McGraw-Hill/Irwin Copyright © 2008 by the McGraw-Hill Companies, Inc. All rights reserved. Marketing Dhruv Grewal Michael Levy Chapter 7 Global Marketing

7-2 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Proctor and Gamble China’s Success Keys to success: Partner, relationships, product, and price adjustments

7-3 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Growth of Global Market Globalization of Production

7-4 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin General Agreement on Tariffs and Trade (GATT) International Monetary Fund (IMF) World Trade Organization (WTO)

7-5 Assessing Global Markets

7-6 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Economic Analysis

7-7 Test Your Knowledge The greater the __________ of a country, generally, the better the opportunity a firm will have in that particular country. A)political freedom B)wealth C)population D)cultural similarities

7-8 Evaluating General Economic Environment Trade deficit vs. trade surplus Trade deficit trade surplus Gross Domestic Product (GDP) Gross National Income (GNI)

7-9 Purchasing Power Parity © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

7-10 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Global Human Development Index

7-11 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Evaluating Market Size and Population Growth Rate

7-12 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Evaluating Real Income 1.Evaluate income 2.Adjust product packaging 3.Adjust product pricing 4.Win

7-13 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Analyzing Infrastructure and Technological CapabilitiesInfrastructure Transportation Communication Distribution Channel Commerce

7-14 Test Your Knowledge Why is the communication system in a foreign market so important? A)To allow consumers to access information about the products and services available. B)To allow consumers to tell their friends about new products. C)To assist foreign-based workers in providing information to the home office. D)To ensure government knowledge of trade agreements.

7-15 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Analyzing Government Actions

7-16 Tariff and Quotas Tax Artificially raises prices Lowers demand Maximum limit Reduces availability of imported goods Tariffs Quotas Both benefit domestically made products because they reduce foreign competition

7-17 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Boycott Groups such as Ethical Consumer publish currentEthical Consumer boycott lists. Discussion question Have you ever boycotted a product?

7-18 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Ethical Dilemma 7.2: Protesting the War with the Wallet Dissatisfied global consumers Voiced dissatisfaction with US war policy Avoidance of U.S. products and services How do firms respond to these actions?

7-19 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Exchange Control Exchange rate Countertrade

7-20 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Trade Agreements

7-21 Test Your Knowledge A __________ consists of those countries that have signed a particular trade agreement. A)foreign coalition B)global band C)trading bloc D)trading coalition

7-22 The European Union The European Union (EU) Monetary and Trade Union Euro (not in the UK) Membership not consists of Western and Eastern European countries Newest petitioner Turkey

7-23 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Analyzing Sociocultural Factors Culture Power Distance Uncertainty Avoidance Individualism Masculinity Time Orientation

7-24 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Country Clusters

7-25 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Choosing a Global Entry Strategy Discussion question Why do you think most firms first try exporting? Export Franchising Strategic alliance Joint venture Direct investment

7-26 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Choosing a Global Marketing Strategy: Target Market (STP) Cultural nuances Subcultures View of product and consumer role Different positioning Adaptation Single positioning strategy

7-27 Test Your Knowledge In the past, global marketplace dominance was determined by such things as ability to develop and promote brand name products, and later in new product development. What are firms currently exploiting in their bid for dominant globalization? A)trade agreements B)financial superiority C)cheap labor D)technological skills

7-28 Adapting for Global Success How do firms successfully introduce a new product to a global market?

7-29 Case in Point: Nescafe in ChinaNescafe in China Challenge Answer Results Nestle wants to introduce its top global instant coffee brand Nescafe to China. Chinese consumers were not coffee drinkers thus needed to be educated in how to consume the product. Nescafe “3 in 1”, coffee, creamer and sweetener in one. Ideal mix for Chinese market easily reconstituted for best taste. Nescafe dominates the in-home coffee category in China.

7-30 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Global Marketing Mix: Product or Service Strategies Sell the same product or service in both the home country market and host country market Sell totally new products or services Sell a product or service similar to that sold in home country but include minor adaptations

7-31 Adding Value 7.1: MTV Conquers the World Seen in million households 164 countries, 34 channels, 18 languages Mix of standardized and local content benefited local music and artists EX: Salam Dangdut in IndonesiaDangdut in Indonesia

7-32 Global Marketing Mix: Global Pricing Strategies Price TariffsQuotas Anti- dumping Policies Economic Conditions Competitive factors

7-33 Managing the Global Marketing Mix How do firms manage the global marketing mix?

7-34 Case in Point: Wal-Mart’s Failed Experiment Challenge Answer Results To continue to grow the most successful retailer in the U.S., Wal-Mart. Stiff competition from entrenched local competitors, a sluggish economy as well as problems with workers and regulators led to Wal-Mart exiting the market in The sale to competitor Metro resulted in pre-tax loss of $1Billion. Wal-Mart enters Germany with the same value proposition (EDLP) it has in the U.S.

7-35 Some global channels are very long and complex. Consumer shop local small local stores. Suppliers must be creative in delivering to these outlets. Global Marketing Mix: Global Distribution Strategies

7-36 Global Marketing Mix: Global Communication Strategies Literacy levels vary by country Firms choose whether to adapt to language differences Cultural and religious differences also matter

7-37 Test Your Knowledge When creating a global distribution strategy, why is it important to shorten distribution channels wherever possible? A)To increase consumer confidence B)To reduce control of supply chain C)To reduce time-to-market D)To model current culture

7-38 Ethical Issues in Global Marketing: Environmental Concerns Waste Management 80/20 Rule: 80% of waste created by 20% of the population Many developing countries don’t manage waste well

7-39 Cleaning up the Earth How can countries balance development and environmental impact?

7-40 Case in Point: Mexico Cleans Up Its Act Challenge Answer Results To manage environmental impact while undergoing economic expansion. Using funds provided by North American Commission for Environmental Cooperation (CEC) and the North American Development Bank (NADBank) improved air quality.North American Commission for Environmental Cooperation (CEC)North American Development Bank (NADBank) Mexico now produces lower levels of some pollutants than either the U.S. or Canada and have lower energy use per capita. Proving environmental impact can be managed.

7-41 Ethical Concerns: Global Labor Issues Fair Wages Working conditions Child Labor

7-42 Ethical Concerns: Impact on Host Country Culture Cultural imperialism – Active, formal policy – Subtle, general attitude

7-43 Countertrade: Trade between two countries where goods are traded for other goods and not for hard currency. Cultural imperialism: The belief that one’s own culture is superior to that of other nations. Exchange rate: The measure of how much one currency is worth in relation to another. Globalization of production: Also known as offshoring, refers to manufacturers’ procurement of goods and services from around the globe to take advantage of national differences in the cost and quality of various factors of production. Gross Domestic Product (GDP): The market value of the goods and services produced by a country in a year. Gross National Income (GNI): GDP plus the net income earned from investments abroad. Infrastructure: The basic facilities, services, and installations needed for a community or society to function. Trade deficit: Occurs when a country imports more goods than it exports. Trade surplus: Occurs when a country exports more goods than it imports. Chapter 7 Glossary

7-44 Direct investment: Exit strategy that requires a firm to maintain 100 percent ownership of its plants, operation facilities, and offices in a foreign country, often through the formation of wholly owned subsidiaries. Exporting: Producing goods in one country and selling them in another. Franchising: A contractual agreement between a firm, the franchisor, and another firm or individual, the franchisee. Joint venture: Formed when a firm entering a new market pools its resources with those of a local firm to form a new company in which ownership, control, and profits are shared. Strategic alliance: Collaborative relationship between independent firms, though the partnering firms do not create an equity partnership; that is, they do not invest in one another. Chapter 7 Glossary for Global Entry Strategies