© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Marketing II The Chang School-Ryerson University Continuing Education preferred Web: Office: Bus 308 Phone: Ext 4215 CMKT 200 Fall 2005 Instructor: Armand Gervais

Lecture 2 Agenda Don’t Forget Name Tags Don’t Forget Name Tags Global Marketing Global Marketing Video Wal-Mart Video Wal-Mart Break Break Discussion Video Discussion Video Simulation Simulation To Do’s for next weeks class To Do’s for next weeks class Time to work in Groups Time to work in Groups

Describe the nature and scope of world trade from a global perspective and its implications for the Canada. Describe the nature and scope of world trade from a global perspective and its implications for the Canada. Explain the effects of economic protectionism and the implications of economic integration for global marketing practices. Explain the effects of economic protectionism and the implications of economic integration for global marketing practices. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:

Understand the importance of environmental factors (cultural, economic, and political) for global marketing efforts. Understand the importance of environmental factors (cultural, economic, and political) for global marketing efforts. Describe alternative approaches firms use to enter and compete in global markets. Describe alternative approaches firms use to enter and compete in global markets. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO :

Identify specific challenges marketers face when crafting worldwide marketing programs. Identify specific challenges marketers face when crafting worldwide marketing programs. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:

NOW THE WORLD CAN BREATHE EASIER…ONE NOSE AT A TIME NOW THE WORLD CAN BREATHE EASIER…ONE NOSE AT A TIME REACHING GLOBAL MARKETS

Breathe Right Worldwide success

World Trade Flows World Trade Flows Global perspective Global perspective DYNAMICS OF WORLD TRADE

FIGURE 7-1 Illustrative world trade flows for manufactured goods and commodities (billions of dollars)

Global perspective (cont) Global perspective (cont) Countertrade Countertrade Countertrade Trade feedback effect Trade feedback effect Trade feedback effect Trade feedback effect United States perspective United States perspective Gross domestic product Gross domestic product Gross domestic product Gross domestic product Balance of trade Balance of trade Balance of trade Balance of trade Competitive Advantage of Nations Competitive Advantage of Nations DYNAMICS OF WORLD TRADE

Competitive Advantage of Nations Competitive Advantage of Nations Factor conditions Factor conditions Demand conditions Demand conditions Related supporting industries Related supporting industries Company strategy, structure, and rivalry Company strategy, structure, and rivalry Economic Espionage Economic Espionage Economic Espionage Economic Espionage DYNAMICS OF WORLD TRADE

FIGURE 7-2 Porter’s “diamond” of national competitive advantage

Concept Check 1. What is the trade feedback effect? A: The phenomenon in which a country’s imports affect its exports and vice versa.

Concept Check 2. What variables influence why some companies and industries in a country succeed globally while others lose ground or fail? A: Factor conditions; demand conditions; related and supporting industries; and company strategy, structure, and rivalry.

Decline of Economic Protectionism Decline of Economic ProtectionismProtectionism EMERGENCE OF A BORDERLESS ECONOMIC WORLD

FIGURE 7-3 How protectionism affects world trade

Decline of Economic Protectionism (cont) Decline of Economic Protectionism (cont) Tariffs Tariffs Tariffs Quota Quota Quota World Trade Organization World Trade Organization World Trade Organization World Trade Organization Rise of Economic Integration Rise of Economic Integration European Union European Union EMERGENCE OF A BORDERLESS ECONOMIC WORLD

FIGURE 7-4 The countries of the European Union in 2002

Map of Euro Countries

1 Euro Coin (Common Side) 1 Euro Coin (Greek) 5 Euro Bank Note (Common Side) 5 Euro Bank Note (French) Euro Coins and Currency

Rise of Economic Integration (cont) Rise of Economic Integration (cont) North American Free Trade Agreement North American Free Trade Agreement Asian Free Trade Agreements Asian Free Trade Agreements EMERGENCE OF A BORDERLESS ECONOMIC WORLD

A New Reality: Global Competition among Global Companies for Global Customers A New Reality: Global Competition among Global Companies for Global Customers Global Competition Global Competition Global Competition Global Competition Strategic alliances Strategic alliances Strategic alliances Strategic alliances EMERGENCE OF A BORDERLESS ECONOMIC WORLD

A New Reality: Global Competition (cont) A New Reality: Global Competition (cont) Global Companies Global Companies Multidomestic marketing strategy Multidomestic marketing strategy Multidomestic marketing strategy Multidomestic marketing strategy Global marketing strategy Global marketing strategy Global marketing strategy Global marketing strategy Global Consumers Global Consumers Global Consumers Global Consumers Emergence of Networked Global Marketplace Emergence of Networked Global Marketplace EMERGENCE OF A BORDERLESS ECONOMIC WORLD

Diet Pepsi Ad Brazil

The Global Teenager 500 million consumers

Concept Check 1. What is protectionism? A: It is the practice of shielding one or more sectors of a country’s economy from foreign competition through the use of tariffs or quotas.

Concept Check 2. The North American Free Trade Agreement was designed to promote free trade among which countries? A: United States, Canada, and Mexico

Concept Check 3. What is the difference between a multidomestic marketing strategy an a global marketing strategy? A: A multidomestic marketing strategy means that firms have as many different product variations, brand names, and advertising programs as countries in which they do business. A global marketing strategy standardizes marketing activities when there are cultural similarities and adapts them when cultures differ.

Cultural Diversity Cultural Diversity Cross-cultural analysis Cross-cultural analysis Cross-cultural analysis Cross-cultural analysis Values Values Values Customs Customs Customs Foreign Corrupt Practices Act Foreign Corrupt Practices Act Foreign Corrupt Practices Act Foreign Corrupt Practices Act Cultural Symbols Cultural Symbols Cultural Symbols Cultural Symbols Semiotics Semiotics Semiotics A GLOBAL ENVIRONMENTAL SCAN

Eiffel Tower Cultural lessons for Coca-Cola

Parthenon Cultural lessons for Coca-Cola

Cultural Diversity (cont) Cultural Diversity (cont) Language Language Back translation Back translation Back translation Back translation Cultural ethnocentricity Cultural ethnocentricity Consumer ethnocentrism Consumer ethnocentrism Consumer ethnocentrism Consumer ethnocentrism A GLOBAL ENVIRONMENTAL SCAN

Economic Considerations Economic Considerations Stage of Economic Development Stage of Economic Development Economic Infrastructure Economic Infrastructure Consumer Income and Purchasing Power Consumer Income and Purchasing Power A GLOBAL ENVIRONMENTAL SCAN

Coca-Cola in Russia Financial investments in bottling and distribution

FIGURE 7-5 How purchasing power differs around the world

Economic Considerations (cont) Economic Considerations (cont) Currency exchange rates Currency exchange rates Currency exchange rates Currency exchange rates A GLOBAL ENVIRONMENTAL SCAN

Political-Regulatory Climate Political-Regulatory Climate Political Stability Political Stability Trade Regulations Trade Regulations A GLOBAL ENVIRONMENTAL SCAN

Checking Political Risk Ranking favorable business climates

1. Semiotics involves the study of ________________________ ________________________ ________. cultural symbols and their role in the assignment of meaning for people cultural symbols and their role in the assignment of meaning for people Concept Check

2. When foreign currencies can buy more Canadian dollars, are Canadian products more or less expensive for a foreign consumer? A: Less expensive.

FIGURE 7-6 Alternative global market- entry strategies GLOBAL MARKET-ENTRY STRATEGIES

Exporting Exporting Exporting Licensing Licensing Licensing Joint Venture Joint Venture Joint Venture Joint Venture Direct Investment Direct Investment Direct Investment Direct Investment GLOBAL MARKET-ENTRY STRATEGIES

Creative Cosmetics in Japan Creative Export Marketing

McDonald’s in Moscow, Russia

Customers Waiting OutsideCustomers Eating Inside McDonald’s in Moscow, Russia

Concept Check 1. What mode of entry could a company follow if it has no previous experience in global marketing? A: Indirect exporting through intermediaries.

Concept Check 2. How does licensing differ from a joint venture? A: In licensing, the firm offers the right to a trademark, patent or trade secret, in return for a fee or royalty. In a joint venture, a foreign and a local firm to produce some product or service. The two companies share ownership, control, and profits of the new entity.

Product and Promotion Strategies Product and Promotion Strategies Product extension Product extension Product adaptation Product adaptation Product invention Product invention CRAFTING A WORLDWIDE MARKETING EFFORT

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

Distribution Strategy Distribution Strategy CRAFTING A WORLDWIDE MARKETING EFFORT

Gillette in Greece Same global message

Gillette in Germany Same global message

Gillette in United States Same global message

FIGURE 7-8 Channels of distribution in global marketing

Pricing Strategy Pricing Strategy Dumping Dumping Dumping Gray market Gray market Gray market Gray market CRAFTING A WORLDWIDE MARKETING EFFORT

Concept Check 1. Products may be sold globally in three ways. What are they? A: Product extension, product adaptation, and product invention.

Concept Check 2. What is dumping? A: Dumping is when a firm sells a product in a country below its domestic price or below its actual cost.

Countertrade is the process of using barter rather than money for making global sales. Countertrade

The trade feedback effect is the phenomenon of imports affecting exports and vice versa. Trade Feedback Effect

The gross domestic product is the monetary value of all goods and services produced in a country during one year. Gross Domestic Product

The difference between the monetary value of a nation’s exports and imports is called the balance of trade. Balance of Trade

The Economic Espionage Act makes the theft of trade secrets by foreign entities a federal crime in the United States. Economic Espionage Act

Protectionism is the practice of shielding one or more sectors of a country’s economy from foreign competition through the use of tariffs or quotas. Protectionism

Tariffs are a government tax on goods and services entering a country. Tariffs

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

The World Trade Organization is a permanent institution that sets rules governing trade between its members. World Trade Organization

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

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

Multinationals using a multidomestic marketing strategy have as many different product variations, brand names, and advertising programs as countries in which they do business. Multidomestic Marketing Strategy

A global marketing strategy is the practice of standardizing marketing activities when there are cultural similarities and adapting them when cultures differ. Global Marketing Strategy

Global consumers consist of customer groups living in many countries or regions of the world who have similar needs or seek similar features and benefits from products or services. Global Consumers

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

A society’s values represent personally or socially preferable modes of conduct or states of existence that are enduring. Values

Customs are the norms and expectations about the way people do things in a specific country. Customs

The Foreign Corrupt Practices Act makes it a crime for U.S. corporations to bride an official of a foreign government or political party to obtain or retain business in a foreign country. Foreign Corrupt Practices Act

Cultural symbols are things that represent ideas and concepts. Cultural Symbols

Semiotics is concerned with the correspondence between symbols and their role in the assignment of meaning for people. Semiotics

In back translation, a translated word or phrase is retranslated into the original language by a different interpreter. Back Translation

Consumer ethnocentrism is the tendency to believe that is inappropriate or immoral to purchase foreign-made products. Consumer Ethnocentrism

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

Exporting is producing goods in one country and selling them in another. Exporting

Under licensing, a company offers the right to a trademark, patent, trade secret, or other intellectual property for a royalty or fee. Licensing

When a foreign company and a local firm invest to create a local business, it is called a joint venture. Joint Venture

Direct Investment entails a domestic firm actually investing in and owning a foreign subsidiary or division. Direct Investment

Dumping is when a firm sells a product in a foreign country below its domestic price or below its actual cost. Dumping

A gray market is a situation where products are sold through unauthorized channels of distribution. Gray Market

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Is Wal-Mart Good For America

Wal-Mart Facts 100 million: The number of people who shop at Wal-Mart's 3400 American stores every week. 100 million: The number of people who shop at Wal-Mart's 3400 American stores every week. 50 million: The amount of square footage Wal-Mart plans to add this year, including new Wal-Mart stores, new Supercenters, new Sam's Club and new international stores. [View a chart of Wal-Mart locations worldwide, as of Jan. 31, 2004.] 50 million: The amount of square footage Wal-Mart plans to add this year, including new Wal-Mart stores, new Supercenters, new Sam's Club and new international stores. [View a chart of Wal-Mart locations worldwide, as of Jan. 31, 2004.]a charta chart 1.2 million: The number of Wal-Mart associates in the U.S. Any full- or part-time Wal-Mart employee, up to and including the CEO, is considered an "associate," in Wal-Mart parlance. Internationally, Wal-Mart employs an additional 330,000 associates. 1.2 million: The number of Wal-Mart associates in the U.S. Any full- or part-time Wal-Mart employee, up to and including the CEO, is considered an "associate," in Wal-Mart parlance. Internationally, Wal-Mart employs an additional 330,000 associates. 600,000: The number of new employees Wal-Mart hires each year. The company's turnover rate is 44 percent -- close to the retail industry average. 600,000: The number of new employees Wal-Mart hires each year. The company's turnover rate is 44 percent -- close to the retail industry average. 1979: The year Wal-Mart's sales first top $1 billion. 1979: The year Wal-Mart's sales first top $1 billion. $256 billion : Wal-Mart's sales in In the words of Wal-Mart CFO Tom Schoewe, Wal-Mart's sales are equal to "one IBM, one Hewlett Packard, one Dell computer, one Microsoft and one Cisco System -- and oh, by the way, after that we got $2 billion left over." $256 billion : Wal-Mart's sales in In the words of Wal-Mart CFO Tom Schoewe, Wal-Mart's sales are equal to "one IBM, one Hewlett Packard, one Dell computer, one Microsoft and one Cisco System -- and oh, by the way, after that we got $2 billion left over." 35: The number of Wal-Mart Supercenters in China. 35: The number of Wal-Mart Supercenters in China. $15 billion: The amount of Chinese products Wal-Mart estimates it imports each year; others suggest the number may be higher. $15 billion: The amount of Chinese products Wal-Mart estimates it imports each year; others suggest the number may be higher. $120 billion: The U.S. trade deficit with China in $120 billion: The U.S. trade deficit with China in percent: The amount of total U.S. retail sales, excluding automobiles, accounted for by Wal-Mart. 8 percent: The amount of total U.S. retail sales, excluding automobiles, accounted for by Wal-Mart. $9.98: The average full-time hourly wage for a Wal-Mart employee. The average full-time hourly wage in metro areas (defined as areas with a population of 50,000 or more) is $ In some urban areas it is higher: $11.03 in Chicago, $11.08 in San Francisco, and $11.20 in Austin. $9.98: The average full-time hourly wage for a Wal-Mart employee. The average full-time hourly wage in metro areas (defined as areas with a population of 50,000 or more) is $ In some urban areas it is higher: $11.03 in Chicago, $11.08 in San Francisco, and $11.20 in Austin.

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin To Do’s for Next Class Before you leave today sign attendance sheet Before you leave today sign attendance sheet me your contact information Student ID, , and contact number me your contact information Student ID, , and contact number Please include a little about yourself: Please include a little about yourself: Program, Major, work experience etc. Program, Major, work experience etc. Complete the assigned readings download through library Complete the assigned readings download through library Form teams and review simulation Form teams and review simulation