Lamb, Hair, McDaniel 2012-2013 CHAPTER 5 Developing a Global Vision Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 © Phil Ashley/Lifesize/Getty Images Chapter 1 Learning Outcomes 1 Discuss the importance of global marketing 2 Discuss the impact of multinational firms on the world economy 3 Describe the external environment facing global marketers 2 Learning Outcomes 4 Identify the various ways of entering the global marketplace 5 List the basic elements involved in developing a global marketing mix 6 Discover how the Internet is affecting global marketing 3 Rewards of Global Marketing Discuss the importance of global marketing 1 4 Rewards of Global Marketing Having a global vision means… • Recognizing and reacting to international marketing opportunities • Using effective global marketing strategies • Being aware of threats from foreign competitors 5 1 Importance of Global Marketing to the U. S. Derives 12 % of gross domestic product (GDP) from world trade 7 % of U.S. employment is supported by exports U.S. businesses export over $1.7 trillion in goods and services annually More small companies are aggressively pursuing international markets 6 1 Globalization Issues Millions of Americans have lost jobs due to: Imports Outsourcing Millions more fear losing jobs Pay cuts: accept or firms will outsource Sectors that are vulnerable: Service White collar Production 7 1 Globalization Benefits Expands economic freedom Spurs competition Raises productivity and living standards Offers access to foreign capital, global export markets, and advanced technology Promotes higher labor and environmental standards Acts as a check on governmental power 8 1 Multinational Firms Discuss the impact of multinational firms on the world economy 2 9 Multinational Corporation A company heavily engaged in international trade, beyond exporting and importing. A multinational corporation moves resources, goods, services and skills across national boundaries without regard to the country in which its headquarters are located. Source: MKT 4 10 2 Multinational Firms Multinational Corporation: A company that manufactures and markets products in many different countries and has multinational stock ownership and management. (not just trade) Source: Understanding Business 11 2 Multinational Firms Note: Not all large global businesses are multinational. Only firms that have manufacturing capacity or some other physical presence in different nations can truly be multinational. Source: Understanding Business 12 2 Stages of Global Business Development 13 1 Companies operate in one country and sell into others 2 Set up foreign subsidiaries to handle sales 3 Operate an entire line of business in another country 4 Virtual operation 2 Are Multinationals Beneficial? • • • • 14 Pros Account for 19 % of U.S. private sector jobs Provide 25 % of private sector wages Account for 74 % of R&D spending AND 48% of total exports Cons • Technology is capital intensive and does not necessarily increase employment. • Support governments that benefit the company, not necessarily the country and its people • May take away more wealth than they generate 2 Global Marketing Standardization 15 Global Marketing Standardization Production of uniform products that can be sold the same way all over the world. Multidomestic Strategy Subsidiaries of multinational firms are allowed to compete independently in domestic markets. 2 External Environment Facing Global Marketers Describe the external environment facing global marketers 3 16 External Environment Facing Global Marketers 1-Culture 4-Demographic Makeup 2-Economics 5-Natural Resources 3-Political and Legal 17 3 1-Culture The common set of values shared by its citizens that determine what is socially acceptable Factors to keep in mind when dealing with different cultures: 1. Language and cultural idioms 2. Customs and traditions 3. Values and expectations of sales presentations 18 3 2-Economic Development 19 Developed Country Complex, sophisticated industries Less Developed Country Basic industries 3 Economic Development: China and India • China and India have two of the highest growth rates in the world • Have the world’s two largest populations • Among highest levels of income disparity • Great linguistic and cultural diversity 20 3 3-Political and Legal 21 Tariff A tax levied on goods entering a country Quota Limit on the amount of a product entering a country Boycott Exclusion of products from a country Exchange Control Foreign exchange must be sold to a control agency Market Grouping Common trade alliance Trade Agreement An agreement to stimulate international trade 3 Political and Legal The Uruguay Round made changes in world trading practices Entertainment, pharmaceuticals, integrated circuits, and software Financial, legal, and accounting services Agriculture Textiles and apparel And created a new trade organization: The World Trade Organization 22 3 Political and Legal Agreements and Organizations CAFTA 23 NAFTA European Union 3 Doha Round • Began in 2001 • Highly contentious from the beginning • Stalemate over lowering tariffs on industrial goods in exchange for cutting U.S. farm subsidies. • More protectionism has made talks increasingly difficult 24 3 4-Demographics & 5- Resources Demographic Considerations: • • • Population density Urban or rural Age of population Natural Resource Considerations: • • • • • 25 International dependencies Shifts of wealth Inflation & recession Export opportunities if resources are abundant Stimulus for military intervention 3 Global Marketing by the Individual Firm Identify the various ways of entering the global marketplace 4 26 Why “Go Global”? Earn additional profits Leverage a unique product or technological advantage Possess exclusive market information Saturated domestic markets Excess capacity Utilize “economies of scale” 27 4 Exhibit 5.3 Risk Levels for Five Methods of Entering the Global Marketplace 28 © 2013 by Cengage Learning Inc. All Rights Reserved. Entering the Global Marketplace 29 Exporting Selling domestically produced products to buyers in other countries Licensing Legal process allowing use of manufacturing/patents/knowledge Contract Manufacturing Private-label manufacturing by a foreign country Joint Venture Domestic firm buys or joins a foreign company to create a new entity Direct Investment Active ownership of a foreign company or manufacturing facility 4 Export Intermediaries 30 Buyer for Export Assumes all ownership risks and sells globally for its own account. Export Broker Plays the traditional broker’s role by bringing buyer and seller together. Export Agent Acts like a manufacturer’s agent for the exporter in the foreign market. 4 The Global Marketing Mix List the basic elements involved in developing a global marketing mix 5 31 The Global Marketing Mix The first step in creating a marketing mix is developing a thorough understanding of the global target market… HOWEVER …global marketing research is conducted in vastly different environments. 32 5 Product and Promotion Same Message Change Message 33 Same Product Change Product One Product One Message Product Adaptation Promotion Adaptation Product Invention 5 Place (Distribution) Adequate distribution is necessary for success in global markets Lack of distribution infrastructure and cultural differences create problems Logistics and shipping costs have been a growing challenge for U.S. companies looking to move production overseas. Global trade has added to strains and charges for all forms of transportation. 34 5 Pricing Must consider transportation and insurance costs, taxes and tariffs (exchange rates) Determine what customers will spend Ensure that foreign buyers will pay the price May need to simplify a product to lower price Don’t assume that low-income countries will accept lower quality 35 5 Exchange Rates The price of one country’s currency in terms of another country’s currency. Floating Exchange Rates A system in which prices of different currencies move up and down based on the demand for and the supply of each currency. 36 5 Dumping Dumping: the sale of an exported product at a price lower than that charged for the same product in the “home” market of the exporter. Dumping may occur as a result of exporter strategies including: 37 Trying to increase an overseas market share Temporarily distributing products to overseas markets to offset slack demand at home Lowering costs by exploiting large-scale production Attempting to maintain stable prices during periods of exchange rate fluctuations 5 Countertrade Countertrade A form of trade in which all or part of the payment for goods or services is in the form of other goods or services. 38 5 The Impact of the Internet Discover how the Internet is affecting global marketing 6 39 The Impact of the Internet http://www.youtube.com/watch?v=QzZyUaQvpdc&feature=related • Opening an e-commerce site puts a company in the international marketplace • The Internet economy is still affected by old (brick & mortar) rules, regulations, and habits 40 6