global markets and international marketing. 5–25–2 chapter learning objectives to understand the...

Global Markets andInternational Marketing

5–2

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

5–3

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

5–4

Environmental Forces in International Markets

• Cultural, Social, and Ethical Forces–Beliefs and values about:

• Family• Religion• Education• Health• Recreation

5–6

Environmental Forces in International Markets (cont’d)

• Economic Differences Affecting International Marketing–Standards of living–Credit–Buying power–Income distribution–National resources–Exchange rates

5–7


• 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 countrywill accept for certain product categories in a specific period of time

Border

5–8


• 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

5–9


• 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

5–10

5–11


• 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

5–12

Regional Trade Alliances, Markets, and Agreements

• The North AmericanFree Trade Agreement (NAFTA)–An alliance that merges Canada, Mexico, and

the United States into a single market

• Eliminates barriers• Eases investment• Simplifies trade

5–13

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

5–14


• 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

5–15


• Asia-Pacific Economic Cooperation (APEC)–An alliance that promotes open trade and economic

and technical cooperation among member nations throughout the world

5–16


• 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

5–17

Levels of Involvement in Global Marketing

FIGURE 5.1

5–18

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

5–19

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

5–20


• 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

5–21


• 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

5–22

5–23

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”

5–24

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.

5–25

International Business

• KFC’s International Growth– Why KFC is so Successful Abroad

• The Tata Brand Abroad– Tetley Tea in America– Conglomerates in America

• Doing Business Abroad: How We’re Different– Communication Styles– Task and Risk Orientation– Decision Making

5–26

Yum Brands KFC

5–27

Yum Brands KFC

• KFC operates in 80 countries and territories (2005)

• Over 11,000 Restaurants (2005)• 8 million customers per day (2005)• Worldwide system sales of over $8

billion (1996 )• Average U.S. system-wide sales per

unit $775,000 (1996 )

5–28

KFC’s International Success: The Reasons

• Being first or second US fast food concept in the country– KFC started in Japan and Australia around 1970– In some countries they got there even before

McDonald’s• Pro-US countries liked and wanted to share in the

American lifestyle• Local country KFC started and run by locals • Universal appeal of chicken as a food item

– A breaded, fried product was unique, – Smart adjustment of the menu

• Replacing mashed potatoes with french fries• Adding inside seating in some countries

• KFC's Original Recipe Chicken had a unique taste that defined fried chicken ala US-style

5–29

KFC’s International Success

• Today, KFC Intl is a major profit generator for its parent, Yum Brands

• In many countries KFC has incredibly high usage frequency

• In the Caribbean during the 1980's it was not unheard of to have customers visiting 2-3 times a week! At first I didn't believe the research but it was true.

5–30

KFC’s International Success: China

• China opened to the world following President Nixon's visit in the early 1970's,

• US QSR chains were slow to get there• Chinese government had higher priorities than

restaurant chains for allowing new industries with foreign investment

• KFC opened its first unit there in 1985 -the first US QSR to open

• All of the above factors were in play. • Today, KFC has over 500 or maybe even 1000

stores there

5–31

Yum Brands KFC

• The Colonel perfected his secret blend of 11 herbs and spices for Kentucky Fried Chicken in 1939

• Signed first franchisee in 1952. • Acquired by PepsiCo in 1986:

6,600 units in 55 countries and territories

• 11,000+ Restaurants today

5–32

Yum Brands KFC

• KFC restaurants offer fried chicken products and some also offer non-fried chicken-on-the-bone products

• Side items such as biscuits, mashed potatoes and gravy, cole slaw and corn, as well as desserts and non-alcoholic beverages

• Distinctive packaging includes the "Bucket" of chicken

• Positioning: There's Fast Food...Then There's KFC!

5–33

Yum Brands KFC

5–34

Tata’s Tetley Tea Brand in USA

5–35


5–36


5–37


5–38

Coming to an Agreement

• US: – Like to write things down, even in initial stages. – Try to include all aspects of agreement in the final written

document. Use legal advice and language. – Nothing is binding until signed by all parties

• India:– Use contracts and a system of law, but overall there is less

emphasis on legal issues. – Focus during negotiations is more personal. – Individual parts of an agreement are usually open to continued

discussion and change until a final contract is signed. – Patience is required to maneuver through the slow-moving

bureaucracy inherent in all facets of Indian life

5–39

View of Time

• US: – Monochronic. – Consider one thing at a time, adhere to schedules, don't

appreciate interruptions. – Deadlines are important

• India:– Little sense of urgency or need to focus on the short term. – Strong orientation to the past and the long-term future. – More relative view of time when it comes to deadlines and

appointments. – Punctuality is expected from foreigners, however

5–40

Decision-Making

• US: – Can be individualized and autocratic– Value is placed on majority opinion– A willingness to consult, although final I decision often rests with leader.

• India:– Decision-making authority rests with the most senior individuals– Middle level managers may have input, but always defer to the highest

ranking person– Decisions are rarely questioned– The decision-making process is slower than in the West– There is I also a higher reliance on religious values and faith when

making a decision

5–41

Communication Style

• US: – Direct communication style. – Concerned with presentation of facts and with the "bottom line." – Usually unemotive, although willing to show emotions, such as

frustration, as a means of influencing the group

• India:– Indirect communication style. – Use of implied meanings, especially to avoid saying "no." – Concern with hospitality and politeness. – Nearly always use social conversation as an introduction to

business discussions

5–42

Protocol

• US: – Informal style, consistent with egalitarian values and

lack of emphasis on hierarchy. More concerned with getting results than with showing deference

• India:– More formal than U.S., although not a great emphasis

on ritual. Protocol is mostly important in respecting the hierarchy and paying proper attention to the most senior personnel. Concerned with politeness, courteousness

5–43

Gestures

• Never point at someone with your foot. Also don't sit with your feet propped up and the soles of your feet showing.

• Pointing with one finger is considered impolite. Rather, use an open palm to gesture

• A person may indicate "yes" by moving their head from side to side, in a gesture looks like a "no" to most Westerners

• Winking may be taken to have a sexual meaning • Whistling is considered impolite

5–44

Gift-giving

• Gifts are not expected, but are appreciated • Flowers are a common gift in India. • Gifts are not generally opened in front of the

giver. Don't be surprised if the recipient sets aside your gift and opens it after you have left

• Black and white are thought to be unlucky. Avoid wrapping gifts in these colors

• Conversely, green, red and yellow are seen as lucky colors

5–45

Managing Workers

• An important consideration in managing Indian employees is the overall harmony of the workplace. There is an emphasis on the maintenance of group harmony as a vital managerial goal. In a society that is built on interpersonal and long-term relationships, it helps managers to show concern for their workers. This may be done more out of a sense of the obligation that comes with one's position, but it is important nevertheless.

• It is also important to remember that Indians have a loose view of time. Deadlines are likely to be seen as more flexible than hard, particularly among those who have not worked in a Western company. Indians take a longer view of events than do Americans. If a deadline is important and unchangeable, it will be necessary to emphasize this point, or even to create an artificial deadline that is earlier than what you really expect.

5–46

Giving Feedback

• Indians don't always separate work and personal relations in quite the same way as Western-oriented managers would expect.

• Many businesses have traditionally been family-owned, so there is more of an overlap between personal and work relationships.

• Thus, criticism is not likely to be done in public, in front of other employees. It is best delivered in a private setting, between the manager and the employee.

5–47

Cross-cultural Communications

• Avoid humor. It doesn't translate well • Be careful when using gestures. Certain ones may be obscene in

some cultures • Learn appropriate nonverbal communications skills. What you

say may not be what they understood. What you hear may not be what they meant to imply

• Say exactly what you mean. Double-meaning words and actionizing verbs should be avoided

• Localize all written materials • Provide as much written information in advance as possible. It's

not their first language

5–48

Cross-cultural Communications

• Be aware of your own speech:– speak slowly without patronizing– enunciate your words– avoid idioms, slang and jargon– avoid language which presumes cultural

understanding• Baseball English - touch base, out of left field, etc.) .

– if at first they don't understand, shouting it won't help

5–49

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.

global markets and international marketing. 5–25–2 chapter learning objectives to understand the...

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