1. Part 3 CUSTOMER BEHAVIOR AND E-MARKETING.

2. 6: Consumer Buying Behavior
7: Business Markets and Buying Behavior
8: Reaching Global Markets
9: Digital Marketing and Social Networking

3. Chapter 8 Reaching Global Markets
Professor Jason C. H. Chen, Ph.D.
School of Business Administration
Gonzaga University
Spokane, WA 99258

4. Learning Objectives Understand the nature of global marketing strategy
Analyze the environmental forces that affect global marketing efforts
Understand several important international trade agreements
Identify methods of international market entry
Understand how customization differs from globalization

5. International Marketing
Developing and performing marketing activities across national boundaries
International markets provide growth opportunities
Many countries offer assistance and research to encourage international business
Export.gov, managed by the U.S. Department of Commerce’s International Trade Administration, collects a variety of resources to help businesses who want to export to other countries
Copyright © 2014 South-Western, Cengage Learning. ALL RIGHTS RESERVED.

6. International Marketing
Traditionally, most companies have entered the global marketplace incrementally as they gained knowledge about various markets and opportunities
McDonald’s and KFC
Born globals – Firms that are international from their inception
Often small technology-based firms
Earn most of their sales outside the domestic home market
eBay, Google, and Logitech
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7. Environmental Forces in Global Markets
Sociocultural
Economic
Technological
Competitive
Political, Legal, and Regulatory
Ethical and Social Responsibility
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8. Environmental Forces
Environmental forces may be dramatically different in international markets than in domestic markets
Research to understand the needs/desires of international customers is crucial to global marketing success
Proper environmental analysis of international markets can:
Generate financial rewards
Increase market share
Heighten customer awareness of products
Copyright © 2014 South-Western, Cengage Learning. ALL RIGHTS RESERVED.

9. Sociocultural Forces
Difficult to transfer marketing symbols, trademarks, logos, and products to international markets
If these are associated with objects that have religious or cultural significance in a particular culture
Buyers’ perceptions of different countries influence product adoption and use
Consumer preferences for products depend on:
Country of origin
Product category of competing products

10. Sociocultural Factors
Extent to which a product’s brand image and country of origin influence purchases is subject to variation based on national culture characteristics
Cultural differences have implications for:
Product development
Advertising
Packaging
Pricing

11. Sociocultural Forces Social Influences Family Religion Education
Health
Recreation
Language
Country of Origin
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12. Sociocultural Factors
Marketing activities are influenced by beliefs and values regarding family, religion, education, health, and recreation
Can be difficult to:
Adapt marketing efforts to different preferences, tastes, and idioms
Transfer marketing symbols, trademarks, logos, and even products to international markets
Consumer preferences for products depends on their impression of the country of origin
Faster acceptance of a product or service through:
Sensitivity to and understanding of cultural differences
Cultural similarities
Copyright © 2014 South-Western, Cengage Learning. ALL RIGHTS RESERVED.

13. Economic Forces Global marketers must understand:
International trade systems
Economic stability/instability of nations
Trade barriers
Economic disparities between nations
Instability is a guaranteed constant in the global business environment
Developing nations, while poorer, offer much market potential
Copyright © 2014 South-Western, Cengage Learning. ALL RIGHTS RESERVED.

14. Economic Forces Many differences between nations exist:
Currency valuation is an important economic factor in the global business environment
Floating exchange rate - Allows the currencies to fluctuate, or float, according to the foreign exchange market
Gross domestic product (GDP) – The market value of a nation’s total output of goods and services for a given period; an overall measure of economic standing
Gives insights into a nation’s wealth and market potential
Standards of living
Availability of credit
Buying power
Income distribution
National resources
Exchange rates
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15. The Top 10 Richest Nations
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16. Table 8.1 Comparative Analysis of Selected Countries
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17. Political, Legal, and Regulatory Forces
Political, legal, and regulatory forces are often intertwined
A nation’s legal and regulatory infrastructure reflect its political situation
Elected or appointed officials:
Enact legislation
Interpret legal decisions
Operate regulatory agencies
Import tariff – A duty levied by a nation on goods bought outside its borders and brought into the country
Quota – A limit on the amount of goods an importing country will accept for certain product categories in a specific period of time
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18. The Best Countries for Entrepreneurs
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19. Nontariff Trade Restrictions
Quota
Limit on the amount of goods an importing country will accept for certain product categories in a specific period of time
Embargo
Government’s suspension of trade in a particular product or with a given country

20. International Trade
Exchange controls: Government restrictions on the amount of a particular currency that can be bought or sold
Balance of trade: Difference in value between a nation’s exports and its imports
Government’s attitude toward importers has a direct impact on economic feasibility of exporting to that country

21. Ethical and Social Responsibility Forces
Accepted business practices vary from country to country
Differences exist in ethical standards:
Bribery
Intellectual property protection
Different modes of operation
Under the Foreign Corrupt Practices Act:
It is illegal for U.S. firms to make large payments or bribes to influence policy decisions of foreign governments
Publicly held U.S. corporations are subjected to rigorous internal controls and record-keeping requirements for overseas operations

22. Ethical and Social Responsibility Forces: Different Cultural Practices
Self-reference criterion (SRC) - Unconscious reference to one’s own cultural values, experiences, and knowledge
Cultural relativism: Morality varies from one culture to another
Business practices are differentially defined as right or wrong by particular cultures

23. Competitive Forces Arise due to:
Interconnected international marketplace
Advances in technology
Firms that operate internationally should:
Be aware of the competitive forces in the countries they target
Identify the interdependence of countries and the global competitors in those markets
Be mindful of global customers

24. Table 8.3: Ranking of the Most Competitive Countries in the World
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25. Technological Forces
Advances in technology make international marketing activities affordable and convenient
Interactive web systems
Instant messaging
Podcast downloads
Technological infrastructure varies by country
Many developing nations are beginning to capitalize on opportunities to surpass existing technology

26. Regional Trade Alliances, Markets, and Agreements
Regional trade alliances create opportunities and impose constraints on international trade
North American Free Trade Agreement (NAFTA)
European Union (EU)
Southern Common Market (MERCOSUR)
Asia-Pacific Economic Cooperation (APEC)
Association of Southeast Asian Nations (ASEAN)
World Trade Organization (WTO)

27. North American Free Trade Agreement (NAFTA)
NAFTA was implemented in 1994, effectively merged Canada, Mexico, and the USA into one market of nearly 4600 million consumers.
Eliminated all tariffs to create a free trade area
Merged Canada, Mexico, and the United States into one market
Provides additional opportunities to integrate trade among all the nations in the Western Hemisphere
Dominican Republic–Central American Free Trade Agreement (CAFTA-DR)

28. European Union (EU)
An economic and political union established in 1993 after the ratification of the Maastricht Treaty by members of the European Community (established in 1958) and since expanded to include numerous Central and Eastern European nations
The establishment of the EU expanded the political scope of the European Economic Community, especially in the area of foreign and security policy, and provided for the creation of a central European bank and the adoption of a common currency, the euro (€). Currently, there are 28 member states including UK.
Works toward:
Standardizing business regulations and requirements, import duties, and value-added taxes
Eliminating customs checks
Creating a standardized currency for use by all members

29. Productivity vs. Vacation Time
Discussion Point
Productivity vs. Vacation Time
U.S. is the most productive country in the world
On average, take less vacation days annually than other countries
Studies show that GDP per hours works in higher in some European countries
Research also reveals that breaks from work actually increase productivity
Does less vacation time make the United States more or less competitive?
Why is America the 'no-vacation nation'?
(CNN) -- Let's be blunt: If you like to take lots of vacation, the United States is not the place to work.
'Americans work like robots'

30. Southern Common Market (MERCOSUR)
Established the Treaty of Asunción in 1991 to unite Argentina, Brazil, Paraguay, and Uruguay as a free trade alliance
Venezuela joined in Currently, Bolivia, Chile, Colombia, Ecuador, and Peru are associate members.
Promotes free circulation of goods, services, and production factors among the countries
Establishes a common external tariff and commercial policy
Asunción (亚松森)-the capital and largest city of Paraguay.

31. Asia-Pacific Economic Cooperation (APEC)
APEC established in 1989 and it promotes open trade and economic and technical cooperation among 21-member nations.
The alliance represents approximately 41 percent of the world’s population, 54 percent of world GDP, and nearly 44 percent of global trade.
Facilitates business and its practice of allowing the business/private sector to participate in a wide range of APEC activities.
Q: Is USA a member of APEC?
A: Yes, and USA is one of the 13 initial members.

33. Association of Southeast Asian Nations (ASEAN)
ASEAN was established in 1967, promotes trade and economic integration among member nations
As of 2010 the ASEAN has 10 member states, one candidate member state, and one observer state.
Members have expressed that there will be no common currency or fully free labor flows between members

34. The World Trade Organization (WTO)
An entity that promotes free trade among member nations by eliminating trade barriers and educating individuals, companies, and governments about trade rules around the world
Founded in 1995 and has 160 members (as of 2014).
Successor to General Agreement on Tariffs and Trade (GATT) – An agreement among nations to reduce worldwide tariffs and increase international trade
Dumping – Selling products at unfairly low prices
Click here to access the WTO homepage

35. Modes of Entry into International Markets
Stage 1 – No regular export activities
Stage 2 – Export via independent representatives (agents)
Stage 3 – Establishment of one or more sales subsidiaries internationally
Stage 4 – Establishment of international production/manufacturing facilities
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36. Fig. 8.1: Levels of Involvement in Global Marketing
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37. Importing and Exporting
Importing: Purchase of products from a foreign source
Exporting: Sale of products to foreign markets
Enables firms of all sizes to participate in global business
Entails minimal effort and cost
Modifications may be the major expenses in adapting a product for the foreign market

38. Trading Company
A company that links buyers and sellers in different countries
Is not involved in manufacturing and does not own assets related to manufacturing
Acts like a wholesaler; purchases products in one country for a low price and sells them to buyers in another country
Reduces risk to the company wanting to trade internationally

39. Licensing
When potential markets are found across national boundaries, and when production, technical assistance, or marketing know-how is required, licensing is an alternative to direct investment.
The licensee (the owner of the foreign operation) pays commissions or royalties on sales or supplies used in manufacturing
An attractive alternative when:
Resources for direct investment are not ________
Product sold is outside the core __________ of a company
A foreign country is politically _________
available
competency
unstable

40. Franchising
Franchising is a form of licensing in which a company (franchiser) grants a franchisee the right to market its product, using its name, logo, methods of operation, advertising, products, and other elements associated with the franchiser’s business.
In return for a financial commitment and an agreement to conduct business in accordance with the franchiser’s standard of operations
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41. Benefits of International Franchising
Allows franchisers to minimize the risks of international marketing:
The franchiser does not have to put up a large capital investment
The franchiser’s revenue stream is fairly consistent because franchisees pay a fixed fee and royalties
The franchiser retains control of its name and increases global penetration
Franchise agreements ensure a standard of conduct and protect the franchise name

42. Three Forms of Contract Manufacturing
Contracting manufacturing occurs when a company hires a foreign firm to produce a designated volume of the firm’s product to specification and the final product carries the domestic firm’s name.
Contracting of noncore operations from internal production within a business to an external entity that specializes in that operation
________________
Outsourcing
Moving a business process that was done domestically at the local factory to a foreign country, regardless of whether the production accomplished in the foreign country is performed by the local company or a third party
_________________
Offshoring
Contracting with an organization to perform some or all business functions in a country other than the country in which the product will be sold
Offshore outsourcing

43. Joint Venture
Joint venture – A partnership between a domestic firm and a foreign firm or government
Popular in industries requiring _______ investments
May be a political necessity because of laws and regulations
Strategic alliances – A partnership that is formed to create a competitive advantage on a worldwide basis
Represented by an agreement to work together
Partners retain their distinct identities
Each partner bringing a core competency to the union
____________- Companies cooperate and compete
large
Co-opetition

44. Direct Ownership
Direct ownership is a possibility that a company makes a long-term commitment to marketing in a foreign country that has a:
__________ market
__________ political and economic environment
Owning facilities may be too expensive for many firms
Multinational enterprise: Firm that has operations or subsidiaries in many countries
Subsidiaries may be semi-autonomous or part of a network led by headquarters
Promising
Suitable

45. Table 8.5 - Marketing Mix Issues Internationally

46. Customization vs. Globalization of International Marketing Mixes
Marketers must realize that similarities and differences exist across all countries
Customization: Adapting marketing strategy and marketing mixes according to cultural, regional, and national differences
The traditional approach to marketing
Globalization – The development of marketing strategies that treat the entire world (or its major regions) as a single entity
Entails producing standardized products, promotion campaigns, prices, and distribution channels for all markets
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47. Globalization
Developing marketing strategies globally as for a single entity
Standardized products
Promotion campaigns
Prices
Distribution channels for all markets
Opportunities generated by global presence
________ to local market differences
Exploit economies of global scale
Exploit economies of global scope
Mine optimal locations for activities and resources
_________ the transfer of knowledge across locations
Adapt
Maximize

48. The 10 Largest Global Corporations
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49. Organizational Architecture
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50. Video Case 8.1
Evo:
the Challenge of Going Global

51. Summary
Evo is an active sports retailer that has unexpectedly become a global distributor. Founded as an online store in 2001, the company opened its Seattle-based retail store four years later; this combination of e-commerce and physical stores allows evo to carry a greater selection and extend its global reach while providing customers with a way to interact with its products. Approximately 5 percent of evo’s business comes from outside the United States, but the company has been constrained by its relationships with international vendors. Evo hopes to work with its vendors to make global selling more feasible. In the meantime, the company continues to ship directly to consumers and engage with its fans through the Internet.

52. 1. What are both the positive and negative outcomes from using exclusive dealer agreements that restrict global distribution?
Vendors create exclusive dealer arrangements with evo to avoid saturating markets overseas and to maintain control over their products. By limiting distribution, manufacturers are able to exert some control over other elements of the marketing mix, such as price.
Because retailers often do not own many of the brands they sell, manufacturers can maintain the right to determine where their products are sold and how much to distribute to the company. If consumers from foreign countries try to order these brands, they will receive notification that their order has been canceled.

53. 2. What are the unique product features that could make evo a global brand?
Evo creates global brand exposure through the Internet. The company launched evoTrip as a service for adventurous sports enthusiasts who want to travel. EvoTrip arranges the trips with the goal to connect people to local cultures, communities, and sports.
In addition to increasing its customer base, evoTrip allows the organization to form relationships with consumers overseas. Evo’s fans also find ways to ship the company’s products internationally.

54. 3. What should evo's marketing strategy be to go global?
Evo should continue to build strong relationships with global consumers and with its vendors to make global selling more feasible. The company might also choose to continue to open more physical stores and create its own brand of products that it could distribute internationally.