19

Principles of Marketing

The Global Marketplace

Learning Objectives
After studying this chapter, you should be able to:
1. Discuss how the international trade system,
economic, political-legal, and cultural
environments affect a company’s international
marketing decisions
2. Describe three key approaches to entering
international markets
3. Explain how companies adapt their marketing
mixes for international markets
4. Identify the three major forms of international
marketing organizations

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 Chapter Outline

1. Global Marketing Today

2. Looking at the Global Marketing
Environment
3. Deciding Whether to Go Global
4. Deciding Which Markets to Enter
5. Deciding How to Enter the Market
6. Deciding on the Global Marketing Program
7. Deciding on the Global Marketing
Organization

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Global Marketing Today

A global firm is one that, by operating in

more than one country, gains
marketing, production, R&D, and
financial advantages that are not
available to purely domestic competitors

The global firms sees the world as one

market
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Global Marketing Today

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?
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Looking at the Global Marketing
Environment

The International Trade System

Restrictions on trade between nations

include:
• Tariffs
• Quotas
• Exchange controls
• Non-tariff trade barriers
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Looking at the Global Marketing
Environment

The International Trade System

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
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Looking at the Global Marketing
Environment

The International Trade System

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 American
product features
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Looking at the Global Marketing
Environment
The International Trade System
The World Trade Organization and GATT

The General Agreement on Tariffs and

Trade (GATT) is a 59-year-old treaty
designed to promote world trade by
reducing tariffs and other international
trade barriers
• Uruguay Round reduced merchandise tariffs
by
30 percent and set up the World Trade
Organization to enforce GATT rules
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Looking at the Global Marketing
Environment
The International Trade System
The World Trade Organization and GATT

World Trade Organization

• Enforces GATT rules
• Mediates disputes
• Imposes trade sanctions

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 Looking at the Global Marketing
Environment
The International Trade System
Regional Free Trade Zones

Economic communities are free trade

zones created by nations to work toward
common goals in the regulation of
international trade
• European Union (EU)
• North American Free Trade Agreement (NAFTA)
• Caribbean Free Trade Agreement (CAFTA)
• South American Community of Nations (CSN)
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Looking at the Global Marketing
Environment
Economic Environment

Economic factors reflect a country’s

attractiveness as a market
• Industrial structure
• Income distribution

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Looking at the Global Marketing
Environment

Economic Environment
Industrial Structure

• Subsistence economies
• Raw material exporting economies
• Industrializing economies
• Industrial economies

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Looking at the Global Marketing
Environment
Economic Environment
Industrial Structure

Subsistence economies have a large majority of

people engaged in agriculture. They consume
most of their output and barter the rest for
simple goods and services. They offer few
market opportunities.

Raw material exporting economies are rich in

one or more natural resources. They are good
markets for large equipment, tools, supplies,
and trucks. If there is a wealthy upper class,
then they are also a market for luxury goods.
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Looking at the Global Marketing
Environment
Economic Environment
Industrial Structure

Industrializing economies have manufacturing that represents

10 percent to 20 percent of the economy and needs imports
of raw textile materials, steel, and heavy machinery and
fewer imports of finished textiles, paper products, and
automobiles. These economies create a rich upper class and
a small but growing middle class that demand new types of
imported goods.

Industrial economies are major exporters of manufactured

goods, services, and investment funds. They trade among
themselves and export to other economies. They represent
an attractive market for all types of goods and services.

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Looking at the Global Marketing
Environment

Economic Environment
Income Distribution

• Low-income households
• Middle-income households
• High-income households

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Looking at the Global Marketing
Environment

Political-Legal Environment

• Country’s attitude toward international

buying
• Government bureaucracy
• Political stability
• Monetary regulations

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Looking at the Global Marketing
Environment
Political-Legal Environment

Country’s attitude toward international

buying involves the country’s
receptiveness to foreign business

Monetary regulations involve the stability

of exchange rates and currency limitations

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Looking at the Global Marketing
Environment
Political-Legal Environment

Countertrade is a non-cash payment

• Barter is the exchange of goods or
services
• Compensation or buyback is the sale
of a plant or equipment and the payment
in resulting products
• Counterpurchase is when the seller
receives payment and agrees to spend
some of the money in the other country
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Looking at the Global Marketing
Environment

Cultural Environment
Impact of Culture on Marketing Strategy

• Business norms
• Cultural preferences, traditions, and
behaviors

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Deciding Whether to Go Global

Factors to consider
• Global competition in the home market
• Stagnant or shrinking home market
• Foreign markets with more opportunity
• Expansion of customers to
international markets

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Deciding Which Markets to Enter

Define international marketing objectives

and policies
• Foreign sales volume
• How many countries to market to
• Types of countries to market to based
on:
• Geography
• Income and population
• Political climate
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Deciding Which Markets to Enter

Rank potential global markets based on:

• Market size
• Market growth
• Cost of doing business
• Competitive advantage
• Risk level

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Deciding How to Enter the
Market

Ways to enter global markets

include:
• Exporting
• Joint venturing
• Direct investment

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Deciding How to Enter the
Market

Exporting is when the company

produces its goods in the home
country and sells them in a foreign
market. It is the simplest means
involving the least change in the
company’s product lines, organization,
investments, or mission.
• Indirect exporting
• Direct exporting
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Deciding How to Enter the
Market

Exporting

Indirect exporting is when the firm works through an

independent international marketing intermediary.
This requires less investment and risk since the firm
does not require an overseas organization or network.

Direct exporting is when the firm handles its own

exports. This requires a greater investment and risk.
• Domestic export department
• Send home-based salespeople abroad
• Use of foreign distributors

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Deciding How to Enter the
Market

Joint venturing is when a firm joins with foreign

companies to produce or market products or
services
• Licensing
• Contract manufacturing
• Management contracting
• Joint ownership

Joint venturing differs from exporting in that the

company joins with a host country partner to
sell or market abroad
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 Deciding How to Enter the
Market
Joint Venturing

Licensing is when a firm enters into an

agreement with a licensee in a
foreign market. For a fee or royalty,
the licensee buys the right to sue the
company’s process, trademark,
patent, trade secret, or other item of
value

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Deciding How to Enter the
Market

Joint Venturing

Contract manufacturing is when a firm

contracts with manufacturers in the
foreign market to product its product
or provide its service. Benefits include
faster startup, less risk, and the
opportunity to form a partnership or to
buy out the local manufacturer.

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Deciding How to Enter the
Market

Joint Venturing

Management contracting is when the domestic

firm supplies management skill to a foreign
company that supplies capital. The domestic
firm is exporting management services rather
than products.

Joint ownership is when one company joins

forces with foreign investors to create a local
business in which they share joint ownership
and control. Joint ownership is sometimes
required for economic or political reasons.
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Deciding How to Enter the
Market

Direct investment is the development of

foreign-based assembly or manufacturing
facilities and offers a number of advantages:

Lower costs
• Raw material
• Labor
• Government incentives
• Logistics
• Control
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Deciding on the Global
Marketing Program

Standardize marketing mix involves

selling the same products and using the
same marketing approaches worldwide

Adapted marketing mix involves adjusting

the marketing mix elements in each
target market, bearing more costs but
hoping for a larger market share and ROI

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Deciding on the Global
Marketing Program

Product Strategies

Straight product extension means marketing

a product in a foreign market without any
change
Product adaptation involves changing the
product to meet local conditions or wants
Product invention consists of creating
something new for a specific country market
• Maintain or reintroduce earlier products
• Create new products
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Deciding on the Global
Marketing Program
Promotion Strategies

Companies can either adopt the same

communication strategy they use
at home or change it for each
market

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Deciding on the Global
Marketing Program
Price Strategies

Uniform pricing is the same price in all markets

but does not consider income or wealth
where the price may be too high in some
markets or not high enough in other markets

Market-based pricing is the price that markets

can pay but does not consider actual costs

Standard markup pricing is a price based on a

percentage of cost but can cause problems in
countries with high costs
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Deciding on the Global
Marketing Program
Distribution Strategies
Whole-Channel View

Seller’s headquarters organization supervises

the channel and is also a part of the channel

Channels between nations move the products

to the borders of the foreign nations

Channel within nations move the products from

their foreign point of entry to the final
customers
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Deciding on the Global
Marketing Program
Distribution Strategies
Differences Within Countries

• Numbers and types of

intermediaries
• Size and character of retail
units

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Deciding on the Global
Marketing Organization

Typical management of international

marketing activities include:
• Organize and export department
with a sale manager and staff
• Create an international division
organized by geography, products,
or operating units
• Become a complete global
organization
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The End