Chapter 1 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel CHAPTER 5 Developing a Global Vision © Phil Ashley/Lifesize/Getty Images

Discuss the importance of global marketing Discuss the impact of multinational firms on the world economy Describe the external environment facing global marketers Learning Outcomes

Identify the various ways of entering the global marketplace List the basic elements involved in developing a global marketing mix Discover how the Internet is affecting global marketing Learning Outcomes 456 3

Discuss the importance of global marketing 1 Rewards of Global Marketing 4

Recognizing and reacting to international marketing opportunities Using effective global marketing strategies Being aware of threats from foreign competitors Having a global vision means… 1 5

Importance of Global Marketing to the U. S.  Derives 12 % of gross domestic product (GDP) from world trade  7 % of U.S. employment is supported by exports  U.S. businesses export over $1.7 trillion in goods and services annually  More small companies are aggressively pursuing international markets 1 6

Globalization Issues  Millions of Americans have lost jobs due to:  Imports  Outsourcing  Millions more fear losing jobs  Pay cuts: accept or firms will outsource  Sectors that are vulnerable:  Service  White collar  Production 1 7

Globalization Benefits  Expands economic freedom  Spurs competition  Raises productivity and living standards  Offers access to foreign capital, global export markets, and advanced technology  Promotes higher labor and environmental standards  Acts as a check on governmental power 1 8

Discuss the impact of multinational firms on the world economy 9 2 Multinational Firms

10 Multinational Corporation A company heavily engaged in international trade, beyond exporting and importing. A multinational corporation moves resources, goods, services and skills across national boundaries without regard to the country in which its headquarters are located. Source: MKT 4 2

11 Multinational Firms Multinational Corporation: A company that manufactures and markets products in many different countries and has multinational stock ownership and management. (not just trade) Source: Understanding Business 2

12 Multinational Firms Note: Not all large global businesses are multinational. Only firms that have manufacturing capacity or some other physical presence in different nations can truly be multinational. Source: Understanding Business 2

Stages of Global Business Development Companies operate in one country and sell into others Set up foreign subsidiaries to handle sales Virtual operation Operate an entire line of business in another country 2 13

Are Multinationals Beneficial? Pros Account for 19 % of U.S. private sector jobs Provide 25 % of private sector wages Account for 74 % of R&D spending AND 48% of total exports Cons Technology is capital intensive and does not necessarily increase employment. Support governments that benefit the company, not necessarily the country and its people May take away more wealth than they generate 14 2

Global Marketing Standardization Production of uniform products that can be sold the same way all over the world. Global Marketing Standardization 2 15 Subsidiaries of multinational firms are allowed to compete independently in domestic markets. Multidomestic Strategy Multidomestic Strategy

Describe the external environment facing global marketers 16 3 External Environment Facing Global Marketers

5-Natural Resources 4-Demographic Makeup 2-Economics 1-Culture 3-Political and Legal 3 17

1-Culture The common set of values shared by its citizens that determine what is socially acceptable Factors to keep in mind when dealing with different cultures: 1. Language and cultural idioms 2. Customs and traditions 3. Values and expectations of sales presentations 3 18

2-Economic Development Developed Country Less Developed Country Complex, sophisticated industries Basic industries 3 19

Economic Development: China and India China and India have two of the highest growth rates in the world Have the world’s two largest populations Among highest levels of income disparity Great linguistic and cultural diversity 3 20

21 3-Political and Legal Tariff Quota Boycott Exchange Control Market Grouping Trade Agreement A tax levied on goods entering a country Limit on the amount of a product entering a country Exclusion of products from a country Foreign exchange must be sold to a control agency Common trade alliance An agreement to stimulate international trade 3

Political and Legal The Uruguay Round made changes in world trading practices Entertainment, pharmaceuticals, integrated circuits, and software Financial, legal, and accounting services Agriculture Textiles and apparel And created a new trade organization: The World Trade Organization 3 22

Political and Legal CAFTA NAFTA European Union Agreements and Organizations 3 23

Doha Round Began in 2001 Highly contentious from the beginning Stalemate over lowering tariffs on industrial goods in exchange for cutting U.S. farm subsidies. More protectionism has made talks increasingly difficult 3 24

4-Demographics & 5- Resources Demographic Considerations: Population density Urban or rural Age of population Natural Resource Considerations: International dependencies Shifts of wealth Inflation & recession Export opportunities if resources are abundant Stimulus for military intervention 3 25

Identify the various ways of entering the global marketplace 26 4 Global Marketing by the Individual Firm

Why “Go Global”?  Earn additional profits  Leverage a unique product or technological advantage  Possess exclusive market information  Saturated domestic markets  Excess capacity  Utilize “economies of scale” 4 27

Risk Levels for Five Methods of Entering the Global Marketplace Exhibit 5.3 Risk Levels for Five Methods of Entering the Global Marketplace © 2013 by Cengage Learning Inc. All Rights Reserved. 28

Entering the Global Marketplace Licensing Legal process allowing use of manufacturing/patents/knowledge Contract Manufacturing Private-label manufacturing by a foreign country Joint Venture Domestic firm buys or joins a foreign company to create a new entity Exporting Selling domestically produced products to buyers in other countries Direct Investment Active ownership of a foreign company or manufacturing facility 4 29

Export Intermediaries Buyer for Export Assumes all ownership risks and sells globally for its own account. Export Broker Plays the traditional broker’s role by bringing buyer and seller together. Export Agent Acts like a manufacturer’s agent for the exporter in the foreign market. 4 30

List the basic elements involved in developing a global marketing mix 31 5 The Global Marketing Mix

The first step in creating a marketing mix is developing a thorough understanding of the global target market… HOWEVER…global marketing research is conducted in vastly different environments. 5 32

Product and Promotion One Product One Message Product Adaptation Promotion Adaptation Product Invention Same Product Same Message Change Message Change Product 5 33

Place (Distribution)  Adequate distribution is necessary for success in global markets  Lack of distribution infrastructure and cultural differences create problems  Logistics and shipping costs have been a growing challenge for U.S. companies looking to move production overseas.  Global trade has added to strains and charges for all forms of transportation. 5 34

Pricing  Must consider transportation and insurance costs, taxes and tariffs (exchange rates)  Determine what customers will spend  Ensure that foreign buyers will pay the price  May need to simplify a product to lower price  Don’t assume that low-income countries will accept lower quality 5 35

Exchange Rates The price of one country’s currency in terms of another country’s currency. Floating Exchange Rates 5 36 A system in which prices of different currencies move up and down based on the demand for and the supply of each currency.

Dumping Dumping: the sale of an exported product at a price lower than that charged for the same product in the “home” market of the exporter. Dumping may occur as a result of exporter strategies including:  Trying to increase an overseas market share  Temporarily distributing products to overseas markets to offset slack demand at home  Lowering costs by exploiting large-scale production  Attempting to maintain stable prices during periods of exchange rate fluctuations 5 37

Countertrade A form of trade in which all or part of the payment for goods or services is in the form of other goods or services. Countertrade 5 38

Discover how the Internet is affecting global marketing 39 6 The Impact of the Internet

Opening an e-commerce site puts a company in the international marketplace The Internet economy is still affected by old (brick & mortar) rules, regulations, and habits