Chapter 5

Developing a
Global Vision

Adopted From:
Lamb, Hair, and McDaniel

1 © 2016 Cengage Learning. All Rights Reserved.

LEARNING OUTCOMES
5-1 Discuss the importance of global
marketing

5-2 Discuss the impact of multinational

firms on the world economy

5-3 Describe the external environment

facing global marketers

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LEARNING OUTCOMES
5-4 Identify the various ways of entering
the global marketplace

5-5 List the basic elements involved in

developing a global marketing mix

5-6 Discover how the Internet is affecting

global marketing

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 Rewards of Global Marketing and the
5-1 Shifting Global Business Landscape

Discuss the importance

of global marketing

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 Rewards of
Global Marketing
Having a global vision means…
• Recognizing and reacting to
international marketing opportunities

• Using effective global marketing

strategies

• Being aware of threats from foreign

competitors

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 Importance of Global
Marketing to the U. S.
 The United States derives 14 percent of
gross domestic product (GDP) from
world trade
 Since 2009, growing exports have added
6.1 million private sector jobs to the U.S.
economy
 287,000 small and medium size firms
export goods from the U.S.

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 Negatives of Trade
and Globalization
 Millions of Americans have lost jobs
 Millions fear losing jobs
 Threat of outsourcing if workers do not
accept pay cuts
 Vulnerability to operations moving
offshore

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 Benefits of
Globalization
 Expands economic freedom
 Spurs competition
 Raises productivity and living standards
 Offers access to foreign capital, global
export markets, and advanced
technology
 Promotes higher labor and
environmental standards
 Acts as a check on government power

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5-2 Multinational Firms

Discuss the impact of

multinational firms on the
world economy

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 Stages of Global
Business Development
Companies
Companies operate
operate in
in one
one country
country
11 and
and sell
sell into
into others
others

Set
Set up
up foreign
foreign subsidiaries
subsidiaries to
to
22 handle
handle sales
sales
Operate
Operate an
an entire
entire line
line of
of business
business in
in
33
another
another country
country

44 Virtual
Virtual operation
operation

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Are Multinationals Beneficial?
Pros Cons
• Account for 19 • Technology is capital
percent of U.S. private intensive and does not
Jobs necessarily increase
• Provide 25 percent of employment.
private wages • Support governments that
benefit the company, not
• 74 percent of R&D
necessarily the country
spending and its people
• 41 percent of the • May take away more
increase in private wealth than they generate
labor productivity

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 Global Marketing
Standardization

Global
Global
Marketing
Marketing
Standardization
Standardization

Multidomestic
Multidomestic
strategy
strategy

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 External Environment
5-3
Facing Global Marketers

Describe the external

environment facing
global marketers

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 External Environment
Facing Global Marketers

Economic
Economic
Development
Development
Culture
Culture

Political
Political
Structure
Structure
Natural
Natural
Resources
Resources
Demographic
Demographic
Makeup
Makeup

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 Culture

Culture
Culture
The common set of values
shared by its citizens that
determine what is socially
acceptable.

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 Culture
Factors to keep in mind when dealing
with different cultures:
1. Language and cultural idioms
2. Customs and traditions
3. Values and expectations of sales
presentations

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 Economic Factors

Developed
Developed Complex,
Complex, sophisticated
sophisticated
Country
Country industries
industries

Less
Less Developed
Developed Basic
Country Basic industries
industries
Country

© 2016 Cengage Learning. All Rights Reserved. 17

 The Global Economy

“If America sneezes, then the rest of

the world catches a cold.”

Understanding and forecasting

growth and demand globally requires
understanding countries around the
world.

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 Economic Development:
China and India
• China and India have two of the
highest growth rates in the world
• Have the world’s two largest
populations, but among highest
levels of income disparity
• Both India and China have
exploded in spending power,
particularly in the upper classes

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Political Structure and Actions
No private ownership
Minimal individual freedom

Little central government

Maximum personal freedom
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 Legal Considerations
A tax levied on goods
Tariff
Entering a country
Limit on the amount of a
Quota
product entering a country
Exclusion of products from
Boycott
a country
Foreign exchange must be
Exchange Control
sold to a control agency

Market Grouping Common trade alliance

An agreement to stimulate
Trade Agreement
international trade

© 2016 Cengage Learning. All Rights Reserved. 21

 Political and Legal
Considerations
The Uruguay Round made changes
in world trading practices

Entertainment, pharmaceuticals,
integrated circuits, and software

Financial, legal, and accounting services

Agriculture

Textiles and apparel

And created a new trade organization:

The World Trade Organization
22
© 2016 Cengage Learning. All Rights Reserved.
 Doha Round
• Began in 2001
• Highly contentious from the
beginning
• Stalemate over lowering tariffs on
industrial goods in exchange for
cutting U.S. farm subsidies.
• More protectionism has made talks
increasingly difficult.

© 2016 Cengage Learning. All Rights Reserved. 23

 Political and Legal
Considerations

Agreements
Agreements
and
andOrganizations
Organizations

European
European
CAFTA-DR
CAFTA-DR NAFTA
NAFTA Union
Union

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5.1 Members of the G-20

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 Demographic Makeup

Marketing Considerations:
 Population density
 Urban or rural
 Age

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 Natural Resources

Shortages in natural resources

create:
 International dependencies
 Shifts of wealth
 Inflation and recession
 Export opportunities if resources
are abundant
 Stimulus for military intervention

© 2016 Cengage Learning. All Rights Reserved. 27

 Global Marketing by
5-4
the Individual Firm

Identify the various

ways of entering the
global marketplace

© 2016 Cengage Learning. All Rights Reserved.

 Why “Go Global?”

 Earn additional profits

 Leverage a unique product or
technological advantage
 Possess exclusive market
information
 Saturated domestic markets
 Excess capacity
 Utilize economies of scale

© 2016 Cengage Learning. All Rights Reserved. 29

 Risk Levels for Five Methods of
5.2 Entering the Global Marketplace

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 Entering the Global
Marketplace

Sell domestically produced

Export products to buyers in other countries

Licensing and Legal process allowing use of

Franchising manufacturing/patents/knowledge

Contract Private-label manufacturing

Manufacturing by a foreign country

Domestic firm buys/joins a foreign

Joint Venture company to create new entity

Active ownership of a foreign

Direct Investment company/manufacturing facility

© 2016 Cengage Learning. All Rights Reserved. 31

 Export Intermediaries

Buyer Assumes
Assumesallallownership
ownershiprisks
risks
Buyer for
for and
Export andsells
sellsglobally
globallyfor
forits
itsown
own
Export account.
account.
Plays
Playsthe
thetraditional
traditionalbroker’s
broker’s
Export
Export role
Broker roleby
bybringing
bringingbuyer
buyerand
and
Broker seller
sellertogether.
together.
Acts
Actslike
likeaamanufacturer’s
manufacturer’s
Export
Export Agent
Agent agent
agentfor
forthe
theexporter
exporterin
inthe
the
foreign
foreignmarket.
market.

© 2016 Cengage Learning. All Rights Reserved. 32

5-5 The Global Marketing Mix

List the basic elements

involved in developing
a global marketing mix

© 2016 Cengage Learning. All Rights Reserved.

 The Global Marketing Mix
The first step in creating a marketing
mix is developing a thorough
understanding of the global target
market…
HOWEVER

…global marketing
research is conducted in vastly
different environments.

© 2016 Cengage Learning. All Rights Reserved. 34

Product and Promotion
Same Change
Product Product

Same One Product, Product

Message One Message Adaptation

Promotion Product
Change
Adaptation Invention
Message

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 Place (Distribution)
• Adequate distribution is necessary for
success in global markets
• Lack of distribution infrastructure and
cultural differences create problems
• Logistics and shipping costs have been a
growing challenge for U.S. companies looking to
move production overseas.
• Global trade has added to strains and charges
for all forms of transportation.

© 2016 Cengage Learning. All Rights Reserved. 36

 Pricing
 Must consider transportation and insurance
costs, taxes and tariffs

 Determine what customers will spend

 Ensure that foreign buyers will pay price

 May need to simplify a product to lower price

 Don’t assume that low-income countries are

willing to accept lower quality

© 2016 Cengage Learning. All Rights Reserved. 37

Exchange Rates…
reflect he price of one’s currency
in terms of another country’s
currency.

Floating Exchange Rates…

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 Dumping

The sale of an exported product at

a price lower than that charged for
the same or a like product in the
“home” market of the exporter.

© 2016 Cengage Learning. All Rights Reserved. 39

 Dumping
Dumping may occur as a result of exporter business
strategies that include:
1.Trying to increase an overseas market share

2.Temporarily distributing products to overseas markets

to offset slack demand at home

3.Lowering unit costs by exploiting large-scale production

4.Attempting to maintain stable prices during periods of

exchange rate fluctuations

© 2016 Cengage Learning. All Rights Reserved. 40

Countertrade

© 2016 Cengage Learning. All Rights Reserved. 41

5-6 The Impact of the Internet

Discover how the Internet

is affecting
global marketing

© 2016 Cengage Learning. All Rights Reserved.

 The Impact of the Internet

• Opening an e-commerce site puts

a company in the international
marketplace
• The Internet-based economy
remains hindered by brick and
mortar rules, regulations, and
habits

© 2016 Cengage Learning. All Rights Reserved. 43

 Social Media

Global marketers use social media:

•Because it is popular around the
world
•To understand customers
•For global brand building

© 2016 Cengage Learning. All Rights Reserved. 44