Gilbert A. Churchill, Jr. J.

Paul Peter
Chapter 3
Global Marketing Challenges
Marketing
A Process for Deciding Whether
to Enter International Markets
Slide
3-1
Source: Betty Jane Punnett and David A. Ricks, International Business (Boston: PWS-Kent Publishing Co., 1992) p. 257
Start
Must we?
Can we?
Should we?
Concentrate
Domestically
Improve
Capability
Identify Specific Opportunities
Select Entry
Option
No No
No
Yes
Yes Yes
Figure
3.1
Major Trading Partners of the U.S.
Slide
3-2
Figure
3.2
Source: U.S. Department of Commerce, Statistical Abstract of the United States,
115th ed. (Washington Government Printing Office, 1995) pp. 819-822.
Canada
Japan
Mexico
Europe
U.K. Exports = $53
Exports = $51
Exports = $114
Exports = $27
Exports = $19
Imports = $32
Imports = $25
Imports = $49
Imports = $129
Imports = $119
Imports and Exports in Billions of Dollars
Environmental Analysis Issues
in Global Markets
Slide
3-3a
Table
3.1
Environment
Economic Environment Stage of Development
Buying Power of Consumers
Type of Currency; exchange rate
Political and Legal Environment
Analysis Issues

Political Stability
Laws limiting international trade
Laws of host nations
General Agreement on Tariffs
and Trade (GATT)
Slide
3-3b
Table
3.1
Environment
Social Environment Cultural influences on buying
behavior
Language differences
Population sizes and distribution
Socioeconomic status
Impact on marketing on the culture
Ethical considerations such as
bribery and human rights
Natural Environment
Analysis Issues
Resources available
Impact of resources on natural resources
Technological Environment Levels of technological development
Available infrastructure
Degrees of government involvement in
competition
Ownership of competitors-local, foreign
or government
Competitive Environment
Environmental Analysis Issues
in Global Markets
Economic/Technological Development
Type of
Society
Description
Traditional
Pre-Industrial
Takeoff
Industrializing
Agricultural, Little Upward Mobility, Little
Technology, Custom-bound (e.g., Ghana)
Social and Economic Change, Rising
Middle-class (e.g., Peru, Uganda)
New Industries, Healthy Social and
Economic Climate (e.g., Thailand, Malaysia)
Spread of Technology (e.g., China, Mexico,
India, Brazil)
Fully
Industrial
Exporter, Technology as Driver
of New Innovation (e.g., original G-7)
Slide
3-4
Legal Considerations of Global Marketing
Tariff - tax levied on imported
products
Quota - limit on the amount of specific
product that can enter a country
Boycott (embargo) - a
prohibition of trade
Exchange Control - laws compelling foreign
exchange earnings to be sold to the central bank
Per Capita Income - income per
person in a particular country
Trade Agreement - agreements
to stimulate international trade
Legal
Structures
Either
Encourage or
Limit
Trade
Slide
3-5a
Important Trade Agreements
Trade
Agreements
Description
NAFTA
EU
ASEAN
GATT
The North American Free Trade Agreement
between Canada, U.S., and Mexico is designed
to phase out trade barriers.
An agreement between 15 Western European
countries to lower trade barriers
An agreement between Southeast Asian
Nations to lower trade barriers.
The General Agreement on Tariffs and Trade is
an International framework of rules to lower
trade barriers among 110 member nations
WTO
The World Trade Organization is designed to
further negotiations and oversee resolution of
disputes related to GATT
Slide
3-6
Political Considerations of Global Marketing
Dumping - practice of pricing products sold
in foreign markets at less than their fair
market price in the domestic market
Counter Trade - form of trade in which
all or part of the payment for goods and services
is in the form of other goods and services
Devaluation - decreasing the value of the
domestic currency in relation to the foreign
currency
Political
Structures
Slide
3-5b
Examples of Cultural Differences that
Could Lead to Marketing Problems
Slide
3-7
Table
3.2
Body Language
Standing with your hands on your hips is a gesture of defiance in
Indonesia.
Physical Contact
Promptness
Eating and Cooking
Other Social Customs
Patting a child on the head is a grave offense in Thailand or Singapore
since the head is revered as the location of the soul.
In Latin countries, your host or business associate would be surprised if
you arrived at the appointed hour.
It is rude to leave anything on your plate when eating in Norway, Malaysia
or Singapore.
In Sweden, nudity and sexual permissiveness are quite all right, but
drinking is really frowned on.
Source: William J. Stanton, Michael J. Etzel and Bruce J. Walker, Fundamentals of Marketing, 9th ed.. (New York: McGraw-Hill,
1991), p. 536. 1991 by the McGraw-Hill Companies, Inc., and reproduced by permission of the publisher.
Exporting
Slide
3-8
A mode of entry involving production of a product in one country and shipping it to
another country for sale.
Risk
High
Low High
Control
Exporting
Licensing
Slide
3-9
An agreement in which an organization grants another organization the right to use a
trademark, a patented product or a process.
Risk
High
Low High
Control
Exporting
Licensing
Joint Ventures
Slide
3-10
A business agreement in which two or more organizations share management of an
enterprise.
Risk
High
Low High
Control
Exporting
Licensing
Joint Ventures
Direct Ownership
Slide
3-11
A mode of entry involving an organization setting up new facilities or acquiring a
foreign firm in the same line of business.
Risk
High
Low High
Control
Exporting
Licensing
Joint Ventures
Direct Ownership
Mechanisms for Serving Global
Markets: Some Pros and Cons
Slide
3-12
Mechanism
Exporting Simple; minimal financial risk
Licensing
Advantages Disadvantages
Joint Venture
Direct
Ownership
May be less profitable than
other mechanisms
Minimal capital outlay; useful
for serving countries with
export restrictions
Difficult to control licensee; when
licensing agreement ends,
licensee may become a
competitor; may be less
profitable than other mechanisms
Share control with venture
partner; partner may learn
technology or secrets that it
uses to compete with the
organization
Risk limited to the
organizations share in the
venture; foreign partner
contributes expertise the
organization lacks; useful
when the host country limits
foreign ownership
Maximum control over foreign
operations; ability to be close
to customers
Expensive to set up; requires
extensive knowledge of foreign
markets and contacts overseas
Source: Based in part on information in Philip R. Cateora, International Marketing, 9th ed. (Burr Ridge, Ill: Irwin, 1996) chapter 10.
Table
3.3
The Largest Multinational Corporations
Annual Revenues
Rank* Company Country in Billions of U.S. $
1 Mitsubishi Japan 184
2 Mitsui Japan 182
3 Itochu Japan 169
4 G.M. U.S. 169
5 Sumitomo Japan 168
6 Marubeni Japan 161
7 Ford Motor U.S. 137
8 Toyota Motor Japan 111
9 Exxon U.S. 110
10 Royal Dutch Britain/
Shell Group Netherlands 110

*Ranked by 1995 sales volume.
Source: The Fortune Global 500, Fortune, 5 August 1996, p.
F1.
Slide
3-13
Globalization vs Customization
Slide
3-14
Globalized
Product
Customized
Product