Process by which goods, services, capital, people, information, and ideas flow across national borders.
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.
Allows goods and ideas to move quickly and efficiently around the world
Quick delivery of goods to better meet the needs of global consumers.
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.
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.
The interdependencies across countries created by several decades of globalization do not simply disappear in the face of a 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.
Financial services (35%)
United States offshoring
Europe accounts for 54%
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
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.
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.
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
Infrastructure and technological analysis
Government actions or inactions
Economic analysis using metrics
General economic environment
Market size and population growth
The greater the wealth of people in a country, the better opportunity a firm will have in that country.
A country imports more goods that it exports.
For US marketers, this signals the potential for greater competition at home from foreign producers.
Higher level of exports than imports.
Preferred by manufacturing firms because it signals a greater opportunity to export products to more markets.
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
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.
Whether average income, according to PPP estimates, are sufficient to meet the basic needs of life in that country.
0 - 1
Low human development
Lower than .5
High human development
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.
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.
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
Firms can make adjustments to an existing products or change the price to meet the unique needs of a particular country market.
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:
Must be sufficiently developed to allow consumers to find information about the products and services available in the marketplace.
Legal, banking, and regulatory systems
Result in laws or other regulations that either promote the growth of the global market or close off the country and inhibit growth.
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.
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.
Designates the maximum quantity of a product that may be brought into a country during a specified period.
Artificially raise prices and therefore lower demand
Reduce the availability of imported merchandise.
A group's refusal to deal commercially with some organization to protest against its policies.
REgulation of a country's currency exchange rate.
Measure of how much one currency is worth in relation to another.
Sets the rules for currency exchange
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.
Intergovernmental agreement designed to mange and promote trade activities for a specific region
Countries that have signed a particular trade agreement.
Trade related issues
USA, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua.
In response to NAFTA
Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.
Building economic stability and lowering trade restrictions among its members.
Make up 2/3 of the world's international trade
Paten requirements were simplified.
Rules governing data privacy and transmission, advertising, direct selling, were simplified.
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.
Beliefs, moral, values, and customs
Hofstede's cultural dimensions
Willingness to accept social inequality as natural
Extent to which the society relies on orderliness, consistency, structure, and formalized procedures to address situations that arise in life.
Perceived obligation to and dependence on groups
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.
Short-versus long term orientation.
Long term orientation values long term commitment and is willing to accept a longer time horizon.
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
Commitment of its management to the proposed 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.
Producing good sin one country and selling them in another.
Least financial risk but only a limited return to the exporting firm.
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.
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.
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
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.
Requires the firm to maintain a 100% ownership through the formation of wholly owned subsidiaries.
High potential returns
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
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.
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.