chapter 5 global vision

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

Lamb, Hair, McDaniel

CHAPTER 5

Developing a Global Vision

2012-2013 ©

Phil A

shley/Lifesize/Getty Im

ages

Discuss the importance of global marketing Discuss the impact of multinational firms on the world economy Describe the external environment facing global marketers

Learning Outcomes

1

2

3

© 2013 by Cengage Learning Inc. All Rights Reserved. 2

Identify the various ways of entering the global marketplace List the basic elements involved in developing a global marketing mix Discover how the Internet is affecting global marketing

Learning Outcomes

4

5

6

© 2013 by Cengage Learning Inc. All Rights Reserved. 3

Discuss the importance of

global marketing

1

Rewards of Global Marketing

© 2013 by Cengage Learning Inc. All Rights Reserved. 4

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…

1© 2013 by Cengage Learning Inc. All Rights Reserved. 5

Importance of Global Marketing to the U. S.

u Derives 12 percent of gross domestic product (GDP) from world trade.

u 7 percent of U.S. employment is supported by exports.

u U.S. businesses export over $1.7 trillion in goods and services annually.

u More smaller companies are aggressively pursuing international markets.

1© 2013 by Cengage Learning Inc. All Rights Reserved. 6

The Fear of Trade and Globalization

u Millions of Americans have lost jobs u Millions fear losing jobs u Threat of outsourcing if workers do not

accept pay cuts u Vulnerability to operations moving

offshore

1© 2013 by Cengage Learning Inc. All Rights Reserved. 7

Benefits of Globalization

u Expands economic freedom u Spurs competition u Raises productivity and living standards u Offers access to foreign capital, global

export markets, and advanced technology

u Promotes higher labor and environmental standards

u Acts as a check on government power 1© 2013 by Cengage Learning Inc. All Rights Reserved. 8

Discuss the impact of multinational firms on

the world economy

© 2013 by Cengage Learning Inc. All Rights Reserved. 9

2

Multinational Firms

Stages of Global Business Development

1

2

4

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

2© 2013 by Cengage Learning Inc. All Rights Reserved. 10

Are Multinationals Beneficial?

Pros •  Account for 19 percent of

U.S. private Jobs •  Provide 25 percent of

private wages •  74 percent of R&D

spending •  48 percent of total

exports

Cons •  Technology is capital

intensive and does not necessarily increase employment.

•  Support governments that benefit the company, not necessarily the country and its people

•  May take away more wealth than they generate

© 2013 by Cengage Learning Inc. All Rights Reserved. 11 2

Global Marketing Standardization

Production of uniform products that can be sold the same way all over the world.

Global Marketing Standardization

2© 2013 by Cengage Learning Inc. All Rights Reserved. 12

Subsidiaries of multinational firms are allowed to compete independently in domestic markets.

Multidomestic strategy

Describe the external environment facing

global marketers

© 2013 by Cengage Learning Inc. All Rights Reserved. 13

3

External Environment Facing Global Marketers

External Environment Facing Global Marketers

Natural Resources

Demographic Makeup

Economic Development

Culture

Political Structure

3© 2013 by Cengage Learning Inc. All Rights Reserved. 14

Culture

Culture

The common set of values shared by its citizens that determine what is socially acceptable.

3© 2013 by Cengage Learning Inc. All Rights Reserved. 15

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

3© 2013 by Cengage Learning Inc. All Rights Reserved. 16

Economic Development

Developed Country

Less Developed Country

Complex, sophisticated industries

Basic industries

3© 2013 by Cengage Learning Inc. All Rights Reserved. 17

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.

3© 2013 by Cengage Learning Inc. All Rights Reserved. 18

Political Structure and Actions No private ownership

Minimal individual freedom

Little central government Maximum personal freedom

3© 2013 by Cengage Learning Inc. All Rights Reserved. 19

© 2013 by Cengage Learning Inc. All Rights Reserved. 20

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

3

Demographic Makeup

Marketing Considerations: u Population density u Urban or rural u Age

3© 2013 by Cengage Learning Inc. All Rights Reserved. 21

Natural Resources

Shortages in natural resources create: u  International dependencies u Shifts of wealth u  Inflation and recession u Export opportunities if resources are

abundant u Stimulus for military intervention

3© 2013 by Cengage Learning Inc. All Rights Reserved. 22

Identify the various ways of entering the global marketplace

© 2013 by Cengage Learning Inc. All Rights Reserved. 23

4

Global Marketing by the Individual Firm

Why “Go Global”?

u Earn additional profits u Leverage a unique product

or technological advantage u Possess exclusive market

information u Saturated domestic markets u Excess capacity u Utilize “economies of scale”

4© 2013 by Cengage Learning Inc. All Rights Reserved. 24

Exhibit 5.3 Risk Levels for Five Methods of Entering

the Global Marketplace

© 2013 by Cengage Learning Inc. All Rights Reserved. 25

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

4© 2013 by Cengage Learning Inc. All Rights Reserved. 26

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.

4© 2013 by Cengage Learning Inc. All Rights Reserved. 27

List the basic elements involved in developing a global marketing mix

© 2013 by Cengage Learning Inc. All Rights Reserved. 28

5

The Global Marketing Mix

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.

5© 2013 by Cengage Learning Inc. All Rights Reserved. 29

Product and Promotion

One Product One Message

Product Adaptation

Promotion Adaptation

Product Invention

Same Product

Same Message

Change Message

Change Product

5© 2013 by Cengage Learning Inc. All Rights Reserved. 30

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.

5© 2013 by Cengage Learning Inc. All Rights Reserved. 31

Pricing u  Must consider transportation and insurance costs,

taxes and tariffs

u  Determine what customers will spend

u  Ensure that foreign buyers will pay price

u  May need to simplify a product to lower price

u  Don’t assume that low-income countries are willing to accept lower quality

5© 2013 by Cengage Learning Inc. All Rights Reserved. 32

Exchange Rates…

The price of one’s currency in terms of another country’s currency.

Floating Exchange Rates…

5© 2013 by Cengage Learning Inc. All Rights Reserved. 33

a system in which prices of different currencies move up and down based on the demand for and the supply of each currency.

Dumping

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…

5© 2013 by Cengage Learning Inc. All Rights Reserved. 34

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

5© 2013 by Cengage Learning Inc. All Rights Reserved. 35

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

5© 2013 by Cengage Learning Inc. All Rights Reserved. 36

Discover how the Internet is affecting

global marketing

© 2013 by Cengage Learning Inc. All Rights Reserved. 37

6

The Impact of the Internet

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

6© 2013 by Cengage Learning Inc. All Rights Reserved. 38