1. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel CHAPTER 5 Developing a Global Vision 2011-2012 © Photos.com/Jupiterimages

2. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 2 Discuss the importance of global marketing Rewards of Global Marketing LO 1

3. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 3 Rewards of Global Marketing  Recognizing and reacting to international marketing opportunities  Using effective global marketing strategies  Being aware of threats from foreign competitors Having a global vision means… LO 1

4. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 4 Importance of Global Marketing to the U. S.  Derives 12 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. LO 1

5. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 5 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 LO 1

6. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 6 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 LO 1

7. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 7 Discuss the impact of multinational firms on the world economy Multinational Firms LO 2

8. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 8 Stages of Global Business Development 1 1 2 2 4 4 3 3 Companies operate in one country and sell into others Set up foreign subsidiaries to handle sales Virtual operation Operate an entire line of business in another country LO 2

9. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 9 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 LO 2

10. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 10 Global Marketing Standardization Production of uniform products that can be sold the same way all over the world. Global Marketing Standardization LO 2

11. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 11 Describe the external environment facing global marketers External Environment Facing Global Marketers LO 3

12. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 12 External Environment Facing Global Marketers Natural Resources Demographic Makeup Economic and Technological Development Culture Political Structure LO 3

13. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 13 Culture The common set of values shared by its citizens that determine what is socially acceptable. LO 3 © Pool/Getty Images

14. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 14 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 LO 3

15. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 15 Economic and Technological Development Developed Country Less Developed Country Complex, sophisticated industries Basic industries LO 3

16. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 16 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. LO 3

17. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 17 Political Structure and Actions No private ownership Minimal individual freedom Little central government Maximum personal freedom LO 3

18. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 18 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 LO 3

19. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 19 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 LO 3

20. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 20 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 LO 3

21. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 21 Political and Legal Considerations CAFTA NAFTA European Union Agreements and Organizations LO 3

22. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 22 LO 6 Exhibit 5.2 Members of G-20

23. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 23 Demographic Makeup Marketing Considerations:  Population density  Urban or rural  Age LO 3

24. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 24 Natural Resources Shortages in natural resources create:  International dependencies  Shifts of wealth  Inflation and recession  Export opportunities if resources are abundant  Stimulus for military intervention LO 3

25. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 25 Identify the various ways of entering the global marketplace Global Marketing by the Individual Firm LO 4

26. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 26 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” LO 4

27. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 27 LO 4 Exhibit 5.3 Risk Levels for Five Methods of Entering the Global Marketplace

28. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 28 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 LO 4

29. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 29 Export Intermediaries Buyer for Export Assumes all ownership risks and sells globally for its own account. Export Broker Plays the traditional broker’s role by bringing buyer and seller together. Export Agent Acts like a manufacturer’s agent for the exporter in the foreign market. LO 4

30. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 30 List the basic elements involved in developing a global marketing mix The Global Marketing Mix LO 5

31. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 31 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. LO 5

32. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 32 Product and Promotion One Product One Message Product Adaptation Promotion Adaptation Product InventionSameProductSameMessage ChangeMessageChangeProduct LO 5

33. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 33 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. LO 5

34. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 34 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 LO 5

35. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 35 Exchange Rates The price of one’s currency in terms of another country’s currency. Exchange Rates Exchange Rates LO 5 a system in which prices of different currencies move up and down based on the demand for and the supply of each currency. Floating Exchange Rates is…

36. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 36 Dumping LO 5 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. Dumping is…

37. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 37 Dumping Dumping may occur as a result of exporter business strategies that include: 1.Trying to increase an overseas market share 2.Temporarily distributing products to overseas markets to offset slack demand at home 3.Lowering unit costs by exploiting large-scale production 4.Attempting to maintain stable prices during periods of exchange rate fluctuations LO 5

38. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 38 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. Countertrade LO 5

39. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 39 Discover how the Internet is affecting global marketing The Impact of the Internet LO 6

40. Chapter 5 Copyright ©2012 by Cengage Learning Inc. All rights reserved 40 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 LO 6