ch01.ppt

Chapter 1Chapter 1 Copyright (c) 2009 John Wiley & Sons, Inc.Copyright (c) 2009 John Wiley & Sons, Inc. 11

Global Marketing Management, 5eGlobal Marketing Management, 5e

Chapter 1Chapter 1

GlobalizationGlobalization


Chapter OverviewChapter Overview

1. Why Global Marketing is Imperative1. Why Global Marketing is Imperative

2.2. Globalization of Markets: ConvergenceGlobalization of Markets: Convergence

and Divergenceand Divergence

3. 3. Evolution of Global MarketingEvolution of Global Marketing


IntroductionIntroduction

Products have been traded across borders Products have been traded across borders throughout recorded civilization, extending back throughout recorded civilization, extending back beyond the beyond the Silk RoadSilk Road that once connected East that once connected East with West from Xian (China) to Rome (Italy).with West from Xian (China) to Rome (Italy).

Total world merchandise trade volume grew from Total world merchandise trade volume grew from $7.6 trillion in 2000 to $7.6 trillion in 2000 to $16.3 trillion in 2008. $16.3 trillion in 2008.


IntroductionIntroduction

Big Emerging Markets (BEMs):Big Emerging Markets (BEMs): In the next ten to twenty In the next ten to twenty years, BEMs such as the Chinese Economic Area (CEA: years, BEMs such as the Chinese Economic Area (CEA: including China, Hong Kong Region, and Taiwan), India, including China, Hong Kong Region, and Taiwan), India, South Korea, Mexico, Brazil, Argentina, South Africa, South Korea, Mexico, Brazil, Argentina, South Africa, Poland, Turkey, and the Association of Southeast Asian Poland, Turkey, and the Association of Southeast Asian Nations (ASEAN: including Indonesia, Brunei, Malaysia, Nations (ASEAN: including Indonesia, Brunei, Malaysia, Thailand, the Philippines, and Vietnam) will provide many Thailand, the Philippines, and Vietnam) will provide many opportunities in global business. opportunities in global business.

BRIC nations – Brazil, Russia, China & India as the new BRIC nations – Brazil, Russia, China & India as the new emerging mkts with global business potentialemerging mkts with global business potential


1. Why Global Marketing is Imperative1. Why Global Marketing is Imperative Saturation of domestic marketsSaturation of domestic markets: :

– Domestic-market saturation in the industrialized countriesDomestic-market saturation in the industrialized countries– Companies look for new marketing opportunities overseas Companies look for new marketing opportunities overseas – Development of new mkt opportunities due to economic & Development of new mkt opportunities due to economic &

population growth in developing countriespopulation growth in developing countries– Companies given incentives to venture abroad Companies given incentives to venture abroad

Global competitionGlobal competition::– Competition around the world, competition has changed in the last Competition around the world, competition has changed in the last

20 yrs20 yrs– Old companies have declined and new ones have emerged Old companies have declined and new ones have emerged

primarily because of global influencesprimarily because of global influences

Proliferation of the Internet & e-commerce Proliferation of the Internet & e-commerce – Internet on the rise and are now intensifying, open gates for Internet on the rise and are now intensifying, open gates for

companies to sell direct to consumers easily across national companies to sell direct to consumers easily across national boundariesboundaries

– Advent of e-commerce enable trade to take place between B2B, Advent of e-commerce enable trade to take place between B2B, B2C, removing the need t go thorough retail channels/middlemenB2C, removing the need t go thorough retail channels/middlemen

– Customer info & data easily available enable companies to develop Customer info & data easily available enable companies to develop mktg strategies aimed at impt customers & build loyal relationships mktg strategies aimed at impt customers & build loyal relationships on a global basis on a global basis

Need for global cooperationNeed for global cooperation:: – Global competition brings global cooperation.Global competition brings global cooperation.– Eg. In IT industry, collaboration among competitors in R & D (Sony, Eg. In IT industry, collaboration among competitors in R & D (Sony,

IBM, Toshiba, Fujitsu)IBM, Toshiba, Fujitsu)– Cross border joint venture & mergers & acquisitionsCross border joint venture & mergers & acquisitions


By examining the top 100 companies in the world, By examining the top 100 companies in the world, profound changes can be observed.profound changes can be observed.– The number of Japanese companies on the list fell from 23 in 2000 The number of Japanese companies on the list fell from 23 in 2000

to 8 in 2008to 8 in 2008– The number of U.S. and European firms has stayed relatively The number of U.S. and European firms has stayed relatively

stable since 1990.stable since 1990.– One of the biggest changes since 1990 has been the emergence of One of the biggest changes since 1990 has been the emergence of

China as the new super economic powerChina as the new super economic power


Changes Changes observed in the past 30 years simply reflect that companies from other observed in the past 30 years simply reflect that companies from other parts of the world have grown in size relative to those of the United States.parts of the world have grown in size relative to those of the United States.– Pressure is on executives in all countries to do better in the upcoming Pressure is on executives in all countries to do better in the upcoming

decade.decade.– political and economic events have also had an impact on the nature of political and economic events have also had an impact on the nature of

global competition:global competition:

1). The demise of the Soviet Union.1). The demise of the Soviet Union.

2). The establishment of the European Union.2). The establishment of the European Union.

3). The establishment of NAFTA.3). The establishment of NAFTA.

4). The deregulation and privatization of state-owned industries.4). The deregulation and privatization of state-owned industries. Growth of Eastern Europe and Southeast Asia will also eventually have an Growth of Eastern Europe and Southeast Asia will also eventually have an

impact on global marketing and business.impact on global marketing and business. ““Global” epitomizes both the Global” epitomizes both the intense competitive pressure intense competitive pressure and the and the expandingexpanding

market opportunities market opportunities around the world.around the world.

Copyright (c) 2007 John Wiley & Sons, Inc.Copyright (c) 2007 John Wiley & Sons, Inc. 88

Top 10 Fortune Global 500 CompaniesTop 10 Fortune Global 500 Companies


Rank Company 2011 2010 Country

Wal-Mart Stores

1 1 US

Royal Dutch Shell

2 2 Netherlands

Exxon Mobil 3 3 US BP 4 4 Britain Sinopec Group 5 7 China China National Petroleum

6 10 China

State Grid 7 8 China Toyota Motor 8 5 Japan Japan Post Holdings

9 6 Japan

Chevron 10 11 US Petronas 86 107 Malaysia

World’s Biggest EconomiesWorld’s Biggest Economies

http://www.businessinsider.com/the-15-biggest-economies-in-the-world-2011-3?op=1

1. US1. US 6. UK6. UK 2. China2. China 7.Brazil7.Brazil 3. Japan3. Japan 8. Italy8. Italy 4. Germany4. Germany 9. Russia9. Russia 5. France5. France 10. Canada10. Canada





1. Why Global Marketing is Imperative1. Why Global Marketing is Imperative

Internet revolutionInternet revolution: : The Internet and electronic The Internet and electronic commerce (e-commerce) are bringing major commerce (e-commerce) are bringing major structural changes to the way companies operate structural changes to the way companies operate worldwide.worldwide.

The term The term globalglobal epitomizes both the competitive epitomizes both the competitive pressure and expanding market opportunities.pressure and expanding market opportunities.

Whether a company operates domestically or Whether a company operates domestically or across national boundaries, it can no longer avoid across national boundaries, it can no longer avoid competitive pressures from around the world.competitive pressures from around the world.


2. Globalization of Markets: 2. Globalization of Markets: Convergence and DivergenceConvergence and Divergence

Per capita income is an important determinant of Per capita income is an important determinant of consumer buying behavior. consumer buying behavior.

When a country’s per capita income is less than When a country’s per capita income is less than $10,000, much of the income is spent on food and $10,000, much of the income is spent on food and other necessities, and very little disposable other necessities, and very little disposable income remains.income remains.

As a country’s per capita incomes reaches As a country’s per capita incomes reaches $20,000, the disposable portion of income $20,000, the disposable portion of income increases dramatically.increases dramatically.

This increased disposable income level results in This increased disposable income level results in increased increased convergent pressures convergent pressures on consumer on consumer buying behavior.buying behavior.



People with higher incomes tend to enjoy similar People with higher incomes tend to enjoy similar educational levels, desires for material positions, ways of educational levels, desires for material positions, ways of spending leisure time, and aspirations for the future.spending leisure time, and aspirations for the future.

Globalization does not suffocate local cultures, but rather Globalization does not suffocate local cultures, but rather liberates them from the ideological conformity of liberates them from the ideological conformity of nationalism, with consumers becoming more receptive to nationalism, with consumers becoming more receptive to new things. new things.

Consumers also have a wider, more divergent “choice set” Consumers also have a wider, more divergent “choice set” of goods and services to choose from.of goods and services to choose from.

In other words, the In other words, the divergence of consumer needs divergence of consumer needs is taking is taking place at the same time.place at the same time.

Convergence & divergence in consumer needs in many Convergence & divergence in consumer needs in many parts of the world translates into tremendous opportunities parts of the world translates into tremendous opportunities for companies willing to risk venturing abroadfor companies willing to risk venturing abroad



International trade vs International Business:International trade vs International Business:– International trade consists of exports and imports.International trade consists of exports and imports.– International business includes international trade and International business includes international trade and

foreign production.foreign production.– Extensive international penetration of companies is Extensive international penetration of companies is

called global reach.called global reach.– International trade and foreign production activities are International trade and foreign production activities are

managed on a global basis.managed on a global basis.– Growth of Multinational Corporations (MNCs) and intra-Growth of Multinational Corporations (MNCs) and intra-

firm trade is a major aspect of global markets.firm trade is a major aspect of global markets.



Who manages international trade?Who manages international trade? – Intrafirm trade: Trade between MNCs and their foreign affiliates. Intrafirm trade: Trade between MNCs and their foreign affiliates.

Comprises 34 % of world trade.Comprises 34 % of world trade.

– 33% of world trade was exports between MNCs and their affiliates. 33% of world trade was exports between MNCs and their affiliates.

– 2/3 of world trade is managed one way or another by MNCs.2/3 of world trade is managed one way or another by MNCs.

– For industrialized countries, foreign production (FDI) forms a larger For industrialized countries, foreign production (FDI) forms a larger part of the business than international tradepart of the business than international trade

– Most of the world’s FDI is in the US, the European Union (EU), and Most of the world’s FDI is in the US, the European Union (EU), and Japan. Japan.

– Over 50% of world trade and over 80% of foreign direct investment Over 50% of world trade and over 80% of foreign direct investment is conducted by three regional economic hubs: the US, the EU and is conducted by three regional economic hubs: the US, the EU and Japan. Japan.

– Collectively, these 3 areas are referred to as the “triad”. The triad is Collectively, these 3 areas are referred to as the “triad”. The triad is a group of three major trading and investment blocs in the a group of three major trading and investment blocs in the international arena.international arena.


3. Evolution of Global Marketing3. Evolution of Global Marketing

What is marketing?What is marketing? Marketing involves the planning and execution of Marketing involves the planning and execution of

the conception, pricing, promotion, and distribution the conception, pricing, promotion, and distribution of ideas, products, and services.of ideas, products, and services.

Marketing involves customer satisfaction and their Marketing involves customer satisfaction and their current and future needs.current and future needs.

Marketing is much more than selling and involves Marketing is much more than selling and involves the entire company.the entire company.

Within marketing strategies, companies are always Within marketing strategies, companies are always under competitive pressure to move forward both under competitive pressure to move forward both reactivelyreactively and and proactivelyproactively..



Five stages in the evolution of global Five stages in the evolution of global marketingmarketing (see Exhibit 1-2)(see Exhibit 1-2)::

1. 1. Domestic MarketingDomestic Marketing (domestic focus; home country (domestic focus; home country customers; ethnocentric orientation).customers; ethnocentric orientation).

2. 2. Export MarketiExport Marketinngg (indirect vs. direct exporting; country (indirect vs. direct exporting; country choice, exports; ethnocentric orientation; home country choice, exports; ethnocentric orientation; home country customers).customers).

3. 3. International MarketingInternational Marketing (markets in many countries; (markets in many countries; polycentric orientation; use of multidomestic marketing polycentric orientation; use of multidomestic marketing when customer needs are different across national when customer needs are different across national markets).markets).



4. 4. Multinational MarketingMultinational Marketing (many markets; consolidation on (many markets; consolidation on regional basis; regiocentric orientation; standardization regional basis; regiocentric orientation; standardization within regions).within regions).

5. 5. Global MarketingGlobal Marketing (international, multinational & geocentric (international, multinational & geocentric orientation; company’s willingness to adopt a global orientation; company’s willingness to adopt a global perspective; global products with local variations,).perspective; global products with local variations,).


Exhibit 1-2: Evolution of Global Exhibit 1-2: Evolution of Global MarketingMarketing



Global Marketing Global Marketing refers to marketing activities that emphasize the refers to marketing activities that emphasize the following:following:

1.1. Standardization efforts.Standardization efforts.

2.2. Coordination across markets.Coordination across markets.

3.3. Global integration.Global integration.

4.4. Reduction in cost efficiencies and duplication of activities among Reduction in cost efficiencies and duplication of activities among national and regional subsidiariesnational and regional subsidiaries

5.5. Transfer of products, ideas, brands across subsidiariesTransfer of products, ideas, brands across subsidiaries

6.6. Have global customersHave global customers



Global marketing does not necessarily mean that Global marketing does not necessarily mean that products can be developed anywhere on a global products can be developed anywhere on a global scale.scale.

The economic geography, climate, and culture The economic geography, climate, and culture affect how companies develop certain products.affect how companies develop certain products.

The Internet adds a new dimension to global The Internet adds a new dimension to global marketing.marketing.

E-commerce retailers gain substantial savings by E-commerce retailers gain substantial savings by selling online.selling online.

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ch01.ppt