Marketing Chapter 8 Homework Under The Super 301 Provisions The Omnibus

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