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CHAPTER 1
GLOBAL ENVIRONMENTAL DRIVERS
Chapter Outline
A. International Marketing Defined
B. The Importance of World Trade
Chapter Objectives
The introductory chapter intends to make students understand the rationale behind international
marketing. This understanding is crucial for an appreciation of the linkages between international
Suggestions for Teaching
During the teaching process, it may be useful to highlight how world trade and global linkages
have intertwined individual nations and their economies. This will clearly establish in the
students’ mind that international marketing is a necessary activity, which improves the lives of
Chapter Summary
A. International Marketing Defined
International marketing consists of the activity, institutions, and processes across national
borders that create, communicate, deliver, and exchange offerings that have value for
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B. The Importance of World Trade
World trade in merchandise as well as services has seen tremendous expansion over the
last decade. Global growth of trade has typically outperformed the growth of domestic
economies in the past few decades. Newly emerging economies have liberalized their
1. Global Linkages
World trade has forged a network of global linkages that bind—countries,
institutions, and individuals—much more closely than ever before. These linkages
were first widely recognized during the worldwide oil crisis of 1970, but they
continue to increase. Even countries that considered themselves as distanced and
independent from any particular economic event in far-away countries are affected
by events in any remote corner of the globe that may impact the global economy.
Linkages have also become more intense on an individual level due to the increase in
communication technology. Transportation linkages allow individuals from different
leadership position. Advances in technology also allow firms to operate in a “market
space” rather than a marketplace by keeping the content while changing the context
of a transaction.The level of global investment is at an unprecedented high. The
shifts in financial flows have resulted in the:
• buildup of international debt by governments
• affected the international value of currencies
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2. Domestic Policy Repercussions
Increased linkages make it difficult to isolate domestic economic activity from
international market events. Policymakers therefore find themselves with increasing
responsibilities yet with fewer and less effective tools to carry out these
responsibilities. Any policy consideration must now be seen in light of international
repercussions due to influences from global trade and investment. To regain some of
Constant rapid technological change and vast advances in communication permit
firms and countries to quickly emulate innovation and counteract carefully designed
plans. Global trade has therefore changed many previously held notions about
nation-state sovereignty and extraterritoriality. The same interdependence that has
made us more affluent has also left us more vulnerable.
way.
C. Opportunities and Challenges in International Marketing
To help a country remain a player in the world economy, governments, firms, and
individuals need to respond aggressively with innovation, process improvements, and
creativity. By transferring knowledge around the globe, an international firm can build
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D. The Goals of This Book
This book aims to make the student, a more successful participant in the international
marketplace by providing information about how international markets work, how a
Key Terms
International marketing: Consists of the activity, institutions, and processes across national
borders that create, communicate, deliver, and exchange offerings that have value for
stakeholders and society.
Questions and Discussions
1. What effect did the financial crisis and recession have upon world trade in 2011?
Students can make use of the following links for more information.
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Economies of entire nations have been affected by the recent recession. With increasing global
linkages, the effects are more widespread than ever. Banks and brokerage firms around the
world suffered an estimated $512 billion in subprime losses. Out of the total $512 billion,
2. Do increased global linkages mean increased risk or more reward?
Increased global linkages can lead countries to either increased risk or more reward. Increased
global linkages may mean increased risk as even countries that considered themselves as
Increased global linkages may also be rewarding. The global linkages allows firms to obtain
resources more efficiently and effectively and at best prices and quality, produce or outsource as it
is beneficial to the organization, and market their products at a global level. Never before has it
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3. What impact does international marketing have on firms and consumers? Is it beneficial to all
concerned?
International marketing has impacted firms and consumers in a big way. The nature of the
impact depends largely on how they have adapted themselves to changes in the global market.
Consumers benefit from more choices and lower prices while firms are exposed to increasing
Production sites once were inflexible, but now plants can be shifted from one country to
another, and suppliers can be found on every continent. Cooperative agreements can be
formed that enable all parties to bring their major strengths to the table and emerge with better
products, services, and ideas than they could produce on their own. In addition, research has
found that multinational corporations face a lower risk of insolvency and pay higher wages
than do domestic companies.
unable to adjust. The result is the extinction of firms or entire industries.
4. Can you think of examples of international marketing contributing to world peace?
The restructuring of Central Europe has resulted in a push for increased joint ventures and
foreign direct investments. This radical change has implied a need for greater harmonization
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and cooperation in the international arena of politics and economics for the United States as
well as other Western nations.
Another example is the 1989 seven-nation Paris economic summit. This summit symbolized
5. Describe some opportunities and challenges in international marketing created by new
advances in information technology and social media.
Students’ answers will vary. New technologies have changed the way we do business, allowing
us to both supply and receive products from across the world by using the Internet. As a result,
consumers, union leaders, policymakers, and sometimes even the firms themselves are finding
Opportunities:
Challenges:
Internet Exercises
1. Using World Trade Organization data (http://www.wto.org) identify the following: (a) world
trade volume of merchandise goods and services for the preceding year, and (b) projections
for world trade volume of merchandise goods and services in the current year. Which
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category (goods or services) is growing faster?
2. Consult the resources available on the World Economic Forum
(www.weforum.org/issues/globalrisks), the Eurasia Group (www.eurasiagroup.net), and other
websites. Identify three of the top global risks that international marketing firms should
consider in their work abroad.
Student answers will vary. Apart from the resources mentioned in the question, students can