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CHAPTER 9

Reaching Global Markets

TEACHING RESOURCES QUICK REFERENCE GUIDE

Resource

Location

Purpose and Perspective

IRM, p. 178

Lecture Outline

IRM, p. 179

Discussion Starters

IRM, p. 190

Class Exercises

IRM, p. 191

Chapter Quiz

IRM, p. 194

Answers to Discussion and Review Questions

IRM, p.195

PURPOSE AND PERSPECTIVE

This chapter examines the nature and increasing importance of global marketing strategy. We then go on

to discuss the environmental forces that affect international marketing strategy, such as how target market

Answers to Application Questions

IRM, p.197

Answers to Internet Exercise

IRM, p.199

Answers to Developing Your Marketing Plan

IRM, p. 200

Comments on the Cases

IRM, p. 201

Case 9.1

Case 9.2

IRM, p. 202

Examination Questions: Essay

Testing CD

Examination Questions: Multiple-Choice

Testing CD

Examination Questions: True-False

Testing CD

PowerPoint Slides

Chapter 9: Reaching Global Markets 179

LECTURE OUTLINE

I. The Nature of Global Marketing Strategy

A. Technological advances and rapidly changing political and economic conditions are making it

easier for more companies to market products overseas as well as domestically.

B. International marketing is the development and performance of marketing activities across

national boundaries.

C. Many U.S. firms are finding that international markets provide tremendous opportunities for

growth.

1. Many countries offer practical assistance and valuable research to help their domestic firms

become more globally competitive.

II. Environmental Forces in International Markets

A. Firms entering international markets often must make significant adjustments to marketing

strategies to adjust to significant differences in market forces.

1. A successful international marketing strategy requires a careful environmental analysis to

B. Sociocultural Forces

1. Cultural and social differences among nations can have significant effects on marketing

activities.

2. Marketers must identify major sociocultural deviations among countries for effective

C. Economic Forces

1. Global marketers need to understand the international trade system, particularly the economic

stability of individual nations as well as trade barriers which may stifle marketing efforts.

180 Chapter 9: Reaching Global Markets

3. An important economic factor in the global business environment is currency valuation.

a. Some countries have floating exchange rates, which allow their exchange rates to

4. Knowledge about per capita income, credit, and the distribution of income provides general

insights into market potential.

5. Opportunities for international trade are not limited to countries with the highest incomes.

Many developing nations represent large and rapidly expanding markets.

a. The countries of Brazil, Russia, India, China, and South Africa (BRICS) have attracted

D. Political, Legal and Regulatory Forces

1. Political, legal and regulatory forces are closely intertwined in most countries. A country’s

legal and regulatory infrastructure is a direct reflection of a political climate.

a. In some countries, this political climate is determined by the people via elections,

2. Political climate and political officials directly affect legislation and regulation. Elected

industry officials also set the tone for a nation’s regulatory environment.

3. A nation’s political system, laws, regulatory bodies, special interest groups, and courts all

have great impact on international marketing.

4. Some countries have established trade restrictions of various kinds.

a. An import tariff is any duty levied by a nation on goods purchased outside its borders

Chapter 9: Reaching Global Markets 181

5. A government’s attitude toward importers has a direct impact on the economic feasibility of

exporting to that country.

E. Ethical and Social Responsibility Forces

1. Differences in national standards are exemplified in the use of payoffs and bribes—a deeply

entrenched practice in many governments.

a. The ultimate decision about whether to give small tips or gifts where they are customary

2. Differences in ethical standards can affect marketing efforts, especially in regards to

intellectual property and counterfeiting issues.

3. Marketers often perceive that other business cultures have different modes of operation,

which can make inexperienced marketers uneasy.

a. This “us vs. them” mentality is known as the self-reference criterion (SRC). The SRC is

an unconscious reference to one’s own cultural values, experiences, and knowledge,

4. Because of differences in culture and ethical standards, many companies are working both

individually and collectively to establish ethics programs and standards for international

business conduct.

F. Competitive Forces

1. Competition and offering customers choices are staples of the global marketplace.

2. In addition to considering the types of competitive structures, international firms should:

3. Each country has unique competitive aspects that are independent of the competitors in that

market.

182 Chapter 9: Reaching Global Markets

G. Technological Forces

1. Advances in technology have made international marketing much easier, more affordable,

III. Regional Trade Alliances, Markets, and Agreements

A. Although more firms are beginning to view the world as one huge marketplace, various regional

trade alliances and specific markets affect companies engaging in international marketing; some

create opportunities, others impose constraints. There are nearly 200 trade agreements globally,

up from a handful in the 1960s.

B. The North American Free Trade Agreement (NAFTA)

1. The 1994 North American Free Trade Agreement (NAFTA) effectively merged Canada,

Mexico, and the United States into one market with a value of over $17 trillion.

4. A similar Central American Free Trade agreement was also ratified. This agreement links the

Central American nations, the Dominican Republic, and the United States.

5. NAFTA has been controversial, and disputes continue to arise over its implementation.

Problems include different visions for the future, border control issues, and a stronger focus

on trading with the United States than the other countries.

6. Although NAFTA has been controversial, it has become a positive factor for U.S. firms that

want to engage in international marketing.

C. The European Union (EU)

1. The European Union (EU) was officially formed in 1958 to promote trade among its

members. Today it includes 27 member nations and half a billion consumers, representing

Chapter 9: Reaching Global Markets 183

3. As the EU nations attempt to function as one large market, consumers in the EU may become

more homogeneous in needs and wants. Marketers should be aware, however, that cultural

differences among the nations may require modifications in the marketing mix for customers

in each nation.

4. The latest worldwide recession has slowed Europe’s economic growth and created a debt

D. Southern Common Market (MERCOSUR)

1. The Southern Common Market (MERCOSUR) was established in 1991 to unite

Argentina, Brazil, Paraguay, and Uruguay as a free trade alliance. Venezuela joined in 2006;

E. Asia-Pacific Economic Cooperation (APEC)

1. The Asia-Pacific Economic Cooperation (APEC), established in 1989, promotes open trade

2. APEC differs from other international trade alliances in its commitment to facilitating

3. Nations in the APEC region have become increasingly competitive and sophisticated.

a. Japan has made many inroads in world markets for automobiles and electronics. Even

though there is a high volume of trade between Japan and the United States, the two

nations are less integrated than they could be—costing the United States billions each

184 Chapter 9: Reaching Global Markets

4. The Trans-Pacific Strategic Economic Partnership is a trade agreement between Singapore,

Brunei, Chile, and New Zealand, with the United States, Vietnam, Malaysia, Japan, Peru, and

F. Association of Southeast Asian Nations (ASEAN)

1. The Association of Southeast Asian Nations (ASEAN) promotes trade and economic

integration among member nations in Southeast Asia. The trade pact includes Malaysia, the

G. World Trade Organization (WTO)

1. The General Agreement on Tariffs and Trade (GATT) was based on negotiations among

member countries to reduce worldwide tariffs and increase international trade in the wake of

H. Fulfilling the purpose of the WTO requires eliminating trade barriers; educating individuals,

companies, and governments about trade rules; and reassuring global markets about policy

changes.

IV. Modes of Entry into International Markets

A. Marketers engage in international marketing activities at several levels of involvement.

1. Traditionally, firms have adopted one of four modes of entering an international market, with

each successive “stage” representing different degrees of international involvement:

2. Today a firm’s international involvement covers a wide spectrum from purely domestic

marketing to global marketing.

Chapter 9: Reaching Global Markets 185

a. Domestic marketing involves marketing strategies aimed at markets within the home

country; global marketing requires the development of marketing strategies for the entire

3. The level of commitment to international marketing is a major variable in global marketing

strategies.

B. Importing and Exporting

1. Importing and exporting require the least amount of effort and commitment of resources.

a. Importing is the purchase of products from a foreign source.

C. Trading Companies

1. Marketers sometimes employ a trading company, which links buyers and sellers in different

countries but is not involved in manufacturing and does not own assets related to

D. Licensing and Franchising

1. Licensing is an alternative to direct investment, requiring a licensee to pay commissions or

royalties on sales or supplies used in manufacturing.

2. Franchising is a form of licensing in which a company (the franchiser) grants a franchisee

the right to market its product, using its name, logo, methods of operation, advertising,

186 Chapter 9: Reaching Global Markets

3. This arrangement allows franchisers to minimize the risks of international involvement in

four ways:

a. The franchiser reduces capital investment.

E. Contract Manufacturing

1. Contract manufacturing occurs when a company hires a foreign firm to produce a

designated volume of the firm’s product to specifications, and the final product carries the

domestic firm’s name.

2. Outsourcing is defined as the contracting of non-core operations or jobs from internal

F. Joint Ventures

1. A joint venture is a partnership between a domestic firm and a foreign firm or government.

a. Control of the joint venture may be equally split or one partner may control decision

2. Strategic alliances, the newest form of international business structure, are partnerships

formed to create competitive advantage on a worldwide basis.

a. Strategic alliances differ from joint ventures in that the alliance partners may have been

traditional rivals competing for market share in the same product class.

G. Direct Ownership

Chapter 9: Reaching Global Markets 187

1. Once a company makes a long-term commitment to marketing in a foreign nation, direct

ownership of a foreign subsidiary or division is a possibility.

V. Global Organizational Structures

A. Firms develop their international marketing strategies and manage their marketing mixes by

developing and maintaining an organizational structure that best leverages resources and core

competencies (See Figure 9.2 in the textbook).

B. Three basic structures of international organizations exist: export departments, international

divisions, and internationally integrated structures (e.g., product division structures, geographic

area structures, and matrix structures).

C. Export Departments

1. For most firms, the early stages of international development are often improvised and

motivated by sales opportunities in the global marketplace.

D. International Divisions

1. The international division of a firm centralizes all of the responsibility for international

operations (and in many cases all international activities also become centralized in the

international division).

188 Chapter 9: Reaching Global Markets

E. Internationally Integrated Structures

1. Three common internationally integrated structures are the product division structure, the

geographic area structure, and the matrix structure.

2. Firms with internationally integrated structures have multiple choices for international market

entry similar to international divisions, and they are the most likely to engage in direct

ownership activities internationally.

a. The product division structure is used by the majority of multinational firms.

(1) Each division is a self-contained entity with responsibility for its own operations,

b. The geographic area structure lends itself well to firms with a low degree of

diversification.

(1) It divides the world into logical geographical areas based on the firm’s operations and

its customers’ characteristics.

VI. Customization versus Globalization of International Marketing Mixes

A. Traditionally, international marketing strategies have customized marketing mixes according to

cultural, regional, and national differences. Realizing that both similarities and differences exist

across countries is a critical first step to developing the appropriate marketing strategy effort

targeted to particular international markets.

C. For many years, marketers have attempted to globalize their marketing mixes as much as possible

by employing standardized products, promotional campaigns, prices, and distribution channels

for all markets.

1. Brand name, product characteristics, packaging, and labeling are among the easiest marketing

mix variables to standardize; media allocation, retail outlets, and price may be more difficult.

Chapter 9: Reaching Global Markets 189

E. Regardless of the extent to which a firm chooses to globalize its marketing strategy, extensive

190 Chapter 9: Reaching Global Markets

DISCUSSION STARTERS

Discussion Starter 1: Global Service in a Global Economy

Discussion Starter 2: FedEx and Customer Satisfaction

FedEx frequently appears on lists of the most admired companies in the world. FedEx is globally known

for its creative advertising and its operational excellence in moving packages from their origins to their

Discussion Starter 3: Global Shipping

ASK: What is more than ¼ mile long and can carry more than a 44–mile–long train?

The answer is the world’s largest container ship the Emma Maersk. The growth of global trade has