Global Environment

BA 523 International MarketingMelike Demirbag Kaplan, PhD

Global Marketing in the 21st Century

The world is shrinking rapidly with the advent of faster communication, transportation, and financial flows.

International trade is booming and accounts for 20 percent of GDP worldwide.

Global competition is intensifying. Higher risks with globalization.

A Global Firm

Operates in more than one country

Gains marketing, production, R&D, and financial advantages not available to purely domestic competitors

The global firm sees the world as one market

Basic Questions

Global firms ask a number of basic questions: What market position should we try to establish

in our own country, in our economic region, and globally?

Who will our global competitors be, and what are their strategies and resources?

Where should we produce or source our product? What strategic alliances should we form with

other firms around the world?

Key Influences in the Global Marketing Environment

The International Trade System

Economic Environment

Political-Legal Environment

Cultural Environment

Key Influences (Trade)

The International Trade System: Restrictions—tariffs, quotas, embargos, exchange controls,

and nontariff trade barriers. The World Trade Organization and GATT:

Helps trade—reduces tariffs and other international trade barriers.

Regional Free Trade Zones: Groups of nations organized to work toward common goals

in the regulation of international trade.

Tariffs & Quotas

Tariffs are taxes on certain imported products designed to raise revenue or to protect domestic firms

Quotas are limits on the amount of foreign imports a country will accept in certain product categories to conserve on foreign exchange and protect domestic industry and employment

Exchange Controls & Nontariff Barriers

Exchange controls are a limit on the amount of foreign exchange and the exchange rate against other currencies

Nontariff trade barriers are biases against bids or restrictive product standards that go against a particular country’s product features

GATT & WTO

General Agreement on Tariffs and Trade (GATT): A 61-year-old treaty Designed to promote world trade Reduces tariffs and other international trade

barriers World Trade Organization

Enforces GATT rules Mediates disputes Imposes trade sanctions

Regional free trade zones such as the European Union, NAFTA or CAFTA help to simplify the process of going global.

Economic EnvironmentEconomic factors reflect

a country’s attractiveness as a market:

Industrial structure Income distribution

Economic Environment

Industrial Structure: Shapes a country’s product and service needs,

income levels, and employment levels. Four types:

Subsistence economies Raw material exporting economies Industrializing economies – Emerging Markets Industrial economies

Economic Environment

Income Distribution Low-income households Middle-income households High-income households

More than half of China’s 1.3 billion consumers can barely afford rice.

More than 400 million Chinese live on less than $2 a day (WB)

Gucci,Cartier, Lexus and Bentley?

Emerging Markets

What are Emerging Markets? Regional economic powerhouses -large

populations, large resource bases, and large markets

Adopting open door policies to replace their traditional state policies that failed to produce sustainable economic growth.

World’s fastest growing economies By 2020, the five biggest emerging markets' share of world output will

double to 16.1 percent from 7.8 percent in 1992. They will also become more significant buyers of goods and services than

industrialized countries

Critical participants in the world's major political, economic, and social affairs.

Asia: China, India, Indonesia, Malaysia,Philippines, Singapore, South Korea, Thailand

Africa and the Middle East:

South Africa and Israel

Eastern Europe: The Czech Republic,

Hungary, Greece,Portugal, Turkey

The Former Soviet Union:Russia, Ukraine, and the Baltic's

Latin America: Argentina, Brazil, Chile,

Mexico, Venezuela

http://en.wikipedia.org/wiki/Emerging_markets

The 86% Markets

14%

86%

GNP per capita greater than $10K GNP per capita less than $10K

The developed world - GNP of over $10K per capita- constitutes only 14% of the world’s population

86% of the world – the emerging markets - has a GNP of less than $10K per capita

It is this 86% that represents the future of global commerce

Political – Legal Environment

Country’s attitude toward international buying Government bureaucracy Political stability Monetary regulations

Demographic Environment

Increasing Population Net increase of 3

people per second

93 million per year

98 % occurring in developing countries

Aging & Urbanization

Cultural Environment

CulturalFactors

Values

Ideas

Attitudes

SubgroupActivities

Beliefs

The cultural environment refers to factors and trends related to how people live and behave.

Cultural Environment

Sellers must examine the ways consumers in different countries think about and use products before planning a marketing program.

Business norms and behavior vary from country to country.

Companies that understand cultural nuances can use them to advantage when positioning products internationally.

Understanding Cultures

Low Context vs. High Context (Hall, 1976) Cultural Dimensions Theory (Hofstede, 1980)

Individualism vs. Collectivism Masculinity vs. Femininity Power Distance Uncertainty Avoidance Long Term Orientation

LG Kimchi FridgeIf you’ve got kimchi in your fridge, it’s hard to keep it a secret. Made from fermented cabbage seasoned with garlic and chili, kimchi is served with most meals in Korea. But when it’s stored inside a normal refrigerator, its pungent odor taints nearby foods. That’s why, two decades ago, LG introduced the kimchi refrigerator, featuring a dedicated compartment that isolates smelly kimchi from other foods. Kimchi refrigerators now have become a fixture in 65 percent of Korean homes, and LG is the country’s top-selling manufacturer.

Ignoring cultural differences can result in strong consumer backlash. Nike was forced to pull these shoes from distribution after learning that the stylized shoe logo resembled “Allah” when written in Arabic.

Importance of Culture

Homework

http://deepblue.lib.umich.edu/bitstream/2027.42/39704/3/wp320.pdf

Rethinking Marketing Programs for Emerging Markets. By: Niraj Dawar and Amitava Chattopadhyay.