1. Global Markets and International Marketing Copyright © Houghton Mifflin Company. All rights reserved. PowerPoint Presentation by Charlie Cook 5 5 Part One Marketing and Its Environment

2. Copyright © Houghton Mifflin Company. All rights reserved. 5–25–2 Chapter Learning Objectives To understand the nature of global markets and international marketing To analyze the environmental forces affecting international marketing efforts To identify several important regional trade alliances, markets, and agreements To examine methods of involvement in international marketing activities To recognize that international marketing strategies fall along a continuum from customization to globalization

3. Copyright © Houghton Mifflin Company. All rights reserved. 5–35–3 Chapter Outline The Nature of International Marketing Environmental Forces in International Markets Regional Trade Alliances, Markets, and Agreements International Involvement Customization Versus Globalization of International Marketing Strategies

4. Copyright © Houghton Mifflin Company. All rights reserved. 5–45–4 The Nature of International Marketing International Marketing –Developing and performing marketing activities across national boundaries Provides growth opportunities Promotes innovation Fosters marketing of better, less expensive products

5. Copyright © Houghton Mifflin Company. All rights reserved. 5–55–5 Environmental Forces in International Markets Cultural, Social, and Ethical Forces –Beliefs and values about: Family Religion Education Health Recreation

6. Copyright © Houghton Mifflin Company. All rights reserved. 5–65–6

7. 5–75–7 Environmental Forces in International Markets (cont’d) Economic Differences Affecting International Marketing –Standards of living –Credit –Buying power –Income distribution –National resources –Exchange rates

8. Copyright © Houghton Mifflin Company. All rights reserved. 5–85–8 Environmental Forces in International Markets (cont’d) Trade Restrictions Affecting International Marketing –Import tariff A duty levied by a nation on goods bought outside its borders and brought in –Quota A limit on the amount of goods an importing country will accept for certain product categories in a specific period of time Border

9. Copyright © Houghton Mifflin Company. All rights reserved. 5–95–9 Environmental Forces in International Markets (cont’d) Trade Restrictions Affecting International Marketing (cont’d) –Embargo A governmental suspension of trade in a particular product or with a given country –Exchange controls Government restrictions on the amount of a particular currency that can be bought or sold

10. Copyright © Houghton Mifflin Company. All rights reserved. 5–10 Environmental Forces in International Markets (cont’d) Balance of Trade –The difference between the value of a nation’s imports and exports 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

11. Copyright © Houghton Mifflin Company. All rights reserved. 5–11

12. Copyright © Houghton Mifflin Company. All rights reserved. 5–12 Environmental Forces in International Markets (cont’d) Political and Legal Forces –Governmental policies, laws, and regulations –Import barriers (quotas, port-of-entry taxes) –Standards of ethics (payoffs, bribes) Technological Forces –Telecommunications (e-mail, cell phones, Internet) –Extent of technological infrastructure

13. Copyright © Houghton Mifflin Company. All rights reserved. 5–13 Regional Trade Alliances, Markets, and Agreements The North American Free Trade Agreement (NAFTA) –An alliance that merges Canada, Mexico, and the United States into a single market Eliminates barriers Eases investment Simplifies trade

14. Copyright © Houghton Mifflin Company. All rights reserved. 5–14 Regional Trade Alliances, Markets, and Agreements (cont’d) The European Union (EU) –An alliance that promotes trade among its member countries in Europe Market unification Common currency (euro) Economic efficiency

15. Copyright © Houghton Mifflin Company. All rights reserved. 5–15 Regional Trade Alliances, Markets, and Agreements (cont’d) The Common Market of the Southern Cone (MERCOSUR) –An alliance that promotes the free circulation of goods, services, and production factors, and has a common external tariff and commercial policy among member nations in South America

16. Copyright © Houghton Mifflin Company. All rights reserved. 5–16 Regional Trade Alliances, Markets, and Agreements (cont’d) Asia-Pacific Economic Cooperation (APEC) –An alliance that promotes open trade and economic and technical cooperation among member nations throughout the world

17. Copyright © Houghton Mifflin Company. All rights reserved. 5–17 Regional Trade Alliances, Markets, and Agreements (cont’d) 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 World Trade Organization (WTO) –An entity that promotes free trade among member nations Provide legal ground rules for international commerce and trade policy

18. Copyright © Houghton Mifflin Company. All rights reserved. 5–18 Levels of Involvement in Global Marketing FIGURE 5.1

19. Copyright © Houghton Mifflin Company. All rights reserved. 5–19 International Involvement Importing –The purchase of products from a foreign source Exporting –The sale of products to foreign markets Trading Companies –Companies that link buyers and sellers in different countries Not involved in actual manufacture of products Market and take title to goods to facilitate overseas exchange trading

20. Copyright © Houghton Mifflin Company. All rights reserved. 5–20 International Involvement (cont’d) Licensing –An alternative to direct investment requiring the licensee to pay commissions or royalties on sales or supplies used in manufacturing Franchising –A form of licensing in which the franchiser grants the franchisee the right to market its product in accordance with the franchiser’s standards BIG PACK of Asia

21. Copyright © Houghton Mifflin Company. All rights reserved. 5–21 International Involvement (cont’d) Contract Manufacturing –The practice of hiring a foreign firm to produce a designated volume of product to specification Joint Ventures –Joint venture A partnership between a domestic firm and a foreign firm or government –Strategic alliance A partnership (possibly of traditional rivals) formed to create a competitive advantage on a worldwide basis

22. Copyright © Houghton Mifflin Company. All rights reserved. 5–22 International Involvement (cont’d) Direct Ownership –A situation in which a company owns subsidiaries or other facilities overseas Multinational Enterprise –A firm that has operations or subsidiaries in many countries

23. Copyright © Houghton Mifflin Company. All rights reserved. 5–23

24. Copyright © Houghton Mifflin Company. All rights reserved. 5–24 Customization Versus Globalization of International Marketing Strategies Customization –Adjusting marketing mixes according to cultural, regional, and national differences Globalization –The development of marketing strategies that treat the entire world (or its major regions) as a single entity Includes standardization of products, promotion campaigns, prices, and distribution channels “Think globally, act locally”

25. Copyright © Houghton Mifflin Company. All rights reserved. 5–25 Customization Versus Globalization of International Marketing Strategies (cont’d) Effect of a Firm Having a Global Presence –Provides global competitive opportunities for creating value through adapting to local market differences exploiting economies of global scale and scope. acquiring optimal locations for activities and resources. maximizing the transfer of knowledge across locations.

26. Copyright © Houghton Mifflin Company. All rights reserved. 5–26 After reviewing this chapter you should: Understand the nature of global markets and international marketing. Be able to analyze the environmental forces affecting international marketing efforts. Be able to identify several important regional trade alliances, markets, and agreements. Be able to discuss methods of involvement in international marketing activities. Recognize that international marketing strategies fall along a continuum from customization to globalization.

27. Chapter 5 Supplemental Slides Copyright © Houghton Mifflin Company. All rights reserved. 5–27

28. Copyright © Houghton Mifflin Company. All rights reserved. 5–28 Key Terms and Concepts The following slides (a listing of terms and concepts) are intended for use at the instructor’s discretion. To rearrange the slide order or alter the content of the presentation –select “Slide Sorter” under View on the main menu. –left click on an individual slide to select it; hold and drag the slide to a new position in the slide show. –To delete an individual slide, click on the slide to select, and press the Delete key. –Select “Normal” under View on the main menu to return to normal view.

29. Copyright © Houghton Mifflin Company. All rights reserved. 5–29 Important Terms International Marketing –Developing and performing marketing activities across national boundaries Import Tariff –A duty levied by a nation on goods bought outside its borders and brought in Quota –A limit on the amount of goods an importing country will accept for certain product categories in a specific period of time

30. Copyright © Houghton Mifflin Company. All rights reserved. 5–30 Important Terms Embargo –A governmental suspension of trade in a particular product or with a given country Exchange Controls –Government restrictions on the amount of a particular currency that can be bought or sold Balance of Trade –The difference between the value of a nation’s imports and exports Trading Companies –Companies that link buyers and sellers in different countries

31. Copyright © Houghton Mifflin Company. All rights reserved. 5–31 Important Terms 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 The North American Free Trade Agreement (NAFTA) –An alliance that merges Canada, Mexico, and the United States into a single market. The European Union (EU) –An alliance that promotes trade among its member countries in Europe

32. Copyright © Houghton Mifflin Company. All rights reserved. 5–32 Important Terms Asia-Pacific Economic Cooperation (APEC) –An alliance that promotes open trade and economic and technical cooperation among member nations throughout the world The Common Market of the Southern Cone (MERCOSUR) –An alliance that promotes the free circulation of goods, services, and production factors, and has a common external tariff and commercial policy among member nations in South America

33. Copyright © Houghton Mifflin Company. All rights reserved. 5–33 Important Terms General Agreement on Tariffs and Trade (GATT) –An agreement among nations to reduce worldwide tariffs and increase international trade World Trade Organization (WTO) –An entity that promotes free trade among member nations Importing –The purchase of products from a foreign source Exporting –The sale of products to foreign markets

34. Copyright © Houghton Mifflin Company. All rights reserved. 5–34 Important Terms Licensing –An alternative to direct investment requiring the licensee to pay commissions or royalties on sales or supplies used in manufacturing Franchising –A form of licensing in which the franchiser grants the franchisee the right to market its product in accordance with the franchiser’s standards Contract Manufacturing –The practice of hiring a foreign firm to produce a designated volume of product to specification

35. Copyright © Houghton Mifflin Company. All rights reserved. 5–35 Important Terms Joint Ventures –A partnership between a domestic firm and a foreign firm or government Strategic Alliance –A partnership (possibly of traditional rivals) formed to create a competitive advantage on a worldwide basis Direct Ownership –A situation in which a company owns subsidiaries or other facilities overseas Multinational Enterprise –A firm with operations or subsidiaries in many countries

36. Copyright © Houghton Mifflin Company. All rights reserved. 5–36 Important Terms Customization –Adjusting marketing mixes according to cultural, regional, and national differences Globalization –The development of marketing strategies that treat the entire world (or its major regions) as a single entity

37. Copyright © Houghton Mifflin Company. All rights reserved. 5–37 Transparency Figure 5E Top Ten Countries Maintaining Trade Deficits and Surpluses with the U.S. Trade Deficit 1. China 2. Japan 3. Canada 4. Mexico 5. Germany 6. Italy 7. France 8. Taiwan 9. Ireland 10. Malaysia Trade Surplus 1. Netherlands 2. Australia 3. Egypt 4. Singapore 5. Brazil 6. Hong Kong 7. Chile 8. Kenya 9. Argentina 10. Jamaica Source: http://www.census.gov/foreign-trade, “Top Trading Partners” for July 2001, Accessed Oct. 13, 2001. Used with permission.

38. Copyright © Houghton Mifflin Company. All rights reserved. 5–38 Transparency Figure 5I Global Sales of Licensed Products Worldwide and in the U.S. and Canada (in billions of dollars) Source: The Licensing Letter, a newsletter published by EPM Communications, in Suzanne Vranica, “Ford Buys Beanstalk for Licensing Magic,” The Wall Street Journal, June 11, 2001, p.B6. Used with permission.