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 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 Hall3-3 Figure 3-1 North American Trade Flows (in Billions of Dollars)

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-4Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-4 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 Hall3-5Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-5 Figure 3-2 Decision Model for Entering Foreign Markets

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-6Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-6 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 Hall3-7Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-7 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 Hall3-8Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-8 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 Hall3-9Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-9 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 Hall3-10Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-10 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 Hall3-11Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-11 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 Hall3-12Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-12 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 Hall3-13Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-13 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 Hall3-14Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-14 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 Hall3-15Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-15 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 Hall3-16Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-16 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 Hall3-17Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-17 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 Hall3-18Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-18 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 Hall3-19Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-19 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 Hall3-20Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-20 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 Hall3-21Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-21 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 Hall3-22Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-22 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 Hall3-23Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-23 Figure 3.3 Market-Entry Strategies

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-24Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-24 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 Hall3-25Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-25 How “Global” Should a Global Marketing Strategy Be? Localization requires adaptation

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-26Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-26 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 Hall3-27Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-27 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