Chapter 15: The Global Marketplace Flashcards
A global firm
is one that, by operating in more than one country, gains marketing, production, research and development (R&D), and financial advantages that are not available to purely domestic competitors.
A company faces six major decisions in international marketing
1) Looking at the global marketing environment
2) Deciding whether to go global
3) Deciding which markets to enter
4) Deciding how to enter the market
5) Deciding on the global marketing program
6) Deciding on the global marketing organization
The International Trade System
Canadian companies looking abroad must start by understanding the international trade system. When selling to another country, a firm may face restrictions on trade between nations. Governments may charge tariffs or duties, taxes on certain imported products designed to raise revenue or protect domestic firms
free trade zones or economic communities
These are groups of nations organized to work toward common goals in the regulation of international trade. One such community is the European Union (EU)
In 1994, the North American Free Trade Agreement (NAFTA)
established a free trade zone among the United States, Mexico, and Canada.
Two economic factors reflect the country’s attractiveness as a market:
its industrial structure and its income distribution.
In considering whether to do business in a given country, a company should consider factors such as
the country’s attitudes toward international buying, government bureaucracy, political stability, and monetary regulations.
Barter
involves the direct exchange of goods or services
Cultural Environment
Each country has its own folkways, norms, and taboos. When designing global marketing strategies, companies must understand how culture affects consumer reactions in each of its world markets
Once a company has decided to sell in a foreign country, it must determine the best mode of entry.
Its choices are exporting, joint venturing, and direct investment
Exporting
Entering foreign markets by selling goods produced in the company’s home country, often with little modification
Companies typically start with indirect exporting
working through independent international marketing intermediaries
Sellers may eventually move into direct exporting
whereby they handle their own exports. The investment and risk are somewhat greater in this strategy, but so is the potential return.
Joint Venturing
joining with foreign companies to produce or market products or services
Joint venturing differs from exporting in that the company joins with a host country partner to sell or market abroad.
There are four types of joint ventures:
licensing, contract manufacturing, management contracting, and joint ownership.
Licensing
The company enters into an agreement with a licensee in the foreign market. For a fee or royalty payments, the licensee buys the right to use the company’s manufacturing process, trademark, patent, trade secret, or other item of value.
Contract Manufacturing
in which the company makes agreements with manufacturers in the foreign market to produce its product or provide its service
Management Contracting
the domestic firm provides the management know-how to a foreign company that supplies the capital. In other words, the domestic firm exports management services rather than products.
Joint Ownership
ventures consist of one company joining forces with foreign investors to create a local business in which they share possession and control. A company may buy an interest in a local firm, or the two parties may form a new business venture.
Direct Investment
The biggest involvement in a foreign market
the development of foreign-based assembly or manufacturing facilities
Standardized global marketing
essentially using the same marketing strategy approaches and marketing mix worldwide
adapted global marketing
the producer adjusts the marketing strategy and mix elements to each target market, resulting in more costs but hopefully producing a larger market share and return.
Five strategies are used for adapting product and marketing communication strategies to a global market
three product strategies and then turn to the two communication strategies.
Five Global Product and Communications Strategies
1) Straight product extension
2) Product adaptation
3) Product invention
4) communication adaptation
5) Dual Adpation
1) Straight product extension
means marketing a product in a foreign market without making significant changes to the product
2) Product adaptation
Involves changing the product to meet local requirements, conditions, or wants.
3) Product invention
consists of creating something new to meet the needs of consumers in a given country.
4) communication adaptation
adapting their advertising messages to local markets
whole-channel view
The first link, channels between nations, moves company products from points of production to the borders of countries within which they are sold. The second link, channels within nations, moves products from their market entry points to the final consumers.
The whole-channel view takes into account the entire global supply chain and marketing channel.
Companies manage their international marketing activities in at least three different ways:
Most companies first organize an export department, then create an international division, and finally become a global organization.
An international division’s corporate staff consists of
marketing, manufacturing, research, finance, planning, and personnel specialists.
It plans for and provides services to various operating units, which can be organized in one of three ways
geographical organizations, with country managers who are responsible for salespeople, sales branches, distributors, and licensees in their respective countries.
world product groups, each responsible for worldwide sales of different product groups
Finally, operating units can be international subsidiaries, each responsible for their own sales and profits.
