Serving Global Markets

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Chapter 7

• Serving Global Markets

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Chapter Objectives

• Describe the importance of international
  marketing from the perspectives of the individual
  firm and the nation.
• Identify the major components of the environment
  for international marketing.
• Outline the basic functions of GATT, WTO, NAFTA,
  and the proposed FTAA, and the European Union.
• Compare the alternative strategies for entering
  international markets.
• Differentiate between a global marketing strategy
  and a multi-domestic marketing strategy.
• Describe the alternative marketing mix strategies
  used in international marketing.
• Explain the attractiveness of the U. S. as a
  target market for foreign marketers.

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The Importance of Global Marketing

• Global marketing is rapidly becoming a necessity
• For 20 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 Marketing domestically produced goods
  and services abroad
• Importing Purchasing foreign goods, services,
  and raw materials

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U.S. Current Trade Facts

• The U.S. accounted for over 10 of world export
  trade and 18 of total world imports in 2006.
• U.S. exports accounted for 10.4 of the nations
  GDP in 2006.
• U.S. exports were up from 81billion in 2005 to
  1 trillion in 2006. Export growth in
  manufactured goods included nuclear materials,
  electric machinery, vehicles, and aircraft.
• U.S. imports increased from 1.6 trillion in 2005
  to 1.8 trillion in 2006. Greater demand for oil,
  combined with high fuel prices, contributed to
  the trade deficit.
• Source U.S. Department of Commerce

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U.S. Trade Facts

• The United States exports about a fifth of its
  industrial production.
• Almost a third of U.S. corporate profits come
  from international trade and foreign investment.
• The United States is the worlds leading exporter
  of farm products _at_ 60 billion per year.
• Almost half of non-farm exports consist of
  chemicals, office machinery, computers,
  automobiles, aircraft, electrical machinery, and
  industrial machinery.
• Daily trade between U.S. and Canada is 1
  billion.
• Source Thomson Higher Education

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Top Ten Merchandise Exporting States

• California
• Texas
• New York
• Michigan
• Washington
• Illinois
• Ohio
• Florida
• New Jersey
• Pennsylvania
• Source www.ita.gov

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• Figure 7.1, P.221
• Top 10 U.S. Trading Partners

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• Table 7.1, P.222 I believe Exxon is now 1,
  Wal-Mart 2.
• The Worlds 10 Largest Marketers Ranked by Sales

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• Warner LambertA Global Leader In Pharmaceuticals
• The copy readsWere making the world feel
  better

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• Service and Retail Exports
• U.S. is a big exporter of services and retailing
• U.S. is the worlds largest exporter of services
• Over 145 billion is spent annually by foreign
  nationals visiting the U.S.
• The most profitable U.S. service exports are
  business and technical services
• Financial services industry is going global via
  the Internet
• Entertainment is another major service export

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• Financial Services a New Global Frontier

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• Benefits of Going Global
• Additional revenues
• New insights into consumer behavior
• Alternative distribution strategies
• Advance notice of new products
• Positioned well to compete effectively with
  foreign competitors

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The International Marketplace

• Market Size
• Over 6 billion people (1.3 billion people in
  China)
• Goods and services need to be adapted to meet
  needs in developing countries
• Urban population increasing faster than a rural
• As a nation develops, an increasingly affluent,
  educated, and cosmopolitan middle-class emerges
• Marketers in developing countries may face
  infrastructure challenges

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• Buyer Behavior
• Behavior differs among both nations and market
  segments within each nation
• Change marketing mix, or change local buyer
  behavior
• Leathermanmarketers fill customer needs around
  the globe with their unique product.

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• Buyer Behavior Research Must Focus on
• Demand Do foreign consumers need the companys
  good or service?
• Competitive environment How do supplies
  currently reach the market?
• Economic environment What is the state of the
  nations economic health?
• Social-cultural environment How do cultural
  factors affect business opportunities?
• Political-legal environment Do any legal
  restrictions complicate entering the market?
• Technological environment To what degree are
  technological innovations used by consumers in
  the market?

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The International Marketing Environment
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• International Economic Environment
• A nations size, per-capita income, and stage of
  economic development determine its desirability
  for international expansion
• Other considerations include
• Country infrastructure
• Exchange rate implications

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• International Social-Cultural Environment
• A nations culture, including language,
  education, religious attitudes, and social
  values, must be considered
• Examples
• Movies must often be adapted for foreign markets
• Restaurant menus are often printed in several
  languages
• The use of pictures can also help when language
  is a problem

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• Table 7.2, P.230
• The Worlds Most Frequently Spoken Languages

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• American Airlines Targeting Latin American
  Travelers With Spanish and Portuguese In-flight
  Magazines

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• International Technological Environment
• The Internet transcends political, economic, and
  cultural barriers, reaching into every corner of
  the Globe
• It is critical to understand how the Web is
  reshaping social and cultural values

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• International Political-Legal Environment
• Marketers must know the current laws and
  regulations for each country in which they
  operate
• U.S. businesses impacted by International Law,
  U.S. Law, and Host country Laws
• Political conditions often influence
  international marketing
• Political risk assessment (PRA)
• Friendship, Commerce, and Navigation (FCN)
  treaties
• ISO certification requirements

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• Pepsi
• Offering small prizes to everyone in this ad
  overseas, obeying a law that forbids offering a
  few dream prizes

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• Forbes Global offers coverage of international
  business and finance news as it sends the message
  of capitalism around the globe

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• McDonalds, like so many other international firms
  had to consider the following while making the
  decision to go international.
• International law
• U.S. law, and
• Legal requirements of host nations
• Any other issues?

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• Trade Barriers
• Tariffs are taxes levied against imported goods
• Revenue Tariffs designed to raise funds for the
  importing government
• Protective Tariffs are usually higher and are
  designed to raise the retail price of an imported
  product to match or exceed that of a similar
  domestic product

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• Administrative Barriers
• Import Quotas
• Embargos
• Subsidies
• Exchange Controls
• Dumping The controversial practice of selling a
  product in a foreign market at a price lower than
  what it commands in the producers domestic market

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Multinational Economic Integration

• Free trade area Region in which participating
  nations agree to the free trade of goods among
  themselves, abolishing tariffs and trade
  restrictions
• Customs union
• Common market
• GATT International trade accord that has helped
  reduce world tariffs
• World Trade Organization (WTO) succeeds GATT to
  oversee agreements, mediate disputes, and reduce
  trade barriers

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• NAFTAAccord removing trade barriers among
  Canada, Mexico, and the United States
• The Free Trade Area of the AmericasProposed free
  trade area stretching the length of the entire
  Western hemisphere and designed to extend free
  trade benefits to additional nations in North,
  Central, and South America
• European UnionCustoms union that is becoming a
  true economic union by adopting a common currency
  and permitting free flow of goods and workers
  throughout the member nations

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• The 25 Members of the European Union

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Going Global
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First Steps in Deciding to Market Globally

• Secure top managements support
• Research the export process and potential markets
• Sources for Analyzing Foreign Markets

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• International marketers benefit from trade shows
  such as those held at the TWTC, Taiwan World
  Trade Center, where thousands of regional and
  global firms meet to network.

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• Strategies for Entering International Markets
• Three basic strategies for entering international
  markets include
• Exporting
• Contractual agreements like franchising,
  licensing, and subcontracting
• International Direct Investment

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• Figure 7.7, P.240
• Levels of Involvement in International Marketing

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• Contractual Agreements
• Franchising A contractual arrangement where a
  wholesaler or retailer (the Franchisee) agrees to
  make some payment and to meet the operating
  requirements of a manufacturer or other
  franchiser in exchange for the right to use the
  firms name and to market its goods or services
• Foreign Licensing an agreement that grants
  foreign marketers the right to distribute a
  firms merchandise or to use its trademark,
  patent, or process in a specified geographic
  area.
• Subcontracting a contractual agreement where a
  firm hires a local company to produce goods or
  services in a specific geographic area.

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• Franchising A Global Strategy for Ruths Chris
  Steak House

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• International Direct Investment
• An additional strategy for entering global
  markets
• Requires direct investment in foreign firms,
  production, and/or marketing facilities
• U.S. firms have invested nearly 2.2 trillion
  overseas
• Foreign firms have invested nearly 2.1 trillion
  in the U.S.

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From Multinational Corporation toGlobal Marketer

• A multinational corporation is a firm with
  significant operations and marketing activities
  outside its home country
• Examples General Electric, Siemens, Toyota,
  ExxonMobil

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Developing an InternationalMarketing Strategy

• Global marketing strategyStandardized marketing
  mix with minimal modifications that a firm uses
  in all of its domestic and foreign markets.
• Multi-domestic marketing strategyApplication of
  market segmentation to foreign markets by
  tailoring the firms marketing mix to match
  specific target markets in each nation

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• The universal image of long-lasting power in an
  Energizer battery is communicated in Latin
  America with this poster . . . Part of
  Energizers global marketing strategy.

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• International Product and Promotional Strategies

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• The Worlds 10 Most Valuable Brands

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• Promotion Adaptation Strategy in International
  Marketing

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• International Distribution Strategy
• Decide on a method of entering the foreign market
• Decide how to distribute the product within the
  foreign market through that entry channel
• International Pricing Strategy
• Competitive, economic, political, and legal
  constraints often limit pricing decisions
• Must adapt to local markets and change when
  conditions change
• Countertrade form of exporting whereby goods and
  services are bartered rather than sold for cash.

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• U.S. Postal Service
• Competing with International Overnight Delivery
  Services on Price and Service Quality

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The U.S. as a Target forInternational Marketers

• The U.S. is an inviting target for many foreign
  marketers
• It offers a large population with high levels of
  discretionary income, political stability, a
  generally favorable attitude toward foreign
  investment and a relatively stable economy

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• The popularity of British import Teletubbies
  among U.S. preschoolers is used in a promotion
  for Jell-O custard sold at Burger King
  restaurants.

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End of Chapter Seven