Chapter 7: Global Marketing Notes


Chapter overview

Chapter 7 explains how companies enter international markets, evaluate foreign opportunities, adapt their marketing strategies, and handle ethical issues in global business.

The five sections are:

  1. The global market and advantages of international trade

  2. Assessment of global markets for opportunities

  3. Entering the global arena

  4. Marketing in a global environment

  5. Ethical issues in the global marketplace

Global market opportunities

Global market opportunities are conditions that make it favorable for a company to expand outside its home country.

These opportunities depend on:

  • Company knowledge and abilities

  • Customer demand

  • Market growth

  • Regulations

  • Trade barriers

  • Economic conditions

  • Political conditions

  • Cultural differences

A company must study both internal and external factors before expanding internationally.

Advantages of international trade

Increased revenue

Selling products in more countries gives a company access to more customers and can increase revenue.

Decreased competition

Some foreign markets may have less competition than the company’s home market.

Faster growth

International expansion can help companies grow when their home market is saturated or growing slowly.

A market is saturated when the industry has enough products or services to meet consumer demand.

Diversification of risk

Operating in multiple countries spreads out business risk.

If sales decrease in one country, sales may increase in another country.

Selling surplus goods

Companies may sell or donate extra inventory in foreign markets instead of allowing it to go to waste.

This is different from dumping, which is an unethical and often illegal practice involving extremely low prices designed to eliminate competition.

Challenges of international trade

Understanding the business environment

The business environment includes the internal and external factors affecting a company, its industry, and its market.

Companies should not assume that a foreign market works the same way as their home market.

Ethnocentrism

Ethnocentrism is the assumption that another country’s business environment or culture is the same as the company’s home country.

This assumption can cause companies to make poor decisions or fail in foreign markets.

Political and legal differences

Countries may have different:

  • Laws

  • Regulations

  • Government systems

  • Business practices

  • Trade requirements

  • Political conditions

Companies must understand these differences before entering a foreign market.

Cultural differences

Culture affects:

  • Customer preferences

  • Buying behavior

  • Advertising

  • Product design

  • Business relationships

  • Communication styles

  • Gift-giving customs

  • Meeting etiquette

Cultural sensitivity

Cultural sensitivity means being aware of, appreciating, and adapting to cultural, ethnic, racial, and social differences.

Marketers should avoid assuming that their own customs are the best or most appropriate customs to follow.

Assessing global markets

Before expanding, a company should evaluate whether it is ready to operate internationally.

Internal assessment

A company should ask:

  • Does international expansion fit the company’s goals?

  • Does the company have enough knowledge and skills?

  • Can the company adapt to local markets?

  • Does the company have enough financial resources?

  • Can the company handle legal and ethical differences?

  • Is management committed to long-term expansion?

Seven characteristics of globally successful companies

  • Attitude: Global expansion is a priority.

  • Aptitude: The company has the necessary knowledge and skills.

  • Magnitude: The size of the expansion matches the company’s abilities.

  • Latitude: The company can adapt to different markets.

  • Rectitude: The company can adjust legally and ethically.

  • Exactitude: The company’s culture can handle uncertainty and change.

  • Fortitude: The company is committed to continuing despite setbacks.

Economic infrastructure

Economic infrastructure includes the facilities and systems needed to produce and distribute goods and services.

Examples include:

  • Roads

  • Railways

  • Airports

  • Internet access

  • Transportation systems

  • Communication systems

  • Warehouses

Poor infrastructure can make it difficult and expensive to operate in a foreign market.

Income and purchasing power

Consumer income

Consumer income is the amount of money earned by a household or individual.

Disposable income

Disposable income is the money left after taxes are paid.

Discretionary income

Discretionary income is the money left after taxes and basic living expenses are paid.

Discretionary income is especially important for companies selling luxury or nonessential products.

Purchasing power

Purchasing power is the amount of goods and services that can be purchased with one unit of currency.

Low purchasing power makes it harder to sell expensive, nonessential products.

Shrinkflation

Shrinkflation occurs when a company reduces the size or amount of a product while keeping the price the same or increasing it.

This allows the company to reduce costs without openly raising the price.

Exchange rates

An exchange rate is the rate at which one country’s currency can be exchanged for another country’s currency.

Exchange rates affect:

  • Product prices

  • Import costs

  • Export earnings

  • Consumer purchasing power

  • Company profits

Because exchange rates change, the price and profitability of products can change as well.

Political stability

Political stability can influence:

  • The economy

  • Business regulations

  • Leadership

  • Taxes

  • Trade policies

  • Foreign investment

Companies may avoid countries with unstable governments because laws and business conditions may change quickly.

Trade regulations

Tariffs

Tariffs are taxes placed on imported goods.

They can be charged as:

  • A percentage of the product’s value

  • A fixed dollar amount

Quotas

Quotas limit the number or value of goods that can be imported or exported.

Embargoes

Embargoes are bans on trade with a specific country.

Trade blocs

Trade blocs are agreements between countries that reduce trade barriers within a region.

Examples include:

  • United States-Mexico-Canada Agreement

  • European Union

Trade regulations can affect product prices, competition, and market access.

Sociocultural factors

Sociocultural factors are the values, behaviors, lifestyles, cultures, and languages that shape how people live.

These factors influence:

  • What customers buy

  • How products are used

  • What advertising appeals are effective

  • How people communicate

  • How business relationships are formed

Lifestyle

Lifestyle describes the way a person or group lives.

Marketers must understand local lifestyles before deciding whether a product will be successful.

Stereotypes

Stereotypes are oversimplified ideas or assumptions about a person or group.

Marketers should avoid stereotypes because they can lead to inaccurate advertising and offend customers.

Entering the Global Arena

Exporting

Exporting occurs when a company produces a product or service in one country and sells it in another country.

Advantages:

  • Lowest level of involvement

  • Lower risk

  • Allows the company to learn about international business

Franchising

Franchising occurs when the owner, called the franchisor, allows another person or company, called the franchisee, to operate using the company’s:

  • Brand

  • Products

  • Business system

  • Knowledge

The franchisee pays fees to the franchisor.

Licensing

Licensing occurs when one company allows another company to use its:

  • Name

  • Brand

  • Trademark

  • Intellectual property

Licensing usually applies to one specific part of the business.

The licensing company has less control over how the brand is used.

Joint venture

A joint venture occurs when two or more companies create one business or project together.

Advantages include:

  • Shared risk

  • Shared resources

  • Local market knowledge

  • Access to existing distribution systems

Strategic alliance

A strategic alliance occurs when companies from different countries agree to invest resources in a mutually beneficial relationship.

The companies remain separate but work together toward shared goals.

Foreign direct investment

Foreign direct investment, or FDI, occurs when a company establishes operations in another country.

Examples include:

  • Building a factory

  • Opening stores

  • Establishing offices

  • Creating foreign subsidiaries

FDI is the most involved and riskiest method of entering a foreign market.

Types of global firms

International firm

An international firm operates globally, regardless of how much involvement it has in foreign markets.

Multinational firm

A multinational firm usually has a centralized structure.

Major decisions are commonly made at the company’s headquarters.

Transnational firm

A transnational firm allows more local adaptation and decision-making in different countries.

It maintains a global brand but gives local markets more flexibility.

Marketing in a Global Environment

Standardized global marketing

A standardized global marketing strategy uses the same marketing strategy in every country.

Advantages:

  • Lower marketing costs

  • Consistent global brand image

  • Easier marketing management

  • Consistent product identity

Coca-Cola is an example of a company that uses a largely standardized global strategy.

Adapted global marketing

An adapted global marketing strategy changes the marketing strategy for different countries.

Adaptations may be based on:

  • Local culture

  • Customer preferences

  • Language

  • Religion

  • Laws

  • Climate

  • Income

  • Buying behavior

Adapted marketing usually costs more because each market requires different strategies.

Netflix is an example because its content differs across countries.

Product strategies

Straight product extension

The same product is sold in both the home and foreign markets.

This is the simplest product strategy.

Product adaptation

The company changes the product to fit local preferences, culture, religion, or laws.

Examples include:

  • Different food ingredients

  • Different product sizes

  • Different colors

  • Different clothing styles

  • Different product features

Product invention

The company creates an entirely new product for a foreign market.

Product invention is the most involved product strategy because the company develops something specifically for the needs of that market.

Price

International pricing decisions must consider:

  • Tariffs

  • Shipping costs

  • Local income levels

  • Exchange rates

  • Local competition

  • Taxes

  • Import fees

  • Government regulations

These factors affect how much customers pay and how much profit the company earns.

Place and distribution

Distribution channels may be different in foreign markets.

Marketers must consider:

  • Wholesalers

  • Retailers

  • Transportation

  • Warehouses

  • Roads

  • Local stores

  • Shipping routes

  • Security risks

Whole channel

The whole channel includes every part of the international distribution system:

  • Manufacturing

  • Wholesalers

  • Retailers

  • Transportation

  • Storage facilities

Companies must study the complete channel before deciding how to distribute products.

Promotion

Promotion strategies may need to change because of:

  • Language

  • Cultural values

  • Religion

  • Local customs

  • Advertising laws

  • Customer preferences

  • Symbols and meanings

A company may keep the same brand but change its slogan, images, or message for different countries.

Ethical Issues in the Global Marketplace

Outsourcing

Outsourcing occurs when a company moves some operations to another country.

Reasons include:

  • Lower costs

  • Saving time

  • Increasing production

  • Increasing quality

  • Accessing specialized skills

A major concern is that outsourcing may reduce jobs in the company’s home country.

Work standards and conditions

Some countries have lower standards for:

  • Wages

  • Safety

  • Hours

  • Working conditions

  • Employee protections

Companies must consider whether lower production costs are connected to unfair or unsafe treatment of workers.

Workplace diversity and equal opportunity

Global companies should promote:

  • Equal opportunity

  • Fair treatment

  • A diverse workforce

  • Inclusive marketing

Diversity can help companies by providing:

  • More ideas

  • Better cultural understanding

  • Stronger customer connections

  • A more adaptable workforce

Child labor

Child labor is considered unethical by many people and organizations.

Countries differ in their rules about the minimum working age, but companies must consider human rights and international labor standards.

Bribery and corruption

Bribery occurs when money or favors are given to influence a business or government decision.

Corruption can create unfair advantages and may be illegal in the company’s home country.

The Foreign Corrupt Practices Act makes it illegal for certain companies and individuals to bribe foreign government officials to obtain or retain business.

Dumping

Dumping occurs when a company sells a very large amount of products in a foreign market at extremely low prices.

Dumping can:

  • Drive competitors out of the market

  • Create a monopoly

  • Allow the company to raise prices later

Many countries have laws against dumping.

Ethical global companies

The Kao Corporation is presented as an example of ethical global business.

Kao focuses on:

  • Reducing waste

  • Using sustainable ingredients

  • Reusable packaging

  • Refillable products

  • Gender equality

  • Universal product design

Kao also worked with Costco to test reusable, foldable containers for products.

Chapter 7 spotlight: Starbucks

Starbucks operates thousands of stores around the world, but its products and marketing are not identical in every country.

Examples:

  • The Pumpkin Spice Latte was marketed differently in Europe, the Middle East, and Africa.

  • Portugal promoted the iced version more heavily because it was more popular there.

  • Starbucks struggled in Australia because it charged premium prices before the brand became part of the local culture.

  • In Milan, Starbucks emphasized the coffee experience and offered products such as wood-fired pizza and cocktails.

The Starbucks example shows that global companies must understand local culture, customer preferences, competition, and purchasing behavior.