Global Marketing Global trade accounts for 25 percent of the U.S. gross domestic product Exporting - Marketing domestically produced goods and services in foreign countries Importing - Purchasing foreign goods and services

Top U.S. Trading Partners—Total Trade Including Exports and Imports

World’s Ten Largest Marketers (Ranked by Annual Sales)

The Importance of Global Marketing Demand for foreign products is increasing in fast-growing economies Globalization and the Internet allow every marketer to be an international marketer

Service and Retail Exports Nearly four of every five dollars in the nation’s gross domestic product comes from services United States is the world’s largest exporter of services and retailing Profitable exports include services such as engineering, financial, computing, legal services, insurance, and entertainment

Benefits of Going Global Additional revenue New insights into customer behavior Alternative distribution strategies Advance notice of new products A major key to achieving success in foreign markets Ability to adapt products to local preferences and culture

International Economic Environment Factors that determine a nation’s prospects as a host for international business expansion Size Per-capita income Stage of economic development

International Economic Environment Infrastructure is an important economic factor to consider when planning to enter a foreign market Changes in exchange rates can complicate international marketing Exchange rate - Price of one nation’s currency in terms of another country’s currency

International Social-Cultural Environment To be effective, marketers must understand a nation’s culture Language plays an important role in global marketing

International Technological Environment The Internet transcends political, economic, and cultural barriers to reach every corner of the globe Technology presents challenges for global marketers that extend beyond the Internet and other telecommunication innovations

International Political-Legal Environment Global marketers must stay abreast of laws and trade regulations in each country in which they compete Firms set up internal political risk assessment units The political environment involves labor conditions in different countries

International Political-Legal Environment International law U.S. has friendship, commerce, and navigation (FCN) treaties with other governments Europe has pushed for mandatory ISO certification to standardize quality levels

International Political-Legal Environment U.S. law Various trade regulations, tax laws, and import and export requirements affecting international marketing Export Trading Company Act of 1982 exempts exporters from antitrust regulations Foreign Corrupt Practices Act makes it illegal to bribe a foreign official in an attempt to solicit new or repeat sales abroad

International Political-Legal Environment Legal requirements of host nations Example: Despite China’s many advances in recent years, the Chinese government continues to censor the Internet

Trade Barriers Barriers fall into two major categories Tariff - Tax levied against imported goods Administrative barriers GATT and WTO agreements have eliminated many tariffs on many products Countries frequently use nontariff barriers to boost exports and control the flows of imported products

Tariffs Two types of tariffs Revenue tariffs - Designed to raise funds for the importing government Protective tariffs - Designed to raise the retail price of an imported product to match or exceed that of a similar domestic product

Other Trade Barriers Import quotas - Limit the number of units of products in certain categories that can cross a country’s border for resale Embargo - Complete ban on the import of specified products Subsidies - Government financial support of a private industry Exchange control - Method used to regulate international trade among importing organizations by controlling access to foreign currencies

Dumping Controversial practice of selling a product in a foreign market at a price lower than what it receives in the producer’s domestic market

Multinational Economic Integration Free-trade area in which participating nations agree to free trade among themselves, abolishing tariffs and trade restrictions Custom union establishes a free-trade area and uniform tariffs for nonmember nations Common market extends a customs union by seeking to reconcile all government regulations affecting trade

General Agreement on Tariffs and Trade (GATT) International trade accord that has helped reduce world tariffs In 1994, Uruguay round produced several important outcomes Reduced farm subsidies Increased protection for patents, copyrights, and trademarks Included services under international trading rules Phased out import quotas on textiles and clothing from developing nations

World Trade Organization (WTO) Succeeded GATT Oversees GATT agreements Serves as a forum for trade negotiations Mediates trade disputes Monitors national trade policies Works to reduce trade barriers throughout the world

World Trade Organization (WTO) WTO has made slow progress toward its major policy initiatives Liberalizing world financial services Telecommunications Maritime markets

North American Free Trade Agreement (NAFTA) Accord removing trade barriers among Canada, Mexico, and the United States Particularly important to U.S. marketers because Canada and Mexico are two of its largest trading partners

The Free Trade Area of the Americas and CAFTA-DR Proposed free trade area stretching the length of the entire Western hemisphere Designed to extend free trade benefits to additional nations in North, Central, and South America Central American Free Trade Agreement–DR (CAFTA-DR) - Trade agreement among the United States, Central American nations, and the Dominican Republic

European Union (EU) Customs union that is moving in the direction of an economic union by: Adopting a common currency Removing trade restrictions Permitting free flow of goods and workers throughout the member nations Goal is to remove all barriers to free trade among its members

The 27 Members of the European Union

Going Global Reasons for marketers to go global Saturation of the target market Strong domestic market share Globalization of customers New customers in emerging markets Globalization of competitors Reduced trade barriers Advances in technology Enhanced customer responsiveness

Strategies for Entering Foreign Markets Three basic choices Importing and exporting Contractual agreements such as franchising, licensing, and subcontracting International direct investment

Importing and Exporting Decision to import, or bring in foreign goods to sell domestically or use as component parts, depends on: Ability of supplier to maintain quality Flexibility in filling orders that vary Response time in filling orders Total costs

Importing and Exporting First-time exporters can reach foreign customers through: Export-trading companies Export-management companies Offset agreement

Franchising Contractual arrangement in which a wholesaler or retailer agrees to meet the operating requirements of a manufacturer or other franchiser Benefits are risk reduction, standardized operations, and greater recognizability Success depends on ability to adapt to local customer preferences

Foreign Licensing Agreement that grants foreign marketers the right to distribute a firm’s merchandise or to use its trademark, patent, or process in a specified geographic area Gives access to local partner’s marketing information and distribution channels, and protection from legal barriers Allows quick entry into a foreign market with a known product

Subcontracting Contractual agreements that assign the production of goods or services to local or smaller firms Can prevent mistakes involving local culture and regulations Can provide protection from import duties

International Direct Investment High involvement and high risk are the major characteristics Firms choosing this method often have a competitive advantage Several forms Acquisition Joint venture

From Multinational Corporation to Global Marketer Multinational corporation - Significant operations and marketing activities outside its home country Examples: General Electric, Siemens, Mitsubishi Important changes since 1960 No longer exclusively U.S. based Multinationals no longer think of their foreign operations as mere outsourcing appendages

From Multinational Corporation to Global Marketer Employ large foreign workforces relative to American staffs Reflect interdependence of world economies, growth of international competition, and globalization of world markets

Developing an International Marketing Strategy Global marketing strategy - Standardized marketing mix with minimal modifications that a firm uses in all of its domestic and foreign markets Can effectively market some goods and services to segments in many nations that share cultures and languages Can be highly effective for luxury products that target upscale consumers everywhere Major benefit is its low cost to implement

Developing an International Marketing Strategy Multidomestic marketing strategy - Application of market segmentation to foreign markets by tailoring the firm’s marketing mix to match specific target markets in each nation

International Distribution Strategy Marketers must set up proper channels and anticipate extensive physical distribution problems A distribution decision involves two steps The firm must decide on a method of entering the foreign market It must determine how to distribute the product within the foreign market through that entry channel

Pricing Strategy Competitive, economic, political, and legal factors can limit pricing decisions Adaptation to local markets Emergence of commodity marketing organizations

Countertrade Form of exporting whereby goods and services are bartered rather than sold for cash May be imposed in less developed nations that lack sufficient foreign currency to obtain goods and services they want Way to control balance-of-trade problems

The United States as a Target for International Marketers U.S. is an inviting target for foreign companies Increasingly, foreign multinationals invest in U.S. assets as they seek to produce goods locally and control distribution channels

Strategic Implications of Marketing in the 21st Century Marketers are pioneers in bringing new technologies to developing nations Greatest competitive advantage belongs to marketers who capitalize on the similarities of their target markets and adapt to the differences New and better products in developing markets will create and maintain relationships for the future