Chapter 7

Marketing 376 with Sagafi at San Diego State University

About this deck

By: mizael daud
Textbook:

Global Marketing (6th Edition)
Created: 2012-02-27
Size: 98 flashcards
Views: 29

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Globalization

Process by which goods, services, capital, people, information, and ideas flow across national borders.

Global markets

Reductions or eliminations of trade barriers by country governments
Decreasing concerns of distance and with regard moving products and ideas.
Standardization of laws.
Globally integrated production processes.

Benefits

Allows goods and ideas to move quickly and efficiently around the world
Quick delivery of goods to better meet the needs of global consumers.

World bank

Ranks countries according to their degrees of globalization on the basis of a composite metric that examines whether the factors necessary to participate in the global marketplace are present.
Countries that do well on the scale represent the best markets for globalized products and services.
The lowest on the scale represent the most troublesome markets.

De-globalization

Increases in protectionism
Insatiable appetite of industrialized countries (80% of world's resources)
Countries fear that the price for economic success and participation in the global market may be the loss of their individual identities and cultures.
Exploitation

Note:

The interdependencies across countries created by several decades of globalization do not simply disappear in the face of a financial crisis.

Financial crisis

Impact in terms of increasing sensitivity to foreign trade deficits and the sourcing of raw materials worldwide.

Globalization of production / Offshoring

Manufacturers' procurement of goods and services from around the globe to take advantage of national differences in the cost and quality of various factors of production such as labor, energy, capital.
Originally focused on relocating manufacturing to lower cost production countries.
This practice now includes products associated with a knowledge economy.

Largest offshoring

Financial services (35%)

United States offshoring

Europe accounts for 54%

Note:

Not all offshoring is about inexpensive labor.
Offshoring is also about a constant global hunt for talent as companies make an effort to reduce costs.

General Agreement on Tariffs and Trade (GATT)

Lowers trade barriers, such as high tariffs on imported goods and restrictions on the number and types of imported products that inhibited the free flow of goods across borders.
Replaced by World Trade Organization (WTO)

World Trade Organization (WTO)

Based in Geneva, Switzerland
Institution
Only international organization that deals with the global rules of trade among nations.
Ensure that trade flows as smoothly, predictably, and freely as possible.
Administers trade agreements, acts as a forum for trade negotiations, settles trades disputes, reviews national trade policies, and assists developing countries in their trade policy issues through technical assistance and training.
150 members

International Monetary Fund (IMF)

Promotes international monetary cooperation and facilitate the expansion and growth of international trade.
Maintains the international monetary system.

World Bank Group

Dedicated to fighting poverty and improving the living standards of people in the developing world.
Provides loans, policy advice, technical assistance, and knowledge sharing services to low and middle income countries in an attempt to reduce poverty.
Poverty reduction through low interest loans and other programs.
Largest funding source of education and HIV / AIDS

IMF and World Bank

Enable marketers to participate in the global marketplace by making it easier to buy and sell, financing deserving firms, opening markets to trade, and raising the global standard of living, which allows more people to buy goods and services.

Criticism

World Bank is merely a puppet of Western industrialized nations to assist in their globalization efforts.
World Bank loans too much money to third world countries, which makes it almost impossible for these to pay back the loans.

Sets of criteria necessary to asses a country's market

Economic analysis
Infrastructure and technological analysis
Government actions or inactions
Sociocultural analysis

Economic analysis using metrics

General economic environment
Market size and population growth
Real income

Sociocultural analysis

Power distance
Uncertainty avoidance
Individualism
Masculinity
Time orientation

Infrastructure

Transportation
Channels
Communication
Commerce

Government actions

Tariff
Quota
Boycott
Exchange control
Trade agreement

Note:

The greater the wealth of people in a country, the better opportunity a firm will have in that country.

Trade deficit

A country imports more goods that it exports.
For US marketers, this signals the potential for greater competition at home from foreign producers.

Trade surplus

Higher level of exports than imports.
Preferred by manufacturing firms because it signals a greater opportunity to export products to more markets.

GDP

Most common way to gauge the size and market potential of an economy.

Market value of the goods and services produced by a country in a year.

Gross national income (GNI)

GDP + Net income earned from investments abroad
(Minus any payments made to nonresidents who contribute to the domestic economy)
US firms that invest or maintain operations abroad count their income from those operations.

Purchasing power parity (PPP)

If the exchange of two countries are in equilibrium, a product purchased in one will cost the same in the other, if expressed in the same currency.

Big Mac Index

Created by The Economist
Exchange rates should adjust to equalize the cost of a basket of goods and services, wherever it is bought around the world.
Uses McDonald's Big Mac as the market basket
Cheapest burger is in China and the most expensive in Norway

Metrics

May not give a full picture of the economic health of a country because they are based solely on material output.

Human development index (HDI)

Metrics that determine the lifestyle elements that ultimately drive consumption.
Composite metric of three indicators of the quality of life in different countries:

Life expectancy at birth.
Educational attainment
Whether average income, according to PPP estimates, are sufficient to meet the basic needs of life in that country.

HDI scale

0 - 1

Low human development

Lower than .5

Medium development

.5-.8

High human development

.8-1

Macroeconomic metrics

Provide a snapshot of a particular country at any one point in time.
Makes it possible to compare countries across and time and identify those that are experiencing economic growth and increased globalization.

Note:

North and South America are expected to shrink relative to Africa.
Less developed countries are experiencing rapid population growth.
Stagnate growth may discourage marketers.

Distribution of population within a particular region.

Rural vs. Urban
Where and how products and services can be delivered.
Long supply chains add costs to products.

India

Enormous market for consumer goods due to:
Rapid growth in the middle class.
Careful banking policies and minimal dependence on exports for its growth.
Protected from the impact of the global financial crisis.
Median age citizens 25.3 years
Protectionism by the central government
Youthful populace

Note:

Firms can make adjustments to an existing products or change the price to meet the unique needs of a particular country market.

Infrastructure

Basic facilities, services, and installions needed for a community or society to function, such as transportation and communications systems, water and power lines, and public institutions like schools, post offices, and prisons.

Prerequisites for marketers:

Transportation systems
Distribution channels
Communication systems
Commercial infrastructure

Media access

Must be sufficiently developed to allow consumers to find information about the products and services available in the marketplace.

Commercial infrastructure

Legal, banking, and regulatory systems

Government actions

Result in laws or other regulations that either promote the growth of the global market or close off the country and inhibit growth.

Government actions

Tariffs
Quotas
Boycotts
Exchange controls
Trade agreements

Tariff/ Duty

Tax levied on a good imported into a country.
Intended to make imported goods more expensive and thus less competitive with domestic products, which in turn protects domestic industries from foreign competition.
Imposed to penalize another country for trade practices that the home country views as unfair.

Dumping

Occurs when a foreign producer sells its offering in a foreign market at a price less than its production costs to gain market share.
Collected fines get distributed among affected firms.

Quota

Designates the maximum quantity of a product that may be brought into a country during a specified period.

Tariffs

Artificially raise prices and therefore lower demand

Quotas

Reduce the availability of imported merchandise.

Boycott

A group's refusal to deal commercially with some organization to protest against its policies.

Exchange control

REgulation of a country's currency exchange rate.

Exchange rate

Measure of how much one currency is worth in relation to another.

Central Bank

Sets the rules for currency exchange

Federal Reserve

Sets the currency exchange rates in the US

When the dollar falls...

Firms that depend on imports of finished goods, raw materials that they fabricate into other products, or services from other countries, the cost of doing business goes up dramatically.
Buyers in other countries find the cost of US goos and services much lower than they were before.

Trade agreement

Intergovernmental agreement designed to mange and promote trade activities for a specific region

Trading bloc

Countries that have signed a particular trade agreement.

NAFTA

North America
Trade related issues

27 members

CAFTA

USA, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua.

Mercosur

Argentina

Brazil

Paraguay

Uruguay

Venezuela

In response to NAFTA

ASEAN

Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.

Building economic stability and lowering trade restrictions among its members.

Trade agreements

Make up 2/3 of the world's international trade

Euro benefits

Stable prices
Paten requirements were simplified.
Rules governing data privacy and transmission, advertising, direct selling, were simplified.
Seamless trade

Trading blocs

Confer an unfair advantage on their member nations because they offer favorable terms for trade.
Stimulate economies by lowering trade barriers and allowing higher levels of reigns investment.

Culture

Beliefs, moral, values, and customs

Visible artifacts
Underlying values

Hofstede's cultural dimensions

Power distance,
Uncertainty avoidance
Individualism
Masculinity
Time orientation

Power distance

Willingness to accept social inequality as natural

Uncertainty avoidance

Extent to which the society relies on orderliness, consistency, structure, and formalized procedures to address situations that arise in life.

Individualism

Perceived obligation to and dependence on groups

Masculinity

Extent to which dominant values are male oriented.
Lower masculinity ranking indicates that men and women are treated equally in all aspects of society.
Higher masculinity ranking indicates that men dominate positions of power.

Time orientation

Short-versus long term orientation.
Long term orientation values long term commitment and is willing to accept a longer time horizon.

Latin America

High on power distance
Low on individualism

English speaking countries

High on individualism
Low on power distance

US and EU

Rely on verbal cues

What is said or written down

China and South Korea

Rely on non verbal cues

Culture affects consumer behavior by:

Why people buy
Who is in charge of the buying decisions
How and where people shop

Internal assessment of a company's capabilities

Firm's access to capital
Current markets it serves
Manufacturing capacity
Proprietary assets
Commitment of its management to the proposed strategy

Progression strategy

Firms begin with less risky strategies to enter their first foreign markets and move to increasingly risky strategies as they gain confidence in their abilities and more control over their operations.

Exporting

Producing good sin one country and selling them in another.
Least financial risk but only a limited return to the exporting firm.

Global Expansion

Begins when a firm receives an order of tis product or service from another country.
Difficult to achieve economies of scale when everything has to be shipped internationally.

Franchising

Contractual agreement between a firm, the franchisor, and another firm or individual, the franchisee.
Entails lower risks and less investment.
Firm has limited control over the market operations thus potential profits is reduced because it must be split with the franchisee.
Threat that the franchisee will break away and operate as a competitor under a different name.

Strategic alliances

Collaborative relationships between independent firms
Partnering firms do not create an equity partnership
They do not invest in one another
Relying on each other to provide a service

Joint venture

A firm entering a new market pools its resources with those of a local firm to form a new company in which ownership, control, and profits are shared.
In addition to sharing the financial burden, the local partner offers the foreign entrant greater understanding of the market and access to resources.

Direct investment

Requires the firm to maintain a 100% ownership through the formation of wholly owned subsidiaries.
Significant risks
Economic downturn
Political instability
High potential returns

International STP

Cultural nuances of other countries.
Subcultures within each country also must be considered.
Consumers often view products and their roles as consumers differently

US firms 50s-60s

Skills necessary to develop, promote, and market brand name consumer goods.

Japanese firms 70s - 80s

Could exploit their skills in production, materials management, and new product development

Today's firms

Dominate the new stage of globalization and exploit their technological skills.

Asian, South and Central American countries

Dominate the manufacturing of consumer goods.

Global product strategies

Sell the same product in both the home country market and the host country.
Sell a product or service similar to that sold in the home country but include minor adaptations.
Sell totally new products.

Note:

The strategy that a firms chooses depends on the needs of the target market.
Economic development and technical standards are also important.

Level of economic development

Affects the global product strategy because it relates directly to consumer behavior.
Consumers in developed countries tend to demand more attributes in their products than do consumers in less developed countries.

Global pricing strategy

Tariffs, quotas, antidumping laws, and currency exchange policies affect pricing decisions.
Competitive factors also affect pricing, since a firm's product may not have the same positioning in the global marketplace as they do in their home country.
Market prices must be adjusted to reflect the local pricing structure.

Distribution strategies

Number of rims wit which the seller needs to deal to get its merchandise to the consumer determines the complexity of the channel.
Additional middlemen add cost and ultimately increase the final selling price of a product.

Distribution in other countries

Lack of adequate transportation to shop at central shopping areas or large malls.
Consumers shop near their homes at small, family owned retail malls.

Communication strategies

Identifying elements that need to be adapted to be effective.
Literacy levels may vary dramatically.
Media availability.
Guidelines in advertising.
Differences in language.

Note:

To avoid potential embarrassment that language confusion may cause, firms spend millions of dollar to develop brand names that have no preexisting meaning in any know language.

Localized approach

Due to cultural and religious differences.

About this deck

By: mizael daud
Textbook:

Global Marketing (6th Edition)
Created: 2012-02-27
Size: 98 flashcards
Views: 29

About StudyBlue

“I have used this website for three exams, and I see a huge difference in my test results.”
Naj