Chapter 19 Globalisation and international marketing

Question 1

What is globalization?

Answer 1

Globalisation is the growing trend towards worldwide
markets in products, capital and labour, unrestricted by
barriers.

Question 2

What key features of globalisation that have an impact on

business strategy?

Answer 2

1 Increased international trade as barriers to trade are
reduced
2 Growth of multinational businesses in all countries as
there is greater freedom for capital to be invested from
one country to another
3 Freer movement of workers between countries.

Question 3

What are Multinational companies?

Answer 3

Multinational companies are businesses that have

operations in more than one country.

Question 4

What is Free international trade?

Answer 4

Free international trade means international trade
that is allowed to take place without restrictions
such as ‘protectionist’ tariffs and quotas.

Question 5

What is a Tariff?

Answer 5

A tariff is a tax imposed on an imported product.

Question 6

What is a quota?

Answer 6

A quota is a physical limit placed on the quantity of

imports of certain products.

Question 7

Potential benefits and strategic opportunities of Globalisation

Answer 7

There is greater opportunity for selling goods in other countries.

Question 8

Potential limitations and threats of Globalisation

Answer 8

Businesses from other countries now have freer access to the domestic market, so there will be increased competition. Wider consumer choice will drive firms that are not internationally competitive out of business.

Question 9

What is international marketing?

Answer 9

International marketing means selling products in markets other than the original domestic market.

Question 10

Why sell products in other countries?

Answer 10

1 Saturated home markets
2 Profits
3 Spreading risks
4 Poor trading conditions in home market
5 Legal differences creating opportunities abroad

Question 11

What is Exporting?

Answer 11

Exporting can be undertaken either by selling the product directly to a foreign customer – perhaps the order has been placed via the company website – or indirectly through an export intermediary, such as an agent or trading company based in the country.

Question 12

Exporting directly Benefits.

Answer 12

1 Exporting directly means that the company has complete control over the international marketing of its products
2 No commission is taken by intermediaries, so profit margins are not reduced.

Question 13

Exporting directly Limitations

Answer 13

1 The business does not have a local agent or trader supporting them, so may lack important local knowledge, e.g. about import controls into the country
2 The exporting business has to handle the logistics of
transporting and storing the product and dealing with all paperwork.

Question 14

Exporting indirectly Benefits

Answer 14

1 The overseas agent or trading company will have local market knowledge and contacts with potential customers and this should aid the marketing of the product
2 Transport and administrative procedures become the responsibility of the agent.

Question 15

Exporting indirectly Limitations

Answer 15

1 A commission or payment will have to be paid to the agent or trading company and this will reduce the exporting firm’s profit margin
2 The intermediary will have other firms’ products to sell as well – how much focus and effort will be given to selling any one product?

Question 16

What is a International franchising

Answer 16

International franchising means that foreign franchisees are used to operate a firm’s activities abroad. This can either take the form of one foreign company being used as a franchisee for all the branches in their country or individual franchisees are appointed to operate each outlet.

Question 17

What is Licensing

Answer 17

Licensing involves the business allowing another
firm in the country being entered to produce its
branding goods or patented products ‘under licence’,
which will involve strictly controlled terms over
quality. This means that goods do not have to be
physically exported, saving on time and transport
cost – and making food products fresher too.

Question 18

What is Subsidiaries?

Answer 18

Subsidiaries can be factories set up by foreign countries,
as with Toyota in the EU and South America, or retailing
operations, as with Wal-Mart in China. They may be
almost completely decentralised – where local managers
take most key decisions – or organised with centralised
control from head office in the home country.

Question 19

Foreign subsidiaries Benefits

Answer 19

1 Head office has control of operations and may decide to decentralise this control to allow local managers to take decisions that reflect local conditions.
2 All profits after tax belong to the company – no commission is paid and no sharing of profits with partner business.

Question 20

Foreign subsidiaries Limitations

Answer 20

It is expensive to set up operations in foreign countries –
senior staff will need to visit and may need to be based in the country. Much higher capital cost required than exporting directly or indirectly.

Question 21

what is Pan-global marketing?

Answer 21

Pan-global marketing means adopting a standardised
product across the globe as if the entire world were a single market – selling the same goods in the same way everywhere.

Question 22

what is Global localisation

Answer 22

Global localisation means adapting the marketing mix,
including differentiated products, to meet national and
regional tastes and cultures.

Question 23

Advantages of a pan-global and pan-regional marketing strategy

Answer 23

1 Cost reduction can be substantial.
The same product can be produced for all markets, allowing substantial economies of scale. The same
marketing mix can be used. This allows just one marketing agency and advertising strategy to be used
for the whole world or region rather than different ones for each country.

Question 24

Disadvantages of a pan-global and pan-regional marketing strategy

Answer 24

1 Despite growing similarity between consumer tastes in
different countries, it might still be necessary to develop different products to suit cultural or religious variations.
2 Setting the same price in all countries will fail to take into account different average income levels.

Question 25

What are the benefits of global localisation?

Answer 25

1 Local needs, tastes and cultures are reflected in the marketing mix of the business and this could lead to higher sales and profits
2 The products are more likely to meet local national legal requirements than if they are standardised products.

Question 26

What are the limitations of global localisation?

Answer 26

1 The scope for economies of scale is reduced.
2 There will be additional costs of adapting products, adverts, store layouts, etc, to specific local needs – these costs might lead to higher prices than a global marketing strategy would result in.