978-0134292663 Chapter 2 Lecture Notes Part 1

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Chapter 2: Global, Ethical, and Sustainable Marketing

Chapter 2

Global, Ethical, and Sustainable Marketing

I. CHAPTER OVERVIEW

In this chapter, students are introduced to global marketing and explore ways in which economic,

political, legal, and cultural issues influence global as well as domestic marketing strategies and

outcomes. These issues also affect whether or not businesses choose to enter a global market.

Students also learn that if a business does enter a global market, the level of commitment is

directly related to the level of control. The chapter discusses how marketers make product, price,

place, and promotion decisions in foreign markets. Ethical business practices are important for

the firm to do its best for stakeholders and to avoid the consequences of low ethical standards.

Many firms practice sustainability when they develop target marketing, product, price,

place/distribution, and promotion strategies designed to protect the environment.

II. CHAPTER OBJECTIVES

Understand the big picture of international marketing and the decisions firms must make

when they consider globalization.

Explain how international organizations such as the World Trade Organization (WTO),

economic communities and individual country regulations facilitate and limit a firm’s

opportunities for globalization.

 Understand how factors in a firm’s external business environment influence marketing

strategies and outcomes in both domestic and global markets.

Explain some of the strategies and tactics that a firm can use to enter global markets.

 Understand the importance of ethical marketing practices.

 Explain the role of sustainability in marketing planning.

III. CHAPTER OUTLINE

►MARKETING MOMENT INTRODUCTION

Ask the class for new product suggestions and conduct a simple vote (raise of hands) to choose

one of the product suggestions for an in-depth discussion of global challenges for marketing that

product across cultures and borders.

p. 31 REAL PEOPLE, REAL CHOICES—HERE’S MY

PROBLEM AT JOHNSON & JOHNSON

When Johnson & Johnson launched the Earthwards® process in

2009, Keith and his team used it to encourage J&J’s products

teams to make significant improvements to 60 products. Today,

Johnson & Johnson has integrated and expanded the original

Part 1: Understand the Value Proposition

process across the company. It uses the Earthwards® approach to

drive continuous innovation. As he considered the best strategy

to promote Earthwards®, Keith knew that one of his biggest

challenges was to convince J&J’s 127,000 employees around the

globe to buy into the idea. He needed a way to drive awareness

and interest in the Earthwards® approach to sustainable product

development across Johnson & Johnson. Generating awareness,

understanding and adoption of the process was a key

performance metric against which his team would be measured.

Keith had only limited resources to accomplish this objective. He

considered his options:

1. Host regional green marketing conferences to showcase

key tools and resources available to key stakeholders.

2. Develop a customer intranet site, including an online

scorecard to take Earthwards® submissions from an Excel

spreadsheet to an online database accessible by all

employees.

3. Develop a high-touch strategy of identifying leaders

within Johnson & Johnson for meetings and training

sessions.

The vignette ends by asking the student which option he/she

would choose.

Keith chose option #2.

Website: www.earthwards.jnj.com

p. 32 1. TAKE A BOW: MARKETING ON THE GLOBAL

STAGE

Firms doing business in this global economy face uncertainty in

the future of the global marketplace. Consumers and world

leaders have argued that the development of free trade and a

single global marketplace will benefit us all because it allows

people who live in developing countries to enjoy the same

economic benefits as citizens of more developed countries.

There are other reasons for a single marketplace. One important

reason comes from fears of the Greenhouse Effect, the turning

of our atmosphere into a greenhouse due to carbon dioxide, The

result, many believe, is global warming, a warming of the earth

which will have disastrous effects on the planet.

There is another single marketplace issue. The Arab Spring, a

series of anti-government protests and uprisings in Arab

countries aided by social media, gave hope that dictatorships in

the Middle East would become democracies. Instead, new violent

Chapter 2: Global, Ethical, and Sustainable Marketing

p. 33

radical groups such as ISIS took over.

1.1 World Trade

World trade refers to the flow of goods and services among

different countries—the total value of all the exports and imports

of the world’s nations. Today, we see increasing growth in world

trade with world exports of merchandise increasing from $12

trillion in 2009 to nearly $19 trillion in 2014.

In some countries, because sufficient cash or credit is simply not

available, trading firms work out elaborate deals in which they

trade (or barter) their products with each other or even supply

goods in return for tax breaks from the local government. This

countertrade accounts for as much as 25 percent of world

trade.

Figure 2.1

Snapshot: North

American

Merchandise

Trade Flows

p. 34

1.2 Should We Go Global?

When firms consider going global, they must think about this in

four steps:

Step 1. “Go” or “no go”—is it in our best interest to

focus exclusively on our home market or should we

cast our net elsewhere as well?

Step 2. If the decision is “go,” which global

markets are most attractive? Which country or

countries offer the greatest opportunity for us?

Step 3. What market-entry strategy, or rather, what

level of commitment is best?

Step 4. How do we develop marketing mix

strategies in the foreign markets? Should we

standardize what we do in other countries, or

develop a unique localized marketing strategy for

each country?

1.2.1 The Globalization Decision

1.2.2 Look at Domestic and Global Market Conditions and

Opportunities

Many times, a firm decides to go global because domestic

demand is declining while demand in foreign markets grows.

1.3 Consider Your Competitive Advantage

Firms hope to create competitive advantage over rivals. When

firms compete in a global marketplace, this challenge is even

greater because there are more players involved, and typically,

some of these local firms have a “home-court advantage.” If it

wants to go global, a firm needs to examine the competitive

advantage that makes it successful in its home country. Will this

Figure 2.2

Process:

Steps in the

Decision Process

for Entering

Global Markets

Part 1: Understand the Value Proposition

competitive advantage also extend to other countries?

p. 35

p. 36

2. UNDERSTAND INTERNATIONAL, REGIONAL,

AND COUNTRY GLOBAL TRADE CONTROLS

Often governments erect roadblocks (or at least those pesky

speed bumps) designed to favor local businesses over outsiders

that hinder a company’s efforts to expand into foreign markets.

2.1 Initiatives in International Cooperation and

Regulation

The World Trade Organization (WTO) replaced the General

Agreement on Tariffs and Trade (GATT) and helped reduce the

problems that protectionism creates. The World Trade

Organization has made giant strides in creating a single open

world market. The objective of the WTO is to “to ensure that

trade flows as smoothly, predictably and freely as possible.”

Two additional organizations have a strong influence on the

advancement of global trade: the World Bank and the

International Monetary Fund (IMF).

The primary purpose of the IMF, also founded in 1944, is to

ensure the stability of the international monetary exchange by

controlling fluctuations in foreign exchange rates, the price of

one currency in terms of another currency. Stabilizing exchange

rates prevents problems with the balance of payments, a

statement of how much trade a country has going out compared

to how much it has coming in.

2.2 Protected Trade: Quotas, Embargoes, and Tariffs

In some cases, a government adopts a policy of protectionism in

which it enforces rules on foreign firms designed to give home

companies an advantage.

Many governments set import quotas on foreign goods to

reduce competition for their domestic industries. Quotas can

make goods more expensive to a country’s citizens because the

absence of cheaper foreign goods reduces pressure on domestic

firms to lower their prices.

Chapter 2: Global, Ethical, and Sustainable Marketing

An embargo is an extreme quota that prohibits commerce and

trade with a specified country altogether.

Governments also use tariffs, or taxes on imported goods, to

give domestic competitors an advantage in the marketplace by

making foreign competitors’ goods more expensive than their

own products.

Discussion question: Ask students to discuss products they know that are associated with import

quotas, an embargo, and tariffs. How do they feel about these protected trade roadblocks in the

context of the products they mentioned?

p. 36 2.3 Economic Communities

Groups of countries may also band together to promote trade

among them and make it easier for member nations to compete

elsewhere. These economic communities coordinate trade

policies and ease restrictions on the flow of products and capital

across their borders.

Economic communities are important to marketers because they

set policies in areas such as product content, package labeling,

and advertising regulations.

Table 2.1

Some Major

Economic

Communities

around the World

Website: www.wto.org

Discussion question: Ask students what they think about the various economic communities.

How would/will they affect their lives as consumers?

p. 37 3. ANALYZE THE EXTERNAL MARKETING

ENVIRONMENT

Whether or not you have decided to venture into a foreign

market, it is essential to understand your external environment.

For firms that choose to limit themselves to their domestic

market, having a sharp picture of the marketing environment

allows them to make good decisions about marketing strategies.

If you’ve decided to go global, understanding local conditions in

potential new country or regional markets helps you to figure out

just where to go.

Figure 2. 3

Snapshot:

Elements of the

External

Environment

Troubleshooting Tip: Just as in the last chapter, it is important to emphasize that the marketing

environmental factors listed in this section of the chapter represent nicely the “OT” of the

SWOT analysis—additionally, it is important for students to recognize that these “OT” factors

are not directly controllable by the company.

p. 37 3.1 The Economic Environment

Understanding the economy of a country in which a firm does

business is vital to the success of marketing plans. Countries with

the highest incomes have experienced lower growth rates (2.4

percent in 2016) compared to much higher growth rates in lower

income countries (5.3 percent) and 5.9 percent in countries with

Table 2.2

Selected

Comparisons of

Economic and

Demographic

Part 1: Understand the Value Proposition

p. 38

the lowest level of development, the least developed countries

(LDCs).

3.1.1 Indicators of Economic Health

The most commonly used measure of economic health of a

country is the gross domestic product (GDP): the total dollar

value of goods and services a country produces within its borders

in a year. A similar but less frequently used measure of economic

health is the gross national product (GNP), which measures the

value of all goods and services a country’s individuals or

organizations produce, whether located within the country’s

borders or not. In addition to total GDP, marketers may also

compare countries based on per capita GDP: the total GDP

divided by the number of people in a country.

GDP and exchange rates alone do not provide the information

marketers need to decide if a country’s economic environment

makes for an attractive market. They must consider economic

infrastructure, the quality of distribution, financial, and

communications systems.

Characteristics

p. 40 3.1.2 Level of Economic Development

Level of economic development takes into consideration the

broader economic picture of a country.

A country’s standard of living is an indicator of the average

quality and quantity of goods and services a country consumes.

Economists describe the following three basic levels of

development:

A country at the lowest stage of economic development is

an LDC. In most cases, its economic base is agricultural.

In least developed countries, the standard of living is low,

as are literacy levels. Bottom of the pyramid (BOP) is

the name for four billion consumers who live on less than

$2 a day.

When an economy shifts its emphasis from agriculture to

industry, standards of living, education, and the use of

technology improve. These countries are developing

countries. In such locales, there may be a viable middle

class, often largely composed of entrepreneurs working

hard to run successful small businesses. Because over

eight out of 10 consumers now live in developing

countries, the number of potential customers and the

presence of a skilled labor force attract many firms to

Sachet packaging

Chapter 2: Global, Ethical, and Sustainable Marketing

these areas. The largest of the developing countries,

Brazil, Russia, India and China, are referred to as the

BRIC countries or simply as the BRICs. These four

countries are the fastest growing of the developing

countries and they represent over 42 percent of the

world’s population.

A developed country boasts sophisticated marketing systems,

strong private enterprise, and bountiful market potential for many

goods and services. Such countries are economically advanced,

and they offer a wide range of opportunities for international

marketers. The United States, the United Kingdom, Australia,

Canada, France, Italy, Germany, and Japan are the most

economically developed countries in the world. In 1975, they

established the Group of Seven (G7) to serve as an informal

forum for these nations (Russia’s membership was revoked

because of its involvement in the Crimean crisis).

p. 41 3.1.3 The Business Cycle

The business cycle is the overall pattern of changes or

fluctuations of an economy. All economies go through cycles of

prosperity (high levels of demand, employment and income),

recession (falling demand, employment and income), and

recovery (gradual improvement in production, lowering

unemployment, and increasing income). A severe recession is a

depression; a period during which prices fall but there is little

demand because few people have money to spend and many are

out of work. Inflation occurs when prices and the cost of living

rise while money loses its purchasing power because the cost of

goods escalates.

p. 41 3.2 The Competitive Environment

Firms must keep abreast of what the competition is doing so they

can develop new product features, new pricing schedules, or new

advertising to maintain or gain market share.

An increasing number of firms around the globe engage in

competitive intelligence (CI) activities, the process of gathering

and analyzing publicly available information about rivals. The

firm uses this information to develop superior marketing

strategies.

►Marketing Moment In-Class Activity

Have students identify information about companies that is publicly available. How can you get

the information? What type of information is available? What does this information tell you

about the company in terms of target market, marketing strategy, pricing strategy, etc.

p. 42 3.2.1. Competition in the Microenvironment

Competition in the microenvironment means the product

alternatives from which members of a target market may choose.

Part 1: Understand the Value Proposition

p. 42

We think of these choices at three different levels. At a broad

level, marketers compete for consumers’ discretionary income:

the amount of money people have left after paying for necessities

such as housing, utilities, food, and clothing. A second type of

choice is product competition, in which competitors offering

different products attempt to satisfy the same consumers’ needs

and wants. The third type of choice is brand competition, in

which competitors offering similar goods or services vie for

consumer dollars.

3.2.2. Competition in the Macroenvironment

When we talk about examining competition in the

macroenvironment, we mean that marketers need to understand

the big picture—the overall structure of their industry.

Four structures describe differing amounts of competition.

A monopoly exists when one seller controls a market.

In an oligopoly, there are a relatively small number of

sellers, each holding substantial market share, in a market

with many buyers.

In a state of monopolistic competition, many sellers

compete for buyers in a market.

Finally, perfect competition exists when there are many

small sellers, each offering the same good or service.

Website: Asia Insight: www.asiainsight.com

p. 43 3.3 The Technological Environment

Changes in technology profoundly affect marketing activities.

Amazon had been working on drones, unmanned aircraft

controlled by a GPS, to deliver packages. A patent is a legal

document that grants inventors exclusive rights to produce and

sell a particular invention in that country. Marketers monitor

government patent applications to discover innovative products

they can purchase from the inventor.

Website: H&M virtual fashion: www.hm.com

p. 43

3.4 The Political and Legal Environment

The political and legal environment refers to the local, state,

national, and global laws and regulations that affect businesses.

3.4.1 American Laws

Laws in the United States governing business have two purposes.

Some such as the Sherman Antitrust Act and the Wheeler–Lea

Act make sure that businesses compete fairly with each other.

Others, such as the Food and Drug Act and the Consumer

Products Safety Commission Act, make sure that businesses do

Table 2.3

Significant

American

Legislation

Relevant to

Marketers

Table 2.4

U.S. Regulatory

Chapter 2: Global, Ethical, and Sustainable Marketing

p. 45

not take advantage of consumers.

3.4.2 Political Constraints on Trade

Global firms know that the political actions a government takes

can drastically affect their business operations. Short of war, a

country may impose economic sanctions that prohibit trade with

another country (as the United States has done with several

countries, including Cuba and North Korea), so access to some

markets may be cut off. Nationalization occurs when the

domestic government reimburses a foreign company (often not

for the full value) for its assets after taking it over.

Expropriation occurs when a domestic government seizes a

foreign company’s assets (and that firm is just out of luck). Now

that the United States has normalized relations with Cuba, it

remains to be seen if these firms seek reimbursement for their

lost property.

3.4.3 Regulatory Constraints on Trade

Governments and economic communities regulate what products

are allowed in the country, what products should be made of, and

what claims marketers can make about them. Local content

rules are a form of protectionism stipulating that a certain

proportion of a product must consist of components supplied by

industries in the host country or economic community.

3.4.4 Human Rights Issues

Some governments and companies are vigilant about denying

business opportunities to countries that mistreat their citizens.

They are concerned about conducting trade with local firms that

exploit their workers or that keep costs down by employing

children or prisoners for slave wages.

3.4.5 The U.S. Generalized System of Preferences

The U.S. Generalized System of Preferences (GSP) is a

program established by Congress to promote economic growth in

the developing world. GSP regulations allow developing

countries to export goods duty-free to the United States.

Agencies and

Responsibilities

Websites:

Environmental Protection Agency (EPA): www.epa.gov

Federal Communications Commission: www.fcc.gov

Federal Trade Commission (FTC): www.ftc.gov

Food and Drug Administration (FDA): www.fda.gov

Discussion question: What human rights issues are particularly of concern among your students?

Why?

Part 1: Understand the Value Proposition

p. 46

p. 47

p. 48

3.5 The Sociocultural Environment

Another element of a firm’s external environment is the

sociocultural environment. This term refers to the characteristics

of the society, the people who live in that society, and the culture

that reflects the values and beliefs of the society. Whether at

home or in global markets, marketers need to understand and

adapt to the customs, characteristics, and practices of its citizens.

3.5.1 Demographics

Demographics are statistics that measure observable aspects of a

population, such as size, age, gender, ethnic group, income,

education, occupation, and family structure.

3.5.2 Values

Every society has a set of cultural values, or deeply held beliefs

about right and wrong ways to live, that it imparts to its

members. For example, for most Americans, punctuality is a core

value; indeed, business leaders often proclaim that “time is

money.” For countries in Latin America and other parts of the

world, this is not at all true.

In collectivist cultures, such as those found in Venezuela,

Pakistan, Taiwan, Thailand, Turkey, Greece, and Portugal, people

tend to subordinate their personal goals to those of a stable

community. In contrast, consumers in individualist cultures,

such as the United States, Australia, Great Britain, Canada, and

the Netherlands, tend to attach more importance to personal

goals, and people are more likely to change memberships when

the demands of the group become too costly.

3.5.3 Social Norms

Social norms are specific rules dictating what is right or wrong,

acceptable or unacceptable.

3.5.4 Language

Language barriers can affect product labeling and usage

instructions, advertising, and personal selling.

3.5.5 Consumer Ethnocentrism

Ethnocentrism refers to the belief that one’s own norms and the

products made in your country are superior. Consumer

ethnocentrism refers to consumers’ beliefs about products

produced in their country versus those from another.

►Marketing Moment In-Class Activity

Have students identify countries and products or stereotypes they associate with those countries.

Chapter 2: Global, Ethical, and Sustainable Marketing

For example, chocolate may be associated with Switzerland while wine may be associated with

France. What products do students associate with Brazil? Nothing? What does that mean if you

are the minister of trade for Brazil? What other countries did students associate with ‘wine’?

What does that say about the global wine industry?

p. 48 4. HOW “GLOBAL” SHOULD A GLOBAL

MARKETING STRATEGY BE?

Going global is not a simple task. If a firm decides to expand

beyond its home country, it must make important decisions about

how to structure its business and whether to adapt its product

marketing strategy to accommodate local needs.

p. 49 4.1 Company-Level Decisions: The Market Entry

Strategy

Just like a romantic relationship, a firm deciding to go global

must determine the level of commitment it is willing to make to

operate in another country. At one extreme, the firm simply

exports its products; while at the other extreme it directly invests

in another country by buying a foreign subsidiary or opening its

own stores. The decision about the extent of commitment entails

a trade-off between control and risk. Direct involvement gives

the firm more control over what happens in the country, but risk

also increases if the operation is not successful.

Table 2. 5

Market-Entry

Strategies

p. 49 4.1.1 Exporting

If a firm chooses to export, it must decide whether it will attempt

to sell its products on its own or rely on intermediaries to

represent it in the target country. These specialists, or export

merchants, understand the local market and can find buyers and

negotiate terms. An exporting strategy allows a firm to sell its

products in global markets and cushions it against downturns in

its domestic market.

p. 49 4.1.2 Contractual Agreements

The next level of commitment a firm can make to a foreign

market is a contractual agreement with a company in that country

to conduct some or all of its business there.

In a licensing agreement, a firm (the licensor) gives another

firm (the licensee) the right to produce and market its product in

a specific country or region in return for royalties on goods sold.

Franchising is a form of licensing that gives the franchisee the

right to adopt an entire way of doing business in the host country.

p. 50 4.1.3 Strategic Alliances

Firms seeking an even deeper commitment to a foreign market

develop a strategic alliance with one or more domestic firms in

the target country. These relationships often take the form of a

joint venture: Two or more firms create a new entity to allow

the partners to pool their resources for common goals. Strategic

Part 1: Understand the Value Proposition

alliances also allow companies easy access to new markets,

especially because these partnerships often bring with them

preferential treatment in the partner’s home country.

p. 50 4.1.4 Direct Investment

An even deeper level of commitment occurs when a firm

expands internationally through ownership, usually by buying a

business in the host country outright. Instead of starting from

scratch in its quest to become multinational, buying part or all of

a domestic firm allows a foreign firm to take advantage of a

domestic company’s political savvy and market position in the

host country.

p. 50

4.2 Marketing Mix Strategies

In addition to “big picture” decisions about how a company will

operate in other countries, managers must decide how to market

the product in each country. They may need to modify the

famous four P’s—product, price, promotion, and place—to suit

local conditions.

4.2.1 Standardization versus Localization

Advocates of standardization argue that the world has become so

small that basic needs and wants are the same everywhere. In

contrast, those in favor of localization feel that the world is not

that small; you need to tailor products and promotional messages

to local environments. These marketers feel that each culture is

unique, with a distinctive set of behavioral and personality

characteristics.

Troubleshooting tip: The decision to employ a standardization vs. localization strategy is a very

complex one for a firm, so plan to have an in-depth discussion of the pros and cons related to

each type of strategy.

p. 51

4.2.2 To P or Not to P: Tweak the Marketing Mix

4.2.3 Product Decisions

A firm seeking to sell a product in a foreign market has three

choices: sell the same product in the new market, modify it for

that market, or develop a brand-new product to sell there.

A straight extension strategy retains the same product

for domestic and foreign markets.

A product adaptation strategy recognizes that in many

cases people in different cultures do have strong and

different product preferences.

A product invention strategy means a company

develops a new product as it expands to foreign markets.

In some cases, a product invention strategy takes the form

of backward invention. A firm may find that it needs to

offer a less complex product than it sells elsewhere.

Chapter 2: Global, Ethical, and Sustainable Marketing

p. 52

p. 53

4.2.4 Promotion Decisions

Marketers must also decide whether it is necessary to modify

their product promotions for a foreign market. Some firms

endorse the idea that the same message will appeal to everyone

around the world, while others feel the need to customize it.

4.2.5 Price Decisions

Costs stemming from transportation, tariffs, differences in

currency exchange rates, and even bribes paid to local officials

often make a product more expensive for a company to

manufacture for foreign markets than in its home country. To

ease the financial burden of tariffs on companies that import

goods, some countries have established free trade zones. These

are designated areas where foreign companies can warehouse

goods without paying taxes or customs duties until they move the

goods into the marketplace. One danger of pricing too high is

that competitors will find ways to offer their product at a lower

price, even if they do this illegally. Gray market goods are

items that are imported without the consent of the trademark

holder. Another unethical and often illegal practice is dumping,

in which a company prices its products lower than they are

offered at home—often removing excess supply from home

markets and keeping prices up there.

4.2.6 Place/Distribution Decisions

Getting your product to consumers in a remote location can be

quite a challenge. It is essential for a firm to establish a reliable

distribution system if it is going to succeed in a foreign market.

p. 53

5. ETHICS IS JOB ONE IN MARKETING PLANNING

It’s hard to overemphasize the importance of ethical marketing

decisions. Businesses touch many stakeholders, and they need to

do what’s best for all of them where possible. When major

companies defraud the public, everyone suffers.

5.1 Ethical Philosophies

What constitutes ethical behavior is often different for different

people. We can point to various ethical philosophies and see how

each guides people to make their decisions.

Utilitarian approach: The decision that provides the most

good or the least harm



Rights approach: The decision that does the best job of

protecting the moral rights of all affected



Fairness or justice approach: The decision that treat all

human beings equally



Common good approach: The decision that contributes to

Table 2.6

Some Common

Ethical

Philosophies

Part 1: Understand the Value Proposition

p.54

p. 55

p. 56

p. 57

the good of all in the community

Virtue approach: The decision is in agreement with

certain ideal virtues

Ethical relativism suggests that what is ethical in one culture is

not necessarily the same as in another culture.

5.2 Codes of Business Ethics

Business ethics are basic values that guide a firm’s behavior. A

code of ethics refers to written standards of behavior to which

everyone in the organization must subscribe.

5.3 Is Marketing Unethical?

There are examples of questionable or unethical marketing.

Criticisms of marketing:



Marketing serves the rich and exploits the poor



Products are not safe



Poor-quality products



Planned obsolescence



Marketing creates interest in products that pollute the

environment



Easy consumer credit makes people buy things they don’t

need and can’t afford



5.4 When Is a Bribe Not a Bribe? Ethical Issues for Global

Business

Understanding the environment where you do business means

staying on top of the ethical values and norms of the business

culture in the marketplace. Bribery occurs when someone

voluntarily offers payment to get an illegal advantage. Extortion

occurs when someone in authority extracts payment under

duress.

6. SUSTAINABILITY: MARKETERS DO WELL BY

DOING GOOD

Firms today have a triple-bottom-line orientation. They don’t just

look at their financial successes but also focus on how they

contribute to their communities (their social bottom line) and

create sustainable business practices (the environmental bottom

line).

6.1 Sustainability Is a Sensible Business Decision

Sustainability adds to the need of the firm to sustain itself and the

long-term future of society. Sustainable companies that satisfy

the long-term needs of customers will survive.

Table 2.7

Highlights of the

American

Marketing

Association

Statement of

Ethics

Chapter 2: Global, Ethical, and Sustainable Marketing

p. 57

p. 59

Find out what other students taking this course would do and

why www.mymktlab.com

Are you more likely to shop at a store that offers recycling?

6.2 Developing a Sustainable Marketing Mix

How some companies already implement sustainable marketing

practices:

Target marketing strategies: They target green customers

who are likely to buy eco-friendly products.

Product strategies: Some firms choose fair trade

suppliers who pay a fair price to producers in developing

countries.

Price strategies: Sustainable marketing practices aim to

establish prices for green products that equal the prices of

other products.

Place/distribution strategies: Locavorism means that

shoppers buy products from farms within 50 to 100 miles

of their homes.

Promotion strategies: Some firms “reuse” old

commercials and tell customers that this is their way of

practicing sustainability.



6.3 Sustainable Customer Behavior

Marketers need to understand what will motivate customers to

seek out, pay for, and use sustainable options.

►METRICS MOMENT

Sustainability metrics are tools that measure the benefits an

organization achieves through the implementation of

sustainability. Unfortunately, unlike many widely used financial

metrics, today there is no standardized method of measuring the

other two elements of the triple bottom line. Hence, it is

extremely hard to compare one company working toward

sustainability with another. The social capital metrics are

possibly the hardest set of metrics to develop—there are simply

too many variables to measure societal progress, and, as a result,

it is extremely difficult to develop standardized metrics.

Apply the Metrics

Today most large firms have a section on their website

that points to their sustainability initiative. Select any

large company that manufactures products. Review their

website and find their section on sustainability.

What are several of the key specific activities the firm

Exhibit:

A campaign for

fair trade bananas

from New

Zealand.

Ripped from the

Headlines:

Ethical/

Sustainable

Decisions in the

Real World

Exhibit:

American

consumers’

values are

changing as

many more of us

are prioritizing

“natural” food

products that

don’t contain

extra additives.

Part 1: Understand the Value Proposition

points to as evidence that they are engaged in

sustainability-related activities?

What specific evidence do they report that quantify their

level of success in sustainability?

Chapter 2: Global, Ethical, and Sustainable Marketing

IV. END-OF-CHAPTER ANSWER GUIDE

CHAPTER QUESTIONS AND ACTIVITIES

 QUESTIONS: TEST YOUR KNOWLEDGE

Describe the market conditions that influence a firm’s decision to enter

foreign markets.

Marketers must consider domestic demand, the market potential abroad, and

a firm’s ability to have a competitive advantage in foreign markets. The

decision may be based on conditions where domestic demand is declining

while demand in foreign markets is growing.

2-2 Explain what world trade means. What is the role of the WTO and

economic communities in

encouraging free trade? What is the role of the World Bank and the

International Monetary

Fund in global trade? What is protectionism? Explain import quotas,

embargoes, and tariffs.

World trade refers to the flow of goods and services among different countries—

may take place through cash, credit payments, or countertrade. The World trade

organization

seeks to create a single open world market where trade flows “smoothly, predictably and

freely as possible.” Two additional organizations influence the advancement of global

trade:

the World Bank and the International Monetary Fund (IMF). The IMF stabilizes

Part 1: Understand the Value Proposition

exchange rates to try to prevent problems with the balance of payments.

Some governments adopt policies of protectionism with rules designed to give

home companies an advantage. Such policies may include trade quotas,

embargoes, or tariffs

that increase the costs of foreign goods. Many countries have banded together

to form

economic communities to promote free trade.

Explain how GDP, the categories of economic development, and the business

cycle influence marketers’ decisions in entering global markets. What are the

BRICS countries? What is the Group of Seven (G7)?

The most commonly used measure of economic health of a country is the

gross domestic product (GDP), the total dollar value of goods and services

a country produces within its borders in a year. A similar but less frequently

used measure of economic health is the gross national product (GNP),

which measures the value of all goods and services a country’s individuals or

organizations produce, whether located within the country’s borders or not.

When marketers scout the world for opportunities, it helps if they consider a

country’s level of economic development to understand the needs of people

who live there and the infrastructure conditions with which they must

contend. Economists look past simple facts such as growth in GDP to decide

this; they also look at what steps are being taken to reduce poverty, inequality,

and unemployment.

Chapter 2: Global, Ethical, and Sustainable Marketing

The largest of the developing countries, Brazil, Russia, India and China, are

referred to as the BRIC countries or simply as the BRICS. These four

countries are the fastest growing of the developing countries and they

represent over 42 percent of the world’s population. The Group of 7 (G7) is an

informal forum of the seven most economically developed countries that meets

annually to discuss major economic and political issues facing the

international community. Formerly the G8, Russia was excluded from the

group as a result of its invasion of Crimea in 2014.

Explain the types of competition marketers face: discretionary income

competition, product competition, and brand competition.

Discretionary income competition is the amount of money people have left

after paying for necessities such as housing, utilities, food, and clothing. Few

consumers are wealthy enough to buy anything and everything.

Product competition in when competitors offer different products to satisfy

the same consumer needs and wants.

When competitors offer similar goods or services and vie for consumer

dollars, this termed brand competition.

What are a monopoly, an oligopoly, monopolistic competition, and pure

competition?

A monopoly is a market situation in which one firm, the only supplier of a

particular product, is able to control the price, quality and supply of the

product.

Part 1: Understand the Value Proposition

An oligopoly is a market structure in which there are a relatively small

number of sellers, each holding a substantial share of the market compete in a

market with many buyers.

Monopolistic competition is a market in which many firms offer slightly

different products, each with unique consumer benefits.

Pure competition is the market structure in which many small sellers, all of

whom offer similar products, are unable to have an impact on the quality,

price or supply of a product.

What aspects of the political and legal environment influence a firm’s decision

to enter a foreign market? Why are human rights issues important to firms in

their decisions to enter global markets?

When entering a foreign market, a firm must carefully weigh political and

legal risks. They must consider regulatory issues, and human rights issues.

Human rights issues are important because businesses, in general, do not want

to exploit workers or employ children or prisoners for slave wages.

What do marketers mean when they refer to technological and sociocultural

environments? Why do they need to understand these environments in a

global marketplace?

The technological environment provides firms with competitive advantages. The

technological environment profoundly affects marketing activities. Toll-free telephone

numbers, easy computer access to customer databases, and, of course, the Internet have

made it possible for people to buy virtually anything they want (and even some things they

don’t want) without ever leaving their homes. Successful marketers continuously scan the

external business environment in search of ideas and trends to spark their own research

efforts. These need to be understood in a global marketplace to allow the actions taken by

the firm to be most appropriate and effective in meeting customer needs and desires.

Chapter 2: Global, Ethical, and Sustainable Marketing

The sociocultural environment refers to the characteristics of the society, the

people who live in that society, and the culture that reflects the values and

beliefs of the society. It includes the demographics, values, social, and

language of the society. Whether at home or in global markets, marketers

need to understand and adapt to the customs, characteristics, and practices of

its citizens.

What is ethnocentricism?

Ethnocentricism relates to the tendency to prefer products or the people of

one’s own culture to those from other countries. For firms that seek to enter a

foreign market, this willingness to try products made elsewhere comes slowly.

Describe the four globalization strategies representing levels of involvement

for a firm: exporting, contractual agreements, strategic alliances, and direct

investment.

A firm deciding to go global must determine the level of commitment it is

willing to make to operate in another country. This commitment can range

from a casual involvement to a full-scale “marriage.” The decision about the

extent of commitment entails a trade-off between control and risk. Direct

involvement gives the firm more control over what happens in the country,

but risk also increases if the operation is not successful.

Exporting involves the least risk. If a firm chooses to export, it must decide

whether it will attempt to sell its products on its own or rely on intermediaries

to represent it in the target country. An exporting strategy allows a firm to sell

its products in global markets and cushions the firm against downturns in its

domestic market. Because the exported products are made at home, the firm

is able to maintain control over design and production decisions.

Part 1: Understand the Value Proposition

The next level of commitment a firm can make to a foreign market is a

contractual agreement with a company in that country to conduct some or all

of its business there. Two of the most common forms of contractual agreement

are licensing and franchising.

Firms seeking an even deeper commitment to a foreign market develop a

strategic alliance with one or more domestic firms in the target country. These

relationships often take the form of a joint venture: a new entity owned by two

or more firms is created to allow the partners to pool their resources for

common goals. Strategic alliances also allow companies easy access to new

markets.

A deeper level of commitment occurs when a firm expands internationally by

buying a business outright in the host country. Direct investment allows a

foreign firm to take advantage of a domestic company’s political savvy and

market position in the host country.

What are the arguments for standardization of marketing strategies in the

global marketplace? What are the arguments for localization? What are some

ways a firm can standardize or localize its marketing mix?

Advocates of standardization argue that the world has become so small, with

tastes so homogenized, that basic needs and wants are the same everywhere.

Those in favor of localization feel that the world is not that small and product

and promotional messages should be tailored to local environments. These

marketers feel that each culture is unique and that each country has a

national character; distinctive sets of behavioral and personality

characteristics.

Chapter 2: Global, Ethical, and Sustainable Marketing

When a firm offers the same products in all its markets, it is following a

standardization strategy. If a firm tailors its products or promotions to the

specific tastes of a region, it is localizing its marketing mix.

Describe the utilitarianism, rights, fairness or justice, common good, and

virtue approaches to ethical decision making. What is ethical relativism?

Utilitarian approach: The decision that provides the most good or the least

harm

Rights approach: The decision that does the best job of protecting the moral

rights of all affected

Fairness or justice approach: The decision that treat all human beings equally

Common good approach: The decision that contributes to the good of all in the

community

Virtue approach: The decision is in agreement with certain ideal virtues

Ethical relativism suggests that what is ethical in one culture is not

necessarily the same as in

another culture.

Why is it increasingly important that firms engage in sustainability? What are

some ways strategies for the Four Ps can include sustainability?

With growing world populations and increasing demand for products,

sustainable business practices are necessary for life in the future. Many firms

practice sustainability when then develop target marketing, product, price,

place/distribution, and promotion strategies designed to protect the

environment and the future of our communities.

Part 1: Understand the Value Proposition

Companies implement sustainable marketing practices in the following

ways:

Target marketing strategies: They target green customers who are likely to buy

eco-friendly products.

Product strategies: Some firms choose fair trade suppliers who pay a fair price

to producers in developing countries

Price strategies: Sustainable marketing practices aim to establish prices for

green products that equal the prices of other products.

Place/distribution strategies: Locavorism means that shoppers buy products

from farms within 50 to 100 miles of their homes.

Promotion strategies: Some firms “reuse” old commercials and tell customers

that this is their way of practicing sustainability.

Sustainability metrics are tools that measure the benefits an organization

achieves through the

implementation of sustainability.

ACTIVITIES: APPLY WHAT YOU’VE LEARNED

In Class, 10–25 Minutes for Teams Using the data in Table 2.2, select two

countries that

are substantively dissimilar. Then select one of the products below. Use the

data for the two

countries to develop arguments why each of the two countries would and

would not be a

Chapter 2: Global, Ethical, and Sustainable Marketing

good opportunity for expansion of the market for your product.

1. New and more environmentally friendly method for heating and

cooling houses.

2. A small automobile that runs on electricity.

3. Barbie and Ken dolls and accessories

4. A low-priced, easy to use, sewing machine that does not require

electricity.

2-14 Creative Homework/Short Project With several members of your class,

assume you are in

the marketing department for a low-end retail store chain; you might

think of a chain similar

to Dollar General. Your firm has decided to begin an expansion into the

global market.

Currently you are considering building stores in France, Ecuador, Brazil

and Australia.

Gather information about these countries using the CIA Factbook

available online and

other sources. Using the data you have about each country, develop ideas

on the pros and

cons of entering each country. Which country do you feel is best? Present

your findings to

your class.

2-15 For Further Research (Individual) Consider the six different ethical

philosophies

Part 1: Understand the Value Proposition

in the chapter. Apply these six philosophies to one of the following ethical

dilemmas. What would be the most ethical decision for each? Explain

why you think so.

Which would you be most likely to follow?

Decisions:

1. You see a fellow student cheating. Should you ignore what you saw,

report it, or do

something else?

2. You are the president of a school club, which gives you access to the

club’s money

You need to buy a new tire for your car but you won’t have enough

money for a week.

You are considering borrowing the money from the club and paying it

back in a

week.

3. You have been assigned to a class project team. In a different class, you

have been

on a team with one of the members of your current team, and you

know he or she

refuses to do any work but expects others the team to help him or her

out. What are

your options, and what should you do?

2-16 In Class, 10–25 Minutes for Teams Assume you are the director of

marketing for a U.S.

firm that produces one of the products listed below. Your firm is

considering going after

Chapter 2: Global, Ethical, and Sustainable Marketing

the Indian market and is faced with the decision of the best entry

strategy. Should your firm

simply export their products, or would a strategic alliance, licensing, a

joint venture, or

direct investment be a better choice? Develop your ideas for a best entry

strategy. Be

specific in your recommendations for a strategy, how to implement the

strategy, and your

reasons for your recommendations.

Products:

1. Tablets (similar to the iPad) targeting the consumer market

2. Expansion of your discount retail store chain

3. Short-term (from an hour up) auto rentals

Teams can present their findings and recommendations to the class.

2-17 Creative Homework/Short Project Consumer ethnocentrism is the

tendency for individuals

to prefer products from one’s own culture. Sometimes people think

products made at home

are better than imported goods. Develop a small study to find out what

students at your

university think about products made at home and abroad. Develop a

survey that asks other

students to evaluate 10 or more products (not brands) that are imported

versus made at

Part 1: Understand the Value Proposition

home. You might wish to ask if they feel the domestic or imported

products are superior in

quality and which they would purchase. Prepare a report on your study

for your class.

Within one class period, you could divide the class up into two groups: the

survey creators

and the respondents. While the survey creators are creating their survey, the

respondents

can discuss what key factors they think will influence their responses on the

survey.

In Class, 10–25 Minutes for Teams Some people argue that our environment is

not in

jeopardy and that sustainability efforts will only make products more

expensive. Plan a

debate in your class with two teams, one arguing for sustainability efforts and

one against.

Students can have a lively debate arguing for and against sustainability

efforts.

2-19 For Further Research (Individual) You are planning a trip to another

country for your

summer vacation. You are considering traveling to Greece, to Peru, to

England, and to

Egypt. Determine the current forex rate for all four countries as well as

the average forex

Chapter 2: Global, Ethical, and Sustainable Marketing

over the past five years for each. Based solely on the information you

collect about forex

rates, explain where you would go and why.

Go to the library or the Internet to find out as much as you can about the

forex rate for the

United Kingdom Greece, Peru, and Egypt. Prepare a report that explains

which supplier

you would choose based on the information you collect about the forex rate.

2-20 For Further Research (Groups) You are part of an up-and-coming

coffeehouse chain in

the United States, and you know that you need to participate in

competitive intelligence

activities to learn more about your competitors. Using the Internet, collect at

least five

distinct pieces of information about either Starbucks or Dunkin’ Donuts that

will enable

you to improve your marketing strategy.

Entering global markets involves a complex decision process. Marketers

must fully

understand market conditions and environmental factors in order to

determine the best

strategy for entering the market and to create a successful marketing mix.

The

environments important to consider include environments of technology,

economic

Part 1: Understand the Value Proposition

environment, competitive, sociocultural, and political/legal. These

collectively are needed

for the decision process. The library information gathering and the different

environment

will be expanded with the search the students conduct.

APPLY MARKETING METRICS

</inst>

Many Western firms see their futures in the growing populations of

developing countries, where eight out of ten consumers now live. Consumers

from countries such as Brazil, India, China and Russia offer new

opportunities for firms because growing numbers of them are accumulating

small but significant amounts of disposable income. Firms like worldwide

cosmetics giant Beirsdorf, producer of Nivea products, are adapting their

products and their marketing activities to meet the needs of these populations.

Often this means selling miniature or even single use packages of shampoo,

dishwashing detergent or fabric softener for only a few cents. The huge Swiss

company Nestlé sells shrimp-flavored instant soup cubes for two cents each in

Ghana while the financial company Allianz, in a joint program with CARE,

sells micro-insurance for five cents a month to the very poor in India.

However, how do these firms measure their success in these new markets?

Firms normally use such marketing metrics as customer awareness or

satisfaction, increases in market share or profits, or return on marketing

investment (ROMI). These metrics may not be right for the new markets in

the developing world where many millions of people buy streamlined versions

of a firm’s products at a fraction of their usual price. What do you think?

Develop a list of possible metrics that firms might use to measure their success

in these new developing markets.

Chapter 2: Global, Ethical, and Sustainable Marketing

Large companies obviously take a huge risk with the adoption of such

practices in developing countries with the hope of a huge return on their

marketing investment. Such risk-return strategies may have to be developed

within the perspective of a longer time period to see ROMI grow, so building

brand strength and equity in a such a developing market may be more valued

by a firm than immediate increases in market share or profits.

Do you think about the approach described above is effective for entering

BRICS markets to appeal to consumers with small but growing disposable

income?

MyMarketingLab for answers to Assisted Graded Questions.

2-22 How would the success of this approach be better measured—that is,

what metrics would

be more useful than the typical metrics used in developed countries? Be

creative and develop a list of several possible metrics that firms might use to

measure their success in these new developing markets. Hint: Keep closely in

mind what firms hope to accomplish by increasing their presence and sales in

those markets.

MyMarketingLab for answers to Assisted Graded Questions.

CHOICES: WHAT DO YOU THINK?

2-23 Critical Thinking and Ethics Assume you are the CMO for a firm that is a

major producer

Part 1: Understand the Value Proposition

of chocolate candy and baking chocolate. The bulk of your chocolate products

are sold in the United States and Europe. For many years, your firm has

purchased cocoa beans (from which chocolate is made) from Country A.

Country A produces 30 percent of the world’s chocolate but recent reports of

child labor have concerned many country leaders and consumers. On some

farms, children are made to work as much as 100 hours a week and are

physically abused. Furthermore, some receive no education whatsoever. You

are considering whether or not your company should change suppliers and

buy cocoa from Country B. Country B is the leader in ethically produced

cocoa. Cocoa is produced in an environmentally sustainable manner and the

country is the world leader of “fair-trade certified” cocoa production.

Unfortunately, the price of cocoa from Country B is nearly twice that of

Country A. this means you would have to significantly increase the price of

your products which you expect to negatively affect the firm’s sales. This, in

turn would likely lead to closing some company facilities and laying off

workers. On the other hand, consumers in your markets are increasingly

concerned about human rights abuses and seek to buy fair trade products.

Develop your thoughts on the following:

The positive and negative outcomes (in addition to those already discussed)

of continuing to purchase cocoa from Country A.

The positive and negative outcomes (other than those already discussed) of

changing suppliers and purchasing cocoa from Country B (in addition to

those already discussed).

Which country would you choose using the Utilitarian approach to decision

making?

Why?

d. Which country would you choose using the rights approach to

decision making? Why?

e. Which country would you personally choose? Why?

MyMarketingLab for answers to Assisted Graded Questions.

Chapter 2: Global, Ethical, and Sustainable Marketing

2-24 Critical Thinking What role has technology played in the globalization of

businesses? Has

technology leveled the economic playing field, or has it merely in-

creased the distance

between the “haves” and the “have-nots”? Give at least one example of

each and

explain your position.

Students can discuss these questions in small groups and present their ideas

to the class.

2-25 Critical Thinking LDCs are not required by the WTO to meet the same

environment

standards as developed countries. Do you think LDCs should be

excluded from WTO

standards for pollution and other environmental protection issues? Why

or why not?

In small groups, students can discuss this issue.

2-26 Critical Thinking Some countries have been critical of the export of

American culture via

movies, television, music and many American consumer goods by U.S.

businesses. What

about American culture might be objectionable? Can you think of some

products that U.S.

marketers export that can be objectionable to some foreign markets?

What is the solution to

Part 1: Understand the Value Proposition

the problem?

You might begin this conversation by talking about individualist cultures

versus collectivist

cultures. These deeply held beliefs form the basis of practices that may be

considered objectionable.

The students may have specific examples of objectionable culture being

exported from the United States. To help the discussion, you might emphasize

the increasing obesity of our population, seen as gluttony by many nations.

This trend may be emphasized by the food we export. Cars made in the

United States may seem too large and lack the pollution controls of those

manufactured and sold in other countries. American media portrays

Americans as amoral and without religious beliefs. TV and movies show

American cities filled with violent crime. The list is endless and students

should be able to brainstorm quite a number.

2-27 Critical Thinking Some of the U.S. population supports free trade,

whereas others are

unhappy, even angry, that the government has reduced regulations on

imports of such

products as textiles and furniture, causing factories to shut down and

employees to lose their

jobs. They feel that the U.S. government should legislate greater regulation

of imported

goods to give American companies an advantage or at least to lessen the

advantage that

companies in other countries receive from their government. What do you

think? How do

you justify your answer?

Chapter 2: Global, Ethical, and Sustainable Marketing

The students will respond differently depending on their personal views on the World

Trade Organization. Removing barriers to trade will allow the natural laws of supply and

demand to regulate pricing and the success of business and will in the long term benefit

consumers worldwide. On the other hand, developing countries need to protect their

domestic industries in order to grow their economies. Developed countries may feel they

need to protect their domestic labor force against imported products made in countries

where wages are very low. Not all countries participate equally in the trade flows among

nations and removing barriers may just increase the disparity.

Critical Thinking In 1999, several single European nations banded together to

form the European Union and converted their individual monetary systems

over to the euro. Do you believe there will ever be other economic

communities that would follow this path? Explain your reasoning and, if

necessary, provide some possible examples. What about the possibility of a

single world currency? Could this happen? Why or why not?

The Internet would be a great source to start this discussion. In particular,

students should research this topic in credible sources of information, such as

the Wall Street Journal, the New York Times, and Business Weekly.

Ethics Ethical relativism suggests that what is ethical in one culture may not

be considered ethical in another. What should the attitude of businesses be

when differences occur? Should businesses follow the ethical values and

practices of their own country or of the host country? What should

governments do about this if anything? What is the role of the WTO?

This question is thought provoking and could be a role-play. Students could

argue that in

some countries, bribes are simply part of the way business is carried out. If

American

companies do not take part in this practice, they will not be competitive.

Business deals will

Part 1: Understand the Value Proposition

go to other countries willing to adopt the following attitude: “When in Rome,

do as the

Romans do.” Other students could argue that ethical values transcend

business deals and that

American companies should remain true to their values. They should refer to

the FCPA,

which prohibits American companies from giving bribes.

Ethics Review the AMA Code of Ethical Norms and Values for Marketers,

provided in the chapter. Which of the areas represented within the document

do you anticipate are the most challenging for marketers to consistently

follow? What makes these issues particularly troublesome? Do you think

marketing in general does a good job adhering to the AMA Code? Provide

specific evidence from your knowledge and experience to support your

position.

The students might have differing views on the topic of advertising. This is a

good time to discuss ethics. Ethics are the rules of conduct that people use to

judge whether a behavior is right or wrong. Some students may present

arguments on the dangers of advertising for potentially dangerous products

like alcoholic beverages while others may cite the Consumer Bill of Rights and

consumers “right to choose.” You might discuss that ethical marketing

behavior means making products safe, pricing products fairly, promoting

products honestly, focusing on product quality, and making the product

available to consumers ethically. Students might address the issue of

marketing to children. How do students feel about marketing sugar-laden

products which cause tooth decay to children?

MINIPROJECT: LEARN BY DOING

Chapter 2: Global, Ethical, and Sustainable Marketing

The purpose of this miniproject is to gain experience in understanding what it

takes to move a product that is successful in its home market into a global

market in which it will continue to be successful. Assume that you are the

director of marketing for a firm that produces its own high-end brands of

makeup, skin care, and hair care products for both men and women. The

products have been endorsed by a number of male and female musicians who

are highly popular with young people. The products are sold only in the

company’s own retail outlets.

Describe your local competitive advantage and why you believe this competitive

advantage will serve you globally.

This is a good opportunity to review the concepts of core competency and

competitive

advantage.

Determine which global market(s) is most attractive for your service. Will

you target a

single country or an economic community? Describe your reasoning.

This is a chance for students to consider the pros and cons of

marketing products in

developed or developing countries. They can discuss the pros and

cons standardization and

localization of their service.

Decide which market-entry strategy you will pursue. Again, explain your

reasoning.

Part 1: Understand the Value Proposition

This question offers students the chance to review entry

strategies and select one.

2-34 Describe your marketing mix strategy:

• How might you need to adapt your product?

• What other product decisions do you need to make?

• How will you promote your products?

• How will you price your products?

• What place/distribution decisions must you consider?

Prepare a short presentation to share with your class.

This is a good project to tie in many of the concepts presented in Chapters

1–2. Students will have the opportunity to learn more about a country, think

about values, cultures, and ethics and apply marketing strategies in the form

of the marketing mix to what they have

learned.</para><problemset><problem id=”ch03prob022″

label=”1″><inst></inst><para>

</para></proble

V. MARKETING IN ACTION CASE: REAL CHOICES AT FORD

Summary of Case

Chapter 2: Global, Ethical, and Sustainable Marketing

Ford Motor Company is investing $1.6 billion to construct a plant in Mexico.

This will create 2,800 jobs in the country. U.S. automotive labor costs average

$30 per hour whereas Mexico’s labor costs average $5 per hour. Ford can

lower costs, become more competitive, and increase profit margins. The

investment in Mexico has critics. The issue of jobs leaving the country is a

part of political debate in Washington, D.C. The announcement of Ford’s

plans was made during the recent presidential campaign. One candidate

called for increased tariffs and penalties for U.S. firms, like Ford, that choose

to relocate manufacturing to foreign markets. Increasing its presence in

Mexico is not Ford’s only initiative Ford. The company has expanded to

Spain, Germany, China, the Middle East, and Africa. While Ford’s improves

its financial outlook, how will it deal with the negative attention generated by

moving jobs outside the United States? Is it possible for the company to

increase its profitability and reduce its dependence on foreign production? In

the current political climate should the company rethink its plans?

Suggestions for Presentation

This case could be assigned for various online or in-class discussion activities.

Online Assignment Suggestions

Go to Ford’s website and search around its various links for material

regarding the controversy. What news articles do they mention?

In-Class Assignment Suggestions

In groups or as individuals, discuss the various consumer and world reactions

to this situation.

Divide the class into groups of three to five students and have each group

conduct a strengths, weaknesses, opportunities and threats (SWOT) analysis

to determine how Ford should proceed with t marketing strategies.

You Make the Call

Part 1: Understand the Value Proposition

2-35. What is the decision facing Ford?

Students should restate the questions posed at the end of the case description

(or create new ones on their own):

How will it deal with the negative attention generated by moving jobs outside

the United States?

Is it possible for Ford to increase its profitability and reduce its dependence on

foreign production?

In the current political climate should the company rethink its plans?

2-36. What factors are important in understanding this decision situation?

The important factors in this decision situation stem directly from the global

marketing environment:

The economic environments of Ford’s various marketplaces as well as of the

countries that Ford can potentially produce their products

The competitive environment—e.g., where are Ford’s competitors

manufacturing their products?

The technological environment—e.g., can Ford create/use better technology to

aid the production of their cars (e.g., increased use of robots) so that moving

production abroad could be avoided in the future?

The political and legal environment—e.g., how has the political landscape

changed for Ford in the wake of its investing in plants in Mexico? Presidential

candidates have promised to keep jobs at home and penalize companies that

take production out of the United States.

Chapter 2: Global, Ethical, and Sustainable Marketing

The sociocultural environment—has there been any shift in Ford’s target

customers since moving production to Mexico in terms of demographics,

values, norms & customs, etc.? If not, should Ford shift its target marketing

strategy?

2-37. What are the alternatives?

As students discuss the various global environmental factors mentioned above,

several alternatives will come into focus—students should be encouraged to

come up with their own alternatives as the discussion develops.

2-38. What decision(s) do you recommend?

This is a very complex and difficult decision facing Ford, so students will

undoubtedly argue passionately and persuasively for many various

recommendations. However, they should be strongly encouraged to discuss the

potential negative and positive outcomes of each of the alternatives.

2-39.What are some ways to implement your recommendation?

Students may make a variety of suggestions for implementation

depending on their

recommendations. These may include specific changes in marketing

strategy, including

promotional activities, pricing, product variations, and many others.

MY MARKETINGLAB

Part 1: Understand the Value Proposition

Go to mymktlab.com for Auto-graded writing questions as well as the following

Assisted-graded writing questions:

2-40 Creative Homework/Short Project. As a marketing manager, you must consider

whether to delay the production and introduction of a new automobile because of a small

problem with the door locks—they could become nonfunctional when temperatures drop

very low. Using (1) the utilitarian approach, (2) the rights approach, and (3) the common

good approach, what would the different decisions be?

2-41 Ethics. Some companies have been criticized for moving their manufacturing to

other countries where laws protecting the environment are more lenient and goods can be

produced more cheaply because the firms do not have to invest in ways to protect the

environment. What do you think of this practice? What can governments and/or

consumers do to prevent such actions?

WEB RESOURCES

Pearson Education, Inc.: www.mymktlab.com

Starbucks Coffee Company: www.starbucks.com

Walmart: www.walmart.com

World Trade Organization (WTO): www.wto.org

Table 2.1 in chapter lists websites for various economic communities

Chapter 2: Global, Ethical, and Sustainable Marketing

Tourism Authority of Thailand (a developing country):

http://www.tatnews.org

Japanese National Tourism Organization (a developed country):

https://www.jnto.go.jp

Asia Insight (independent full-service market research firm providing customized research

across 14 Asian countries daily, as well as numerous global studies across continents):

www.asiainsight.com

Consumer Product Safety Commission (CPSC): www.cpsc.gov

Environmental Protection Agency (EPA): www.epa.gov

Federal Communications Commission: www.fcc.gov

Federal Trade Commission (FTC): www.ftc.gov

Ford Motor Co.: www.ford.com

Foreign Corrupt Practices Act (FCPA):

www.usdoj.gov/usao/eousa/foia_reading_room/usam/title9/47mcrm.htm

Food and Drug Administration (FDA): www.fda.gov

Part 1: Understand the Value Proposition

Hong Kong Disneyland: www.hongkongdisneyland.com

Cosmopolitan magazine: www.cosmopolitan.com

The American Marketing Association’s Statement of Ethics: