Principles of Marketing - Chapter Notes

Principles of Marketing - Chapter 7: Marketing in a Global Environment

Chapter Outline

• 7.1 The Global Market and Advantages of International Trade

• 7.2 Assessment of Global Markets for Opportunities

• 7.3 Entering the Global Arena

• 7.4 Marketing in a Global Environment

• 7.5 Ethical Issues in the Global Marketplace

7.1 The Global Market and Advantages of International Trade

Learning Outcomes

• LO1: Define global market opportunities.

• LO2: Explain why international trade is advantageous to business.

• LO3: Discuss the challenges of international trade.

Annual Sales Volume and Product Life Cycle

• Product Life Cycle Stages:

  • Introduction: Low sales, high acquisition costs, minimal competitors, financial losses.

  • Growth: Increasing sales, customer base, profit; greater competition.

  • Maturity: Maximum sales, high profits; stable competition.

  • Decline: Declining sales, customers, and profit; declining competition.

Global Market Opportunities

• Definition: Global markets encompass those outside the home country where the product/service exists.

• Conditions for Expansion:

  • Internal Conditions:

  • Company’s ability

  • Company’s resources, including financial resources

  • External Conditions:

  • Market growth

  • Non-prohibitive regulations or trade barriers

  • Customer demand

Advantages of International Trade

• Increased Revenues: Access to more opportunities to tap into new markets for revenue growth.

• Decreased Competition: Especially in developing countries where lack of infrastructure can limit entry for small competitors.

• Faster Growth: Companies can experience more rapid growth alongside local economies as employment increases and consumer choices expand.

• Diversification of Risk: Risk is spread across multiple markets, allowing for balanced risk management.

• Disposal of Surplus Goods: Facilitates efficiency and reduction of waste associated with unsold inventory.

Challenges of International Trade

• Understanding the Business Environment:

  • Refers to internal and external factors affecting a business's success. Many firms may wrongly assume foreign markets mirror their own; this is known as ethnocentrism.

• Understanding Target Country’s Politics:

  • Companies must navigate the complex political landscape impacting laws and industry relationships.

• Differences in Regulations and Marketing:

  • Firms must cater marketing strategies to the local culture, necessitating cultural sensitivity and adaptability.

Discussion Question

• Based on the advantages and challenges of international trade expansion, what else should be considered in decision-making?

7.2 Assessment of Global Markets for Opportunities

Learning Outcomes

• LO1: Identify different ways to assess opportunities in global markets.

• LO2: Discuss effective methods of analyzing global opportunities.

Internal Assessment for Global Expansion

• Referenced from the Harvard Business Review: Seven characteristics of firms successful in the global market:

  • Attitude: Global expansion as a priority.

  • Aptitude: Equipped with necessary knowledge and skills.

  • Magnitude: Alignment of the scope of expansion with capabilities.

  • Latitude: Flexibility to adapt to foreign markets.

  • Rectitude: Ethical adaptability in foreign business contexts.

  • Exactitude: Corporate culture aligns with flexibility and management of uncertainty.

Economic Infrastructure

• Definition: Resources benefitting the production/distribution of goods and services, such as roads and high-speed internet.

• Consumer Income and Purchasing Power:

  • Types:

  • Consumer Income: Total earnings available to households.

  • Disposable Income: Income remaining after taxes.

  • Discretionary Income: Revenue left after living expenses, targeted by marketers.

Purchasing Power

• Definition: The amount of goods a unit of currency can buy; varies significantly across global markets.

• Currency Exchange Rates: Fluctuating rates influence purchasing power and related economic indicators.

Political and Policy Impact

• Importance of political analysis for understanding government actions and their implications on business operations.

• Political Stability: Affects economic growth possibilities.

Trade Regulations

• Definition of Trade Regulations: Rules that govern trade practices.

  • Tariffs: Taxes on imports.

  • Quotas: Limits on the number of imports/exports.

  • Embargoes: Restrictions on trade with certain countries due to political reasons.

  • Trade Blocs: Agreements among countries to lessen trade barriers.

Analyzing Sociocultural Factors

• Definition: Values, behaviors, languages, and societal norms influencing a community's way of life.

  • Impact of cultural factors such as education, lifestyle, and technology availability on marketing strategies and consumer behavior.

Conducting a Cross-Cultural Analysis

• Importance of recognizing cultural values, customs, symbols, language, and the nuances in communication.

Discussion Question

• How might recent global political movements impact the marketplace, and what precautions should companies take?

7.3 Entering the Global Arena

Learning Outcomes

• LO1: List strategies for global competition.

• LO2: Discuss different forms of global competition.

Ways to Enter the Global Arena

• Decision-making processes for appropriate strategic methods based on organizational goals.

• Entry Modes of International Expansion:

  • Low Investment and Risk: Exporting, Franchising, Licensing.

  • High Investment and Risk: Joint Ventures, Strategic Alliances, Wholly Owned Subsidiaries.

Six Paths to Choose From

• Exporting: The least involvement, producing in one country and selling in another.

• Franchising: Permitting another entity to operate a business using proprietary methods and branding in exchange for fees.

• Licensing: Allowing another organization to utilize its intellectual property (IP).

• Joint Venture: Establishing a new company with shared risk among multiple firms.

• Strategic Alliance: Resource-sharing agreements benefiting both parties involved.

• Direct Foreign Investment: Full establishment of operations in a foreign country.

Forms of Global Competition

• International: Organizations operating globally without a defined central structure.

• Multinational: Centralized systems with management focused domestically.

• Transnational: Combines globalization with localization strategies.

7.4 Marketing in a Global Environment

Learning Outcomes

• LO1: Describe how marketing strategies are adapted globally.

• LO2: Summarize the impact of global strategies on the 4Ps of marketing (Product, Price, Promotion, Place).

Adapting Marketing Strategies for Global Marketplace

• Standardized Global Marketing Strategy: Uses the same marketing approach as in domestic markets.

  • Benefits: Reduces marketing costs.

• Adapted Global Marketing Strategy: Customized for global markets, requiring a larger investment in development and management.

The 4Ps in a Global Environment

• Product:

  • Straight Product Extension: Same product marketed universally.

  • Product Adaptation: Modifications made to meet specific cultural expectations.

  • Product Invention: The creation of a new product designed for the specific market.

• Price: Factors including shipping, tariffs, and local economic conditions must be considered.

• Promotion: Critical reliance on details and proper cultural translations.

• Place: The entire distribution channel must be assessed for effectiveness.

Discussion Question

• Compare the pros and cons of standardized versus adaptive marketing strategies. What factors influence this decision?

7.5 Ethical Issues in the Global Marketplace

Learning Outcomes

• LO1: Identify ethical issues in global organizations.

• LO2: Provide examples of companies demonstrating ethical practices in the global marketplace.

Ethical Issues Facing Global Organizations

• Outsourcing: Relocating operations to lower-cost foreign countries raises ethical concerns regarding work conditions and quality.

• Workplace Standards: Companies must balance the desire for cost savings with the need to ensure quality and ethical standards.

• Child Labor: Treatment of child labor varies by country; however, ethical implications exist for international businesses employing children.

• Bribery and Corruption: Adherence to laws against bribery is crucial; businesses must navigate differing legal landscapes.

• Dumping:

  • The practice of flooding a market with low-priced goods to eliminate competition, followed by price increases.

Discussion Question

• Should U.S. companies adhere to domestic laws and standards when conducting global business? Provide arguments for both perspectives.