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Chapter 8 Global Marketing 203
CHAPTER 8
GLOBAL MARKETING
CHAPTER OVERVIEW
Global trade now accounts for roughly 20 percent of the U.S. gross domestic product (GDP), compared
with 10 percent 30 years ago. It takes the form of exporting (selling domestic goods and services abroad)
as well as importing (purchasing foreign goods and services).
This chapter examines the global dimensions of marketing. Global marketing is now vital to a nation and
to many businesses that want to expand and survive in a competitive marketplace. It expands markets,
makes distribution economies possible, gives companies the opportunity to explore growth in other
nations, and allows them to be less dependent on conditions at home.
Global trade also builds employment. The United Nations estimates that 82,000 transnational
corporations are operating today, employing about 69 million workers directly and through subsidiaries.
Many of these companies and their subsidiaries represent related party trade, which includes trade by
U.S. companies with their subsidiaries overseas as well as trade by U.S. subsidiaries of foreign-owned
firms with their parent companies.
Changes in the 17th Edition
The chapter has been updated and revised in several ways.
• The Opening Vignette and Evolution of a Brand highlights Walmart’s success expansion into
international markets. Even as growth in its U.S. market slows, new global markets have helped
offset any declines in the retail giant’s total revenues. Walmart has expanded to Africa, Europe,
Asia, and Latin America over the last decade, now operating more than 6,100 stores on a global
basis in 27 countries and e-commerce websites in 10 countries. See “Walmart Extends Its Global
Reach.”
• Solving an Ethical Controversy highlights a front-page story published by The New York Times
about abusive, unsafe working and living conditions endured by poorly paid employees building
iPads and iPhones in Chinese factories operated by Foxconn. The important question, “Should
foreign companies be responsible for unsafe working conditions in China?,” and more is
discussed in “Who’s Responsible for Overseas Working Conditions?.”
• Marketing Success talks about McDonald’s, the world’s largest restaurant chain, operating in
more than 119 countries and opening hundreds of new locations every year. McDonald’s opened
its first French restaurant in 1979, followed by a franchise expansion where for many years what it
204 Part 2 Understanding Buyers and Markets
did above all was offer people a slice of America. But the French love quality in their cuisine,
mostly eat at home, rarely snack, and like to take their time at the table. In order to better satisfy
preferences in France, it changed its recipes, incorporated French-style ingredients and dishes,
introduced the McBaguette, installed order kiosks, provided table service, etc. France is now
McDonald’s second-largest market (after the United States), with more than 1,300 restaurants
and a 30-unit annual growth rate. The company’s success in France is discussed in “McDonald’s
Thrives in France.”
• Career Readiness highlights how savvy international business travelers learn as much as
possible in advance about local customs and etiquette in their destination, including key phrases
in the local language. More in “Tips for International Travel.”
• Video Case 8.2 includes an overview of how theater company Nederlander’s activities target
different markets across the world.
LECTURE OUTLINE
The Opening Vignette and Evolution of a Brand—Walmart Extends Its Global Reach illustrates
how the giant retailer has opened more than 6,100 stores in countries across the globe, which
has helped the company offset sales declines over the last few years in the United States. How
can the company continue to expand its global reach? Should it consider taking on business
partners in certain areas of the world? How will the local culture impact Walmart’s ability to be
successful in certain countries?
Chapter Objective 1: Describe the importance of global marketing from the perspectives
of the individual firm and the country as a whole.
Key Terms: exporting, importing, related party trade
PowerPoint Basic: 4
PowerPoint Expanded: 4-9
Exports and
Imports—How many
of the top ten trading
nations did you
1. Global trade
a. Global trade now accounts for 20 percent of the U.S. gross
domestic product (GDP) compared with 10 percent 30
years ago
b. The top ten nations that trade with the U.S. account for 63
percent of U.S. imports and 62 percent of exports
c. Global trade can be divided into two categories:
d. Global trade is vital to a nation and its marketers for
several reasons
i. It expands markets and builds employment
Chapter 8 Global Marketing 205
expect to be in the
list? Which nations
are noticeably
absent from this list?
Why do you think
that is?
Table 8.1—World’s
Ten Largest Public
Companies (Ranked
by Annual Sales)—
What industries
dominate this list?
What industries are
ii. It makes production and distribution economies
possible
iii. It allows companies to explore growth opportunities
in other nations and makes them less dependent
on economic conditions in their home nations
iv. It can help meet customer demand, reduce costs,
and provide information on potential markets
around the world
v. For North American marketers, trade with foreign
markets is especially important because the U.S.
and Canadian economies represent a mature
market for many products
e. Transactions that cross national borders involve additional
considerations—different laws, varying levels of
technological capability, economic conditions, cultural and
business norms, and consumer preferences
f. Companies that want to market their products worldwide
must reconsider each of the marketing variables—product,
distribution, promotion, and price—in terms of the global
marketplace
g. To succeed in global marketing, today’s marketers
answers questions such as:
i. How do our products fit into a foreign market?
ii. How can we turn potential threats into
opportunities?
2. The importance of global marketing
b. For most U.S. companies global marketing is rapidly
becoming a necessity
c. Over the past decade, U.S. goods and service exports
have nearly doubled
d. Walmart currently ranks as the world’s largest private
employer
206 Part 2 Understanding Buyers and Markets
noticeably missing?
Note: Ask students
to name the top
profitable U.S.
service exports and
then let them
compare it with the
list you have.
Students might not
be surprised to see
financial and
computing but would
be surprised to see
legal services
featured in the list.
e. The globalization of business and the boundless nature of
the Internet have made it possible for every marketer to
become an international marketer
f. Some firms rely on purchasing raw materials abroad as
input for their domestic manufacturing operations
g. Among the top U.S. imports are crude oil, computers and
computer accessories, consumer electronics, and
passenger cars
3. Service and retail exports
a. Despite the U.S. work population moving away from
farming, and manufacturing goods, the U.S. continues to
produce record volumes of agricultural and manufactured
goods
b. Nearly four of every five dollars in the nation’s gross
domestic product (GDP) comes from services such as
banking, entertainment, business and technical services,
retailing, and communications
f. A glance at the increasing number of foreign companies
listed on the New York Stock Exchange illustrates the
importance of global financial services
g. The entertainment industry is another major service
exporter; almost a century of exposure to U.S.-made films,
television programs and, more recently, music video clips
has made international viewers more familiar with
American culture and geography than that of any other
nation on earth
h. Many U.S. retailers have opened stores around the world
4. Benefits of going global
a. Besides generating additional revenue, firms expand
operations outside their home country to gain other
benefits, including:
i. New insights into consumer behavior
Chapter 8 Global Marketing 207
Travel
in other international markets
b. Global marketers typically are well positioned to compete
effectively with foreign competitors
Assessment check questions
1.1. Define importing and exporting. Importing involves purchasing
1.2. What is the largest category of exports from the United States? The
1.3. What must global marketers do effectively to reach foreign markets?
Global marketers must adapt their goods and services to local
preferences.
Chapter Objective 2: Identify the five major components of the environment for global
marketing.
Key Terms: infrastructure, exchange rate, political risk assessment (PRA), friendship commerce
and navigation (FCN) treaties, ISO (International Organization for Standardization) certification,
tariffs, revenue tariffs, protective tariffs, import quotas, embargo, subsidy, exchange control,
dumping
PowerPoint Basic: 5
PowerPoint Expanded: 10-21
1. The international marketing environment
a. Environmental factors have a powerful influence on the
2. International economic environment
a. A nation’s size, per-capita income, and stage of economic
development determine its prospects as a host for
international business expansion
b. Nations with low per-capita incomes may be poor markets
Table 8.2—The
World’s Most
Frequently Spoken
Languages—Which
languages did you
expect to see on this
list? Which ones
enter a foreign market
i. An inadequate infrastructure may constrain
marketers’ plans to manufacture, promote, and
distribute goods and services in a particular
country
e. Changes in exchange rates can complicate international
marketing
i. An exchange rate is the price of one nation’s
currency in terms of another country’s currency
ii. Fluctuations in exchange rates can make a nation’s
currency more or less valuable, compared to that
of other nations
iii. In today’s global economy, imbalances in trade,
dependence on fossil fuels, and other conditions
affect the currencies of many countries
iv. At the beginning of the 21st century, most
3. International social-cultural environment
a. Before entering a foreign country, marketers should study
all aspects of that nation’s culture, including language,
education, religious attitudes, and social values
b. Language plays an important role in global marketing
i. Marketers must make sure not only to use the
appropriate language or languages for a country
but also to ensure the message is correctly
translated and conveys the intended meaning
ii. Firms that rely on call centers located in India and
staffed by Indian nationals have discovered an
occasional language gap
iii. But these employees do speak English, the
Overseas Working
Conditions?
4. International technological environment
a. More than any innovation since the telephone, Internet
technology has made it possible for both large and small
firms to connect to the entire world
5. International political-legal environment
a. Global marketers must continually stay abreast of laws
and trade regulations in each country in which they
compete
b. Political conditions often influence international marketing
as well
e. The legal environment for U.S. firms operating abroad
results from three forces:
i. International law
ii. U.S. law
iii. Legal requirements of host nations
f. International law emerges from treaties, conventions, and
agreements among nations
i. The U.S. has many friendship, commerce, and
navigation (FCN) treaties with other governments;
these agreements set terms for various aspects of
commercial relations with other countries
210 Part 2 Understanding Buyers and Markets
Standardization) certification—internationally
recognized standards that ensure a company’s
goods, services, and operations meet established
quality levels
iv. The organization has two sets of standards: the
ISO 9000 series of standards sets requirements for
g. The second dimension of the international legal
environment, U.S. law, includes various trade regulations,
tax laws, and import and export requirements affecting
international marketing
i. The Export Trading Company Act (1982) exempts
companies from antitrust regulations so they can
6. Trade barriers
a. Assorted trade barriers affect global marketing
b. These barriers fall into two major categories
i. Tariffs refer to taxes levied on imported products;
some tariffs impose set taxes per pound, gallon, or
unit; others are calculated according to the value of
the imported item
c. Tariffs
i. Tariffs can be classified as either revenue or
protective tariffs
Chapter 8 Global Marketing 211
Note: What are the
disadvantages of
import quota? How
does it affect product
choice? Price?
Overall
competitiveness?
ii. Revenue tariffs are designed to raise funds for the
importing government
d. Other trade barriers
i. Governments may erect a number of other
barriers, ranging from special permits and detailed
inspection requirements to quotas on foreign-made
items in an effort to stem the flow of imported
goods—or halt them altogether
ii. Import quotas limit the number of units of products
in certain categories that cross a country’s border
for resale
iii. The quota is supposed to protect domestic industry
and employment and preserve foreign exchange,
but it does not always work that way
e. Dumping
i. The practice of selling a product in a foreign market
at a price lower than it commands in the producer’s
domestic market is called dumping
ii. Critics of free trade often argue that foreign
212 Part 2 Understanding Buyers and Markets
governments give substantial support to their own
exporting companies
iii. Government support may permit these firms to
extend their export markets by offering lower prices
abroad
Assessment check questions
2.1. What are the three criteria that determine a nation’s prospects as a
host for international business expansion? A nation’s size, per-capita
2.2. What is an FCN treaty? FCN stands for friendship, commerce, and
2.3. What are the two major categories of trade barriers? The two
categories of trade barriers are tariffs and nontariffs.
Chapter Objective 3: Outline the basic functions of GATT, WTO, NAFTA, FTAA, CAFTA-
DR, and the European Union.
Key Terms: free-trade area, customs union, common market, General Agreement on Tariffs and
Trade (GATT), World Trade Organization (WTO), North American Free Trade Agreement
(NAFTA), Free Trade Area of the Americas (FTAA), Central American Free Trade Agreement-
DR (CAFTA-DR), European Union (EU)
PowerPoint Basic: 6-7
PowerPoint Expanded: 22-30
1. Multinational economic integration
a. A noticeable trend toward multinational economic
integration has developed over the nearly seven decades
since the end of World War II
b. Multinational economic integration can be set up in several
2. GATT and the World Trade Organization
a. The General Agreement on Tariffs and Trade (GATT), a
trade accord that has sponsored several rounds of major
tariff negotiations, substantially reducing worldwide tariff
levels, has existed for six decades
b. In 1994, a seven-year series of GATT conferences, the
Uruguay Round, culminated in one of the biggest victories
for free trade in decades
c. The Uruguay Round reduced average tariffs by one-third,
or more than $700 billion
d. Among its major victories, it:
i. Reduced farm subsidies, which opened vast new
markets for U.S. exports
ii. Increased protection for patents, copyrights, and
trademarks
iii. Included services under international trading rules,
e. A key outcome of the GATT talks was establishment of the
World Trade Organization (WTO), a 159-member
organization that succeeds GATT
f. The WTO oversees GATT agreements, serves as a forum
for trade negotiations, and mediates trade disputes
g. It also monitors national trade policies and works to reduce
trade barriers throughout the world
i. Unlike GATT, WTO decisions are binding
ii. Countries that seek to become members of the
214 Part 2 Understanding Buyers and Markets
maritime markets
iv. Trade officials have not agreed on the direction for
the WTO
3. The NAFTA Accord
a. More than a decade after the passage of the North
American Free Trade Agreement (NAFTA), an agreement
between the United States, Canada, and Mexico that
removes trade restrictions among the three nations,
negotiations among the nations continue
4. The Free Trade Area of the Americas and CAFTA-DR
a. NAFTA was the first step in creating a Free Trade Area of
the Americas (FTAA), stretching the length of the entire
Western Hemisphere, from Alaska’s Bering Strait to Cape
Horn at South America’s southern tip, encompassing 34
countries, a population of 800 million, and a combined
gross domestic product of more than $11 trillion
i. It would be the world’s largest free-trade zone on
b. As FTAA negotiations continue, the United States entered
into an agreement with the Dominican Republic and
Central American nations known as the Central American
Free Trade Agreement-DR (CAFTA-DR)
i. Supporters of the agreement say it will help
Chapter 8 Global Marketing 215
Figure 8.2—The 28
Members of the
European Union—
How many EU
nations can you
most members of
EU. Which countries
have not yet
accepted the Euro?
5. The European Union
a. The best-known example of a multinational economic
community is the European Union (EU)
i. 28 countries make up the EU
ii. Five countries—Serbia, Iceland, Macedonia,
Montenegro, and Turkey—are candidates for
membership
iii. With a total population of more than 505 million
and economic power
c. In some ways, the EU is making definite progress toward
its economic goals
i. It is drafting standardized eco-labels to certify that
products are manufactured according to certain
environmental standards
ii. It is creating guidelines governing marketers’ uses
of customer information
iii. Marketers can also protect some trademarks
throughout the entire EU with a single application
and registration process through the Community
Trademark (CTM), which simplifies doing business
216 Part 2 Understanding Buyers and Markets
Assessment check questions
3.1. What is the World Trade Organization? The World Trade
3.2. What countries are parties to the NAFTA accord? The United
3.3. What is the goal of the European Union? The European Union (EU)
Chapter Objective 4: Identify the six alternative strategies for entering foreign markets.
Key Terms: franchise, foreign licensing, subcontracting
PowerPoint Basic: 8-10
PowerPoint Expanded: 31-38
Figure 8.3—Levels
of Involvement in
1. Going global
a. Globalization affects almost every industry and individual
throughout the world, at least in some way
b. Traditional marketers who take their firms global may do
c. Virtually every domestic marketer recognizes the need to
investigate whether to market its products overseas
d. Common reasons that marketers cite for going global
include:
i. Globalization of customers
ii. New customers in emerging markets
2. Strategies for entering foreign markets
a. Successful global marketing starts at the top
b. Once marketers have researched and identified markets
for expansion and won the support of leadership, they may
choose from three basic strategies for entering foreign
markets:
i. Importing and exporting
ii. Contractual agreements such as franchising,
licensing, and subcontracting
iii. International direct investment
c. The level of risk and the firm’s degree of control over
international marketing increase with greater involvement
Chapter 8 Global Marketing 217
Global Marketing—
Which level offers
the most control?
The least? Which
offers the highest
and lowest risk?
Note: Discuss the
Note: Franchising
has worked well with
fast-food countries
across the globe.
Which other industry
has used franchising
to a large extent?
Why do you think it
McDonald’s Thrives
3. Importing and exporting
a. An importer is a firm that brings in goods produced abroad
to sell domestically or to be used as components in its
products
b. In making import decisions, the marketer must assess
local demand for the product, taking into consideration
factors such as:
i. Ability of the supplier to maintain agreed-to quality
levels
c. Exporting involves a continuous effort in marketing a firm’s
merchandise to customers in other countries
d. Many firms export their products as the first step in
reaching foreign markets
e. First-time exporters can reach foreign customers through
one or more of three alternatives:
i. An export-trading company (ETC) buys products
from domestic producers and resells them abroad
4. Contractual agreements
a. As a firm gains sophistication in global marketing, it may
enter contractual agreements that provide several flexible
alternatives to exporting
b. Franchising
i. A franchise is a contractual arrangement in which a
wholesaler or retailer (the franchisee) agrees to
meet the operating requirements of a manufacturer
or other franchiser
ii. The franchisee receives the right to sell the
products and use the franchiser’s name as well as
218 Part 2 Understanding Buyers and Markets
in France
depends on its willingness to balance standard
practices with local customer preferences
c. Foreign licensing
i. Foreign licensing is a contractual agreement that
grants foreign marketers the right to distribute a
firm’s merchandise or to use its trademarks,
patents, or process in a certain geographic area
d. Subcontracting
i. Subcontracting is a contractual agreement in which
the production of goods or services is assigned to
local companies
ii. Using local subcontractors can prevent mistakes
involving local culture and regulations
5. International direct investment
a. Another strategy for entering global markets is
international direct investment in foreign firms, production,
and marketing facilities
b. The U.S. direct investment abroad is nearly $3.7 trillion
c. Foreign direct investment in the U.S. is originated through
investors in Europe, United Kingdom, and Japan
d. Although high levels of involvement and high risk potential
are characteristics of investments in foreign countries,
firms choosing this method often have a competitive
advantage
e. Direct investment can take several forms:
i. A company can acquire an existing firm in a
country where it wants to do business
Chapter 8 Global Marketing 219
Assessment check questions
4.1. What are the three basic strategies for entering foreign markets? The
4.2. What is a franchise? A franchise is a contractual agreement in which
Chapter Objective 5: Differentiate between a global marketing strategy and a
multidomestic marketing strategy.
Key Terms: global marketing strategy, multidomestic marketing strategy
PowerPoint Basic: 11
PowerPoint Expanded: 39-42
1. Developing an international marketing strategy
a. In developing a marketing mix, international marketers
may choose between two alternative approaches: a global
marketing strategy or a multidomestic marketing strategy
b. A global marketing strategy defines a standard marketing
mix and implements it with minimal modifications in all
foreign markets
i. It brings the advantage of economies of scale to
production and marketing activities
ii. It saves money because it allows large-scale
