Serving Global Markets Chapter 7 Serving Global Markets

Chapter Objectives Describe the importance of international marketing from the perspectives of the individual firm and the nation. Identify the major components of the environment for international marketing. Outline the basic functions of GATT, WTO, NAFTA, and the proposed FTAA, and the European Union. Compare the alternative strategies for entering international markets. Differentiate between a global marketing strategy and a multi-domestic marketing strategy. Describe the alternative marketing mix strategies used in international marketing. Explain the attractiveness of the U. S. as a target market for foreign marketers.

The Importance of Global Marketing Global marketing is rapidly becoming a necessity For 20 years, U.S. exports have grown about 10 percent annually The Internet makes it possible for every marketer to become an international marketer International Trade accounts for at least 25% of U.S. GDP Exporting: Marketing domestically produced goods and services abroad Importing: Purchasing foreign goods, services, and raw materials

U.S. Current Trade Facts The U.S. accounted for over 10% of world export trade and 18% of total world imports in 2006. U.S. exports accounted for 10.4% of the nation’s GDP in 2006. U.S. exports were up from $81billion in 2005 to $1 trillion in 2006. Export growth in manufactured goods included nuclear materials, electric machinery, vehicles, and aircraft. U.S. imports increased from $1.6 trillion in 2005 to $1.8 trillion in 2006. Greater demand for oil, combined with high fuel prices, contributed to the trade deficit. Source: U.S. Department of Commerce

U.S. Trade Facts The United States exports about a fifth of its industrial production. Almost a third of U.S. corporate profits come from international trade and foreign investment. The United States is the world’s leading exporter of farm products @ $60 billion per year. Almost half of non-farm exports consist of chemicals, office machinery, computers, automobiles, aircraft, electrical machinery, and industrial machinery. Daily trade between U.S. and Canada is $1 billion. Source: Thomson Higher Education

Top Ten Merchandise Exporting States California Texas New York Michigan Washington Illinois Ohio Florida New Jersey Pennsylvania Source: www.ita.gov

Figure 7.1, P.221 Top 10 U.S. Trading Partners

Table 7.1, P.222 [I believe Exxon is now #1, Wal-Mart #2.] The World’s 10 Largest Marketers Ranked by Sales

Warner Lambert A Global Leader In Pharmaceuticals The copy reads: “We’re making the world feel better”

Service and Retail Exports U.S. is a big exporter of services and retailing U.S. is the world’s largest exporter of services Over $145 billion is spent annually by foreign nationals visiting the U.S. The most profitable U.S. service exports are business and technical services Financial services industry is going global via the Internet Entertainment is another major service export

Financial Services: a New Global Frontier

Benefits of Going Global Additional revenues New insights into consumer behavior Alternative distribution strategies Advance notice of new products Positioned well to compete effectively with foreign competitors

The International Marketplace Market Size Over 6 billion people (1.3 billion people in China) Goods and services need to be adapted to meet needs in developing countries Urban population increasing faster than a rural As a nation develops, an increasingly affluent, educated, and cosmopolitan middle-class emerges Marketers in developing countries may face infrastructure challenges

Change marketing mix, or change local buyer behavior Behavior differs among both nations and market segments within each nation Change marketing mix, or change local buyer behavior Leatherman marketers fill customer needs around the globe with their unique product.

Buyer Behavior Research Must Focus on: Demand: Do foreign consumers need the company’s good or service? Competitive environment: How do supplies currently reach the market? Economic environment: What is the state of the nation’s economic health? Social-cultural environment: How do cultural factors affect business opportunities? Political-legal environment: Do any legal restrictions complicate entering the market? Technological environment: To what degree are technological innovations used by consumers in the market?

The International Marketing Environment International Marketing mix International technological environment International economic environment International political-legal environment International social-cultural environment

International Economic Environment A nation’s size, per-capita income, and stage of economic development determine its desirability for international expansion Other considerations include: Country infrastructure Exchange rate implications

International Social-Cultural Environment A nation’s culture, including language, education, religious attitudes, and social values, must be considered Examples: Movies must often be adapted for foreign markets Restaurant menus are often printed in several languages The use of pictures can also help when language is a problem

Table 7.2, P.230 The World’s Most Frequently Spoken Languages

American Airlines Targeting Latin American Travelers With Spanish and Portuguese In-flight Magazines

International Technological Environment The Internet transcends political, economic, and cultural barriers, reaching into every corner of the Globe It is critical to understand how the Web is reshaping social and cultural values

International Political-Legal Environment Marketers must know the current laws and regulations for each country in which they operate U.S. businesses impacted by International Law, U.S. Law, and Host country Laws Political conditions often influence international marketing Political risk assessment (PRA) Friendship, Commerce, and Navigation (FCN) treaties ISO certification requirements

Pepsi Offering small prizes to everyone in this ad overseas, obeying a law that forbids offering a few “dream” prizes

Forbes Global offers coverage of international business and finance news as it sends the message of capitalism around the globe

McDonalds, like so many other international firms had to consider the following while making the decision to go international. International law U.S. law, and Legal requirements of host nations Any other issues?

Trade Barriers Tariffs are taxes levied against imported goods Revenue Tariffs designed to raise funds for the importing government Protective Tariffs are usually higher and are designed to raise the retail price of an imported product to match or exceed that of a similar domestic product

Administrative Barriers Import Quotas Embargos Subsidies Exchange Controls Dumping The controversial practice of selling a product in a foreign market at a price lower than what it commands in the producer’s domestic market

Multinational Economic Integration Free trade area: Region in which participating nations agree to the free trade of goods among themselves, abolishing tariffs and trade restrictions Customs union Common market GATT: International trade accord that has helped reduce world tariffs World Trade Organization (WTO): succeeds GATT to oversee agreements, mediate disputes, and reduce trade barriers

NAFTA Accord removing trade barriers among Canada, Mexico, and the United States The Free Trade Area of the Americas Proposed free trade area stretching the length of the entire Western hemisphere and designed to extend free trade benefits to additional nations in North, Central, and South America European Union Customs union that is becoming a true economic union by adopting a common currency and permitting free flow of goods and workers throughout the member nations

The 25 Members of the European Union

Going Global

First Steps in Deciding to Market Globally Secure top management’s support Research the export process and potential markets Sources for Analyzing Foreign Markets

International marketers benefit from trade shows such as those held at the TWTC, Taiwan World Trade Center, where thousands of regional and global firms meet to network.

Strategies for Entering International Markets Three basic strategies for entering international markets include: Exporting Contractual agreements like franchising, licensing, and subcontracting International Direct Investment

Figure 7.7, P.240 Levels of Involvement in International Marketing

Contractual Agreements Franchising: A contractual arrangement where a wholesaler or retailer (the Franchisee) agrees to make some payment and to meet the operating requirements of a manufacturer or other franchiser in exchange for the right to use the firm’s name and to market its goods or services Foreign Licensing: an 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. Subcontracting: a contractual agreement where a firm hires a local company to produce goods or services in a specific geographic area.

Franchising: A Global Strategy for Ruth’s Chris Steak House

International Direct Investment An additional strategy for entering global markets Requires direct investment in foreign firms, production, and/or marketing facilities U.S. firms have invested nearly $2.2 trillion overseas Foreign firms have invested nearly $2.1 trillion in the U.S.

From Multinational Corporation to Global Marketer A multinational corporation is a firm with significant operations and marketing activities outside its home country Examples: General Electric, Siemens, Toyota, ExxonMobil

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. Multi-domestic marketing strategy Application of market segmentation to foreign markets by tailoring the firm’s marketing mix to match specific target markets in each nation

The universal image of long-lasting power in an Energizer battery is communicated in Latin America with this poster . . . Part of Energizer’s global marketing strategy.

International Product and Promotional Strategies Same Product Product Adaptation New Product Same Promotion Straight Extension Wrigley’s gum Coca-Cola Eastman Kodak Cameras and Film Campbell’s soup Exxon gasoline Product Invention Nonelectric sewing machines Manually operated washing machines Different Promotion Promotion Adaptation Bicycles/motorcycles Outboard motors Dual Adaptation Coffee Some clothing

The World’s 10 Most Valuable Brands

Promotion Adaptation Strategy in International Marketing

International Distribution Strategy Decide on a method of entering the foreign market Decide how to distribute the product within the foreign market through that entry channel International Pricing Strategy Competitive, economic, political, and legal constraints often limit pricing decisions Must adapt to local markets and change when conditions change Countertrade form of exporting whereby goods and services are bartered rather than sold for cash.

U.S. Postal Service Competing with International Overnight Delivery Services on Price and Service Quality

The U.S. as a Target for International Marketers The U.S. is an inviting target for many foreign marketers It offers a large population with high levels of discretionary income, political stability, a generally favorable attitude toward foreign investment and a relatively stable economy

The popularity of British import Teletubbies among U. S The popularity of British import Teletubbies among U.S. preschoolers is used in a promotion for Jell-O custard sold at Burger King restaurants.

End of Chapter Seven