Thriving in the Marketing Environment:

The World is Flat

2

Chapter Objectives

• Understand business ethics and explain how marketers practice ethical business behavior

• Explain how firms practice social responsibility• Understand the big picture of international marketing, including

world trade flows and the decision criteria firms use in their decisions to go global

• Explain the WTO, economic communities, and how countries protect local industries by establishing roadblocks to foreign companies

• Understand how factors in the external business environment influence marketing strategies and outcomes

• Explain the strategies that a firm can use to enter global markets• Understand the arguments for standardization versus localization of

marketing strategies in global markets

3

Real People, Real Choices: Decision Time at Tupperware

• Tupperware Brands Corporation (Rick Goings)• How to refresh brand perception?

Option 1: increase advertising in new markets Option 2: utilize public relations Option 3: build demand using word-of-mouth

TUPPERWARE.COM

4

Welcome to theNew Era of Marketing

• Adopt a global focus

• Managers emphasis social profit: net benefit for a firm and society from the firm’s ethical practices and socially responsible behavior

INTERFACEINC.COM

5

Figure 3.1: Linking Ethics to Profits

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Doing Good: Ethical Behaviorin the Marketplace

• Business ethics: basic values that guide a firm’s behavior

• Codes of ethics: written standards of behavior to which everyone in the organization must subscribe

7

Consumerism: People Fighting Back

• The social movement directed toward protecting consumers from harmful business practices

• Consumer Bill of Rights: the right to be safe, be informed, be heard, and choose freely

PHILLIP MORRIS

8

Discussion

• In 2006, the National Institutes of Health In 2006, the National Institutes of Health released the results of a study showing released the results of a study showing that young people tend to drink more in that young people tend to drink more in areas with more alcohol advertising areas with more alcohol advertising compared to areas with less advertisingcompared to areas with less advertising Do alcohol companies have an ethical obligation to Do alcohol companies have an ethical obligation to

curtail their advertising in order to decrease drinking curtail their advertising in order to decrease drinking rates among young people?rates among young people?

9

Ethics in the Marketing Mix

• Making the product safe

• Pricing the product fairly

• Promoting the product ethically

• Making the product available ethically

10

Discussion

• Some people criticize advertising as being deceptiveDo you agree or disagree?What would be the advantages and disadvantages to

firms when they deceive consumers?

11

Doing It Right: PromotingSocial Responsibility

• Social responsibility: organizations engaging in activities that have a positive effect on society and promote public good

CORPORATE

RESPONSIBILITY

AT INTELNFL Video

12

Doing It Right: Promoting Social Responsibility (cont’d)

• Serving the Environment

• Serving Society: Cause Marketing

• Serving the Community:Promoting Cultural Diversity

13

Individual Activity

• Write down some thoughts about how products/services have the potential to harm you individually In your opinion, do any products “cross the line” when

it comes to your level of comfort?

14

Global Marketing

• World Trade: the flow of goods/services among different countries – the value of all exports/imports of the world’s nations

• Countertrade: trading products between countries or supplying goods in return for tax breaks from local government (accounts for 25% of all world trade)

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Figure 3.3: North America Trade Flows (in $billions)

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Figure 3.4: Decision Model for Entering Foreign Markets

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Making the Decision to Go Global

• “Go” or “no go”: is it in the best interest of the firm to remain in home market or to go where opportunities exist?

• Which global markets are most attractive?

• Key to the decisions: market conditions and creating a competitive advantage

18

At the Borders

• Protectionism: quotas, embargoes, and tariffs

• World Trade Organization (WTO): to “help trade flow smoothly, freely, fairly, and predictably”

• Economic communities promoting trade

19

Discussion

• Do you think the WTO will succeed in eliminating world trade barriers?

• What do you think are the positive and negative aspects of a totally free marketplace?

• What countries will win and which will lose in such a world?

20

The Global Marketing Environment

• A company going global must understand local conditions in the targeted country

• Understanding the external environment: economic, competitive, technological, political, and cultural factors affect marketers’ global strategies

21

The Economic Environment: Indicators of Economic Health

• Economic health = market potential for firm

• Gross domestic product (GDP): total dollar value of goods/services a country produces within its borders in a year

• Per capita GDP: total GDP/number of citizens

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Indicators of Economic Health (cont’d)

• Gross national product (GNP): the value of all goods/services produced by a country whether in its borders or not

• Economic infrastructure: quality of country’s distribution, financial, and communications systems

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Level of Economic Development

• Less developed country (LDC)Economic base is often agriculturalAttractive markets for staples and inexpensive items

• Developing countriesEconomy shifts emphasis from agriculture to industry

• Developed countriesOffer wide range of opportunities for international

marketers

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The Business Cycle

• Prosperity• Recession• Recovery• Depression• Inflation

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The Competitive Environment

• Competitive intelligence: gathering and analyzing publicly available information about rivals to develop superior marketing strategiesCollected from news media, the Internet, and publicly

available government documents

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The Competitive Environment (cont’d)

• Competition in the microenvironmentCompetition in the microenvironment• Competition for consumer’s discretionary income Competition for consumer’s discretionary income • Competition among products to satisfy the same Competition among products to satisfy the same

consumer’s needs/wants consumer’s needs/wants • Competition among brands offering similar Competition among brands offering similar

goods/services on the basis of brand reputation or goods/services on the basis of brand reputation or perceived benefitsperceived benefits

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The Competitive Environment (cont’d)

• Competition in the macroenvironment (overall structure of industry)MonopolyOligopolyMonopolistic competitionPerfect competition

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The Technological Environment

• Technology provides firms with important competitive advantages

• Patent: legal document giving inventors exclusive rights to produce/sell a particular invention in that country

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The Political and Legal Environment

• Local, state, national, and global laws and regulations affect businesses

• The law in the United StatesTo make sure businesses compete fairly with each

other To make sure that businesses don’t take advantage

of consumers

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The Political and Legal Environment (cont’d)

• Political Constraints on Trade Political Constraints on Trade Economic sanctionsEconomic sanctions NationalizationNationalization ExpropriationExpropriation

• Regulatory constraints on tradeRegulatory constraints on trade Local content rules: a proportion of a product must Local content rules: a proportion of a product must

consist of components supplied by industries in the consist of components supplied by industries in the host country or economic communityhost country or economic community

• Human rights issuesHuman rights issues

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The Sociocultural Environment

• Demographics

• Cultural valuesCollectivist versus individualistic cultures

• Norms, customs, mores, and conventions

• Language

• Ethnocentrism: the tendency to prefer products from one’s own culture

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Discussion

• Some countries have criticized U.S. business for exporting American cultureWhat about American culture might be objectionable?Can you think of some products that U.S. marketers

export that can be objectionable to some foreign markets?

33

Group Activity

• What global external environment factors would you consider to be critically relevant for the following products (form a small group and pick one of the products listed below): Coffee Cars Video games Sporting events Computers Soda

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How “Global” Should a Global Marketing Strategy Be?

• Market-entry strategy: the level of commitment to operate in another country

Figure 3.4

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How “Global” Should a Global Marketing Strategy Be? (cont’d)

• Exporting

• Contractual agreementsLicensing Franchising

• Strategic alliancesJoint venture

• Direct investment

• Born-global firms

LOGITECH

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Global Marketing: Choosing a Marketing Mix Strategy

• Standardization vs. localizationStandardization: offer the same products in all

marketsLocalization: offer a customized marketing mix for

each country

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Global Marketing: Choosing a Marketing Mix Strategy (cont’d)

• Product decisionsStraight extension strategy Product adaptation strategyProduct invention strategyBackward invention

• Promotion decisions: whether or not to modify promotions

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Global Marketing: Choosing a Marketing Mix Strategy (cont’d)

• Price decisionsFree trade zonesGray market goods Dumping

• Distribution decisions

39

Group Activity

• Form a small group and formulate either a brief standardized or local strategy in a foreign country (of your choice) for one of the following products:Tide laundry detergentVerizon cellular phone serviceDirect TV serviceHollister clothingWeber gas barbecue grills

40

Real People, Real Choices

• Tupperware Brands Corporation (Rick Goings)

• Rick chose option 2: Utilize public relationsSince the campaign launched in April 2005,

Tupperware has seen a significant increase in the number of media exposures it has gotten

41

Discussion

• The World Trade Organization seeks to eventually remove all barriers to world trade.

• Do you think this will ever be a reality?• What do you think are the positive and negative

aspects of a totally free marketplace? • Which countries will win and which will lose in

such a world?

42

Marketing in Action Case:You Make the Call

• What is the decision facing New Balance?

• What factors are important in understanding this decision situation?

• What are the alternatives?

• What decision(s) do you recommend?

• What are some ways to implement your recommendation?

43

Keeping it Real: Fast Forward to Next Class Decision Time at Plan-it Marketing

• Meet Cindy Tungate, president Plan-it Marketing, a marketing research firm

• Plan-it’s client Priceline needs help in planning its business

• The decision: What marketing research strategy will maximize results for Priceline?