McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 7, YOU SHOULD BE ABLE TO: Describe the nature and scope of world trade from a global perspective and its implications for the United States. LO1 Identify the major trends that have influenced the landscape of global marketing in the past decade. LO2 Identify the environmental forces that shape global marketing efforts. LO3 7-2

LO4 LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 7, YOU SHOULD BE ABLE TO: Name and describe the alternative approaches companies use to enter global markets. Explain the distinction between standardization and customization when companies craft worldwide marketing programs. LO5 7-3

DELL’S QUEST FOR GROWTH IN EMERGING ECONOMIES 7-4

 Global Perspective DYNAMICS OF WORLD TRADE WORLD TRADE FLOWS LO1  United States Perspective Countertrade Trade Feedback Effect Gross Domestic Product (GDP) Balance of Trade 7-5

FIGURE 7-1 FIGURE 7-1 World trade flows for goods and commodities within and between geographic regions ($ billions U.S.) 7-6

FIGURE 7-2 FIGURE 7-2 Porter’s diamond of national competitive advantage: 4 key elements on why some countries become world leaders 7-7

 Porter’s “Diamond” DYNAMICS OF WORLD TRADE COMPETITIVE ADVANTAGE OF NATIONS LO1 Factor Conditions Demand Conditions Company Strategy, Structure, and Rivalry Related and Supporting Industries  Economic Espionage Act (1996) Economic Espionage Act (1996) 7-8

Sharp Aquos TV and Bruno Magli Shoes What element of Porter’s Diamond of National Competitive Advantage? LO1 7-9

MARKETING IN A BORDERLESS ECONOMIC WORLD TREND 1—DECLINE OF ECONOMIC PROTECTIONISM LO2  Protectionism Protectionism  Tariffs Tariffs  Quota Quota  World Trade Organization (WTO) World Trade Organization (WTO)  General Agreement on Tariffs and Trade (GATT) 7-10

MAKING RESPONSIBLE DECISIONS Global Ethics and Global Economics— The Case of Protectionism LO2 7-11

FIGURE 7-3 FIGURE 7-3 Protectionism hinders world trade when countries raise prices and limit supply through tariff and quota policies 7-12

 European Union Euro  North American Free Trade Agreement (NAFTA) MARKETING IN A BORDERLESS ECONOMIC WORLD TREND 2—RISE OF ECONOMIC INTEGRATION LO2  Asian Free Trade Agreements 7-13

Euro Launch TV Ad What are the benefits of economic integration? LO2 7-14

FIGURE 7-4 FIGURE 7-4 The European Union in early 2010 consists of 27 countries with more than 500 million consumers 7-15

MARKETING IN A BORDERLESS ECONOMIC WORLD TREND 3A—GLOBAL COMPETITION LO2  Global Competition Global Competition  Strategic Alliances Strategic Alliances 7-16

FIGURE 7-A FIGURE 7-A Global companies and marketing strategy 7-17

 International Firms  Transnational Firms  Multinational Firms Multidomestic Marketing Strategy Global Marketing Strategy Global Brand MARKETING IN A BORDERLESS ECONOMIC WORLD TREND 3B—GLOBAL COMPANIES LO2 7-18

 Global Consumers Global Consumers MARKETING IN A BORDERLESS ECONOMIC WORLD TREND 3C—GLOBAL CONSUMERS LO2 7-19

MARKETING MATTERS The Global Teenager—A Market of 2 Billion Voracious Consumers with $200 Billion to Spend LO2 7-20

MARKETING IN A BORDERLESS ECONOMIC WORLD TREND 4—A NETWORKED GLOBAL MARKETPLACE LO2 7-21

A GLOBAL ENVIRONMENTAL SCAN CULTURAL DIVERSITY LO3 Foreign Corrupt Practices Act (1977) Foreign Corrupt Practices Act (1977)  Cross-Cultural Analysis Cross-Cultural Analysis  Values Values  Customs Customs 7-22

FIGURE 7-B FIGURE 7-B Cultural appreciation 7-23

A GLOBAL ENVIRONMENTAL SCAN CULTURAL DIVERSITY LO3  Cultural Symbols Cultural Symbols #13 Semiotics 7-24

A GLOBAL ENVIRONMENTAL SCAN CULTURAL DIVERSITY LO3  Language Unintended Meanings Back Translation  Consumer Ethnocentrism Consumer Ethnocentrism 7-25

A GLOBAL ENVIRONMENTAL SCAN ECONOMIC CONSIDERATIONS LO3  Stage of Economic Development Developed Countries: Japan Developing Countries  Made the Move: Brazil  Remain Locked: Tanzania Bottom of the Pyramid 7-26

A GLOBAL ENVIRONMENTAL SCAN ECONOMIC CONSIDERATIONS LO3  Economic Infrastructure Communications Financial Transportation Distribution Systems 7-27

A GLOBAL ENVIRONMENTAL SCAN ECONOMIC CONSIDERATIONS LO3  Consumer Income and Purchasing Power Microfinance: India Microfinance: India  Currency Exchange Rate Currency Exchange Rate 7-28

FIGURE 7-5 FIGURE 7-5 A comparison of the purchasing power differences around the world 7-29

 Political Stability  Trade Regulations A GLOBAL ENVIRONMENTAL SCAN POLITICAL-REGULATORY CLIMATE LO3 7-30

GOING ONLINE Checking a Country’s Political Risk Rating LO3 7-31

FIGURE 7-6 FIGURE 7-6 Alternative global market-entry strategies 7-32

 Exporting Exporting Indirect Exporting Direct Exporting GLOBAL MARKET-ENTRY STRATEGIES EXPORTING LO4 7-33

MARKETING MATTERS Creative Cosmetics and Creative Export Marketing in Japan LO4 7-34

 Advantages  Disadvantages  Franchising GLOBAL MARKET-ENTRY STRATEGIES LICENSING LO4  Contract Manufacturing  Contract Assembly 7-35

 Joint Venture Joint Venture GLOBAL MARKET-ENTRY STRATEGIES JOINT VENTURE LO4 Advantages Disadvantages 7-36

GLOBAL MARKET-ENTRY STRATEGIES DIRECT INVESTMENT LO4 Advantages Disadvantages  Direct Investment Direct Investment 7-37

FIGURE 7-7 FIGURE 7-7 Five product and promotion strategies for global marketing 7-38

 Product Extension CRAFTING A WORLDWIDE MARKETING PROGRAM PRODUCT STRATEGIES LO5  Product Adaptation  Product Invention 7-39

 Communication Adaptation CRAFTING A WORLDWIDE MARKETING PROGRAM PROMOTION STRATEGIES LO5  Dual Adaptation  Identical Message 7-40

 Countries Impose Pricing Constraints CRAFTING A WORLDWIDE MARKETING PROGRAM DISTRIBUTION AND PRICING STRATEGIES LO5  Channels Can Be Long or Short  Prices May Be Too High or Too Low Dumping Gray Market  Channels and Economic Development 7-41

FIGURE 7-8 FIGURE 7-8 Channels of distribution in global marketing 7-42

VIDEO CASE 7 CNS BREATHE RIGHT STRIPS: GOING GLOBAL 7-43

VIDEO CASE 7 CNS 7-44

VIDEO CASE 7 CNS 1. What are the advantages and disadvantages for CNS taking Breathe Right strips into international markets? 7-45

VIDEO CASE 7 CNS 2. What are the advantages to CNS of (a) using its three-stage process to enter new global markets and (b) having specific criteria to move through the stages? 7-46

VIDEO CASE 7 CNS 3. Using the CNS criteria, with what you know, which countries should have highest priority for CNS? 7-47

VIDEO CASE 7 CNS 4. Which single segment of potential Breathe Right strip users would you target to enter new markets? 7-48

VIDEO CASE 7 CNS 5. Which marketing mix variables should CNS emphasize the most to succeed in a global arena? Why? 7-49

Countertrade Countertrade is the practice of using barter rather than money for making global sales. 7-50

Gross Domestic Product (GDP) Gross domestic product (GDP) is the monetary value of all goods and services produced in a country during one year. 7-51

Balance of Trade Balance of trade is the difference between the monetary value of a nation’s exports and imports. 7-52

Economic Espionage Act (1996) The Economic Espionage Act (1996) is a law that makes the theft of trade secrets by foreign entities a federal crime in the United States. 7-53

Protectionism Protectionism is the practice of shielding one or more industries within a country’s economy from foreign competition through the use of tariffs or quotas. 7-54

Tariffs Tariffs are government taxes on goods or services entering a country that primarily serve to raise prices on imports. 7-55

Quota A quota is a restriction placed on the amount of a product allowed to enter or leave a country. 7-56

World Trade Organization (WTO) The World Trade Organization (WTO) is a permanent institution that sets rules governing trade between its members through panels of trade experts who decide on trade disputes between members and issue binding decisions. 7-57

Global Competition Global competition exists when firms originate, produce, and market their products and services worldwide. 7-58

Strategic Alliances Strategic alliances are agreements among two or more independent firms to cooperate for the purpose of achieving common goals. 7-59

Multidomestic Marketing Strategy A multidomestic marketing strategy involves multinational firms that have as many different product variations, brand names, and advertising programs as countries in which they do business. 7-60

Global Marketing Strategy A global marketing strategy involves transnational firms that employ the practice of standardizing marketing activities when there are cultural similarities and adapting them when cultures differ. 7-61

Global Brand A global brand is a brand marketed under the same name in multiple countries with similar and centrally coordinated marketing programs. 7-62

Global Consumers Global consumers are consumer groups living in many countries or regions of the world who have similar needs or seek similar features and benefits from products or services. 7-63

Cross-Cultural Analysis Cross-cultural analysis involves the study of similarities and differences among consumers in two or more nations or societies. 7-64

Values Values are a society’s personally or socially preferable modes of conduct or states of existence that tend to persist over time. 7-65

Customs Customs are what is considered normal and expected about the way people do things in a specific country. 7-66

Foreign Corrupt Practices Act (1977) The Foreign Corrupt Practices Act (1977) is a law, amended by the International Anti-Dumping and Fair Competition Act (1998), that makes it a crime for U.S. corporations to bribe an official of a foreign government or political party to obtain or retain business in a foreign country. 7-67

Cultural Symbols Cultural symbols are things that represent ideas and concepts. 7-68

Semiotics Semiotics is a field of study that examines the correspondence between symbols and their role in the assignment of meaning for people. 7-69

Back Translation Back translation is the practice where a translated word or phrase is retranslated into the original language by a different interpreter to catch errors. 7-70

Consumer Ethnocentrism Consumer ethnocentrism is the tendency to believe that it is inappropriate, indeed immoral, to purchase foreign-made products. 7-71

Bottom of the Pyramid Bottom of the pyramid is the largest but poorest socioeconomic group in the world. 7-72

Microfinance Microfinance is the practice of offering small, collateral-free loans to individuals who otherwise would not have access to the capital necessary to begin small businesses or other income- generation activities. 7-73

Currency Exchange Rate A currency exchange rate is the price of one country’s currency expressed in terms of another country’s currency. 7-74

Exporting Exporting is a global market-entry strategy in which a company produces goods in one country and sells them in another country. 7-75

Joint Venture Joint venture is a global market- entry strategy in which a foreign company and a local firm invest together to create a local business in order to share ownership, control, and profits of the new company. 7-76

Direct Investment Direct investment is a global market-entry strategy that entails a domestic firm actually investing in and owning a foreign subsidiary or division. 7-77

Dumping Dumping occurs when a firm sells a product in a foreign country below its domestic price or below its actual cost. 7-78

Gray Market A gray market is a situation where products are sold through unauthorized channels of distribution. Also called parallel importing. 7-79