Marketing

Chapter 3
Global Marketing Challenges
Gilbert A. Churchill, Jr. J. Paul Peter

Irwin/McGraw-Hill

The McGraw-Hill Companies, Inc., 1998

Slide 3-1 Figure 3.1

A Process for Deciding Whether to Enter International Markets

Start
Must we?

No

Should we?

No

Concentrate Domestically

Yes No

Yes
Improve Capability

Can we?

Yes
Identify Specific Opportunities

Select Entry Option

Source: Betty Jane Punnett and David A. Ricks, International Business (Boston: PWS-Kent Publishing Co., 1992) p. 257

Slide 3-2 Figure 3.2

Major Trading Partners of the U.S.

Imports and Exports in Billions of Dollars

Canada
Exports = $114 Exports = $53 Imports = $129

Exports = $27
Imports = $25

U.K.

Japan
Imports = $119 Exports = $51 Imports = $49

Exports = $19 Imports = $32

Mexico

Europe

Source: U.S. Department of Commerce, Statistical Abstract of the United States, 115th ed. (Washington Government Printing Office, 1995) pp. 819-822.

Slide 3-3a Table 3.1

Environmental Analysis Issues in Global Markets

Environment Analysis Issues

Economic Environment

Stage of Development Buying Power of Consumers Type of Currency; exchange rate

Political and Legal Environment

Political Stability
Laws limiting international trade Laws of host nations General Agreement on Tariffs and Trade (GATT)

Irwin/McGraw-Hill

The McGraw-Hill Companies, Inc., 1998

Slide 3-3b Table 3.1

Environmental Analysis Issues in Global Markets

Environment Analysis Issues 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 Resources available Impact of resources on natural resources Levels of technological development Available infrastructure

Social Environment

Natural Environment Technological Environment Competitive Environment

Degrees of government involvement in competition Ownership of competitors-local, foreign or government

The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Slide 3-4 Table 3.2

Examples of Cultural Differences that Could Lead to Marketing Problems

Body Language Standing with your hands on your hips is a gesture of defiance in Indonesia.

Physical Contact 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.
Promptness In Latin countries, your host or business associate would be surprised if you arrived at the appointed hour. Eating and Cooking It is rude to leave anything on your plate when eating in Norway, Malaysia or Singapore. Other Social Customs 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.

Slide 3-5

Exporting
High

Risk

Exporting
Low

Control

High

definition: a mode of entry involving production of a product in one country and shipping it to another country for sale.
Irwin/McGraw-Hill
The McGraw-Hill Companies, Inc., 1998

Slide 3-6

Licensing
High

Risk

Licensing Exporting
Low

Control

High

definition: an agreement in which an organization grants another organization the right to use a trademark, a patented product or a process.
Irwin/McGraw-Hill
The McGraw-Hill Companies, Inc., 1998

Slide 3-7

Joint Ventures
High

Risk

Joint Ventures
Licensing Exporting

Low

Control

High

definition: a business agreement in which two or more organizations share management of an enterprise.
Irwin/McGraw-Hill
The McGraw-Hill Companies, Inc., 1998

Slide 3-8

Direct Ownership
High

Direct Ownership
Risk

Joint Ventures
Licensing Exporting

Low

Control

High

definition: a mode of entry involving an organization setting up new facilities or acquiring a foreign firm in the same line of business.
Irwin/McGraw-Hill
The McGraw-Hill Companies, Inc., 1998

Slide 3-9 Table 3.3

Mechanisms for Serving Global Markets: Some Pros and Cons

Mechanism Advantages

Exporting Licensing

Simple; minimal financial risk

Minimal capital outlay; useful for serving countries with export restrictions

Disadvantages May be less profitable than other mechanisms 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

Joint Venture

Risk limited to the organizations share in the venture; foreign partner contributes expertise the organization lacks; useful when the host country limits foreign ownership

Direct 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.

Slide 3-10

Globalization vs Customization

Globalized Product

Customized Product

Irwin/McGraw-Hill

The McGraw-Hill Companies, Inc., 1998