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Chapter 06 - Understanding and Reaching Global Consumers and Markets
6-1
CHAPTER CONTENTS
PAGE
POWERPOINT RESOURCES TO USE WITH LECTURES ........................................... 6-2
LEARNING OBJECTIVES (LO) ......................................................................................... 6-3
KEY TERMS ........................................................................................................................... 6-3
LECTURE NOTES
• Chapter Opener: Amazon Builds Multi-Billion Dollar Operation in India .................. 6-4
• Dynamics of World Trade (LO 6-1) ............................................................................. 6-5
• Marketing in a Dynamic Global Economy (LO 6-2) ................................................... 6-7
APPLYING MARKETING KNOWLEDGE ...................................................................... 6-25
BUILDING YOUR MARKETING PLAN .......................................................................... 6-27
VIDEO CASE (VC)
• VC-6: Mary Kay, Inc.: Building a Brand in India ....................................................... 6-29
IN-CLASS ACTIVITY (ICA)
• ICA 6-1: Introducing Carmex Healing Cream to European Markets .......................... 6-31
CONNECT EXERCISES …………………………………………………….…………… 6-35
• Protectionism Case Analysis
• Global Market Entry Click and Drag*
Chapter 06 - Understanding and Reaching Global Consumers and Markets
6-2
POWERPOINT RESOURCES TO USE WITH LECTURES
PowerPoint
Textbook Figures Slide
Figure 6-1 Leading countries in global merchandise trade in terms of imports (U.S.) and
exports (China) .............................................................................................................. 6-7
Figure 6-2 Protectionism hinders world trade through tariffs and quota policies ........................... 6-10
Marketing Matters, Making Responsible Decisions, and/or Marketing inSite
Marketing Matters—Customer Value: The Global Teenager—A Market of 2 Billion Voracious
Consumers ......................................................................................................................................... 6-18
Marketing Matters—Creative Cosmetics and Creative Export Marketing in
Japan ................................................................................................................................................. 6-30
PowerPoint
Videos Slide
6-2: Nestlé Japan Ad ......................................................................................................................... 6-23
6-4: Nescafé China Video ................................................................................................................. 6-36
In-Class Activity (ICA)
ICA 6-1: Introducing Carmex Healing Cream to European Markets ................................................ 6-44
Chapter 06 - Understanding and Reaching Global Consumers and Markets
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LEARNING OBJECTIVES (LO)
After reading this chapter students should be able to:
LO 6-2: Identify the major developments that have influenced world trade and global marketing.
LO 6-4: Name and describe the alternative approaches companies use to enter global markets.
KEY TERMS
back translation
global competition
balance of trade
global consumers
consumer ethnocentrism
global marketing strategy
countertrade
joint venture
cross-cultural analysis
multidomestic marketing strategy
cultural symbols
protectionism
currency exchange rate
quota
customs
tariffs
economic espionage
values
exporting
World Trade Organization (WTO)
Foreign Corrupt Practices Act (1977)
global brand
Chapter 06 - Understanding and Reaching Global Consumers and Markets
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LECTURE NOTES
TRANSFORMING THE WAY INDIA SELLS, TRANSFORMING THE
WAY INDIA BUYS: AMAZON.IN BUILDS A MULTI-BILLION DOLLAR
OPERATION FROM THE GROUP UP TO THE CLOUD
• “The opportunity (in India) is so large it will be measured in trillions of U.S. dollars,”
according to Amazon executives.
• In order to succeed in India, the company needs great people, great platform and
about $1 billion annually to build business for Amazon. Why India?
a. India is the 2nd most populous country.
e. India has 2nd largest Internet user base in the world and will have 850 million
users in 2025.
• What challenges does Amazon India face?
• Trade regulations – Foreign companies are prohibited from selling products
directly to India consumers.
• Payment systems – Barely 60% of Indian consumers have bank accounts and only
12% have credit or debit cards.
• Entrenched competition – Competitors in India already operate sizeable
distribution systems: Flipkart (owned by Walmart) and Snapdeal.
6-5
I. DYNAMICS OF WORLD TRADE [LO 6-1]
• The dollar value of world trade more than doubled in the past decade.
• Manufactured products and commodities account for 80 percent of world trade;
service industries represent the other 20 percent.
• World trade reflects interdependencies among industries, countries, and regions.
• Manifest themselves in country, company, industry, and regional exports and imports.
• Are evolving.
A. Global Perspective on World Trade.
a. The United States, China, Japan, Western Europe, and Canada together
account for more than two-thirds of world trade in manufactured products and
commodities.
b. [Figure 6-1] In terms of imports and exports:
• China is the world’s leading exporter, followed by the U.S. and Germany.
c. The trade feedback effect.
• Is a phenomenon where:
• Every nation’s imports arise from the exports of other nations:
– As the exports of one country increase…
• This nation’s greater demand for imports stimulates the exports of other
countries.
Chapter 06 - Understanding and Reaching Global Consumers and Markets
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• Increased demand for exports of other nations:
• This trade feedback effect is one argument for free trade among nations.
d. Countertrade.
• Is the practice of using barter rather than money for making global sales.
• Occurs because:
• Involves an estimated 15 to 20 percent of world trade.
• Is popular with many Eastern European nations and Asian and African
countries.
– Daimler AG sold 30 trucks to Romania in exchange for bananas,
B. United States Perspective on World Trade.
a. Gross domestic product (GDP).
b. The U.S. is among the world’s leaders in exports.
c. But over the past 40 years, its percentage share of world imports has increased
while its percentage share of exports has decreased.
d. Balance of trade is the difference between the monetary value of a nation’s
exports and imports.
e. Over the past 40 years, two things have happened regarding U.S. trade:
Chapter 06 - Understanding and Reaching Global Consumers and Markets
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f. The four largest importers of U.S. products and services are Canada, Mexico,
China, and Japan, purchasing approximately two-thirds of U.S. exports.
g. The four largest exporters to the U.S. are China, Canada, Mexico, and Japan.
U.S. has a balance of trade deficit with all four countries; China accounts for
40% of total U.S. balance of trade deficit.
LEARNING REVIEW
6-1. What country is the biggest as measured by world trade?
6-2. What is the trade feedback effect?
II. MARKETING IN A DYNAMIC GLOBAL ECONOMY [LO 6-2]
Five developments in the past decade have significantly influenced global marketing:
2. Economic integration and among countries.
4. Presence of a networked global marketspace.
A. Economic Protectionism by Individual Countries
• Protectionism is the practice of shielding one or more industries within a
country’s economy from foreign competition through the use of tariffs or quotas.
a. The economic argument for protectionism is that it:
Chapter 06 - Understanding and Reaching Global Consumers and Markets
6-8
MAKING RESPONSIBLE DECISIONS
Ethics: Global Ethics and Global Economics—The Case of Protectionism
World trade benefits from free and fair trade among nations. Nevertheless,
governments of many countries continue to use tariffs and quotas to protect their various
domestic industries. Why? Protectionism earns profits for domestic producers and tariff
b. [Figure 6-2] Tariffs and quotas discourage world trade.
• Tariffs.
– Tariffs are government taxes on products or services entering a
country that primarily serve to raise prices on imports.
• Quotas.
– A quota is a restriction placed on the amount of a product allowed to
enter or leave a country.
• The World Trade Organization (WTO).
a. Is a permanent institution that…
Chapter 06 - Understanding and Reaching Global Consumers and Markets
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• The WTO:
a. Was formed in 1995 by the major industrial nations of the world.
B. Economic Integration Among Countries
A number of countries with similar economic goals:
• Have formed transnational trade groups or signed trade agreements to…
1. European Union (EU).
a. [Figure 6-3] As of early 2016, the EU consisted of 28 member countries that
have eliminated most trade barriers across their borders. The United Kingdom
will formally withdraw from EU in 2019.
b. As a single market, the EU has more than 510 million consumers, with a
combined GDP larger than the U.S.
c. The euro.
• Has been adopted as a common currency by 16 EU countries.
d. Pan-European marketing strategies are possible due to:
• Greater uniformity in product and packaging standards.
Chapter 06 - Understanding and Reaching Global Consumers and Markets
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2. North American Free Trade Agreement (NAFTA).
a. NAFTA lifted many trade barriers between Canada, Mexico, and the U.S. to
b. The U.S. has voiced concerns that its trade policies with Mexico under
NAFTA need to be reviewed with regard to tariffs on Mexican-produced
products into the U.S.
C. Global Competition among Global Companies for Global Consumers
Economic integration among countries has created a new reality for marketers.
1. Global competition.
a. Exists when firms originate, produce, and market their products and services
worldwide.
b. Broadens the competitive landscape for marketers.
c. To meet the demands of global competition:
• Collaborative relationships are developing to meet global competition.
• Strategic alliances:
– Are agreements among two or more independent firms to…
• Example: General Mills and Nestlé of Switzerland:
– Created Cereal Partners Worldwide to market General Mills cereals
worldwide.
2. Global Companies.
a. Consists of three types of companies that:
Chapter 06 - Understanding and Reaching Global Consumers and Markets
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b. International firms.
• Market their existing products and services in other countries the same
c. Multinational firms.
• View the world as consisting of unique parts and markets to each part
differently.
d. Transnational firms.
• View the world as one market and emphasize cultural similarities across
countries or universal consumer needs and wants more than differences.
• Employ a global marketing strategy, which:
– Is the practice of standardizing marketing activities when there are
• Market a global brand—a brand marketed under the same name in
multiple countries with similar and centrally coordinated marketing
programs.
– Global brands:
* Have the same product formulation or service concept.
[ICA 6-1: Introducing Carmex Healing Cream to Foreign Markets]
3. Global Consumers. Global competition often focuses on the identification and
pursuit of global consumers.
Chapter 06 - Understanding and Reaching Global Consumers and Markets
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a. Global consumers:
• Consist of consumer groups living in many countries or regions of the
b. Evidence suggests:
• The presence of a global middle-income class, a youth market, and a
MARKETING MATTERS
Customer Value: The Global Teenager—A Market of 2 Billion Voracious Consumers
The global “teenager market” consists of 2 billion 13- to 19-year-olds who live in
Europe, North and South America, and industrialized nations of Asia and the Pacific Rim.
D. The Presence of a Networked Global Marketspace
Internet-based technology is a growing tool for exchanging products, services, and
information on a global scale.
• Almost 4 billion businesses, educational institutions, government agencies, and
households worldwide had Internet access by 2018.
[Video 6-1: Nestlé Hungary Ad]
E. Prevalence of Economic Espionage
Chapter 06 - Understanding and Reaching Global Consumers and Markets
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Borderless economic world has a dark side of economic espionage.
• Economic espionage is the clandestine collection of trade secrets or proprietary
information about competitors.
• Practice is common in high-tech industries: electronics, specialty chemicals,
industrial equipment, aerospace, and pharmaceuticals.
LEARNING REVIEW
6-3. What is protectionism?
Answer: Protectionism is the practice of shielding one or more industries within a
country’s economy from foreign competition through the use of (1) tariffs, which are a
6-4. The North American Free Trade Agreement was designed to promote free trade
among which countries?
6-5. What is the difference between a multidomestic marketing strategy and a global
marketing strategy?
Answer: Multinational firms view the world as consisting of unique markets. As a
result, they use a multidomestic marketing strategy because they have as many different
III. A GLOBAL ENVIRONMENTAL SCAN [LO 6-3]
• Global companies conduct continuous scans of the five environmental forces (social,
economic, technological, competitive and regulatory).
Chapter 06 - Understanding and Reaching Global Consumers and Markets
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A. Cultural Diversity
• Marketers must be sensitive to the cultures of different societies to create
successful exchange relationships with global consumers.
1. Values.
a. Represent a society’s personally or socially preferable modes of conduct or
2. Customs are considered normal and expected about the way people do things in a
specific country.
a. Customs can vary from country to country (Example: 3M’s Scotch-Brite
cleaning pad for the Philippines).
c. Bribes, kickbacks, and payoffs:
• Entice someone to commit an illegal or improper act on behalf of the giver
d. The Foreign Corrupt Practices Act (1977).
• Is a law, amended by the International Anti-Dumping and Fair
Competition Act (1998).
• Makes it a crime for U.S. corporations to:
3. Cultural symbols are things that represent ideas and concepts.
a. Symbols play a role in cross-cultural analysis because different cultures attach
different meanings to things.
Chapter 06 - Understanding and Reaching Global Consumers and Markets
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b. Semiotics is a field of study that examines the correspondence between
symbols and their role in the assignment of meaning for people.
4. Language.
a. Global marketers should know:
• The native tongues of countries in which they market.
[Video 6-2: Nestlé Japan Ad]
5. Cultural Ethnocentricity.
a. Cultural ethnocentricity is the belief that aspects of one’s culture are superior
to another’s. This view is an impediment to successful global marketing.
Chapter 06 - Understanding and Reaching Global Consumers and Markets
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B. Economic Considerations
1. Economic Infrastructure.
a. Consists of a country’s communications, transportation, financial, and
distribution systems.
b. Is a critical consideration in determining whether to try to market to a
country’s consumers and organizations.
c. Wholesale and retail institutions:
d. The communication infrastructures in many developing countries are limited
e. The lack of formal financial and legal systems in some countries can cause
problems when:
• Dealing with financial institutions.
2. Consumer Income and Purchasing Power.
a. Global marketers must consider:
b. Per capita incomes vary widely between nations (EU countries = $35,000;
Liberia = $700).
Chapter 06 - Understanding and Reaching Global Consumers and Markets
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[Video 6-3: Denizen video]
f. Microfinance:
• Is the practice of offering small, collateral-free loans to individuals who…
g. Income growth in developing countries of Asia, Latin America, and Eastern
4. Currency Exchanges Rates.
a. A currency exchange rate is the price of one country’s currency expressed in
terms of another country’s currency. Example: $ ₤ € ¥.
b. Failure to consider exchange rates when pricing products for global markets
C. Political-Regulatory Climate
• Marketers must not only identify a country’s current political and regulatory
1. Political Stability.
a. Billions of dollars in trade have been lost as a result of internal political strife,
2. Trade Regulations.
Chapter 06 - Understanding and Reaching Global Consumers and Markets
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a. Countries have rules that govern business practices within their borders,
LEARNING REVIEW
6-6. Cross-cultural analysis involves the study of __________.
6-6. When foreign currencies can buy more U.S. dollars, are U.S. products more or less
expensive for a foreign consumer?
IV. COMPARING GLOBAL MARKET-ENTRY STRATEGIES [LO 6-4]
• [Figure 6-4] Once a company enters the global marketplace, it selects a means of
market entry: (1) exporting, (2) licensing, (3) joint venture, and (4) direct investment.
A. Exporting
• Is a global market-entry strategy in which a company produces products in one
country and sells them in another country.
• Consists of two forms:
a. Indirect exporting is when a firm sells its domestically produced products in a
foreign country through an intermediary.
Chapter 06 - Understanding and Reaching Global Consumers and Markets
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MARKETING MATTERS
Entrepreneurship: Creative Cosmetics and Creative Export Marketing in Japan
A medium-sized U.S. cosmetics firm has had marketing success in Japan because of
its top-quality product, effective advertising, and export marketing program relying on savvy
b. Direct exporting is when a firm sells its domestically produced products in a
foreign country without intermediaries.
• Is used when companies believe sales will be sufficiently large and easy to
• Is commonly employed by large firms and is the prominent strategy among small-
and medium-sized companies.
B. Licensing
• Under licensing, a company offers the right to a trademark, patent, trade secret, or
other similarly valued items of intellectual property in return for a royalty or a fee.
a. Advantages of licensing:
• Low risk.
b. Disadvantages of licensing:
• Licensor gives up control of its product.
Chapter 06 - Understanding and Reaching Global Consumers and Markets
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• The licensor may create its own competition because some licensees are:
• If the licensee is a poor choice, the name or reputation of the company
may be harmed.
• Two variations of licensing represent alternative ways to produce a product within
the foreign country:
a. With contract manufacturing:
• A U.S. company may contract with a foreign firm to manufacture products
b. With contract assembly, the U.S. company may contract with a foreign firm to
assemble (not manufacture) parts and components that have been shipped to
that country.
c. In both cases:
• The advantage to the foreign country is the employment of its people.
• A third variation of licensing is franchising.
a. Is when a company contracts with an individual to set up an operation to
C. Joint Venture
• A joint venture:
a. Is a global market-entry strategy in which a foreign and a local firm invest
together.
