Chapter

Global Markets and Marketing

Global Markets and Marketing

5

The significance of international marketing to firms.

What makes foreign markets attractive.

Challenges in designing marketing strategies.

Developing Global Brands

The Significance of International Trade

• Access to products otherwise unavailable– FoodstuffsFoodstuffs

– Minerals and other natural resourcesMinerals and other natural resources

• What don’t we have in U.S.?• Comparative Advantage

– Advantage in natural resourcesAdvantage in natural resources

– Advantage in human resourcesAdvantage in human resources

Exports as a Percent of GDP in Selected Countries (2006)

Country Exports as a % of GPDCountry Exports as a % of GPD

United StatesUnited States 11% 11%

United KingdomUnited Kingdom 2828

FranceFrance 27 27

GermanyGermany 4545

JapanJapan 1616

CanadaCanada 36 36

MexicoMexico 2828

ChinaChina 3939Source: http://datafinder.worldbank.org/exports-goods-services-gdp Year: 2006

Environmental Considerations in International Marketing

• Social and Cultural Forces• Economic Environment

– InfrastructureInfrastructure– Level of economic developmentLevel of economic development

• Political and Legal Forces• Trade Barriers

– TariffTariff: A tax imposed on a product entering a country.– Import quotaImport quota– Local-content lawsLocal-content laws– Boycott or embargoBoycott or embargo

• Free-Traders vs. ProtectionistsFree-Traders vs. Protectionists

Trade agreements both inhibit and encourage international marketing

• General Agreement on Tariffs and Trade (GATT) - General Agreement on Tariffs and Trade (GATT) - now called the World Trade Organization (WTO)

• The European Union (EU)The European Union (EU)

• North American Free Trade Agreement (NAFTA)North American Free Trade Agreement (NAFTA)

• The Asia-Pacific Economic Cooperation forum (APEC)The Asia-Pacific Economic Cooperation forum (APEC) is a trade pact with 19 member nations that account for 45 percent of world trade.

EU Members (and candidates)2009

Canada 30.7

Venezuela 23.2

Brazil 161.8

Uruguay 3.2

Paraguay 5.2

United States 283.0

Mexico 95.8

Colombia 37.7

Ecuador 12.2

Peru 24.8

Argentina 36.1Chile 14.8

Bolivia 8.0

NAFTA

Japan 126.4

South Korea 46.5

Taiwan 21.8Hong Kong 6.7

Philippines 73.1

Brunei 0.3

Papua NewGuinea 4.6

Australia 18.7

Maldives 0.3

Sri Lanka 18.7Malaysia 22.1

China 1,243

Nepal 22.0

Pakistan 141.9

Bangladesh 127.6

Bhutan 0.6India 984

Singapore 3.2

Vietnam 76.2

Indonesia 199.7 New Zealand 3.8

Thailand 61.2

APEC

Designing the International Marketing Mix

• Marketing ResearchMarketing Research

– Statistical data are scarce and often not reliable.

– There is a lack of uniformity among countries regarding the definition of measures.

• Product PlanningProduct Planning decisions include:

– Product adaptation.Product adaptation.

– Branding and labeling.Branding and labeling.

• PricingPricing issues are:

– Cost-plus pricing. Price Differential.Cost-plus pricing. Price Differential.

– Dumping. Foreign Exchange.Dumping. Foreign Exchange.

– Countertrade or barter.Countertrade or barter.

Designing the International Marketing Mix (Con’t.)

• Distribution systemsDistribution systems consist of:consist of:– Domestic foreign-trade middlemen.Domestic foreign-trade middlemen.

– Foreign-trade middlemen located abroad.Foreign-trade middlemen located abroad.

– Wholesalers and retailers operating within foreign markets.Wholesalers and retailers operating within foreign markets.

– Manufacturer’s sales branches and offices located in foreign Manufacturer’s sales branches and offices located in foreign countries.countries.

– Bribes, kickbacks, and extortion payments are common in many Bribes, kickbacks, and extortion payments are common in many international distribution systems.international distribution systems.

– Gray marketing (export diversion)Gray marketing (export diversion)

• AdvertisingAdvertising focuses on: focuses on:– Standardization.Standardization.

– Adapting media strategyAdapting media strategy and message details.

Pringles Ad

Strategic Planning for International Marketing

• Global StrategyGlobal Strategy - the same marketing plan is employed throughout the world.

• Regional StrategyRegional Strategy - used when geographic areas have much in common, but are distinct from other geographic areas.

• Local StrategyLocal Strategy - used when there are few marketing mix dimensions that can be transferred from one market to another

Global Branding Strategy

• What is is?

• Why such a desire to do it?

• Few brands/products REALLY do it completely.

• #1 Global brand of Shampoo?

Brand Name Problems...

• You’ve probably heard some of the classic blunders made by American companies:

• Chevy Nova in Mexico

• Clairol Mist Stick in Germany

• Look at some interesting foreign brands...

Poor Candidates for Global Brands

• Crapsy Fruit:• French cereal

• Happy End:• German toilet paper

• Bimbo:• Mexican Toasted Bread

• Plopp:• Scandinavian chocolate

Source: Newsweek March 17, 1997

• Pocari Sweat:• Japanese Sport Drink

• Skinless:• Japanese condoms

• Zit:• German lemonade

• Super Piss:• Scandinavian car lock de-icer

International Trade Balance

Info.

The Role of International Trade Balances

• A country’s balance of paymentsbalance of payments is an accounting record of all its transactions with all the other nations in the world.

• A country’s trade balancetrade balance is the difference between what it exports and what it imports.

– When exports exceed imports, trade surplustrade surplus– When imports exceed exports, trade deficittrade deficit

A country’s expenditures across all categories must equal income across all categories

• If total expenditures are more than total income, the country must borrow to make up the difference.

• If a country’s debt grows, it is faced with pressure to raise taxes and lower government spending.

The U.S. has large expenditures in four categories that significantly affect its

balance of payments.

• Military forces stationed overseas

• Foreign aid

• Oil imports

• American tourist travel abroad

To offset these expenditures and maintain equilibrium in To offset these expenditures and maintain equilibrium in the balance of payments, U.S. businesses need to the balance of payments, U.S. businesses need to

generate a substantial trade balance.generate a substantial trade balance.