Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 3-1 Chapter 3: Understanding the Marketing Environment & Global Issues  Deciding to Go Global –“Go” or “no go” –Which global markets are most attractive?  We will treat this as a market segmentation decision (Ch. 7)  Factors in the External Environment –Trends that pose opportunities or threats –SW [OT] (from Ch. 2) The World FactbookFactbook provides valuable information on many countries

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 3-2 Decision Model to Enter Foreign Markets External Factors of Influence

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 3-3 The [Macro] Economic Environment: Indicators of Economic Health  Key economic indicators: –Gross domestic product (GDP): –Gross national product (GNP): –Economic infrastructure Quality of country’s distribution, financial, and communications systems –The Business Cycle Prosperity Recession Recovery Depression Inflation/Unemployment –Other: savings rate, debt/credit levels

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 3-4 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 Hall 5 Competitive Industry Structure –Monopoly – one company holds all market share; can price at will (unless regulated). Example? –Oligopoly – relatively small # companies hold majority mkt share; companies control prices. Ex? –Monopolistic competition – many companies share market; each has some degree of price control. Example? –Perfect competition – many companies producing homogenous products; none has pricing control. Ex?

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 6 The Technological Environment  Technology used for marketing strategies –Ex: internet / social media  Technology used for competitive advantage –Ex: manufacturing technology, MIS  Disruptive technologies –A form of competition as well—potential to change industry structure

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 3-7 The Political and Legal Environment: Legal Influences on Business  Local, state, national, and global laws and regulations affect businesses –Ex: New environmental regulations  Purpose of American law –To ensure fair competition –To ensure consumer welfare- make sure that businesses don’t take advantage of consumers –Note: Internationally, laws not same

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 3-8 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

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 3-9 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 Hall 3-10 The Sociocultural Environment  Trends in characteristics of people in society –Demographic groups/categories –Cultural values & beliefs Product appropriateness Brand and product names (translation issues and/or appropriateness) Packaging (colors have cultural implications) Example: Skinny Dip Candles sold in Dubai –Global considerations: Norms, customs, mores, and conventions Language Ethnocentrism - tendency to believe one’s own culture is best

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall The Natural Resource Environment*  Availability of raw materials  Sustainability of business practices

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 3-12 Ethical Issues in Global Business  Truthfulness in business dealings varies by country (“acceptability” varies)  Bribery  Extortion  Transparency Bribepayers Index

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 3-13 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 Hall 3-14  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 Whether changes in promotional strategies are needed –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