Chapter 5 Notes

Rewards of Global Marketing and the Shifting Global Business Landscape

Global Business Imperatives

• Global Marketing: Targets markets worldwide.

• Global Vision: Recognizes and reacts to international marketing opportunities and threats.

Why Nations Trade

• Free Trade: Creates mutual gains.

  • Absolute Advantage: Country can produce a product at a lower cost than others.

  • Comparative Advantage: Countries specialize in efficient production and trade.

Importance of Global Marketing

• Many countries rely on international commerce for producing final products.

  • Gross Domestic Product (GDP): Total market value of final goods and services.

• Historically, only large companies engaged internationally; now medium and small firms also pursue global markets.

Job Outsourcing and Inshoring

• Outsourcing: Sending jobs abroad.

• Inshoring: Bringing jobs back to the U.S.

Globalization

• Benefits: Enhances economic freedom, competition, productivity, and living standards.

• Costs: Increased competition for domestic firms may lead to job losses.

Multinational Firms

Definition

• Multinational Corporation: Heavily engaged in international trade, moving resources across borders.

Stages of Development

1. Operate in one country, sell elsewhere.

2. Establish foreign subsidiaries.

3. Operate entire businesses in other countries.

4. Conduct global business online.

Benefits and Drawbacks of Multinationals

• Benefits:

  • Drive productivity growth.

  • Improve living standards.

  • Access global resources.

• Drawbacks:

  • Focus on modern tech; limited labor force employment.

  • Complex supply chains and regulatory issues.

Global Marketing Strategies

• Global Marketing: Marketing goods/services across national boundaries.

• Global Marketing Standardization: Producing uniform products for all markets.

• Multidomestic Strategy: Subsidiaries compete independently in domestic markets.

External Environment Faced by Global Marketers

Key Factors

• Culture: Values, societal structures, language, and customs.

• Economic Development: Influences on purchasing power and demand.

• Political Structures: Varies from ownership systems to government regulations.

• Demographics: Determines market size and growth potential.

• Natural Resources: Availability affects production and pricing.

Legal Considerations

• Tariffs: Taxes on imported goods.

  • Quotas: Limits on specific products.

  • Trade Agreements: Enhance trade opportunities.

Major Trade Agreements

• United States-Mexico-Canada Agreement (USMCA): Replaced NAFTA with new provisions.

• European Union: Important free trade zone with unified policies.

• Trade War between U.S. and China: Tariff escalations affecting trade.

Global Marketing by the Individual Firm

Reasons to Go Global

• Profit Opportunities: Access new markets.

• Unique Advantages: Benefit from unique products/technologies.

• Economies of Scale: Lower production costs.

Methods of Entering Global Marketplace

1. Exporting: Selling products to buyers abroad.

2. Licensing and Franchising: Allow firms to use proprietary methods or brands.

3. Contract Manufacturing: Producing products under another firm's brand.

4. Joint Ventures: Collaborating with foreign companies.

5. Direct Investment: Owning business interests abroad.

The Global Marketing Mix

Understanding Market

• Conduct research considering cultural differences.

Product Decisions

• Standardization: One product and message for all markets.

• Adaptation: Change product to fit local preferences.

• Product Invention: Creating new products for markets.

Promotional Strategies

• Customize marketing messages to cultural contexts.

Pricing Strategies

• Consider additional costs like tariffs and transportation.

Exchange Rates

• Impact on pricing and costs in global markets.

Countertrade

• Trade where payment involves goods/services instead of currency.

The Impact of the Internet

• E-commerce opens international markets.

• 50% of services trade is digitally facilitated.