The Global Marketplace Chapter 18 Powerpoint slides Extendit! version Instructor name Course name School name Date Principles of Marketing: 6th Canadian Edition

Learning Objectives After studying this chapter, you should be able to: Discuss how the international trade system, economic, political-legal, and cultural environments affect a company’s international marketing decisions Describe three key approaches to entering international markets Explain how companies adapt their marketing mixes for international markets Identify the three major forms of international marketing organization Principles of Marketing: 6th Canadian Edition

Opening Vignette: Coca-Cola Worldwide Started in an Atlanta pharmacy in 1893 by Asa Chandler Developed familiar red and white logos from the very beginning Already selling internationally by 1900, now 70% of total sales Built bottling plants in Europe and Asia during WW2 Worldwide success the result of strong marketing: balancing global standardization with local adaptation Advertising budget: $1.1 billion per year for 200 countries Taste, packaging, and positioning of main brand are standardized Products offered, promotion, price, and distribution are localized to individual market preferences Principles of Marketing: 6th Canadian Edition

Importance of Global Marketing International trade in Canada is booming Canada exports $468.5 billion in 2002, 41% of GDP, more proportionately than the U.S. or Japan Most (82%) of Canadian exports go to the U.S. One of three jobs in Canada tied to trade Domestic markets limited by small population size Today’s marketing environment characterized by: Faster communication Faster transportation Faster financial flows Stronger familiarity with foreign culture End result: smaller world Principles of Marketing: 6th Canadian Edition

Major Decisions in Global Marketing Free trade initiatives mean home markets are no longer safe from foreign competition Canadian companies forced to compete globally to protect themselves Canadian government actively promotes international trade Major growth will come from emerging markets; North America population is relatively stable and the target for foreign competitors Global firm: a firm that, by operating in more than one country, gains R&D, production, marketing, and financial advantages that are not available to purely domestic competitors Figure 18.1 Principles of Marketing: 6th Canadian Edition

The International Trade System Barriers to international trade: Tariff: a tax levied by a government against certain imported products; designed to protect domestic manufacturers and raise revenue; also known as import duties Quota: a limit on the amount of goods that an importing company will accept in certain product categories Embargo: a ban on the import or the export of a certain product. Figure 18.1 Principles of Marketing: 6th Canadian Edition

The International Trade System (continued) Exchange controls: government limits on the amount it holds of foreign exchange and on its exchange rate against other currencies (floating with another currency) Non-tariff trade barriers: Bias against bids: can be used for large public projects that are funded as economic development tools (Bombardier and the Montreal subway cars), or military spending Product standards: writing safety rules around local products that render foreign products uncompetitive Figure 18.1 Principles of Marketing: 6th Canadian Edition

The International Trade System (continued) Trade organizations that exist to foster & regulate world trade: General Agreement on Trade and Tariffs (GATT): first formed in 1948, successive rounds have reduced average world tariffs from 45% to 5%; currently have 144 member nations Formed the World Trade Organization (WTO) to enforce GATT rules and host further negotiations (who is the next new member?) Other trade organizations, unions, or agreements: European Union (EU) (how many numbers?), NAFTA (who?), APEC (where was the latest meeting held?), MERCOSUR The purpose in all of these is to foster cooperation and promote trade between nations Figure 18.1 Principles of Marketing: 6th Canadian Edition

The International Trade System (continued) Two factors in the economic environment influence attractiveness: Types of economies: Subsistence economies: most people engage in simple agriculture, consume their output and trade for basic needs; few opportunities for trade Raw-material-exporting economies: rich in one or more natural resources but poor in other needs; good markets for large equipment and infrastructure, with a small wealthy upper class, but low-income for most of the population Figure 18.1 Principles of Marketing: 6th Canadian Edition

The International Trade System (continued) Types of economies: Industrializing economies: manufacturing accounts for 10% to 20% of the economy, needs raw materials to fuel growing industry, mostly due to favourable labour costs; good markets for increasing middle class (China) Industrial economies: major exporters of manufactured goods, investment funds, technology, and expertise Income distribution: How income is distributed within the economy will influence the size and attractiveness of international markets Figure 18.1 Principles of Marketing: 6th Canadian Edition

The International Trade System (continued) Political-legal environment: four factors influence attractiveness of international markets: Attitudes toward international buying Government bureaucracy Political stability Monetary regulations Countertrade: international trade involving the direct or indirect exchange of goods for other goods instead of cash; includes barter, compensation (buyback) (buy the result of operation), and counterpurchase (buy a product from the buyer’s country in a specific time frame) Figure 18.1 Principles of Marketing: 6th Canadian Edition

The International Trade System (continued) Cultural environment: two directions of influence Impact of culture on marketing strategy: companies need to be careful when translating their marketing programs to different cultures to avoid offense (translated into non purchase); not all products will sell Impact of marketing strategy on cultures: exposure to foreign products and media causing changes in values, much to the chagrin of some within local markets (americanisation) Figure 18.1 Principles of Marketing: 6th Canadian Edition

The Decision to go International Reasons for entering international markets: Growth opportunities outside of domestic markets As a counterattack against competition at home Reduce dependence on existing markets Need a larger customer base to achieve economies of scale Figure 18.1 Principles of Marketing: 6th Canadian Edition

Deciding which markets to enter Factors to consider: Marketing objectives Volume of foreign sales it wants to achieve The speed of development of its international operations How many countries Types of countries to enter Figure 18.1 Principles of Marketing: 6th Canadian Edition

Indicators of Market Potential Table 18.1 Principles of Marketing: 6th Canadian Edition

Market Entry Strategies Many companies begin with indirect exporting, the simplest way to sell internationally Commitment, investment, potential for profit, and risk increases over time Figure 18.2 Principles of Marketing: 6th Canadian Edition

Market Entry Strategies (continued) Exporting: Entering a foreign market by selling goods produced in the company’s home country, often with little modification Indirect exporting: selling through independent, international marketing intermediaries; Direct exporting: handling their own export program, may use local distributors or company personnel The simplest and least risky way to enter foreign markets May be a temporary effort or sustained Figure 18.2 Principles of Marketing: 6th Canadian Edition

Market Entry Strategies (continued) Joint venturing: Entering a foreign market by joining with domestic or foreign companies to produce or market products or services May be a requirement for entering a foreign market; China Licensing: entering into an agreement with a foreign licensee for the right to use a manufacturing process, trademark, patent, trade secret, or other item of value for a fee or royalty (pharmaceutical company, Coca-Cola) Offers quick entry but involves more risk as the company may lose some control over their business; may create a competitor Figure 18.2 Principles of Marketing: 6th Canadian Edition

Market Entry Strategies (continued) Joint venturing: Contract manufacturing: a company contracts with manufacturers in a foreign market to produce the product or provide its service; also known as outsourcing Management contracting: the domestic firm supplies (exports) management services to a foreign manufacturer Joint ownership: a company joins with investors in a foreign market to create a local business in which they share ownership More risky due to control and profit repatriation issues Figure 18.2 Principles of Marketing: 6th Canadian Edition

Market Entry Strategies (continued) Direct investment: Entering a foreign market by developing foreign-based assembly or manufacturing facilities The highest amount of commitment, risk, control and potential for profit of the market entry strategies Political stability of the foreign country is a major concern; new governments may nationalize (seize the assets of) whole industries (Bolivia) Creates jobs within the markets the company want to sell to Figure 18.2 Principles of Marketing: 6th Canadian Edition

Global Marketing Programs Standardized marketing mix: using the same marketing mix elements for all of the company’s international markets Adapted marketing mix: adjusting the marketing mix elements to better suit each international target market entered Essentially five options when attempting to make product and promotion decisions for foreign markets: Figure 18.3 Principles of Marketing: 6th Canadian Edition

Whole Channel Concept Whole-channel view: designing international channels that take into account all the necessary links in distributing the seller’s products to final buyers, including: The seller’s headquarters organization, Channels between nations, and Channels within nations Figure 18.4 Principles of Marketing: 6th Canadian Edition

In Conclusion… The learning objectives for this chapter were: Discuss how the international trade system, economic, political-legal, and cultural environments affect a company’s international marketing decisions Describe three key approaches to entering international markets Explain how companies adapt their marketing mixes for international markets Identify the three major forms of international marketing organization Principles of Marketing: 6th Canadian Edition