Developing a Global Vision Lamb, Hair, McDaniel Chapter 5 Developing a Global Vision CHAPTER 5 Developing a Global Vision © Photos.com/Jupiterimages

Chapter 4 Developing a Global Vision OPINION QUESTION Moore Electronics sells automated lighting for airport runways. The government of an eastern European country has offered Moore a contract to provide equipment for the 15 major airports in the country. The official in charge of awarding the contract, however, is demanding a 5 percent kickback. He told Moore to build this into the contract price so that there would be no cost to Moore. Without the kickback, Moore loses the contract. Such kickbacks are considered a normal way of doing business in this country. Should Moore incorporate this kickback into his bid? Yes, since it is a normal way of doing business in this European country No, since it is not a universally accepted practice.

Rewards of Global Marketing Chapter 5 Developing a Global Vision Rewards of Global Marketing Having a global vision means… Recognizing and reacting to international marketing opportunities Using effective global marketing strategies Being aware of threats from foreign competitors LO1

Importance of Global Marketing to the U. S. Chapter 5 Developing a Global Vision Importance of Global Marketing to the U. S. Derives 13 percent of gross domestic product (GDP) from world trade. 27 percent of manufacturing jobs in U.S. are supported by exports. U.S. businesses export over $1.7 trillion in goods and services annually. More smaller companies are aggressively pursuing international markets. LO1

The Fear of Trade and Globalization Chapter 5 Developing a Global Vision The Fear of Trade and Globalization Millions of Americans have lost jobs Millions fear losing jobs Threat of outsourcing if workers do not accept pay cuts Vulnerability to operations moving offshore LO1

Benefits of Globalization Chapter 5 Developing a Global Vision Benefits of Globalization Expands economic freedom Spurs competition Raises productivity and living standards Offers access to foreign capital, global export markets, and advanced technology Promotes higher labor and environmental standards Acts as a check on government power LO1

Blocking Foreign Investment Chapter 5 Developing a Global Vision Blocking Foreign Investment Many governments, such as China, Russia, and Canada, are blocking foreign purchases of factories, land and companies. The U.S. could be accused of this as well. © iStockphoto.com/Joerg Reimann LO2 7

Global Marketing Standardization Chapter 5 Developing a Global Vision Global Marketing Standardization Global Marketing Standardization Production of uniform products that can be sold the same way all over the world. LO2

External Environment Facing Global Marketers Chapter 5 Developing a Global Vision External Environment Facing Global Marketers Economic and Technological Development Culture Political Structure Natural Resources Demographic Makeup LO3

Chapter 5 Developing a Global Vision Culture Culture The common set of values shared by its citizens that determine what is socially acceptable. © Pool/Getty Images LO3

Chapter 5 Developing a Global Vision Culture Factors to keep in mind when dealing with different cultures: 1. Language and cultural idioms 2. Customs and traditions 3. Values and expectations of sales presentations LO3 11

Economic and Technological Development Chapter 5 Developing a Global Vision Economic and Technological Development Developed Country Less Developed Country Complex, sophisticated industries Basic industries LO3

Economic Development: China and India Chapter 5 Developing a Global Vision Economic Development: China and India China and India have two of the highest growth rates in the world. Have the world’s two largest populations. Among highest levels of income disparity. Great linguistic and cultural diversity. LO3 13

Political Structure and Actions Chapter 5 Developing a Global Vision Political Structure and Actions No private ownership Minimal individual freedom Little central government Maximum personal freedom LO3

Legal Considerations LO3 Tariff Quota Boycott Exchange Control Chapter 5 Developing a Global Vision Legal Considerations Tariff Quota Boycott Exchange Control Market Grouping Trade Agreement A tax levied on goods entering a country Limit on the amount of a product entering a country Exclusion of products from a country Foreign exchange must be sold to a control agency Common trade alliance An agreement to stimulate international trade LO3

Political and Legal Considerations Chapter 5 Developing a Global Vision Political and Legal Considerations The Uruguay Round made changes in world trading practices Entertainment, pharmaceuticals, integrated circuits, and software Financial, legal, and accounting services Agriculture Textiles and apparel And created a new trade organization: The World Trade Organization LO3

Doha Round LO3 Began in 2001 Highly contentious from the beginning Chapter 5 Developing a Global Vision Doha Round Began in 2001 Highly contentious from the beginning Failed in summer, 2008 First multilateral free trade act failure since WWI Cost of Failure: $100 billion annually LO3

Political and Legal Considerations Chapter 5 Developing a Global Vision Political and Legal Considerations CAFTA NAFTA European Union Agreements and Organizations LO3

Marketing Considerations: Chapter 5 Developing a Global Vision Demographic Makeup Marketing Considerations: Population density Urban or rural Age LO3

Shortages in natural resources create: Chapter 5 Developing a Global Vision Shortages in natural resources create: International dependencies Shifts of wealth Inflation and recession Export opportunities if resources are abundant Stimulus for military intervention LO3

Why “Go Global”? LO4 Earn additional profits Chapter 5 Developing a Global Vision Why “Go Global”? Earn additional profits Leverage a unique product or technological advantage Possess exclusive market information Saturated domestic markets Excess capacity Utilize “economies of scale” LO4

Chapter 5 Developing a Global Vision Exhibit 5.3 Risk Levels for Five Methods of Entering the Global Marketplace LO4

Entering the Global Marketplace Chapter 5 Developing a Global Vision Entering the Global Marketplace Licensing Legal process allowing use of manufacturing/patents/knowledge Contract Manufacturing Private-label manufacturing by a foreign country Joint Venture Domestic firm buys/joins a foreign company to create new entity Export Sell domestically produced products to buyers in other countries Direct Investment Active ownership of a foreign company/manufacturing facility LO4

The Global Marketing Mix Chapter 5 Developing a Global Vision The Global Marketing Mix The first step in creating a marketing mix is developing a thorough understanding of the global target market… HOWEVER …global marketing research is conducted in vastly different environments. LO5 24

Product and Promotion LO5 Same One Product Product One Message Chapter 5 Developing a Global Vision Product and Promotion One Product One Message Product Adaptation Promotion Invention Same Message Change LO5

Place (Distribution) LO5 Chapter 5 Developing a Global Vision Place (Distribution) Adequate distribution is necessary for success in global markets Lack of distribution infrastructure and cultural differences create problems Logistics and shipping costs have been a growing challenge for U.S. companies looking to move production overseas. Global trade has added to strains and charges for all forms of transportation. LO5

Chapter 5 Developing a Global Vision Pricing Must consider transportation and insurance costs, taxes and tariffs Determine what customers will spend Ensure that foreign buyers will pay price May need to simplify a product to lower price Don’t assume that low-income countries are willing to accept lower quality LO5

Exchange Rates Floating Exchange Rates is… LO5 Chapter 5 Developing a Global Vision Exchange Rates Exchange Rates The price of one’s currency in terms of another country’s currency. Floating Exchange Rates is… a system in which prices of different currencies move up and down based on the demand for and the supply of each currency. LO5

Chapter 5 Developing a Global Vision Dumping Dumping is… the sale of an exported product at a price lower than that charged for the same or a like product in the “home” market of the exporter. LO5

Countertrade LO5 Countertrade Chapter 5 Developing a Global Vision Countertrade Countertrade A form of trade in which all or part of the payment for goods or services is in the form of other goods or services. LO5

The Impact of the Internet Chapter 5 Developing a Global Vision The Impact of the Internet Opening an e-commerce site puts a company in the international marketplace Internet Economy remains hindered by brick and mortar rules, regulations, and habits LO6