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Reaching Global MarketsReaching Global Markets

Principles of Marketing Principles of Marketing Chapter 9Chapter 9

Shrinking Shrinking GlobeGlobe

Source: David Harvey, The Condition of Postmodernity(Oxford and Cambridge, Mass.: Basil Blackwell, 1989), p. 241, plate 3.1.

Environmental Forces

Global Markets

Sociocultural

Economic

Political, Legal, and Regulatory

Ethical/social responsibility

Competitive

Technological

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Economic Indicators

Gross Domestic Product

• Total market value of all goods and services produced within a nation’s borders

• Measure of economic output

Gross Domestic Income

• GDP plus income generated from non-resident sources– Example: money sent to families in home countries

– Profits from selling goods made in another country in the home country

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Economic System Structures

Resource Allocation

PrivatePrivate

StateState

Market Market CommandCommand

MarketMarketCapitalismCapitalism

Centrally Centrally Planned Planned CapitalismCapitalism

MarketMarketSocialismSocialism

CentrallyCentrallyPlannedPlannedSocialismSocialism

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Global Marketing- Schrage 2

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FREE TRADE AGREEMENTS

Regional Integration

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FreeFreeTrade Trade AreaArea

CustomsCustomsUnionUnion

Common Common MarketMarket

Economic Economic UnionUnion

PoliticalPoliticalUnionUnion

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North AmericaNorth America

• NAFTA– 1988 first agreement with US and Canada

– Very controversial before signing and since.

– Both countries US top trading partners.

– Some protectionist measures still exist

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EU

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•Efforts began after WWII•Originally 15 members•Advanced regional integration•Now with 27 members, more have applied•Requires specific levels of national debt, interest rates, and inflation.

Latin America

• Caribbean

• Nations south of Mexico in Central America and South America

• major preferential agreements– Andean

– Mercosur

– CARICOM

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CAFTA

• Recent agreement with Panama, Costa Rica, Nicaragua, Honduras, Guatemala, El Salvador

• Dominican republic added

• Implemented July 2005

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MERCOSUR

• 1991-Asunción Treaty– Argentina– Brazil– Paraguay– Uruguay

• More of a customs union than common market

• Financial Crisis has allowed for diversion from CETs

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GATT-WTO

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Major impact has been on the reduction of trade barriers since 1950

Not a governing body, so no real power

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Risk

9-16

Profit Potential

Modes of Entry

Expansion Expansion StrategiesStrategies• Companies must decide to expand by seeking

– New markets in existing countries– New country markets for already identified and served market segments

9-17Global Marketing Schrage 9

Narrow FocusNarrow Focus Country FocusCountry Focus

Country Country DiversificationDiversification

Global Global DiversificationDiversification

MarketMarket

ConcentrationConcentration DiversificationDiversification

ConcentrationConcentration

CountryCountry

DiversificationDiversification

Matrix For global marketing

Local product/ local brand

Local product/ local brand

Global product/ local brand

Global product/ local brand

Local Product/

Global brand

Local Product/

Global brand

Global product/

global brand

Global product/

global brand

ProductLocal Global

Local

Brand

Global

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Customization vs. GlobalizationAdaptation vs. Standardization

Global Standardization?Global Standardization?

CREATIVITY is thinking up new things. INNOVATION is doing new things.

Theodore Levitt

Strategic Alternatives-global product planningWhich is appropriate for your industry or product type????Which is appropriate for your industry or product type????

Strategy 2: production extension

Communication

Adaptation

Strategy 4:

Dual adaption

Strategy 1:

Dual extension

Strategy 3:

Product adaptation

Communication

Extension

Same Different

Different

Same

ProductProduct

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� Cultural issues in ethical behavior:

– Cultural relativism • Ethical behavior is always determined by cultural context.

• “When in Rome, do as the Romans do”

– Ethical imperialism • Behavior that is unacceptable in one’s home environment should not be acceptable anywhere else.

What is ethical behavior?What is ethical behavior?

Ethical Aspects of Labor

• Training

• Fair Pay

• Exploitation– Sweat shops

– Child labor