The Global Marketplace

1. The Global Marketplace

2. ROAD MAP: Previewing the Concepts • Discuss how the international trade system, economic, political-legal, and cultural environments affect a company’s international marketing decisions. • Describe three key approaches to entering international markets. • Explain how companies adapt their marketing mixes for international markets. • Identify the three major forms of international marketing organization.

3. Global Marketing in the 21st Century • The world is shrinking rapidly with the advent of faster communication, transportation, and financial flows. • International trade is booming and accounts for 25% of U.S. GDP. • Global competition is intensifying. • Higher risks with globalization.

4. U.S. Globalization Many U.S. companies have made the world their market.

5. Major International Marketing Decisions

6. Looking at the Global Marketing Environment The International Trade System: Restrictions—tariffs, quotas, embargos, exchange controls, and non-tariff trade barriers. The World Trade Organization and GATT: Helps Trade—reduces tariffs and other international trade barriers. Regional Free Trade Zones: Groups of nations organized to work toward common goals in the regulation of international trade.

7. Discussion Question • What types of U.S. companies would like to see higher tariffs and what types would like to see lower tariffs or no tariffs? Why is this the case?

8. Industrial Structure • Shapes a country’s product and service needs, income levels, and employment levels. Subsistence Economies Raw Material Exporting Economies Industrializing Economies Industrial Economies Income Distribution

9. Political-Legal Environment Attitudes Toward InternationalBuying Government Bureaucracy Political Stability Monetary Regulations

10. Cultural Environment • Sellers must examine the ways consumers in different countries think about and use products before planning a marketing program. • Business norms vary from country to country. • Companies that understand cultural nuances can use them to advantage when positioning products internationally.

11. Cultural Differences When Nike learned that this stylized “Air” logo resembled “Allah” in Arabic script, it apologized and pulled the shoes from distribution.

12. Deciding Whether to Go Global • Reasons to consider going global: • Foreign attacks on domestic markets • Foreign markets with higher profit opportunities • Stagnant or shrinking domestic markets • Need larger customer base to achieve economies of scale • Reduce dependency on single market • Follow customers who are expanding

13. Deciding Which Markets to Enter • Before going abroad, the company should try to define its international marketing objectives and policies. What Volume of Foreign Sales is Desired? How Many Countries to Market In? What Types of Countries to Enter? Choose Possible Countries and Rank Based on Market Size, Market Growth, Cost of Doing Business, Competitive Advantage, and Risk Level

14. Colgate Goes to China Using aggressive promotional and educational programs, Colgate has expanded its market share from 7% to 35% in less than a decade.

15. Market Entry Strategies

16. Market Entry Strategies • Exporting: • Indirect: working through independent international marketing intermediaries. • Direct: company handles its own exports.

17. Market Entry Strategies • Joint Venturing: • Joining with foreign companies to produce or market products or services. • Approaches: • Licensing • Contract manufacturing • Management contracting • Joint ownership

18. Joint Ownership KFC entered Japan through a joint ownership venture with Japanese conglomerate Mitsubishi.

19. Market Entry Strategies • Direct Investment: • The development of foreign-based assembly or manufacturing facilities. • This approach has both advantages and disadvantages.

20. Deciding on the Global Marketing Program • Standardized Marketing Mix: • Selling largely the same products and using the same marketing approaches worldwide. • Adapted Marketing Mix: • Producer adjusts the marketing mix elements to each target market, bearing more costs but hoping for a larger market share and return.

21. Marketing Mix Adaptation In India, McDonald’s serves chicken, fish, and vegetable burgers, and the Maharaja Mac—two all-mutton patties, special sauce, lettuce, cheese, pickles, onions, on a sesame-seed bun.

22. Five Global Product and Promotion Strategies

23. Global Product Strategies • Straight Product Extension: • Marketing a product in a foreign market without any change. • Product Adaptation: • Adapting a product to meet local conditions or wants in foreign markets. • Product Invention: • Creating new products or services for foreign markets.

24. Global Promotion Strategies • Can use a standardized theme globally, but may have to make adjustments for language or cultural differences. • Communication Adaptation: • Fully adapting an advertising message for local markets. • Changes may have to be made due to media availability.

25. Global Pricing Strategies • Companies face many problems in setting their international prices. • Possible approaches include: • Charge a uniform price all around the world. • Charge what consumers in each country will pay. • Use a standard markup of costs everywhere. • International prices tend to be higher than domestic prices because of price escalation. • Companies may become guilty of dumping –a foreign subsidiary charges less than its costs or less than it charges in its home market.

26. International Pricing Twelve European Union countries have adopted the euro as a common currency, creating “pricing transparency” and forcing companies to harmonize their prices throughout Europe.

27. Whole-Channel Concept for International Marketing

28. Deciding on the Global Marketing Organization • Organize an export department • Create international divisions • Geographical organizations • World product groups • International subsidiaries • Become a global organization

29. Rest Stop: Reviewing the Concepts • Discuss how the international trade system, economic, political-legal, and cultural environments affect a company’s international marketing decisions. • Describe three key approaches to entering international markets. • Explain how companies adapt their marketing mixes for international markets. • Identify the three major forms of international marketing organization.

30. The North American Free Trade Agreement Katy Haas Coordinator, Alianzas www.alianzas.us

31. Index • Why Enter a Free Trade Agreement? • What is NAFTA? • Background of NAFTA • Reaction after Implementation • The Mexican Peso Crisis • What about America’s Farmers?

32. “Mexico is the most important country to the United States in the 21st century” • Impact on: • Employment • Immigration • Environment • Trucking industry • Missouri’s role • NAFTA’s future • Conclusion --President George W. Bush Sept. 5, 2001

33. Why Enter a Free Trade Agreement?

34. Levels of Economic Integration *If the policies are not just harmonized by separate governments, but have a unified government with binding commitments on all members, then you reach political integration and have “full economic integration”.

35. Effective as of January 1, 1994 What is NAFTA? A trade agreement between CANADA, MEXICO, and the UNITED STATES which provides for the elimination of tariffs on North American goods shipped among the three countries.

36. Background of NAFTA An Introduction Salinas Clinton Zedillo Marcos

37. Expectations and Goals MEXICO: Lower inflation and foreign debt; create more well-paying jobs for Mexicans, thus producing less incentive for Mexicans to work illegally in the U.S.; Mexico would become a richer market for American exporters. UNITED STATES: Would solidify an expanding trade relationship, which would spur job creation at home and help to continue the revolutionary shift throughout Latin America away from state controlled markets toward freer markets. Would exert presidential authority, improve inter-American relations and advance the cause of global trade liberalization.

38. Reaction After Implementation How the Countries Were Affected Immediately How They Are Affected Now

39. Top U.S. Exports Imports and 1. Motor Vehicles 2. Oil/Natural Gas 3. Motor Vehicle Parts 4. Semiconductors 5. Electronic Parts 1. Aircraft 2. Electronic Computing Equipment 3. Motor Vehicle Parts 4. Motor Vehicles 5. Semiconductors 6. Aircraft/Space/Missile Parts 7. Chemicals 8. Plastics 9. Airplane Engines/Parts 10. Refined Petroleum Products

40. NAFTA Pros • Goods/Services at lower cost • Most underdeveloped countries gain the most (i.e. standards of trade increased) • Tariffs reduced • Jobs created • Mexico’s economy is growing again

41. NAFTA Cons • Fuel for peso crisis • Benefits Mexico more than the U.S. • U.S. deficit with trading partners • Loss of low-wage American jobs to Mexico • Environmental problems • Traffic congestion and delays along the borders

42. The Mexican Peso Crisis Was NAFTA to Blame? Wages in United States and Mexico

43. What about America’s Farmers? BENEFITS: More export opportunities. Since NAFTA was approved in 1993, U.S. agricultural exports to Mexico have nearly doubled. DISADVANTAGES: Face regulations that increase the costs of production while foreign competitors gain from cheap production and labor.

44. Impact on:Employment • Was U.S. workers’ loss Mexican workers’ gain? • Maquiladora - Primarily foreign-owned assembly plants • Jobs lost to Mexico vs. Jobs supported by exports to Mexico and Canada

45. Impact on:Immigration • In the 1990s, U.S. population grew 13.2%, with 60% growth of Mexican immigrants. • Among Latinos nationwide, 26% are between the ages of 25-40. • Remittances from Mexicans working in the U.S.: $6.65 billion (for 2001 through 3rd quarter) • Increase in Mexican migrants led to increase in Border Patrol staff

46. Impact on:Environment North American Agreement on Environmental Cooperation (NAAEC) - commission to enforce environmental law. Border Environment Cooperation Commission and the North American Development Bank - commission to address pollution problems along the U.S.-Mexican border NAFTA Environmental Agreements:

47. The areas of concern include: vehicle safety, driver training, environmental issues and possible illegal drug trafficking. Trucking Industry A recent investigation determined that the average 18-wheeler in Mexico is 40% overloaded, carrying a gross vehicle weight of more than 120,000 pounds. If U.S. truckers operated at a similar overcapacity, interstate highways would have a life span of 14 years, as opposed to their 40-year design life.

48. Missouri’s Role

49. Missouri’s Role (continued) Between 1994 and 1999, Missouri exports to NAFTA partners increased 63.4%. Canada and Mexico are Missouri’s first- and second-largest export markets, respectively, accounting for 50.5% of Missouri’s total exports 1999.

50. 1. A trade pattern 2. A system of connecting highways and rail routes 3. An opportunity to strengthen economic development in a region Mid-Continent International Trade Corridor