage exports and restrict imports
• In 2011, the total was $2.7 trillion
• European Union trade, domestic and foreign, is $3 trillion +
Government Programs that Support Exports
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• Tax incentives
• Subsidies
• Governmental assistance
• Free trade zones
Governmental Actions to Discourage Imports and Block Market Access
• Tariffs
• Import controls
• Nontariff barriers
– Quotas
– Discriminatory procurement policies
– Restrictive customs procedures
– Arbitrary monetary policies
– Restrictive regulations
Tariff Systems
• Single-column tariff
– Simplest type of tariff
– Schedule of duties in which rate applies to imports from all countries
on the same basis
• Two-column tariff
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– General duties plus special duties apply
Preferential Tariff
• Reduced tariff rate applied to imports from certain countries
• GATT prohibits the use, with three exceptions:
– Historical preference arrangements already existed
– Preference is part of formal economic integration treaty
– Industrial countries are permitted to grant preferential market access to
LDCs
Customs Duties
• Ad valorem duty
– Expressed as percentage of value of goods
• Specific duty
– Expressed as specific amount of currency per unit of weight, volume,
length, or other unit of measurement
• Compound or mixed duties
– Apply
Other Duties and Import Charges
• Anti-dumping Duties
– Dumping is the sale of merchandise in export markets at unfair prices
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– Special import charges equal to the dumping margin
• Countervailing Duties
• Variable Import Levies
• Temporary Surcharges
Organizing for Exporting in the Manufacturer’s Country
• Exports can be handled
– As a part-time activity performed by domestic employees
– Through an export partner
– Through an export department
– Through an export department within an international division
– For multi-divisional companies; each possibility exists for each division
Organizing for Exporting in the Market Country
• Direct market representation
– Advantages: control and communications
• Representation by independent intermediaries
– Advantages: best for situations with small sales volume
Trade Financing and Methods of Payment
• Documentary credits (letter of credit)
• Documentary collections (bill of exchange)
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• Cash in advance
• Sales on open account
• Sales on consignment basis
Customs Trade Partnership Against Terrorism
• The U.S. Customs and Border Patrol inspects cargo
• C-TPAT aims to have businesses certify their security and that of their
partners
• They get inspection priority
Duty Drawback
• Refunds of duties paid on imports that are processed or incorporated into
other goods AND re-exported
• Reduce the price of imported production inputs
• Used in the U.S. to encourage exports
• After NAFTA, U.S. reduced drawbacks on exports to Canada and Mexico
• China had to reduce drawbacks in order to join the WTO
Sourcing
• Must emphasize benefits of sourcing from country other than home country
• Must assess vision and values of company leadership
• Advantage can be gained by
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– Concentrating some of the marketing activities in a single location
– Leveraging company’s know-how
– Tapping opportunities for product development and R&D
Factors that Affect Sourcing
• Management vision
• Factor costs and conditions
• Customer needs
• Logistics
• Country infrastructure
• Political risk
• Exchange rate, availability, and convertibility of local money
Chapter 9
Licensing, Investment and strategic Alliances
Licensing
• A contractual agreement whereby one company (the licensor) makes an
asset available to another company (the licensee) in exchange for royalties,
license fees, or some other form of compensation
– Patent
– Trade secret
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– Brand name
– Product formulations
Advantages to Licensing
• Provides additional profitability with little initial investment
• Provides method of circumventing tariffs, quotas, and other export barriers
• Attractive ROI
• Low costs to implement
• License agreements should have cross-technology agreements to share
developments and create competitive advantage for each party
Disadvantages to Licensing
• Limited participation
• Returns may be lost
• Lack of control
• Licensee may become competitor
• Licensee may exploit company resources
Special Licensing Arrangements
• Contract manufacturing
– Company provides technical specifications to a subcontractor or local
manufacturer
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– Allows company to specialize in product design while contractors
accept responsibility for manufacturing facilities
• Franchising
– Contract between a parent company-franchisor and a franchisee that
allows the franchisee to operate a business developed by the
franchisor in return for a fee and adherence to franchise-wide policies
Investment
• Partial or full ownership of operations outside of home country
– Foreign Direct Investment (FDI)
• Forms
– Joint ventures
– Minority or majority equity stakes
– Outright acquisition
Joint Ventures
• Entry strategy for a single target country in which the partners share
ownership of a newly-created business entity
• Builds upon each partner’s strengths
• Examples: Budweiser and Kirin (Japan), GM and Toyota, GM and Daewoo in
S. Korea, Ford and Mazda, Chrysler and BMW
Global Strategic Partnerships
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• Possible terms:
– Collaborative agreements
– Strategic alliances
– Strategic international alliances
– Global strategic partnerships
Success Factors of Alliances
• Mission: Successful GSPs create win-win situations, where participants
pursue objectives on the basis of mutual need or advantage.
• Strategy: A company may establish separate GSPs with different partners;
strategy must be thought out up front to avoid conflicts.
• Governance: Discussion and consensus must be the norms. Partners must
be viewed as equals.
• Culture: Personal chemistry is important, as is the successful development of
a shared set of values.
• Organization: Innovative structures and designs may be needed to offset the
complexity of multi-country management.
• Management: Potentially divisive issues must be identified in advance and
clear, unitary lines of authority established that will result in commitment by
all partners.
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