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Copyright ©2009 by Cengage Learning Inc. All rights reserved 1 Designed by Eric Brengle B-books, Ltd. CHAPTER 5 Developing a Global Vision Prepared by Amit Shah Frostburg State University Marketing Lamb, Hair, McDaniel 10

Int To Mktng Ch5

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Text of Int To Mktng Ch5

Chapter 4

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*

CHAPTER 5Developing a Global Vision

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Learning Outcomes*

Discuss the importance of global marketing Discuss the impact of multinational firmson the world economy Describe the external environment facing global marketers

LOILO2LO3

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Learning Outcomes *

Identify the various ways of entering theglobal marketplace

List the basic elements involved in developing a global marketing mix Discover how the Internet is affectingglobal marketing

LO5LO6LO4

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Rewards of Global Marketing*Discuss the importance of global marketing LOI

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Rewards of Global Marketing*LOI

Individuals and organizations using a global vision to effectively market goods and services across national boundaries.

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Rewards of Global MarketingRecognizing and reacting to international marketing opportunities Using effective global marketing strategies Being aware of threats from foreign competitors

*LOIHaving a global vision means

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U.S. exports a fifth of industrial production.

One of every 5 jobs in U.S. is supported by exports.

Every U.S. state has realized net employment gains directly attributed to foreign trade.

U.S. businesses export over $800 billion in goods.

*Importance of Global Marketing to the U. S. LOI

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Exports account for 25 percent of U.S. economic growth .

U.S. is worlds leading exporter of farm products.

Chemicals, office machinery and computers, automobiles, aircraft, and electrical and industrial machinery make up almost half of all nonagricultural exports

About half of U.S. merchandise imports are raw materials, capital goods, and industrial products

*Importance of Global Marketing to the U. S. LOI

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Millions of Americans have lost jobs Millions fear losing jobs Threat of outsourcing if workers do not accept pay cuts Vulnerability to operations moving offshore

*The Fear of Trade and Globalization LOI

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Benefits of GlobalizationExpands economic freedomSpurs competitionRaises productivity and living standardsOffers access to foreign capital, global export markets, and advanced technologyPromotes higher labor and environmental standardsActs as a check on government power

*LOI

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REVIEW LEARNING OUTCOMEThe Importance of Global Marketing*LOI

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Multinational Firms*Discuss the impact of multinational firmson the world economy LO2

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Stages of Global Business Development*LO2

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Global Marketing Standardization*LO2

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REVIEW LEARNING OUTCOMEImpact of Multinational Firms*LO2

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External Environment Facing Global Marketers*Describe the external environment facing global marketers

LO3

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External Environment Facing Global Marketers*LO3Natural ResourcesDemographic MakeupEconomic and Technological DevelopmentCulturePolitical Structure

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Culture*LO3

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Economic and Technological Development*LO3

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Political Structure and Actions*LO3

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Legal Considerations*LO3

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The Uruguay Round made changes inworld trading practices:Political and Legal Considerations*LO3

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Political and Legal Considerations*LO3

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Demographic MakeupMarketing Considerations: Population densityUrban or ruralPersonal income Age

*LO3

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Shortages in Natural ResourcesCreate International dependenciesShifts of wealthInflation and recessionExport opportunities if resources are abundantStimulus for military intervention

*LO3

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Natural ResourcesPetroleumFoodstuffsPrecious metalTimberWater

*LO3

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REVIEW LEARNING OUTCOMEExternal Environment Facing Global Marketers*LO3

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Global Marketing by the Individual Firm*Identify the various ways of entering theglobal marketplaceLO4

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Global Marketing QuestionsWhat are our options in selling abroad? How difficult is global marketing? What are the potential risks and returns?*LO4

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Why Go Global?Earn additional profitsLeverage a unique product or technological advantagePossess exclusive market informationSaturated domestic marketsExcess capacityUtilize economies of scale

*LO4

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Risk Levels for Global Entry*LO4

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Entering the Global Marketplace*LO4

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Export Intermediaries*LO4

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REVIEW LEARNING OUTCOMEEntering the Global Marketplace*LO4

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The Global Marketing Mix*List the basic elements involved in developing a global marketing mix LO5

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Product and Promotion*LO5

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Place (Distribution)Adequate distribution is necessary for success in global marketsSome countries have complicated systemsLack of distribution infrastructure and cultural differences create problems Innovative distribution systems can create competitive advantage

*LO5

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PricingMust consider transportation and insurance costs, taxes, and tariffs Determine what customers will spend Ensure that foreign buyers will pay price

May need to simplify a product to lower price

Dont assume that low-income countries are willing to accept lower quality

*LO5

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Exchange Rates*LO5

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DumpingTrying to increase an overseas market share Temporarily distributing products to overseas markets to offset slack demand at home Lowering unit costs by exploiting large-scale production Attempting to maintain stable prices during periods of exchange rate fluctuations

*LO5

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Countertrade*LO5

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REVIEW LEARNING OUTCOMEDeveloping a Global Marketing MixPROMOTION

One Product, One MessageProduct InventionProduct AdaptationMessage Adaptation*LO5PLACE

Channel ChoiceChannel StructureCountry InfrastructurePRICE

DumpingCountertradeExchange RatesPurchasing Power

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The Impact of the Internet*Discover how the Internet is affectingglobal marketingLO6

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REVIEW LEARNING OUTCOMEThe Impact of the Internet*LO6

*Chapter 5 Developing a Global Vision*Chapter 5 Developing a Global Vision*Chapter 5 Developing a Global Vision*Chapter 5 Developing a Global Vision*Chapter 5 Developing a Global VisionNotes:The word global refers to a boundless mobility and competition in social, business, and intellectual arenas. Global marketing is no longer an option for business; it is imperative. Businesses in the United States must have a global vision to react to international marketing opportunities, and also to remain competitive in home markets. Moreover, foreign competition is entering the U.S. market in almost every industry. Example of the boundary-free aspects of global vision can be demonstrated in companies, such as Gillette, Ashtech, Pillsbury, General Motors, and PepsiCo.

Global marketing is not a one-way street, with only U.S. companies selling products and services worldwide. Foreign competition is now found in almost every industry, and U.S. businesses have lost significant market share. Industries such as electronics, cameras, autos, china, tractors, and leather goods have struggled against foreign competitors.

Discussion/Team Activity:Ask the class to discuss companies that are considered top global brands. What characteristics have made these companies global leaders?

*Chapter 5 Developing a Global VisionNotes:Over the past 20 years, world trade has climbed from $200 billion a year to over $11 trillion.

Discussion/Team Activity:Discuss ways that small- and medium-sized firms can compete in a global environment with limited resources.

*Chapter 5 Developing a Global VisionNotes:The U.S. derives about 12 percent of its GDP from world trade, with the impact on the U.S. economy summarized on this slide. France, Britain, and Germany derive more than 19 percent of their GDP from world trade. About 85 percent of all US exports of manufactured goods are shipped by 250 companies; less than 10 percent of all manufacturing businesses (25,000 companies) export goods on a regular basis. Only large multinational companies have serious attempted to compete worldwide. However, more smaller companies are now pursuing international markets. *Chapter 5 Developing a Global VisionNotes:*Chapter 5 Developing a Global VisionNotes: The negatives of global trade are shown on this slide. Discussion/Team Activity:Discuss examples of the downside of globalization.

Debate the ethical issues associated with foreign sweatshops.

*Chapter 5 Developing a Global VisionNotes:Traditional economic theory says that globalization relies on competition to drive down prices and increase product and service quality. Business goes to the countries that operate most efficiently and have the technology to produce what is needed. Labor is cheaper in many countries. *Chapter 5 Developing a Global Vision*Chapter 5 Developing a Global VisionNotes:Multinational corporations are those heavily engaged in international trade, moving products and services across national boundaries. Many multinational corporations are enormous. Wal-Marts annual sales are larger than the GDP of all but 30 nations in the world. The role of multinational corporations in developing nations is a subject of controversy. Critics claim that the wrong kind of technology is transferred to developing nations. For example, capital-intensive technology does not substantially increase employment.

Multinationals sometimes support oppressive regimes if it is in their best interests.

Another criticism is that firms take more wealth out than they bring in.

*Chapter 5 Developing a Global VisionNotes:Multinationals often develop their global business in stages. *Chapter 5 Developing a Global VisionNotes:Multinational corporations operate somewhat differently in each country, with a strategy of providing different product features, packaging, and advertising. Communication and technology have made the world smaller, and thus the emergence of global markets for standardized products, as opposed to segmented foreign markets with different products. This concept is global marketing standardization. Even though global marketing standardization should enable companies to lower production and marketing costs, success is based on variation, not on offering the same product everywhere.

Discussion/Team Activity:Discuss products and services that are successfully marketed as globally standardized products. Examples: Camay soap, Crest toothpaste, Head and Shoulders shampoo, and Pampers diapers.

*Chapter 5 Developing a Global Vision*Chapter 5 Developing a Global Vision*Chapter 5 Developing a Global VisionNotes:Many of the same external environmental factors that operate in domestic markets also apply to global markets.

*Chapter 5 Developing a Global VisionNotes:Culture underlies the family, the educational system, religion, and the social class system.

Culture influences product preferences and the marketing mix. A company with no understanding of a countrys culture is doomed to failure. Furthermore, cultural blunders lead to misunderstandings and perceptions of rudeness. Each country has its own unique customs and traditions that determine business practices and influence negotiations. Understanding language is key to translating product names, slogans, production instructions, and promotional messages.

*Chapter 5 Developing a Global VisionNotes:The second factor in the external environment is the level of economic development in countries where a global marketer operates. In general, complex and sophisticated industries are found in developed countries, and more basic industries are found in less developed nations.

*Chapter 5 Developing a Global VisionNotes:The third variable is political structure. Government policies run the spectrum from no private ownership and minimal individual freedom to little central government and maximum personal freedom. As rights of private property increase, government-owned industries tend to decrease. The least amount of business regulation fosters the strongest economies. Countries include Australia, Canada, New Zealand, the United Kingdom, and the United States. Others are Singapore and Hong Kong.

*Chapter 5 Developing a Global VisionDiscussion/Team Activity:1. Discuss examples of each of the legal considerations described above.

*Chapter 5 Developing a Global VisionNotes:The Uruguay Round, adopted in 1994 and signed by 151 nations, is an agreement to lower trade barriers worldwide. The agreement has reduced tariffs by one-third worldwide and should raise global income by $235 billion annually. The agreement covers services, intellectual property rights, and trade-related investment measures such as exchange controls. The Uruguay Round made the following changes in world trading practices: * Protection of patents, copyrights, and trademarks for twenty years. * Licensing standards for professionals cannot discriminate against foreign applicants. * Reduction in farm subsidies in Europe, opening new opportunities for U.S. exports. * The phase-out of strict quotas limiting imports from developing countries. * A new trade agreement, the World Trade Organization (WTO), replaced the old General Agreement on Tariffs and Trade (GATT). Discussion/Team Activity:1. Discuss the impact of counterfeit products on global trade.

*Chapter 5 Developing a Global VisionOnline: World Trade Organization (WTO)Do you really know what the World Trade Organization is about? Get informed by reading the facts at the WTO Web site? Notes:The trend toward globalization has resulted in the creation of additional agreements and organizations: specifically the Central America Free Trade Agreement, the North American Free Trade Agreement, the European Union, the World Bank, and the International Monetary Fund.NAFTA, ratified in 1993, created the worlds largest free trade zone. The agreement includes Canada, the United States, and Mexico. The main impact of NAFTA has been the opening of Mexican markets to U.S. companies and removing Mexican licensing requirements, quotas, and tariffs that limited transactions. The real question is whether NAFTA can continue to deliver rising prosperity in its member countries.The newest trade agreementthe Central America Free Trade Agreementwas instituted in 2005. It will reduce tariffs to CAFTA countriesthe US, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. The European Union was ratified in 1993 by twelve member countries in Europe. In 2004, the EU expanded from 15 members to 25 members and currently have 27 members. The primary goal of the EU is to create a unified European market. However, many regulations are not standardized, and productivity and living standards differ greatly with some of the new member countries from the former Soviet satellites. The EU is a very attractive market with a huge amount of purchasing power. However, with different languages and individual country cultures, Europe will always be more diverse than the U.S. and product differences will continue. A different problem facing global marketers is the possibility of a protectionist movement by the EU against outsiders. Discussion/Team Activity:Discuss the pros and cons of NAFTA as it affects the U.S. economy.

*Chapter 5 Developing a Global VisionNotes:Population density information alone is not particularly useful to marketers. They also need to know if populations are urban or rural, the level of personal income and distribution of wealth, and the age demographics.

Discussion/Team Activity:What marketing opportunities exist in developing countries where population growth is occurring?

*Chapter 5 Developing a Global VisionNotes:Petroleum shortages have created wealth for oil-producing countries such as Norway, Saudi Arabia, and the United Arab Emirates.

Other natural resources that affect international marketing include climate and water resources (affecting agricultural conditions), precious metals, and timber.

*Chapter 5 Developing a Global Vision*Chapter 5 Developing a Global Vision*Chapter 5 Developing a Global Vision*Chapter 5 Developing a Global VisionNotes:The global environment should be carefully considered prior to entering the global marketplace. Concrete answers to the above questions would likely encourage U.S. firms to enter the international arena.

*Chapter 5 Developing a Global Vision*Chapter 5 Developing a Global VisionNotes:Exhibit 5.4 diagrams the risk levels for entering the global marketplace. Five methods of entering global markets are shown on this slide, in order of risk. Exporting is usually the least complicated and least risky alternative for entering the global marketplace, however it also has the lowest rate of return. On the other hand, direct investment offers the highest rate of return, but is accompanied by the highest risk.

Exhibit 5.5 in the text explains the services offered by the U.S. Commercial Service to help beginning exporters, as well as established global businesses. Services include marketing research, trade events, locating qualified buyers and partners, and global business consulting.

*Chapter 5 Developing a Global VisionDiscussion/Team Activity:Discuss examples of companies that have entered the global marketplace in each of the ways described on this slide.

*Chapter 5 Developing a Global VisionNotes:Instead of selling directly to foreign buyers, a company may decide to sell to intermediaries located in its domestic market. Three types of intermediaries are described on this slide. *Chapter 5 Developing a Global Vision*Chapter 5 Developing a Global Vision*Chapter 5 Developing a Global VisionNotes:An important decision is to alter the product or the promotion for the global market.One Product / One Message: Global marketing standardization means developing a single product for all markets and promoting it the same way worldwide. However, even a same product/same message strategy may require changes to suit local needs.Product Invention: This refers to creating a new product or drastically changing an existing product. For example, consumers in different countries use products differently, requiring different product characteristics. Product Adaptation: Products, including packaging, are slightly altered to meet local conditions. Promotion Adaptation: The same basic product is maintained, but the promotional strategy is altered to position the product effectively in different countries. Promotion varies in different countries. Language barriers, translation problems, and cultural differences create headaches.

*Chapter 5 Developing a Global Vision*Chapter 5 Developing a Global Vision*Chapter 5 Developing a Global VisionNotes:1. If a countrys currency appreciates, less of that currency is needed to buy another countrys currency.*Chapter 5 Developing a Global VisionNotes:Dumping means selling an exported product at a price lower than that charged for the same or like product in the exporters home market. This is regarded as price discrimination that can harm the importing nations competing industries. Dumping may occur as a result of business strategies that include the points listed above.*Chapter 5 Developing a Global VisionNotes:A common type of countertrade is straight barter. A second form is the compensation agreement where a company provides technology and equipment for a plant, and agrees to take full or partial payment in goods produced by that plant.

*Chapter 5 Developing a Global Vision*Chapter 5 Developing a Global Vision*Chapter 5 Developing a Global VisionNotes:Opening an e-commerce site on the Internet immediately puts a company in the international marketplace.

The promise of borderless commerce and the global Internet economy are still restrained by old brick-and-mortar rules, regulations, and habits.