chapter 7 Flashcards
Trade Feedback Effect
a country’s imports affect its exports & a country’s exports affect its imports
Countertrade
the practice of using barter rather than money for making global sales
Ex: Daimler sold Jeeps in Ecuador in exchange for bananas
Role of U.S in World Trade Can Be Viewed from Two Perspectives:
- Gross Domestic Product
- Balance of Trade
Gross Domestic Product
the monetary value of all products/servs produced in a country during one year
› U.S. is a world leader in GDP
Balance of Trade
the difference between the monetary value of a nation’s exports and imports
Surplus in its Balance of Trade
when a country’s exports exceed its imports
Deficit in its Balance of Trade
when imports exceed exports
› U.S. has a continuing balance of trade deficit bc imports have exceeded exports each year
› U.S. volume of both exports & imports has increased dramatically, showing why almost every American is significantly affected
U.S. Four Major Trading Partners
› Canada, Mexico, China, Japan
› China accounts for 40% of total U.S. balance of trade deficit
Globalization
the focus on creating economic, cultural, political, and technological interdependence among individual national institutions and economies
Five Developments Have Significantly Influenced the Landscape of Global Marketing/Globalization Over the Past Decade:
- Economic protectionism by individual countries
- Economic integration among countries
- Global competition among global companies for global consumers
- The presence of a networked global marketspace
- The growing prevalence of economic espionage
Protectionism
the practice of shielding one or more industries within a country’s economy from foreign competition through the use of tariffs or quotas
- Limits the outsourcing of jobs, protects a nation’s political security, discourages economic dependency on other countries, & promotes development of domestic industries & employment
Tariffs & Quotas can
discourage world trade & have slowed the growth of world trade
Tariffs
government taxes on products/servs entering a country that primarily serve to raise prices on imports (increases prices)
Ex: EU Countries have a 10% tariff on cars imported from the U.S., which is 4 times higher than the tariff imposed by the U.S. on cars from the EU
Quota
restriction placed on the amount of a product allowed to enter or leave a country (limits supply)
Ex: China has import quotas on corn, cotton, rice, & wheat
World Trade Organization (WTO):
› a permanent institution that sets rules governing trade between its members through panels of trade experts who decide on trade disputes between members and issue binding decisions
-Has decided over 500 trade disputes to mitigate trade wars b/w countries
Trade War
a situation in which countries try to damage each other’s trade, typically by imposition of tariff and quota restrictions
Ex: Dispute b/w the U.S. & China
Economic Integration Among Countries
countries w/ similar economic goals have formed transnational trade groups/ signed trade agreements to promote free trade among member nations & enhance their individual economies
Three Examples of Economic Integration Among Countries
European Union (EU)
U.S.-Mexico-Canada Agreement (USMCA)
Regional Comprehensive Economic Partnership (RCEP)
Global Competition Among Global Companies for Global Consumers
world trade is driven by this
Global Competition
exists when firms originate, produce, and market their products and services worldwide
Ex: Cola war waged by Pepsi & Coke in the U.S. has been repeated around the world
Three Types of Global Companies
- international firms
- multinational firms
- transnational firms
International Firm
engages in trade & marketing in different countries as an extension of the marketing strategy in its home country
- Market their existing products/servs in other countries the same way they do in their home country
Ex: Avon, distributes its product line through direct selling in Asia, Europe, & South America, employing the same marketing strategy used in the U.S.
Multinational Firm
views the world as consisting of unique parts & markets to each part differently
- Use a multidomestic marketing strategy
Multidomestic Marketing Strategy
strategy used by multinational firms that have as many different product variations, brand names, and advertising programs as countries in which they do business
Ex: Mr. Clean in North America & Asia but Maestro Limpio in Mexico & Puerto Rico
Transnational Firm
views the world as one market & emphasizes cultural similarities across countries or universal consumer needs/wants rather than differences
- Employ a global marketing strategy
Global Marketing Strategy
strategy used by transnational firms that employ the practice of standardizing marketing activities when there are cultural similarities and adapting them when cultures differ
Ex: McDonald’s & Subway (quick-serv restaurants)
-Benefits marketers by allowing them to realize economies of scale from their production & marketing activities
Global Brand
a brand marketed under the same name in multiple countries with similar and centrally coordinated marketing programs
Ex: McDonald’s food taste the same wherever you go France or U.S.
Global Consumers
consumer groups living in many countries or regions of the world who have similar needs or seek similar features and benefits from products/services
Ex: Samsung, Sony, IKEA have benefited from the growing global middle-income class desire for kitchen appliances, electronics, & home furnishings
The Presence of a Networked Global Marketspace
› Internet Technology is a tool for exchanging products, servs, & information on a global scale & affects globalization/world trade
› A networked global marketspace enables the exchange of products, servs, & info from sellers anywhere to buyers anywhere at any time & at a lower cost
Ex: Nestle operates 65 individual country websites in more than 20 languages that span 5 continents
Economic Espionage
the clandestine collection of trade secrets or proprietary information about a company’s competitors
-Common in high tech industries such as electronics, specialty chemicals, etc
Economic Espionage Act (1996):
makes the theft of trade secrets by foreign entities a federal crime in the U.S.
Three Kinds of Uncontrollable Environmental Variables That Affect Global Marketing Pratices:
- Cultural
- Economic
- Political-Regulatory
Cultural
must be sensitive to the cultural underpinnings of different societies
Cross-Cultural Analysis
the study of similarities and differences among consumers in two or more nations or societies
-Involves Values, Customs, Symbols, & Language of other societies
Values
personally or socially preferable modes of conduct or states of existence that tend to persist over time
Ex: McDonald’s does not sell beef hamburgers in India & replaces it with something else
Customs
what is considered normal and expected about the way people do things in a specific country
Ex: Japanese women give Japanese men chocolates on Valentine’s day
Cultural Symbols
things that represent ideas and concepts in a specific culture
Ex: Thumbs up is positive sign in U.S. but offensive in Russia
Language
marketers should know not only the native tongues of countries in which they market their product/servs but also the nuances & idioms of a language
Back Translation
the practice where a translated word or phrase is retranslated into the original language by a different interpreter to catch errors
Ex: IBM’s first Japanese translation of its “Solutions for a Small Planet” advertising message yielded “Answers that make people smaller”, the error was corrected
Cultural Ethnocentricity
› the belief that aspects of one’s culture are superior to another’s
Consumer Ethnocentrism
›the tendency to believe that it is inappropriate, indeed immoral, to purchase foreign-made products
Economic
global marketing is affected by economic considerations
Scan of the Global Marketplace Should Include
- an assessment of the economic infrastructure in these countries
- measurement of consumer income in different countries
- recognition of a country’s currency exchange rates
Economic Infrastructure
a country’s communications, transportation, financial, & distribution systems is a critical consideration in determining whether to try to market to a country’s consumers/orgs
Measurement of Consumer Income in Different Countries
- Must consider what the average per capita or household income is among a country’s consumers & how the income is distributed to determine a nation’s purchasing power
-Developing countries represent a prominent marketing opportunity for global companies
Currency Exchange Rate
the price of one country’s currency expressed in terms of another country’s currency
Ex: U.S. dollar expressed in Japanese yen, euros, etc
Political-Regulatory
analysis of its political stability & trade regulations
Political Stability
affected by government’s orientation toward foreign comps & trade with other countries
-Factors combine to create a political climate that’s favorable or unfavorable
Trade Regulations
countries have a variety of rules that govern business practices within their borders
-These rules often serve as trade barriers
Four Global Market Entry Strategies
- Exporting
- Licensing
- Joint Venture
- Direct Investment
Exporting
producing products in one country & selling them in another country
Indirect Exporting
when a firm sells its domestically produced products in a foreign country through an intermediary
-Least amount of commitment/risk but return the least profit
Direct Exporting
when a firm sells its domestically produced products in a foreign country without intermediaries
-Large volume of purchases, more risk, increased profits
Licensing
company offers the right to a trademark, patent, trade secret, or other similarly valued item of intellectual property in return for a royalty or a fee
› Advs: low risk & capital-free entry into a foreign country
› Disadvs: licensor forgoes control of its product & reduces potential profits gained from it
› Franchising is a variation of licensing
Joint Venture
when a foreign company & a local firm invest together to create a local business in order to share ownership, control, and profits of the new company
Ex: Strauss Group has a joint venture with PepsiCo to market Frito-Lay’s Cheetos, Doritos
› Advs: one comp may not have the necessary financial, physical, or managerial resources to enter a foreign market alone. A government may require/strongly encourage a joint venture before it allows a foreign comp to enter its market
› Disadvs: two comps disagree about policies/courses of action for their joint venture or when governmental bureaucracy bogs down the effort
› Government involvement is becoming more important to the success/failure of joint ventures
Direct Investment
domestic firm actually investing in & owning a foreign subsidiary or division
Ex: Reebok entered Russia by creating a subsidiary known as Reebok Russia
› Is the biggest commitment a comp can make when entering the global market
› Follows one of the three market-entry strategies
› Advs: cost savings, better understanding of local market conditions, & fewer local restrictions
› Disadvs: financial commitments/risks
Product Extension Strategy
selling virtually the same product in other countries
› In the same form as in its home market
› Works best when the consumer market target for the product is alike across countries/cultures-consumers share the same desires, needs, uses for the product
Ex: Coca Cola, Nike apparel/shoes, Apple phones
Product Adaptation
1changing a product in some way to make it more appropriate for consumer preferences or a country’s climate
Ex: Maybelline’s makeup is adapted to local skin types & weather across the globe
Product Invention
inventing totally new products designed to satisfy common needs across countries
Ex: Whirlpool developed a compact, automatic clothes washer specifically for households in developing countries
Communication Adaption Strategy
› comps adapting their promotion message
Dual Adaptation Strategy
modifying both their products & promotion messages
Ex: Nestle does this with Nescafe coffee
Simple Rule Applied to Global Comps
Standardize product & promotion strategies whenever possible & customize them wherever necessary
Distribution Strategy
channel through which a product manufactured in one country must travel to reach its destination in another country
- Seller > Seller’s International Marketing Headquarters > Channels b/w Nations > Channels within Foreign Nation > Final Consumer
Pricing Strategy
face many challenges in determining a pricing strategy. Individual countries, even those with free trade agreements, may impose considerable competitive, political, & legal constraints.
Dumping
when a firm sells a product in a foreign country below its domestic price or below its actual cost
Gray Market (parallel importing)
products are sold through unauthorized channels of distribution. Individuals buy products in a lower-priced country from a manufacturer’s authorized retailer, ship them to higher-priced countries, & then sell them below the manufacturer’s suggested retail price through unauthorized retailers.
- When comps price their products very high in some countries but competitively in others
International Environment
Importance
Sectors
Factors Signifying Importance
Balance of Trade
Shrinking Globe
Foreign Competition
Shrinking Globe
our worlds is becoming smaller through advances in communication and transportation
Ex: we can talk to each other easily & can easily connect with each other
Cross Country Analysis
demographic (population trends, gender, etc)
social/cultural (cultural similarities/differences)
economic (imports/exports)
technological (tech advancements)
natural (natural resources/disasters)
legal/regulatory (rules/laws)
How much standardization?
- pure standardization
-mixed (glocalization)
-pure non-standardization
Pure Standardization
keep my product the same no matter what
Mixed (Glocalization)
I have something unique that ppl love but am going to adapt it based on a country’s customs
Pure Non-Standardization
creating a completely new product specifically for that market
Why International Marketing is Relevant
Important for everyone
Products & Servs are global
-Internet & Communications Technology
Multi Cultural Work Teams
-Nearly all orgs
-Higher productive output
We are all global employees & citizens
Important Themes for International Marketing
Method for growth
Plan but expect the unexpected
Lots of uncertainty & uncontrollable factors
New complexity for each new market
Cultural awareness & sensitivity
Flexibility/adaptability
Find the right balance
Cultural Adjustment
Most challenging and most important while confronting international markets
