Chapter 3 Thrive in the Marketing Environment: The World Is Flat

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-2Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-2 Chapter Objectives  Understand the big picture of international marketing  Explain the World Trade Organization, economic communities, and how countries protect local industries  Understand how factors in the external business environment influence marketing strategies and outcomes  Explain the strategies that a firm can use to enter global markets  Understand the arguments for standardization vs. localization of marketing mix strategies in global markets

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-3Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-3 Real People, Real Choices: Decision Time at eBay  Which option should eBay undertake? –Option 1: Customize eBay by adding additional categories for artisans’ products, but don’t create a separate brand –Option 2: Create a completely separate, custom branded experience –Option 3: Create a hybrid model using an independent marketplace and licensed brand

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-4Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-4 Global Marketing  World trade: The flow of goods and services among different countries—the value of all the exports and imports of the world’s nations  Countertrade: A type of trade in which goods are paid for with other items instead of with cash World Trade Organization

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-5 Figure 3-1 North American Trade Flows (in Billions of Dollars)

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-6Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-6 Deciding to Go Global  “Go” or “no go” – Is it in the best interest of the firm to remain in home market or to go where foreign business opportunities exist? –Which global markets are most attractive?

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-7Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-7 Figure 3-2 Decision Model for Entering Foreign Markets

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-8Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-8 Deciding to Go Global  Must consider market conditions and competitive advantage when making a decision –Chinese firms such as Chery are now exporting their brands to other countries, including the U.S.

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-9Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-9 Road Blocks at the Borders  Protectionism –Quotas, embargoes, and tariffs  Initiatives in international regulation and cooperation help trade –General Agreement on Tariffs and Trade (GATT) –World Trade Organization (WTO)  Economic communities help to promote trade

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-10Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-10 It’s Debatable Class Discussion Question Do you think that the WTO can succeed in eliminating trade barriers? If so, what would be some of the positive and negative aspects of achieving a truly free marketplace? Could some countries benefit at the expense of others? Explain!

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-11 Which of the following statements about world trade is false? 1.World trade activity is steadily increasing year to year. 2.World trade refers to the value of all exports and imports of the world’s nations. 3.All countries participate equally in world trade. 4.Some countries barter for goods rather than paying with currency.

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-12 Which of the following statements about world trade is false? 1.World trade activity is steadily increasing year to year. 2.World trade refers to the value of all exports and imports of the world’s nations. 3.All countries participate equally in world trade. 4.Some countries barter for goods rather than paying with currency.

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-13 The growth in global trade has been accompanied by an increase in unsafe products produced by the Chinese. 1.True 2.False

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-14 The growth in global trade has been accompanied by an increase in unsafe products produced by the Chinese. 1.True 2.False

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-15 Which of the following is not a form of protectionism? 1.Countertrade 2.Import quotas 3.Embargo 4.Tariffs

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-16 Which of the following is not a form of protectionism? 1.Countertrade 2.Import quotas 3.Embargo 4.Tariffs

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-17Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-17 Analyzing the Global Marketing Environment  A company going global must understand local conditions in the targeted country, including the: –Economic environment –Competitive environment –Technological environment –Political/legal environment –Sociocultural environment The World Factbook provides valuable information on many countriesFactbook

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-18Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-18 Understanding Local Conditions Marketers sometimes hire specialized research firms, like Asia Insight, to help master the intricacies of foreign markets

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-19Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-19 The Economic Environment: Indicators of Economic Health  Key economic indicators: –Gross domestic product (GDP): Total dollar value of goods/services a country produces within its borders in a year –Gross national product (GNP): Value of all goods and services produced by a country’s citizens or organizations –Economic infrastructure Quality of country’s distribution, financial, and communications systems

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-20Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-20 The Economic Environment: Level of Economic Development  Least developed country (LDC) –Economic base is often agricultural  Developing countries –Economy shifts emphasis from agriculture to industry  Developed countries –Offer wide range of opportunities for international marketers

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-21Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-21 The Economic Environment: The Business Cycle  All economies go through periods of: –Prosperity –Recession –Recovery –Depression –Inflation

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-22Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-22 The Competitive Environment: Analyzing the Market and Competition  Competitive intelligence: Gathering and analyzing publicly available information about rivals to develop superior marketing strategies –Collected from news media, the Internet, and publicly available government documents

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-23Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-23 The Competitive Environment: Competition in the Microenvironment  Competition in the microenvironment –Competition for consumer’s discretionary income –Competition among products to satisfy the same consumer’s needs/wants –Competition among brands offering similar goods/services on the basis of brand reputation or perceived benefits

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-24Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-24 The Competitive Environment: Competition in the Macroenvironment  Competition in the macroenvironment (overall structure of industry) –Monopoly –Oligopoly –Monopolistic competition –Perfect competition

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-25Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-25 The Technological Environment  Technology: –Provides firms with important competitive advantages –Profoundly affects marketing activities –Can transform industries  Patent: –Legal document giving inventors exclusive rights to produce/sell a particular invention in that country

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-26Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-26 The Political and Legal Environment: Legal Influences on Business  Local, state, national, and global laws and regulations affect businesses  Purpose of American law: –To make sure businesses compete fairly with each other –To make sure that businesses don’t take advantage of consumers

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-27Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-27 The Political and Legal Environment: Political Influences on Business  Retaliatory actions against American businesses sometimes occur as a result of political activity or war  Political constraints on trade are commonly imposed: –Economic sanctions –Nationalization –Expropriation

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-28Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-28 The Political and Legal Environment: Legal Influences on Business  Regulatory constraints on trade often restrict the marketing of goods  Also common—local content rules –A portion of a product must consist of components supplied by industries in the host country or economic community  Human rights issues may limit foreign countries business opportunities

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-29Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-29 The Sociocultural Environment  Key sociocultural considerations: –Demographics –Cultural values Collectivist vs. individualistic cultures –Norms, customs, mores, and conventions –Language –Ethnocentrism: The tendency to prefer products from one’s own culture

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-30Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-30 Ethical Issues in Global Business  Truthfulness in business dealings varies by country  Bribery: When someone voluntarily offers payment to get an illegal advantage  Extortion: When someone in authority extracts payment under duress

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-31Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-31 Table 3-5 Transparency Bribepayers Index RankCountry2006 Index* 1Switzerland7.81 2Sweden Australia7.59 9United States Russia China India4.62 * Lower scores indicate a higher propensity to pay bribes

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-32 Factors related to the economic environment that global marketers must consider include all but which of the following? 1.Level of country economic development 2.Economic health indicators 3.Intensity of competition 4.The current business cycle

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-33 Factors related to the economic environment that global marketers must consider include all but which of the following? 1.Level of country economic development 2.Economic health indicators 3.Intensity of competition 4.The current business cycle

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-34 If you prefer products from your own culture, then you have a(n) _________ tendency. 1.ethnocentric 2.sustainable 3.export 4.global marketing

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-35 If you prefer products from your own culture, then you have a(n) _________ tendency. 1.ethnocentric 2.sustainable 3.export 4.global marketing

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-36 Oligopolies are characterized by a market structure in which many firms with slightly different products offer consumers unique benefits. 1.True 2.False

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-37 Oligopolies are characterized by a market structure in which many firms with slightly different products offer consumers unique benefits. 1.True 2.False

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-38 Which of the following statements is true? 1.Conflicting customs are rarely a problem in international marketing 2.Language difficulties challenge marketers when breaking into foreign markets 3.Ethical standards in the International market are similar to that found in the U.S. 4.The United States is considered to be a collectivist culture.

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-39 Which of the following statements is true? 1.Conflicting customs are rarely a problem in international marketing 2.Language difficulties challenge marketers when breaking into foreign markets 3.Ethical standards in the International market are similar to that found in the U.S. 4.The United States is considered to be a collectivist culture.

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-40Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-40 Figure 3.3 Market-Entry Strategies

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-41Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-41 How “Global” Should a Global Marketing Strategy Be?  Choose a marketing-mix strategy: –Standardization vs. localization Standardization: Offer the same products in all markets Localization: Offer a customized marketing mix for each country –Once standardization or localization is chosen, it’s time to tweak the marketing mix

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-42Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-42 How “Global” Should a Global Marketing Strategy Be? Localization requires adaptation

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-43Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-43 How “Global” Should a Global Marketing Strategy Be?  Tweaking the marketing mix –Product decisions: Straight extension strategy: Market existing product in foreign market Product adaptation strategy Modifies product for foreign market Product invention strategy Develops new product for foreign market –Promotion decisions: Whether or not to modify

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-44Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-44 How “Global” Should a Global Marketing Strategy Be?  Tweaking the marketing mix –Price decisions: Products are often more expensive to produce for foreign markets. Free trade zones Gray market goods Dumping –Distribution decisions: Getting the product to remote locations is often difficult

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-45 Which of the following global market strategies is associated with the greatest amount of risk? 1.Contractual agreements 2.Exporting strategy 3.Direct investment 4.Strategic alliance

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-46 Which of the following global market strategies is associated with the greatest amount of risk? 1.Contractual agreements 2.Exporting strategy 3.Direct investment 4.Strategic alliance

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-47 Your firm decides to create one product for all the countries it targets around the world. Your firm has adopted a(n) _________ strategy. 1.cause marketing 2.localization 3.embargo 4.standardization

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-48 Your firm decides to create one product for all the countries it targets around the world. Your firm has adopted a(n) _______ strategy. 1.cause marketing 2.localization 3.embargo 4.standardization

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-49 Trying to package, refrigerate, and store goods in less developed countries is a significant concern for a firm’s distribution decisions. 1.True 2.False

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-50 Trying to package, refrigerate, and store goods in less developed countries is a significant concern for a firm’s distribution decisions. 1.True 2.False

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-51 When marketers offer similar, but not identical products in foreign markets, it is called a _________: 1.strategic alliance 2.product adaptation strategy 3.joint venture 4.straight extension strategy

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-52 When marketers offer similar, but not identical products in foreign markets, it is called a _________: 1.strategic alliance 2.product adaptation strategy 3.joint venture 4.straight extension strategy

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-53 Gray market goods are those items manufactured outside of a country and then imported without the permission of the trademark holder. 1.True 2.False

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-54 Gray market goods are those items manufactured outside of a country and then imported without the permission of the trademark holder. 1.True 2.False

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-55Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-55 Real People, Real Choices: Decision Made at eBay  Robert chose option 3 –Implementation: eBay licensed the “WorldofGood.com” brand and launched project with both community commerce platforms using search engine, banner, affiliate, , and viral marketing, as well as PR/event marketingWorldofGood.com –Measuring success: Used metrics to measure operational business and co-branding strategy success

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-56Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-56 Keeping It Real: Fast-Forward to Decision Time at Plan-It Marketing  Meet Cindy Tungate, president of Plan- It Marketing, a marketing research firm  Plan-It’s client Priceline needs help in planning its business  The decision to be made: What marketing research strategy will maximize results for Priceline?

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-57Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-57 Copyright © 2009 Pearson Education, Inc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.