Ch. 7- Reaching Global Markets

Front 1

Dynamics of World Trade
and World Trade Flows

Back 1

All nations do not participate equally in world trade. Flows reflect interdependency among industries, countries, and regions.
-exports and imports:
US, Europe, Canada, Japan and China account for 2/3 of world trade.

Front 2

Countertrade

Back 2

the practice of using barter rather than money in making global sales. (15-20% of world trade)
-popular in E. European countries, Russia, and Asian countries

Front 3

Global Perspective on Exports and Imports

Back 3

views exports and imports as complementary economic flows: A country's imports effect its exports and exports effect its imports.

Front 4

trade feedback effect

Back 4

-greater demand for imports stimulates exports from other counties

-increased exports lead to more income, which leads to more demand for imports.

Front 5

US Perspective: role in world markets

Back 5

-world's perennial leader in GDP
-world leader in exports, but shifting down
-percentage share of imports has increased
-role in the world marketplace has increased

Front 6

Gross Domestic Product

Back 6

the monetary value of all goods and services produced within a country during one year

Front 7

Balance of Trade

Back 7

Difference between the monetary value of a nation's exports and imports
Exports> Imports= Surplus
Imports> Exports= Deficit

Front 8

US Balance of Trade

Back 8

Since 1975:
1) imports have significantly exceeded exports= Trade deficit
2) volume of both imports and exports is about 10-15x what it was - significant effect on every American

*3 largest importers of US goods: Canada, Mexico, Japan
Exporters: Canada, China, Mexico, and Japan
-Trade imbalanace b/w US and Asia

Front 9

Competitive Advantage of nations

Why do some companies succeed globally? (Four Key Elements)

Back 9

1) Factor conditions: Natural resources, Education and skill levels, Wage rates
2) Demand Conditions: Size of domestic market, Sophistication of consumers, Media exposure of products
3) Related and Supporting Industries: existence of supplier clusters that accelerate innovation EX. Germans
4) Company strategy, structure, and rivalry: number of companies in an industry, intensity of competition, Public or private ownership

Front 10

National Competitive advantage Cont.

*economic espionage

Back 10

Theme: firm that succeeds in global markets has first succeeded in in intense domestic competition (#4)

* Down side of competitive advantage: clandestine collection of trade secrets or proprietary info. of competitors

Front 11

Economic Espionage Act (1996)

Back 11

law to counteract the threat of economic espionage that
makes the theft of trade secrets by foreign entities a federal crime in the United states.

Front 12

Marketing in A Borderless World:

Four Trends:

Back 12

1) Gradual decline of economic protectionism by individual countries

2) Formal economic integration and free trade among nations

3) Global competition among global companies for global customers

4) Development of networked global marketspace

Front 13

1) Decline of Economic Protectionism

Back 13

-quotas and tariffs

-every country has some form of protectionism, but it has declined

Front 14

Protectionism

Back 14

the practice of shielding one or more industries within a country's economy from foreign competition through the use of tariffs and quotas

Arg.-limits the outsourcing of jobs, protects political security, discourages dependency on other nations, and encourages development of domestic industries

Front 15

Tariffs

Back 15

a government tax on goods or services entering a country that primarily serves to raise prices on imports.

Front 16

Quota

Back 16

a restriction placed on the amount of a product allowed to enter or leave a country.
-Seek to guarantee domestic industries access to a certain percentage of their domestic market.
-Limits supply and increase prices
EX. Italian quota on Jap. motorcycles

Front 17

General Agreement on Tariffs and Trade(GATT)

Back 17

International treaty that was intended to limit trade barriers and promote world trade through the reduction in tariffs,BUT did not address quotas

Front 18

World Trade Organization

Back 18

formed in 1995 by the major industrialized nations of the world to address a broad array of world trade issues.

- A permanent institution that sets rules governing trade b/w its members through panels of trade experts who decide on trade disputes and issue binding decisions
EX. Kodak decision regarding Japan

Front 19

2)Rise of Economic Integration

Back 19

-forming of international trade groups that promote free trade among member nations and enhancing individual economies
EU, NAFTA, and Asian Free Trade Areas

Front 20

European Union

Back 20

-25 member countries that have eliminated most barriers to the free flow of goods, services, capital, and labor across borders
-most adopted common currency: euro
-less need to market on a nation by nation basis
- reduced production and marketing cost savings

Front 21

NAFTA - North American Free Trade Agreement

Back 21

- lifted many trade barriers b/w Canada, Mexico and the United States.
-Plans to expand to Latin American and Caribbean Countries
- cross-border retailing, manufacturing, and investment

Front 22

Asian Free Trade Agreements

Back 22

growing efforts to liberalize free trade from Japan to the four little dragons(Hong Kong, Singapore, South Korea, and Tiawan) through Thailand, Malaysia, and Indonesia.
-reduce tariffs

Front 23

Global Competition

Back 23

exists when firms originate, produce, and market their products and services worldwide.

- broadens the competitive landscape for marketers
EX. Pepsi vs. Coke, Pampers vs. Huggies
- many collaborative relationships have formed as a result

Front 24

Strategic Alliances (Global)

Back 24

agreements among two or more independent firms to cooperate for the purpose of achieving common goals, such as competitive advantage or customer value creation.
EX. General Mills and Nestle goined to fine tune European cereal marketing(Nestle), and distribute GM worldwide

Front 25

Part 2: Global Companies

Back 25

1) international 2)multinational
3) transnational
-employ people in different countries
-have divisions/subsidiaries worldwide

Front 26

a. international firm

Back 26

engages in trade and marketing in different countries as an extension of the marketing strategy in its home country
-same way as in home country (AVON)

Front 27

b. multinational firm

Back 27

views the world as consisting of unique parts, and markets to each part differently
-use multidomestic strategy

Front 28

Multidomestic Marketing Strategy

Back 28

strategy used by multinationals that means that they have as many different product variations, brand names, and advertising programs as countries in which they do business
ie. using different brand names in different countries

Front 29

c. transnational firm

Back 29

views the world as one market and emphasizes cultural similarities across countries or universal consumer needs and wants more than differences.

Front 30

Global Marketing Strategy

Back 30

strategy used by transnational firms
- the practice of standardizing marketing activities when there are cultural similarities and adapting them when cultures differ

-benefit: allows marketers to realize economies of scale from their production and marketing activities.
-popular among business to business marketers (Texas instruments) and some consumer goods (Coke, McDonalds, Mattel)

Front 31

Global Brand

Back 31

a brand marketed under the same name in multiple countries with similar and centrally coordinated marketing programs
EX. McDonalds, Gillette

- have same product formulation and service concept, deliver the same benefits, and use consistent marketing/advertising
-some aspects are tailored

Front 32

Def: Global Consumers

Back 32

consumer groups living in many countries or regions of the world who have similar needs or seek familiar features and benefits from products or services
-global middle-income class (IKEA), youth market(Nike), and elite segment (Gucci)

Front 33

4) Emergence of a Networked Global Marketspace

Back 33

-internet technology is a tool for exchanging goods, services, and information on a global scale
- enables exchange of goods services and info. from companies ANYWHERE to customers ANYWHERE AT ANY TIME and at lower cost.
-business to business e-commerce worldwide
-multiple country and language websites

Front 34

Global Environmental Scan

Back 34

- five environmental factors discussed earlier (Social, Economic, Regulatory, Technological, and Competitive)
- focus on uncontrollable:
Cultural, Economic, and Political-Regulatory

Front 35

1)Cultural Diversity

*DEF: Cross-Cultural Analysis

Back 35

study is necessary before exchange

*the study of similarities and differences among consumers in two or more nations or societies
VALUES, CUSTOMS, SYMBOLS, AND LANGUAGE; also Ethnocentricity

Front 36

a.Values

Back 36

represent personally or socially acceptable preferable modes of conduct or states of of existence that tend to persist over time.
EX. Cow sacred in India

-affect attitudes and beliefs and importance assigned to specific behaviors and attributes of goods and services

Front 37

b.Customs

Back 37

what is considered normal and expected about the way people do things in a specific country.
EX. men wear cosmetics in France
EX. Giving Business Gifts
-bribes, kickbacks, and payoffs to commit an illegal act for economic gain is corrupt in most nations
-ALSO: nonverbal behavior- Japanese listen more

Front 38

Foreign Corrupt Practices Act (1977)

amended: International anti-dumping and Fair Competition Act (1998)

Back 38

make it a crime for US corporations to bribe an official of a foreign government or political party to obtain or retain business in a foreign country.
- does not include bribes to foreign companies

Front 39

c.Cultural Symbols-

Back 39

things that represent ideas and concepts

-play an important role in cross-cultural analysis
-improper use can= disaster
EX. Thumbs up, unlucky numbers

-country of origin has different symbol for quality

Front 40

Semiotics

Back 40

field of study that examines the correspondence between symbols and their role in the assignment of meaning for people

Front 41

d. Language

Back 41

not only the native tongue of a particular country, but also the nuances and idioms of language
EX. Brand name meaning in different countries

Front 42

Back Translation

Back 42

a translated word or phrase is retranslated into the original language by a different interpreter to catch errors.

Front 43

cultural ethnocentricity

Back 43

The tendency to people to view their own culture (customs, values, symbols and language) as superior to others.

-impediment to successful global marketing

Front 44

Consumer Ethnocentrism

Back 44

the tendency to believe that it is inappropriate, indeed immoral, to purchase foreign made products.

-purchases are unpatriotic, harm domestic industry, and cause domestic unemployment
EX. US, France, Germany

Front 45

2) Economic Considerations

Back 45

Do:
1)Comparative analysis of economic development in different countries

2)An assessment of the economic infrastructure

3)Measurement of consumer income

4)Currency exchange rate recognition

Front 46

a.Stages of Development:

1) Developed

2) Developing

Back 46

a. have somewhat mixed economies. Private enterprise dominates, although there are substantial public sectors. (US, Canada, Japan, Western Europe)

b. in the process of moving from an agricultural to an industrial economy. Subgroups:
1)made the move (Brazil, China, Australia)
2)remain locked in preindustrial (Afghanistan, Chad)

Front 47

b.economic infrastructure

Back 47

country's communications, transportation, financial, and distribution systems
-we can take our infrastructure systems for granted
-communications infrastructure: telecommunications like telephones, cable TV, computers, satellite etc.
-financial and legal systems

Front 48

c. consumer income and purchasing power

Back 48

income distribution is a more reliable measure of a company's purchasing power than per capita income
-more middle income = greater purchasing power
-government subsidies must be taken into account

Front 49

d. Definition: Currency Exchange Rates

Back 49

the price of one country's currency expressed in terms of another country's currency
EX. dollar expressed in Brazillian Reals, Yen, Euros, etc.
-must consider when pricing in foreign countries

Front 50

Effect of Fluctuations in Exchange Rates

Back 50

fluctuations impact sales and profits made by global countries

-buy more US dollars= US products are less expensive for foreign consumers.

Front 51

3) Political-Regulatory Environment

Back 51

favorable or unfavorable? how long will conditions last?

Political Stability
Trade Regulations

Front 52

a. Political Stability

Back 52

effected by: government's orientation toward foreign companies and trade with other countries

Front 53

b. Trade Regulations

Back 53

rules that govern business practices within a country's borders
-trade barriers

-free trade agreements and rules that specify how goods are to be made and marketed

Front 54

Global Market-Entry Strategies (4)

Back 54

1)Exporting (Direct and Indirect)
2)Licensing (Contract Manufacturing, Contract Assembly, Franchising)
3)Joint Venture
4)Direct Investment

Profit Potential, Risk, Financial Investment, and marketing control increses as you move form 1->4

Front 55

A. Exporting (30%)

Back 55

producing goods in one country and selling them in another country
- entry option that requires the least amount of changes in terms of product, organization, and corporate goals. Less local employment.

-prominent strategy global market entry strategy for small and med. sized firms

Front 56

indirect export

Back 56

when a firm sells its domestically produced goods in a foreign country through an intermediary. least amount of commitment and risk, but also potential profit

Front 57

direct export

Back 57

when a firm sells its domestically produced goods in a foreign country without intermediaries.

-usually b/c large sales volume is easy to obtain
- a little more risk and profit possibility than indirect

Front 58

B. Licensing

Back 58

company offers the right to a trademark, patent, trade secret, or other intellectual property in return for a royalty or fee.

ADV- low risk, capital-free entry, home country gains employment

DIS- licensor forgoes control and potential profits. may be creating it's own competition

Front 59

contract manufacturing

Back 59

a US company may contract with a foreign country to manufacture products according to stated specifications. Product then sold in the foreign country or sent back to the US

- low wage rate for licensor, employment for licensee

Front 60

contract assembly

Back 60

US company may contract with a foreign firm to assemble (not manufacture)parts and components that have been shipped to that company.
- low wage rate for licensor, employment for licensee

*franchising is third method of licensing used

Front 61

C. Joint Venture

Back 61

when a foreign company and a local firm invest together to create a local business.

-Two companies share ownership, control, and profits

Front 62

Advantages and disadvantages of a Joint Venture

Back 62

ADV- one company may not have the financial, physical or managerial resources to enter a foreign market alone
- The govt may require or strongly encourage a joint venture before it will allow a company to enter its market (China)

DIS- two companies may disagree about policies or courses of action b/c of govt. bureaucracy

Front 63

D. Direct Investment

Back 63

a domestic firm actually invests in and owns a foreign subsidiary or division
-biggest investment a company can make when entering a global market
EX. Nissan plant in Tennessee
- usually follows one of the other market-entry strategies

ADV- cost savings, better understanding of local market, fewer local restrictions
DIS- high risk and investment

Front 64

Crafting a Worldwide Marketing Program

Back 64

-after choosing strategy to enter the market you must design, implement, and control the marketing program

Front 65

Product and Promotion Strategies

Back 65

can 1)use the same promotion or 2) adapt the promotion

can 1) use the same product as in the home market 2)adapt the product or 3) create a totally new product

RULE: standardize whenever possible and customize whenever necessary

Front 66

1) product extension

Back 66

SAME PRODUCT/ SAME PROMO
selling virtually the same product in other countries
EX. Coke, Wrigley's, Sony

- works best when consumer market target for the product is the same across all countries and cultures

Front 67

2) product adaptation

Back 67

ADAPT PRODUCT/ SAME PROMO
changing the product in some way to make it more appropriate for a country's climate or consumer preferences
EX. Gerber baby food, Mascara for different climates

Front 68

3) Product invention

Back 68

CREATE NEW PRODUCT
inventing totally new products designed to satisfy common needs across countries
EX. Flexable Flashlight

Front 69

4)communication adaptation strategy

5) dual adaptation strategy

Back 69

4)Adapt Promotion/ Same product
EX. golden beauty products

5)Adapt promotion/Adapt Product
EX. Nescafe coffee

Front 70

Distribution Strategy

Back 70

channels in global marketing:
seller-> Seller's international marketing headquarters-> channels between nations-> Channels w/in foreign nations-> Final consumer

Front 71

Pricing Strategy

Back 71

countries may impose competitive, political, and legal constraints, on the pricing of global companies
EX. Wal-Mart in Germany

- costs of production, tariffs, transportation and storage costs

Front 72

Dumping

Back 72

when a company sells a product in a foreign country below its domestic price or below its actual cost.
- build company's share of market
- products are in surplus

Front 73

Grey Market (or parallel importing)

Back 73

situation where products are sold through unauthorized channels of distribution.
When people buy in a lower price country from an authorized retailer, ship to higher priced countries and then sell below the manufacturer's suggested retail price. Legal in the US.

occurs when companies price their products very high in one country, but competitively in others