global environment ba 523 international marketing melike demirbag kaplan, phd
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Global Environment
BA 523 International MarketingMelike 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 EnvironmentEconomic 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:
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:
South Africa and Israel
Eastern Europe: The Czech Republic,
Hungary, Greece,Portugal, Turkey
The Former Soviet Union:Russia, Ukraine, and the Baltic's
Latin America: Argentina, Brazil, Chile,
Mexico, Venezuela
http://en.wikipedia.org/wiki/Emerging_markets
The 86% Markets
14%
86%
GNP per capita greater than $10K GNP per capita less than $10K
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
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
CulturalFactors
Values
Ideas
Attitudes
SubgroupActivities
Beliefs
The cultural environment refers to factors and trends related to how people live and behave.
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)
Individualism vs. Collectivism Masculinity vs. Femininity Power Distance Uncertainty Avoidance Long Term Orientation
LG Kimchi FridgeIf 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.
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.
Importance of Culture
Homework
http://deepblue.lib.umich.edu/bitstream/2027.42/39704/3/wp320.pdf
Rethinking Marketing Programs for Emerging Markets. By: Niraj Dawar and Amitava Chattopadhyay.
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