Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Global Marketing Management Masaaki Kotabe & Kristiaan Helsen Third Edition John Wiley & Sons, Inc., 2004

Chapter 1 Globalization Imperative

Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Chapter Overview 1. Why Global Marketing is Imperative 2.Globalization of Markets: Convergence and Divergence 3. Evolution of Global Marketing 4. Appendix: Theories of International Trade and the Multinational Enterprise

Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Introduction Products have been traded across borders throughout recorded civilization, extending back beyond the Silk Road that once connected East with West from Xian (China) to Rome (Italy). Products have been traded across borders throughout recorded civilization, extending back beyond the Silk Road that once connected East with West from Xian (China) to Rome (Italy). Total world trade volume in goods and services grew from $6.5 trillion in 1998 to $7.6 trillion in Total world trade volume in goods and services grew from $6.5 trillion in 1998 to $7.6 trillion in 2000.

Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Introduction (contd.) According to the World Trade Organization (WTO), the world’s five exporting countries were the United States ($781 billion), Germany ($552 billion), Japan ($479 billion), France ($298 billion), and Britain ($284 billion), collectively accounting for 38 percent of global trade in According to the World Trade Organization (WTO), the world’s five exporting countries were the United States ($781 billion), Germany ($552 billion), Japan ($479 billion), France ($298 billion), and Britain ($284 billion), collectively accounting for 38 percent of global trade in The Triad Regions (North America, Western Europe, and Japan) of the world collectively produce over 80 percent of world GDP. The Triad Regions (North America, Western Europe, and Japan) of the world collectively produce over 80 percent of world GDP.

Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Introduction (contd.) Big Emerging Markets (BEMs): In the next ten to twenty years, BEMs such as the Chinese Economic Area (CEA: including China, Hong Kong Region, and Taiwan), India, South Korea, Mexico, Brazil, Argentina, South Africa, Poland, Turkey, and the Association of Southeast Asian Nations (ASEAN: including Indonesia, Brunei, Malaysia, Thailand, the Philippines, and Vietnam) Big Emerging Markets (BEMs): In the next ten to twenty years, BEMs such as the Chinese Economic Area (CEA: including China, Hong Kong Region, and Taiwan), India, South Korea, Mexico, Brazil, Argentina, South Africa, Poland, Turkey, and the Association of Southeast Asian Nations (ASEAN: including Indonesia, Brunei, Malaysia, Thailand, the Philippines, and Vietnam)

Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Introduction (contd.) will provide many opportunities in global business.

Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Why Global Marketing is Imperative Saturation of domestic markets: Domestic-market saturation in the industrialized parts of the world and marketing opportunities overseas are evident in global marketing. Saturation of domestic markets: Domestic-market saturation in the industrialized parts of the world and marketing opportunities overseas are evident in global marketing. Global competition: Competition around the world and proliferation of the Internet are on the rise. Global competition: Competition around the world and proliferation of the Internet are on the rise. Need for global cooperation: Global competition brings global cooperation. Need for global cooperation: Global competition brings global cooperation.

Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Why Global Marketing is Imperative (contd.) Internet revolution: The Internet and electronic commerce (e-commerce) are bringing major structural changes to the way companies operate worldwide. Internet revolution: The Internet and electronic commerce (e-commerce) are bringing major structural changes to the way companies operate worldwide. The term “global” epitomizes both the competitive pressure and expanding market opportunities. The term “global” epitomizes both the competitive pressure and expanding market opportunities. Whether a company operates domestically or across national boundaries, it can no longer avoid competitive pressures from around the world. Whether a company operates domestically or across national boundaries, it can no longer avoid competitive pressures from around the world.

Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Globalization of Markets: Convergence and Divergence International trade consists of exports and imports. International trade consists of exports and imports. International business includes international trade and foreign production. International business includes international trade and foreign production. Extensive international penetration of companies is called global reach. Extensive international penetration of companies is called global reach. International trade and foreign production activities are managed on a global basis. International trade and foreign production activities are managed on a global basis. Growth of Multinational Corporations (MNCs) and intra-firm trade is a major aspect of global markets. Growth of Multinational Corporations (MNCs) and intra-firm trade is a major aspect of global markets.

Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Globalization of Markets: Convergence and Divergence (contd.) International trade versus international business: International trade versus international business: –International trade consists of exports and imports. –International business includes international business trade and foreign production. Who manages international trade? Who manages international trade? –Intrafirm trade: Trade between MNCs and their affiliates.

Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Evolution of Global Marketing What is marketing? Marketing involves the planning and execution of the conception, pricing, promotion, and distribution of ideas, products, and services. What is marketing? Marketing involves the planning and execution of the conception, pricing, promotion, and distribution of ideas, products, and services. Marketing involves customer satisfaction and their current and future needs. Marketing involves customer satisfaction and their current and future needs. Marketing is much more than selling and involves the entire company. Marketing is much more than selling and involves the entire company. Within marketing strategies, companies are always under competitive pressure to move forward both reactively and proactively. Within marketing strategies, companies are always under competitive pressure to move forward both reactively and proactively.

Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Evolution of Global Marketing (contd.) Five stages in the evolution of global marketing (see Exhibit 1-2): Five stages in the evolution of global marketing (see Exhibit 1-2): 1. Domestic Marketing (domestic focus; home country customers; ethnocentric orientation). 1. Domestic Marketing (domestic focus; home country customers; ethnocentric orientation). 2. Export Marketing (indirect vs. direct exporting; country choice, exports; ethnocentric orientation; home country customers). 2. Export Marketing (indirect vs. direct exporting; country choice, exports; ethnocentric orientation; home country customers). 3. International Marketing (markets in many countries; polycentric orientation; use of multidomestic marketing when customer needs are different across national markets). 3. International Marketing (markets in many countries; polycentric orientation; use of multidomestic marketing when customer needs are different across national markets).

Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Evolution of Global Marketing (contd.) 4. Multinational Marketing (many markets; consolidation on regional basis; regiocentric orientation; standardization within regions). 5. Global Marketing (international, multinational & geocentric orientation; company’s willingness to adopt a global perspective; global products with local variations). 5. Global Marketing (international, multinational & geocentric orientation; company’s willingness to adopt a global perspective; global products with local variations).

Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Evolution of Global Marketing (contd.) Global Marketing: Global marketing refers to marketing activities that emphasize the following: Global Marketing: Global marketing refers to marketing activities that emphasize the following: 1.Standardization efforts. 2.Coordination across markets. 3.Global integration.

Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Evolution of Global Marketing (contd.) Global marketing does not necessarily mean that products can be developed anywhere on a global scale. Global marketing does not necessarily mean that products can be developed anywhere on a global scale. The economic geography, climate, and culture affect how companies develop certain products. The economic geography, climate, and culture affect how companies develop certain products. The Internet adds a new dimension to global marketing. The Internet adds a new dimension to global marketing. E-commerce retailers gain substantial savings by selling online. E-commerce retailers gain substantial savings by selling online.

Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Appendix: Theories of International Trade & the Multinational Enterprise Comparative Advantage Theory (see Exhibit 1-3) Comparative Advantage Theory (see Exhibit 1-3) –Absolute Advantage –Comparative Advantage –Commodity Terms of Trade –Principles of International Trade –Factor Endowment Theory International Product Cycle Theory (see Exhibit 1-4) International Product Cycle Theory (see Exhibit 1-4) –Economies of Scale

Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Appendix: Theories of International Trade & the Multinational Enterprise (contd.) –Economies of Scope –Technological Gap –Preference Similarity –Stages of International Product Cycle Theory: »Introduction Stage A U.S. company innovates on a new product in its home country. A U.S. company innovates on a new product in its home country.

Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Appendix: Theories of International Trade & the Multinational Enterprise (contd.) »Growth Stage Product standards emerge and mass production becomes feasible. Product standards emerge and mass production becomes feasible. »Maturity Stage Many U.S. and foreign companies vie for market share in the international markets. Many U.S. and foreign companies vie for market share in the international markets.

Chapter 1Kotabe & Helsen's Global Marketing Management, Third Edition, Appendix: Theories of International Trade & the Multinational Enterprise (contd.) »Decline Stage Companies in the developing countries also begin producing the product and marketing it in the rest of the world. Companies in the developing countries also begin producing the product and marketing it in the rest of the world. Internalization/Transaction Cost Theory Internalization/Transaction Cost Theory –Appropriability Regime –Dominant Design –Manufacturing and Marketing Ability

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