chapter 15 the global marketplace the global marketplace

Chapter 15

The Global Marketplace The Global Marketplace

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall 15 - 2

1. Discuss how the international trade system and the economic, political-legal, and cultural environments affect a company’s international marketing decisions.

2. Describe three key approaches to entering international markets.

3. Explain how companies adapt their marketing mixes for international markets.

4. Identify the three major forms of international marketing organization.

Rest Stop:Rest Stop: Previewing the ConceptsPreviewing the Concepts


Going Global• Global Presence: Last year,

nearly 65% of McDonald’s $23.5 billion in sales occurred outside of the U.S. McDonald’s has 32,000 restaurants in 100+ countries.

• Russian Expansion: It took 14 years to bring McDonald’s to Russia. Individual stores required 200+ signatures to open. Reliable suppliers were scarce forcing McDonald’s to manufacture their own buns and burgers as well as teach Russians how to grow Russet Burbank potatoes for fries.

McDonald’s Serves Customers Around the WorldFirst Stop

Adaptation is Necessary• Workforce Challenges:

Russian employees did not understand fast food concept. Managers were trained at Hamburger University and new employees received 16-20 hours of product and service training. 50,000 customers flocked to Pushkin Square store on its first day open.

• Russia Today: 240 McDonald’s exist in 40 cities; lines remain long in many stores. Russians are now being introduced to drive-thru concept, as well as breakfast menu.


Global Marketing Today

• Several trends characterize the global marketplace today:The world is shrinking rapidly with the advent

of faster communication, transportation, and financial flows.

International trade is booming.Global competition is intensifying.Risks associated with globalization are

increasing.



• Global firm:A firm that, by operating in more than

one country, gains R&D, production, marketing, and financial advantages in its costs and reputation that are not available to purely domestic competitors.



• Major international marketing decisions:Looking at the global marketing environment.Deciding whether to go global.Deciding which markets to enter.Deciding how to enter the market.Deciding on the global marketing program.Deciding on the global marketing

organization.


Looking at the Global Marketing Environment

• The International Trade System:Restrictions exist on trade between nations—

tariffs, quotas, embargos, exchange controls, and nontariff trade barriers.

• The World Trade Organization and GATT:Helps trade—reduces tariffs and other

international trade barriers.Sets global standards for trade.WTO enforces GATT rules by mediating

disputes and enforcing trade sanctions.



• Regional Free Trade Zones (or economic communities): A group of nations organized to work toward

common goals in the regulation of international trade.

• Key economic communities:European Union (EU).North American Free Trade Agreement

(NAFTA).Latin America and South America also have

free trade zones.



• Factors in the economic environment reflect a country’s market attractiveness: Industrial structure shapes a country’s

product and service needs, income levels, and employment levels.

Four types of industrial structure include:• Subsistence economies.• Raw material exporting economies.• Industrializing economies.• Industrial economies.

Income distribution is a second important factor.



• Nations’ political-legal environments vary by:Attitudes toward international buying.Government bureaucracy.Political stability.Monetary regulations.

• Many countries barter to pay for purchases from other countries.Barter involves a direct exchange of goods or

services.



• Cultural environment:Sellers must examine the ways consumers

in different countries think about and use products before planning a marketing program.• Mistakes can be embarrassing and costly.

Business norms and behavior vary by country.

Companies that understand cultural nuances can use them to their advantage when positioning products internationally.



• Critics worry that marketing strategies may be negatively impacting global cultures. “Americanization” and a loss of individual

country identity is of concern.Backlash against American globalization has

sometimes resulted.To succeed abroad, American firms must

adapt to local cultural values and traditions.

• Cultural exchange goes both ways.


Deciding Whether to Go Global

• Reasons to consider going global:Foreign attacks on domestic markets may be

countered by counterattacks abroad.Customers may be expanding globally and

require international servicing.Foreign markets may offer growth

opportunities when domestic market is stagnant.

• Risks must be weighed against the firm’s ability to operate globally.


• Before going abroad, the company should try to define its international marketing objectives and policies.What volume of foreign sales is desired?How many countries to market in?What types of countries to enter?

• Possible countries should be listed and ranked based on several factors.

• The market(s) with the greatest long-run ROI should be chosen.

Deciding Which Markets to Enter


Deciding How to Enter the Market

• Several market entry strategies exist:Exporting.Joint venturing.Direct investment.



• Exporting:Entering a foreign market by selling goods

produced in the company’s home country, often with little modification.

• Types of exporting: Indirect:

• Working through independent international marketing intermediaries.

Direct: • Company handles its own exports.


• Joint venturing:Entering foreign markets by joining with

foreign companies to produce or market a product or service.

• Approaches:Licensing.Contract manufacturing.Management contracting.Joint ownership.



• Licensing:A method of

entering a foreign market in which a company enters into an agreement with a licensee in a foreign market.

• Contract manufacturing:A joint venture in

which a company contracts with manufacturers in a foreign market to produce the product or provide its service.



• Management contracting: A joint venture in which

the domestic firm supplies the management know-how to a foreign company that supplies the capital; the domestic firm exports management services rather than products.

• Joint ownership: A joint venture in

which a company joins investors in a foreign market to create a local business in which the firm shares joint ownership and control.



• Direct Investment:Entering a foreign market by developing

foreign-based assembly or manufacturing facilities.

Advantages:• Lower costs due to cheap labor or raw materials.• Firm may improve image in host country.• Better adaptation of products to country.• Firm keeps full control over the investment.

Disadvantages:• Currency risks, market failure, government change.



Deciding on the Global Marketing Program

• Standardized global marketing mix:Using basically the same marketing strategy

and mix in all international markets.

• Adapted global marketing mix:Adjusting the marketing strategy and mix

elements to each international target market, bearing more costs but hoping for a larger market share and return.

• Coca Cola

• http://www.thecoca-colacompany.com/brands/brandlist.html




• Global product strategies:Straight product extension: Marketing

a product in a foreign market without any change.

Product adaptation: Adapting a product to meet local conditions or wants in foreign markets.

Product invention: Creating new products or services for foreign markets.


• Global promotion strategies:Firms can either adopt the same promotion

strategy they used in the home market or change it for each local market.

Some global firms use a standardized advertising theme around the world with minor adaptations.

Other firms follow a communication adaptation strategy by fully adapting an advertising message for local markets.

Changes may also have to be made due to media availability.




• Global pricing strategies:Companies face many considerations in

setting their international prices.• Standard pricing methods ignore cost

differentials and local market conditions.International prices tend to be higher

than domestic prices because of price escalation.• Some global firms create simpler or smaller

versions of products to sell abroad.



• Global pricing strategies:Setting prices for foreign subsidiaries can be

problematic:• Charging too much results in higher tariff duties and

lower income taxes.• Charging too little can result in charges of dumping if

price is less than the product costs or less than is being charged in the home market.

The Internet makes price differences more obvious and has forced more standardized pricing.



• Global distribution channels:International firms must take a whole-

channel view of distributing products to final consumers and consider:• Channels between nations.• Channels within nations.• The entire global value delivery network.



• Global distribution channels differ by:The numbers and types of

intermediaries.• Size and character of retail units differ as

well, presenting challenges.The transportation infrastructure.

• Coca-Cola has adapted its distribution methods to meet local Chinese market needs.


Deciding on the Global Marketing Organization

• International marketing efforts can be managed in three different ways:Organizing an export department.Creating international divisions:

• Geographical organizations.• World product groups.• International subsidiaries.

Becoming a global organization.


1. Discuss how the international trade system and the economic, political-legal, and cultural environments affect a company’s international marketing decisions.

2. Describe three key approaches to entering international markets.

3. Explain how companies adapt their marketing mixes for international markets.

4. Identify the three major forms of international marketing organization.

Rest Stop: Reviewing the Concepts

chapter 15 the global marketplace the global marketplace

Documents

global global presence

global marketing organization

global marketing environment

global marketing program

global firm

global marketplace slide

global standards

global competition