1. Chapter 3 Thrive in the Marketing Environment: The World Is Flat

2. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-2 Chapter Objectives 1.Understand the big picture of international marketing 2.Share some key statistics and facts about the world 3.Discuss why and how companies should enter new markets overseas 4.Discuss the relevant international environments: Economic, Competitive, Technological, Legal, and Social-Cultural 5.Explain the strategies that a firm can use when they enter global markets: Changing their products and/or promotions or not 4-2

3. Worldwide Demographic Trends Over six billion people…Eight billion worldwide by 2025 (the U.S. represents only about 5%) 2 billion between India and China and both are growing fast in terms of importing and exporting. Goods and services need to be adapted to meet needs in developing countries. Development means people are increasingly affluent, educated, and cosmopolitan Urban populations are increasing faster than rural 4-3

4. The Importance of Global Marketing For the past 15 years, U.S. exports have grown about 10 percent annually The Internet makes it possible for every marketer to become an international marketer International Trade accounts for at least 25% of U.S. GDP: Exporting - Selling domestically produced goods and services abroad Importing - Purchasing foreign goods, services, and raw materials 4-4

5. Figure 3.1 North American Merchandise Trade Flows (in Billions of Dollars) 4-5

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7. Table 7.2 Table 7.2 The World’s Most Frequently Spoken Languages 4-7

8. The U.S. as a Target for International Marketers The U.S. is an inviting target: Fairly large population with high levels of discretionary income Political stability A generally favorable attitude toward foreign investment and products A relatively stable economy The world’s largest importer 4-8

9. Service Exports U.S. is the world’s largest exporter of services as well as products Q. What are some of the largest U.S. service exports? 4-9

10. Service Exports Over $105 billion is spent annually by foreign nationals visiting the U.S. – “Exporting Tourism” Financial services industry is going global via the WWW Entertainment is another major U.S. service export 4-10

11. Visa, and Many Firms Who Accept It, Enjoy the Benefits of Being Global Marketers 4-11

12. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-12 Figure 3.2 Decision Model for Entering Foreign Markets 4-12

13. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-13 Going Global 1.“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? 2.Decide which global markets are most attractive. 4-13

14. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-14 Going Global 3.Thoroughly understand the environments of the countries selected 4.Decide which way(s) to enter markets:  Exporting  Direct Investment  Contractual agreements like franchising, and foreign licensing 5.Decide how to adopt marketing strategies to each foreign market – change from domestic strategy or not? 4-14

15. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-15 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 4-15

16. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-16 The Economic Environment: Indicators of Economic Health Key economic indicators: 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 4-16

17. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-17 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 4-17

18. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-18 The Economic Environment: The Business Cycle All economies go through periods of: Prosperity Recession Recovery Depression Inflation 4-18

19. The Economic Environment Trade Barriers Tariffs are taxes levied against imported goods Import Quotas limit the number of units of certain goods than can be imported for resale Embargos are complete bans on the import of specified productsDumping The controversial practice of selling a product in a foreign market at a price lower than what it receives in the producer’s domestic market 4-19

20. Trading Blocs (aka International Market Agreements) NAFTA NAFTA: Accord removing trade barriers among Canada, Mexico, and the United States Brings together 415 million people with a combined gross domestic product of $7.9 trillion (the world’s largest “free-trade” zone) European Union European Union: Comprised of 27 European countries which also share a common currency (Euro): http://en.wikipedia.org/wiki/Member_State_of_the_Europ ean_Union http://en.wikipedia.org/wiki/Member_State_of_the_Europ ean_Union MERCOSUL: MERCOSUL: Comprised of 5 full members and 5 associate members in Central and South America: http://en.wikipedia.org/wiki/Mercosur#Full_members http://en.wikipedia.org/wiki/Mercosur#Full_members 4-20

21. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-21 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 4-21

22. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-22 The Competitive Environment: Competition in the Macroenvironment Competition in the macroenvironment (overall structure of industry) Monopoly – only one company Oligopoly – a small # “own the market” Monopolistic competition – many companies offering products perceived as different Perfect competition – no company can influence the others 4-22

23. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-23 The Technological Environment Technology: Infrastructure of country (ex: cell coverage) User abilities, preferences, inclinations 4-23

24. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-24 The Political and Legal Environment: Legal Influences on Business Need to understand and account for:  U.S. Laws  The other countries’ laws  The laws of trade between any 2 countries 4-24

25. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-25 The Political and Legal Environment: Legal Influences on Business Regulatory constraints on trade often restrict the marketing of goods (quotas, tariffs) 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 4-25

26. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-26 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 4-26

27. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-27 Figure 3.3 Market-Entry Strategies 4-27

28. Contractual Agreements to enter foreign markets: Licensing - An agreement that grants foreign marketers the right to distribute a firm’s merchandise or to use its trademark, patent, or process in a specified geographic area. Franchising - A wholesaler or retailer (the Franchisee) agrees to make some payment and to meet the operating requirements of a firm (the Franchisor) in exchange for the right to use the firm’s name and to market its goods or services. 4-28

29. Schlotzsky’s Deli Entering International Markets Through Franchising 4-29

30. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-30 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 4-30

31. Tweaking the Marketing Mix: International Product and Promotion Strategies 1.Straight Extension: The same product marketed in the domestic market is introduced in the foreign market using the same promotional strategy 2.Promotion adaptation: The same product is introduced in a foreign market with a unique promotional strategy for the new market 3.Product Adaptation: Product modifications are made for the foreign market, but the same domestic promotional strategy is used 4.Dual adaptation: Modifications of both product and promotional strategies are used in a foreign market 5.Product Invention: The development of a new product combined with a new promotional strategy to take advantage of unique foreign opportunities 4-31

32. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall3-32 Ethical Issues in Global Business When in Rome… Do as the Romans Do?? or Do as you would in U.S.?? 4-32