p. 572
PPT 19-12
PPT 19-13
p.
572-573
PPT 19-14
p. 573
Economic Environment
Two economic factors reflect the country’s attractiveness as
a market:
1. Industrial structure
2. Income distribution
The country’s industrial structure shapes its product and
service needs, income levels, and employment levels.
The four types of industrial structures are as follows:
1. Subsistence economies: The vast majority of people
engage in simple agriculture. They consume most of
their output and barter the rest for simple goods and
services. They offer few market opportunities.
2. Emerging economies: In an emerging economy, fast
growth in industrialization results in rapid overall
economic growth. Industrialization creates a new
rich class and a growing middle class, both
demanding new types of goods and services.
3. Industrial economies: Major importers and exporters
of manufactured goods and services. Their varied
manufacturing activities and large middle classes
make them rich markets for all sorts of goods.
Income distribution is the second factor.
Industrialized nations may have low-, medium-, and
high-income households.
Countries with subsistence economies may consist mostly
of households with very low family incomes.
Still other countries may have households with only either
very low or very high incomes.
Even poor or developing economies may be attractive
markets for all kinds of goods.
Political-Legal Environment
In considering whether to do business in a given country, a
company should consider factors such as the country’s
attitudes toward international buying, government
p. 573
Photo: Coca-Cola
p. 574
Photo: Godrej
PPT 19-15
p. 575
bureaucracy, political stability and monetary regulations.
Some nations are very receptive to foreign firms; others are
less accommodating. Political instability can increase the
risk of doing business in a country.
Companies must consider a country’s monetary regulations.
Sellers want to take their profits in a currency of value to
them.
Ideally, the buyer can pay in the seller’s currency or in other
world currencies. In addition to currency limits, a changing
exchange rate also creates high risks for the seller.
Assignments, Resources
Use Discussion Question 19-1 here
Use Critical Thinking Exercise 19-6 here
Use Marketing by the Numbers here
Use Think-Pair-Share 5 and 6 here
Troubleshooting Tip
Currency and exchange rates are usually confusing
to undergraduate students, so these concepts and
terms need to be described very carefully. The
examples in the book are quite useful, and you can
generally find additional examples in the business
press.
p. 575
PPT 19-16
p. 576
Cultural Environment
The Impact of Culture on Marketing Strategy
Sellers must understand the ways that consumers in
different countries think about and use certain products
before planning a marketing program.
Business norms and behavior vary from country to country.
Understanding the differences can help companies not only
avoid embarrassing mistakes but also take advantage of
cross-cultural opportunities.
The Impact of Marketing Strategy on Cultures
Social critics contend that large American multinationals
such as McDonald’s, Coca-Cola, Starbucks, Nike, Google,
Disney, and Facebook are “Americanizing” the world’s
cultures.
Critics worry that, under such “McDomination,” countries
p. 576
Photo: Mark &
Spencer
p. 577
Photo: KFC
p. 578
around the globe are losing their individual cultural
identities.
Such concerns have sometimes led to a backlash against
American globalization.
In the most recent Millward Brown BrandZ brand value
survey, 19 of the top 25 brands were American-owned.
However, the cultural exchange goes both ways: America
gets as well as gives cultural influence. Look at House of
Cards, Dancing with the Stars, Harry Potter, and the growth
of soccer in the U.S.
Assignments, Resources
Use Critical Thinking Exercise 19-7 here
Use Individual Assignment 1 here
Use Think-Pair-Share 7 here
Use Outside Example 1 here
p. 578
PPT 19-17
p. 578
DECIDING WHETHER TO GO GLOBAL
Not all companies need to venture into international
markets to survive.
Any of several factors might draw a company into the
international arena.
Global competitors might attack the company’s
home market by offering better products or lower
prices.
The company might want to counterattack these
competitors in their home markets to tie up their
resources.
The company’s customers might be expanding
abroad and require international servicing.
International markets might simply provide better
opportunities for growth.
Before going abroad, the company must weigh several risks
and answer many questions about its ability to operate
globally.
Can the company understand the consumers?
Can it offer competitively attractive products?
Will it be able to adapt to other countries’ business
cultures?
PPT 19-18 Can they deal effectively with foreign nationals?
Do the company’s managers have the necessary
international experience?
Has management considered the regulations and
political environments of other countries?
Troubleshooting Tip
On deciding whether to go international, many
students will believe that it is simply a matter of the
company deciding to expand. The concept of being
forced to go into other countries because of
customers pulling you along, or having to fight a
global competitor on your home turf, will surprise
some of them. Challenge them to think about how
small companies grow, and why they might start
selling their goods overseas. Use a local company
that sells unique items. How could foreign
customers find them? How would they decide that
there is a market in another country? You can break
the class into teams to work on these types of issues.
p. 578
PPT 19-19
p.
578-579
PPT 19-20
DECIDING WHICH MARKETS TO ENTER
Before going abroad, the company should:
Define its international marketing objectives and
policies.
Decide what volume of foreign sales it wants.
Choose how many countries it wants to market.
Decide on the types of countries to enter.
Evaluate each selected country.
Possible global markets should be ranked on several factors,
including:
Market size
Market growth
Cost of doing business
Competitive advantage
Risk level
Review Learning Objective 1: Discuss how the
international trade system and the economic, political-legal,
and cultural environments affect a company’s international
marketing decisions.
p. 579
Photo: Amazon
p. 580
Table 19.1:
Indicators of
Market Potential
Assignments, Resources
Use Discussion Question 19-4 here
Use Online, Mobile, and Social Media Marketing
here
Use Marketing Ethics here
Troubleshooting Tip
The economic and political-legal environments will
likely be unfamiliar to most students. Some students
might have done mission or humanitarian work in
foreign countries with economies and political
systems vastly different from our own. If you are
lucky enough to have them in your class, have
students relate their experiences. Economics majors,
or those who enjoyed an economics class, may also
be able to relate what they have learned about these
issues from a different point of view.
p. 580
PPT 19-21
p. 580
PPT 19-22
p. 580
PPT 19-23
p. 581
p. 581
PPT 19-24
Describe three key approaches to entering international
markets.
DECIDING HOW TO ENTER THE MARKET
Exporting
Exporting is the simplest way to enter a foreign market.
Indirect exporting is working through independent inter-
national marketing intermediaries.
Indirect exporting involves less investment and less risk.
Direct exporting is where the company handles their own
exports.
The investment and risk are somewhat greater in this
strategy, but so is the potential return.
Joint Venturing
Joint venturing is joining with foreign companies to
produce or market products or services.
There are four types of joint ventures:
1. Licensing
2. Contract manufacturing
3. Management contracting
4. Joint ownership
Learning Objective
2
p. 580
Key Term:
Exporting
p. 580
Figure 19.2: Market
Entry Strategies
p. 581
Key Terms:
Joint venturing,
Licensing
p. 581
Ad: Tokyo Disney
Resort
p. 581
PPT 19-25
p. 581
PPT 19-26
p. 581
PPT 19-27
Licensing
Licensing is a simple way for a manufacturer to enter
international marketing.
The company enters into an agreement with a licensee in
the foreign market.
For a fee or royalty, the licensee buys the right to use the
company’s manufacturing process, trademark, patent, trade
secret, or other item of value.
Licensing has disadvantages:
The firm has less control over the licensee than it
would over its own operations.
If the licensee is very successful, the firm has given
up profits.
When the contract ends, it may find it has created a
competitor.
Contract Manufacturing
Contract manufacturing occurs when the company
contracts with manufacturers in the foreign market to
produce its product or provide its service.
The drawbacks are:
Decreased control over the manufacturing process
Loss of potential profits on manufacturing
The benefits are:
The chance to start faster, with less risk
The later opportunity either to form a partnership
with or to buy out the local manufacturer
Management Contracting
Management contracting takes place when the domestic
firm supplies management know-how to a foreign company
that supplies the capital.
This is a low-risk method of getting into a foreign market,
and it yields income from the beginning.
p. 581
Key Terms:
Contract
manufacturing
p. 581
Key Term:
Management
contracting
p. 582
PPT 19-28
p. 582
PPT 19-29
The arrangement is not sensible if the company can put its
management talent to better uses or if it can make greater
profits by undertaking the whole venture.
Joint Ownership
Joint ownership ventures consist of one company joining
forces with foreign investors to create a local business in
which they share ownership and control.
A company may buy an interest in a local firm, or the two
parties may form a new business venture.
Joint ownership may be needed for economic or political
reasons.
Joint ownership has drawbacks:
The partners may disagree over policies.
Whereas U.S. firms emphasize the role of
marketing, local investors may rely on selling.
Direct Investment
Direct investment is the development of foreign-based
assembly or manufacturing facilities.
Advantages:
Lower costs in the form of cheaper labor or raw
materials, foreign government investment
incentives, and freight savings.
The firm may improve its image in the host country.
Development of a deeper relationship with govern-
ment, customers, local suppliers, and distributors.
The firm keeps full control over the investment.
The main disadvantage of direct investment is that the firm
faces many risks including:
Restricted or devalued currencies
Falling markets
Government changes
Review Learning Objective 2: Describe three key
approaches to entering international markets.
p. 582
Key Term: Joint
0wnership
p. 582
Photo: Intel
p. 582
Key Term: Direct
investment
Assignments, Resources
Use Discussion Questions 19-2 and 19-3 here
Use Additional Project 2 here
Use Individual Assignment 2 here
p. 583
PPT 19-30
PPT 19-31
p. 585
PPT 19-32
PPT 19-33
Explain how companies adapt their marketing strategies
and mixes for international markets.
DECIDING ON THE GLOBAL MARKETING
PROGRAM
Standardized global marketing involves using largely the
same marketing strategy approaches and marketing mix
worldwide.
Adapted global marketing adjusts the marketing strategy
and mix elements to each target market, bearing more costs
but hoping for a larger market share and return.
Some global marketers believe that technology is making
the world a smaller place and that consumer needs around
the world are becoming more similar.
This paves the way for “global brands” and standardized
global marketing. Global branding and standardization, in
turn, result in greater brand power and reduced costs from
economies of scale.
However, because cultural differences are hard to change,
most marketers adapt their products, prices, channels, and
promotions to fit consumer desires in each country.
Five strategies exist that allow for adapting product and
marketing communication strategies to a global market
(Figure 19.3).
Product
1. Straight product extension means marketing a
product in a foreign market without any change.
2. Product adaptation involves changing the product
to meet local conditions or wants.
Learning Objective
3
p. 583
Key Terms:
Standardized global
marketing, Adapted
global marketing
p. 583
Photo: L’Oréal
p. 584
Photo: 7-Eleven
p. 585
Figure 19.3: Five
Global Product and
Communications
Strategies
p. 585-587
Key Terms: Straight
product extension,
Product adaptation,
Product invention
p. 586
p. 586
PPT 19-34
3. Product invention consists of creating something
new to meet the needs of consumers in a given
country.
Promotion
Companies can either:
1. Adopt the same communications strategy they use in
the home market; or
2. Change it for each local market.
Advertising themes are changed sometimes to avoid taboos
in other countries.
Communication adaptation is fully adapting advertising
messages to local markets.
Media also needs to be adapted internationally because
media availability and regulations vary from country to
country.
Photo: Dunkin’
Donuts
p. 587
Key Term:
Communication
adaptation
p. 587
Photo: Chevrolet
Assignments, Resources
Use Real Marketing 19.1 here
Use Real Marketing 19.2 here
Use Discussion Question 19-4 here
Use Marketing Ethics here
Use Video Case here
Use Additional Projects 3 here
Use Small Group Assignments 1 and 2 here
p. 588
PPT 19-35
Price
A company could set a uniform price globally, but this
amount would be too high of a price in poor countries and
not high enough in rich ones. It could charge what
consumers in each country would bear, but this strategy
ignores differences in the actual costs from country to
country. Finally, the company could use a standard markup
of its costs everywhere, but this approach might price the
company out of the market in some countries where costs
are high.
Regardless of how companies go about pricing their
products, their foreign prices probably will be higher than
their domestic prices for comparable products.
p. 588
Photo: Motorola
p. 589
p. 589
PPT 19-36
It is a price escalation problem. It must add the cost of
transportation, tariffs, importer margin, wholesaler margin,
and retailer margin to its factory price.
To overcome this problem when selling to less-affluent
consumers in developing countries, many companies make
simpler or smaller versions of their products that can be
sold at lower prices.
The internet is making global price differences more
obvious.
When firms sell their wares over the internet, customers can
see how much products sell for in different countries. This
is forcing companies toward more standardized inter-
national pricing.
Distribution Channels
The whole-channel view takes into account the entire
global supply chain and marketing channel. It recognizes
that to compete well internationally, the company must
effectively design and manage an entire global value
delivery network.
Figure 19.4 shows the two major links between the seller
and the final buyer.
Channels between nations move company products from
points of production to the borders of countries within
which they are sold.
Channels within nations move the products from their
market entry points to the final consumers.
Review Learning Objective 3: Explain how companies
adapt their marketing strategies and mixes for international
markets.
p. 589
Key Term:
Whole-channel
view
p. 589
Figure 19.4:
Whole-Channel
Concept for
International
Marketing
p. 589
Photo: Distribution
in Brazil
Assignments, Resources
Use Discussion Question 19-5 here
Use Video Case here
Use Additional Projects 4 here
p. 590
PPT 19-37 Identify the three major forms of international
marketing organization.
DECIDING ON THE GLOBAL MARKETING
Learning Objective
4
PPT 19-38
ORGANIZATION
A firm normally gets into international marketing by simply
shipping out its goods. If its international sales expand, the
company organizes an export department.
Many companies get involved in several international
markets and ventures. An international division may be
created to handle all its international activity.
International divisions are organized in a variety of ways.
Geographical organizations: Country managers are
responsible for salespeople, sales branches,
distributors, and licensees in their respective
countries.
World product groups: Each group is responsible for
worldwide sales of different product groups.
International subsidiaries: Each unit is responsible
for its own sales and profits.
Global organizations are companies that have stopped
thinking of themselves as national marketers who sell
abroad and have started thinking of themselves as global
marketers.
Review Learning Objective 4: Identify the three major
forms of international marketing organization.
Assignments, Resources
Use Critical Thinking Exercise 19-8 here
Use Online, Mobile, and Social Media Marketing
here
Use Outside Example 2 here
Use Company Case here