Mid term review

Global
Marketing
Warren J. Keegan Mark C. Green
Introduction to
Global Marketing
Chapter 1
Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall

INTRODUCTION
• Global vs. “Regular” Marketing
- Scope of activities are outside the home-country market

GLOBAL MARKETING: What It Is & What It Isn’t
Single Country
Marketing Strategy
• Target Market Strategy
• Marketing Mix
– Product
– Price
– Promotion
– Place
Global Marketing
Strategy
• Global Market Participation
• Marketing Mix Development
– 4 P’s: Adapt or Standardize?
• Concentration of Marketing
Activities
• Coordination of Marketing
Activities
• Integration of Competitive Moves

STANDARDIZATION vs. ADAPTATION
• Globalization (Standardization)
– Developing standardized products marketed worldwide
with a standardized marketing mix
– Essence of mass marketing
• Global localization (Adaptation)
– Mixing standardization and customization in a way that
minimizes costs while maximizing satisfaction
– Essence of segmentation
– Think globally, act locally

Management Orientations
• Ethnocentric Orientation
– Home country is superior to others
– Sees only similarities in other countries
– Assumes products and practices that succeed at home will
be successful everywhere
– Leads to a standardized or extension approach

• Polycentric Orientation
– Each country is unique
– Each subsidiary develops its own unique business and
marketing strategies
– Often referred to as multinational
– Leads to a localized or adaptation approach that assumes
products must be adapted to local market conditions

• Regiocentric Orientation
– A region is the relevant geographic unit
• Ex: The NAFTA or European Union market
– Some companies serve markets throughout the world but
on a regional basis
• Ex: General Motors had four regions for decades
European Union

• Geocentric Orientation
– Entire world is a potential market
– Strives for integrated global strategies
– Also known as a global or transnational company
– Retains an association with the headquarters country
– Pursues serving world markets from a single country or
sources globally to focus on select country markets
– Leads to a combination of standardization and adaptation
elements

Forces Affecting Global Integration &
Global Marketing
• Multilateral trade agreements
• Converging market needs and wants and
the information revolution
• Transportation and
communication improvements
• Product development costs

Restraining Forces Affecting Global
Integration and Global Marketing
• Management myopia
• Organizational culture
• National controls
• Opposition to globalization
globophobia

Global
Marketing
Chapter 2: The
Global Economic
Environment

2-12
The World Economy—
The New Realities
1. Capital movements have replaced trade as
the driving force of the world economy
2. Production has become uncoupled from
employment
3. The world economy, not individual
countries, is the dominating factor
4. 75-year struggle between capitalism and
socialism has almost ended
5. E-Commerce diminishes the importance of
national barriers and forces companies to
re-evaluate business models

2-13
Economic Systems
Resource Allocation
Market Command
Private
Resource
Ownership
State
Market
Capitalism
Market
Socialism
Centrally
Planned
Capitalism
Centrally
Planned
Socialism
DEMAND
SUPPLY

2-14
Market Capitalism
• Individuals and firms allocate resources
• Production resources are privately owned
• Driven by consumers
• Government’s role is to promote competition
among firms and ensure consumer protection

2-15
Centrally Planned Socialism
• Opposite of market capitalism
• State holds broad powers to serve the public interest;
decides what goods and services are produced and in
what quantities
• Consumers can spend only what is available
• Government owns entire industries and controls
distribution
• Demand typically exceeds supply
• Little reliance on product differentiation, advertising,
pricing strategy
• China, India, and the former USSR now moving
towards some market allocation and private
ownership

2-16
Stages of Market Development
• The World Bank has defined four categories of development
using Gross National Income (GNI) as a base
– Low income countries
– Lower-middle income countries
– Upper-middle income countries
– High income countries
• BEMs (Big Emerging Markets), identified 10 years ago, were
countries in Central Europe, Latin America, and Asia that were
to have rapid economic growth
• Today, it’s BRIC: Brazil, Russia, India, and China

Categories of Development
Low-Income Lower-Middle Upper-Middle High
Per capita GNI ≤ $996 $996 to $3,945 $3,946-$12,195 ≥ $12,196
% of population 13% 56% 15% 16%
Characteristics • Limited
industrialization
• High % of population
in farming
• High birth rates
• Low literacy rates
• Heavy reliance on
foreign aid
• Political instability
and unrest
• Rapidly expanding
consumer markets
• Cheap labour
• Mature,
standardized, labour-
intensive industries
like footwear,
textiles and toys
• Rapidly
industrializing, less
agricultural
employment
• Increasing
urbanization
• Rising wages
• High literacy rates
and advanced
education
• Lower wage costs
than advanced
countries
• Sustained economic growth
through disciplined innovation
• Service sector is more than
50% of GNI
• Households have high
ownership levels of basic
products
• Importance of information
processing and exchange
• Ascendancy of knowledge over
capital, intellectual over
machine technology, scientists
and professionals over
engineers and semiskilled
workers
• Future-oriented
• Importance of interpersonal
relationships
Countries • Sub-Saharan Africa
• Uzbekistan and
Turmenistan
• BRIC nations are
India, China
• Brazil, Russia,
Malaysia, Chile,
Venezuela, Hungary,
Mexico
• Also called newly
industrializing
economies (NIEs)
• G-7 (U.S., Japan, Germany,
France, Britain, Canada and
Italy )

2-18
Product Saturation Levels
• The % of potential buyers or households who
own a product
• India: 20% of people have telephones
• Autos: 1 per 43,000 Chinese; 21 per 100 Poles;
8 per 1,000 Indians
• Computers: 1 PC per 6,000 Chinese; 11 PCs
per 100 Poles; 34 PCs per 100 EU citizen

2-19
Balance of Payments
• Record of all economic transactions between the
residents of a country and the rest of the world
– Current account–record of all recurring trade in
merchandise and services, and humanitarian aid
• trade deficit—negative current account
• trade surplus—positive current account
– Capital account–record of all long-term direct investment,
portfolio investment, and capital flows

2-20
Balance of Payments

2-21
Managing Economic Exposure
• Economic exposure refers to the impact of currency
fluctuations on the present value of the company’s
future cash flows
• Two categories of economic exposure:
– Transaction exposure is from sales/purchases
– Real operating exposure arises when currency fluctuations,
together with price changes, alter a company’s future
revenues and costs

Global
Marketing
The Global Trade
Environment
Chapter 3

GATT
• General Agreement on Tariffs and Trade
– Treaty among nations to promote trade among
members established in 1947
• Handled trade disputes
• Lacked enforcement power
• Replaced by World Trade Organization in 1995
3-23

Hierarchy of Economic Integration
CET = Common External Tariffs

3-25
Free Trade Area
• Two or more countries agree to
abolish tariffs and other barriers to
trade amongst themselves
• Countries continue independent
trade policies with countries outside
agreement
• Rules of origin requirements restrict
transshipment of goods from the
country with the lowest tariff to
another
NAFTA Protest in Ottawa

3-26
Customs Union
• Evolution of Free Trade Area
• Includes the elimination of internal barriers to
trade (as in FTA)
• AND establishes common external barriers to
trade
• Examples: The EU and Turkey, the Andean
Community, Mercosur, CARICOM, Central
American Integration System (SICA)

3-27
Common Market
• Includes the elimination of internal barriers
to trade (as in free trade area)
• AND establishes common external barriers
to trade (as in customs union)
• AND allows for the free movement of
factors of production, such as labor, capital,
and information

3-28
Economic Union
• Includes the elimination of internal barriers to trade
(as in free trade area)
• AND establishes common external barriers to trade
(as in customs union)
• AND allows for the free movement of factors of
production, such as labor, capital, and information
(as in common market)
• AND coordinates and harmonizes economic and
social policy within the union

3-29
Economic Union
• Full evolution of economic union
– creation of unified central bank
– use of single currency
– common policies on issues such as agriculture,
social policy, transport, competition, mergers,
taxation
– requires extensive political unity
– would lead to a central government in time
European
Union Flag

Global
Marketing
Social & Cultural
Environments
Chapter 4

Culture is both physical and
nonphysical
Physical Culture
– Clothing
– Tools
– Decorative art
– Body
adornment
– Homes
– Diet
– Language
– Aesthetics
– Colour
Abstract Culture
– Religion
– Perceptions
– Attitudes
– Beliefs
– Values

High- and Low-Context Cultures
• High Context
– Less information is
contained in the verbal
part of the message
– Emphasis on background,
basic values, societal status
of the communicator
– Less emphasis on legal
paperwork
– Focus on personal
reputation
Saudi Arabia, Japan
• Low Context
– Messages are explicit and
specific
– Words and numbers carry
all information
– Reliance on legal
paperwork
– Focus on non-personal
documentation of
credibility
Switzerland, U.S., Germany

High- and
Low-Context Cultures

Hofstede’s Cultural Typology
• Power Distance
• Individualism/Collectivism
• Masculinity
• Uncertainty Avoidance
• Long-term Orientation

Self-Reference Criterion (SRC)
and Perception
• Unconscious reference to one’s own cultural values;
creates cultural myopia
• How to Reduce Cultural Myopia:
– Define the problem or goal in terms of home country
cultural traits
– Define the problem in terms of host-country cultural traits;
make no value judgments
– Isolate the SRC influence and examine it
– Redefine the problem without the SRC influence and solve
for the host country situation

Environmental Sensitivity

Global
Marketing
Political, Legal
and Regulatory
Environments
Chapter 5

5-38
Taxes
• Government taxation policies
– High taxation can lead to black market growth and
cross-border shopping
• Corporate taxation
– Companies attempt to limit tax liability by shifting
location of income

5-39
Seizure of Assets
• Expropriation–governmental action to dispossess a
foreign company or investor
– Compensation should be provided in a “prompt, effective,
and adequate manner”
• Confiscation occurs when no compensation is
provided
• Nationalization–a government takes control of some
or all of the enterprises in an entire industry
– Acceptable according to international law if:
• satisfies public purpose
• includes compensation

5-40
Intellectual Property
• Intellectual property must be registered in each
country where business is conducted
– Patent–gives an inventor exclusive right to make, use, and
sell an invention for a specified period of time
– Trademark–distinctive mark, motto, device, or emblem
used to distinguish it from competing products
– Copyright–establishes ownership of a written, recorded,
performed, or filmed creative work

5-41
Infringement of Intellectual Property
• Counterfeiting–unauthorized copying and
production of a product
• Associative Counterfeit/Imitation–product
name differs slightly from a well-known brand
• Piracy–unauthorized publication or
reproduction of copyrighted work

Antitrust Rulings
• Laws are designed to combat restrictive business
practices and to encourage competition
• Enforced by FTC in the U.S., Fair Trade Commission in
Japan, European Commission in European Union

Global
Marketing
Global
Marketing
Global Information
Systems and
Market Research
Chapter 6

5 Sources of Information for the Global
Marketer
1-44
1 -
Management
Information
Systems (MIS)
3 - Market
Research
4 - Personal
Sources
2 -
Environmental
Scanning
5 - Direct
Sensory
Perception

6-45
1 – Management Information Systems
(MIS)
A. Intranet
B. Electronic Data Interchange (EDI)
C. Electronic point of sale
D. Data Warehouses (CRM)

6-46
A. Intranet
• A private network
• Allows authorized company personnel (or
outsiders) to share information electronically
• 24-Hour Nerve Center
• Allows companies like Amazon.com and Dell
to operate as real time enterprises

6-47
B. Electronic Data Interchange
• Allows business units to:
– Submit orders
– Issue invoices
– Conduct business electronically
• Transaction formats are universal
• Allows computers from different companies
to speak the same language

6-48
C. Efficient Consumer Response (ECR)
• A joint initiative by members of a supply chain
to work toward improving and optimizing
aspects of the supply chain to benefit
customers
– This is in addition to EDI
– An effort for retailers and vendors to work closely
on stock replenishment
• Utilizes electronic point of sale

6-49
D. Customer Relationship Management
• Philosophy that values two-way communication
between company and customer
• Every point of contact with a consumer is an
opportunity to collect data

6-50
2 - Environmental Scanning
• Business needs a routine way to track interesting information
• An efficient, effective system that will scan and digest published sources
and technical journals
• Daily scanning, translating, digesting, abstracting, and electronic input of
information into a market intelligence system
• Expanding information coverage to other regions of the world

6-51
3 - Formal Global Market Research
• Global marketing research is the project-
specific, systematic gathering of data in the
search scanning mode on a global basis
– Challenge is to recognize and respond to national
differences that influence the way information is
obtained

6-52
4/5 - Other Sources of Global Market
Information
4. Personal sources
– Company executives based abroad who have contact with
distributors, consumers, suppliers, and government officials
– Friends, acquaintances, professional colleagues, consultants, and
prospective employees
5. Direct sensory perception
– Using the senses to find out firsthand what is going on in a
particular country

6-53
Steps in the Research Process
1. Identify the information requirement
2. Define the problem
3. Choose a unit of analysis
4. Examine data availability
5. Assess value of research
6. Design the research
7. Analyze the data
8. Present the findings

6-54
Step 1: Identifying the
Information Requirement
• What information do I need?
– Existing markets
• Customer needs already being served by one or more
companies; information may be readily available
– Potential markets
• Latent market—an undiscovered market; demand
would be there if product was there
• Incipient market—market will emerge as macro
environmental trends continue
• Why do I need this information?

6-55
Step 2: Problem Definition and
Overcoming the SRC
• Self-reference criterion occurs when a person’s values and
beliefs intrude on the assessment of a foreign culture
• Must be aware of SRCs
– Enhances management’s willingness to conduct market research
– Ensures that research design has minimal home-country bias
– Increases management’s receptiveness to findings

6-56
Step 3:
Choose a Unit of Analysis
• Will the market be
– Global
– A region
– A country
– A province
– A state
– A city

6-57
Step 4:
Examine Data Availability
• Sources may be
– Company records
– Secondary sources
• Trade journals
• Government sources such as CIA World Factbook,
Statistical Yearbook of the United Nations, World Bank
• Commercial sources such asThe Economist and
Financial Times, Marketresearch.com

6-58
Step 5: Assess Value of Research
• What is the information worth versus what it will
cost to collect?
• What will it cost if the data are not collected?
• What will the company gain with this information?

6-59
Step 6: Research Design—Data
Collection
• Use multiple indicators
• Develop customized indicators specific to the industry,
product market, or business model
• Do not assess a market in isolation
• Observation of purchasing patterns/ behavior is more
important than reports of purchase intention or price
sensitivity

6-60
Step 6: Research Design—Research
Methodologies
• Primary data collection methods
1. Survey research
2. Personal interviews
3. Consumer panels
• Nielsen—TV viewing
4. Observation
• Using people or cameras
5. Focus groups Same as local Marketing

6-61
Step 7: Analyzing Data
• Clean the data
• Tabulate the data using
statistical techniques—
ANOVA, regression,
factor analysis, cluster
analysis
• Perceptual mapping,
conjoint analysis

6-62
Step 8: Presenting the Findings
• Report must clearly
address problem
identified in Step 1
• Include a memo or
executive summary
of the key findings
along with main
report

Copyright 2013, Pearson Education Inc., Publishing as Prentice-HallCopyright 2013, Pearson Education Inc., Publishing as Prentice-Hall
Global
Marketing
Global
Marketing
Global Market Entry
Strategies: Licensing,
Investment and Strategic
Alliances
Chapter 9

Investment Cost of
Marketing Entry Strategies

Which Strategy
Should Be Used?
• It depends on:
1. Vision
2. Attitude toward risk
3. Available
investment capital
4. How much control
is desired

Licensing
• A contractual agreement whereby one company (the
licensor) makes an asset available to another
company (the licensee) in exchange for royalties,
license fees, or some other form of compensation
– Patent
– Trade secret
– Brand name
– Product formulations

Advantages and Disadvantages
to Licensing
Advantages
• Provides additional
profitability with little initial
investment
• Provides method of
circumventing tariffs,
quotas, and other export
barriers
• Attractive ROI
• Low costs to implement
Disadvantages
• Limited participation
• Returns may be lost
• Lack of control
• Licensee may become
competitor
9-67

9-68
Special Licensing Arrangements
• Contract manufacturing
– Company provides technical
specifications to a subcontractor
or local manufacturer
– Allows company to specialize in product design while contractors
accept responsibility for manufacturing facilities
• Franchising
– Contract between a parent company–franchisor and a franchisee that
allows the franchisee to operate a business developed by the
franchisor in return for a fee and adherence to franchise-wide policies
119 countries
34000 outlets
80% are franchised units

Foreign Direct Investment (FDI)
• Partial or full ownership of operations outside of home
country
• Forms
1. Joint ventures
2. Minority or majority
equity stakes
3. Outright acquisition
IKEA, with affordable furniture and
housewares, spent $2 billion in Russia.

9-70
1. Joint Ventures
• Partners share ownership of a newly-created
business entity
– Builds upon each partner’s strengths
• Examples: Budweiser and Kirin (Japan), GM and Toyota, GM and
Russian government, Ericsson’s cell phones and Sony, Ford and
Mazda, Chrysler and BMW

9-71
Advantages and Disadvantages of
Joint Ventures
• Advantages
– Allows for sharing of risk
(both financial and political)
– Provides opportunity to learn
new environment
– Provides opportunity to
achieve synergy by combining
strengths of partners
– May be the only way to enter
market given barriers to entry
• Disadvantages
– Requires more investment
than a licensing agreement
– Must share rewards as well as
risks
– Requires strong coordination
– Potential for conflict among
partners
– Partner may become a
competitor

2. Equity Stake or 3.Full Ownership
a. Start-up of new operations
– Greenfield operations or Greenfield investment
b. Merger with an existing enterprise
c. Acquisition of an existing enterprise
• Examples: Volkswagen, 70% stake in Skoda Motors, Czech
Republic (equity), Honda, $550 million auto assembly plant in
Indiana (new operations)

The Nature of Global Strategic
Partnerships
Participants remain independent
Participants make ongoing
contributions in technology, products,
and other key strategic areas
Participants share benefits of
alliance as well as control over
performance of assigned tasks

Welcome back to
Global Marketing
Chapter 8: Exporting, Importing and
Sourcing

Learning Outcomes
• Understand the difference between export selling and export
marketing
• Understand the role of government and how they impact
exporting and importing
• Understand decisions related to sourcing
1-75

8-76
• Export selling involves selling the same product, at the
same price, with the same promotional tools, in a
different place
• Export marketing tailors the marketing mix to
international customers
Export Selling versus
Export Marketing

Attitude toward Exporting
Unwilling to
Export
Fills unsolicited
orders only
Explores
feasibility of
exporting
Exports to one
or more
markets (trial)
Exports to one
or more
markets
Company
pursues
focused
exporting
Proactively
seeks out any
exporting
opportunities
1-77

Requirements for
Export Marketing
• An understanding of the target market environment
• The use of market research and identification of market
potential
• Decisions concerning product design, pricing, distribution and
channels, advertising, and communications

8-79
Key Export Participants
• Foreign purchasing agents
• Export brokers
• Export merchants
• Export management companies
– Acts as the export department for
≥2 mfrs
• Manufacturer’s export agents
• Export distributor
– Takes financial risk
– Represents several manufacturers
• Export commission
representative
• Cooperative exporter
• Freight forwarders

8-80
In-house or External Representation?
• Direct market representation
– Usually selling directly to retailer or wholesaler
– Advantages—control and communications
• Representation by independent
intermediaries
– Advantages—best for situations with small sales
volume

8-81
National Policies Governing Exports and
Imports
• Most nations encourage exports
and restrict imports
• When all nations want the
same thing,…conflicts
arise
• A trend towards lowering
of trade barriers, eg. EU, NAFTA

8-82
Government Programs that
Support Exports
• Tax incentives
• Subsidies
• Governmental assistance
– Eg.Export Development
Canada (EDC)
–
• Free trade zones

8-83
Governmental Actions to Discourage Imports
and Block Market Access
• Tariffs
• Nontariff barriers
– Quotas
– Discriminatory procurement policies
– Restrictive customs procedures
– Arbitrary monetary policies
– Restrictive regulations

8-84
Other Duties and Import Charges
• Anti-dumping duties
– Dumping is the sale of merchandise in export
markets at unfair prices
– Special import charges equal to the dumping
margin
• Countervailing duties
• Variable import levies
• Temporary surcharges

8-85
Factors that Affect Sourcing
• Management vision
• Factor costs and conditions
• Customer needs
• Logistics
• Country infrastructure
• Political risk
• Exchange rate, availability, and convertibility of local
money

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