GLOBAL MARKETING ENVIRONMENT

Submitted by: Mohit Goyal Harsimran Singh

GLOBAL MARKETING ENVIRONMENT

When the company considers the world as one market and develops its products and marketing strategies keeping in mind the needs and wants of the diverse customers, it is indulging in Global Marketing. The Global Marketing Environment consists of all factors external to an organization that can affect the organizations marketing activities. These factors are largely uncontrollable, although marketers can influence some of them.

Economic Environment
The economic environment includes factors and trends related to income levels and the production of goods and services. Economic trends in different parts of the world can affect marketing activities in other parts of the world.

For example- changes in interest rates in Germany affect the value of the dollar on world currency markets, which affects the price, and subsequently sales, of American exports and imports.

TYPES OF ECONOMIC SYSTEM

1. The Capitalist Economic System
The capitalist economic system believed in the fundamental fact of free market allocation system, where the role of the state in a market economy is to promote competition and ensure consumer protection. All farms, factories and other means of production are the property of private individuals and firms. They are free to use them, with a view to making profit or not to use them, if it so suits them.

Desire for profit is the main motive behind the capitalist economy system. Everyone is free to take-up any line of production he likes and is free to enter into any contract with other fellow citizens for his profit.

2. The Socialist Economic System

The socialist economic system believed in the command allocation system. The major instruments of production is under the state control and rest are owned and operated privately, so that the economy is run for social benefit rather than private profit. Government plans production by determining what produced and what quantity.

3. Mixed Economic System

It is neither pure capitalism nor pure socialism, but a mixture of the previous two economic systems. The characteristics of both capitalism and socialism is found in this economic system. It is operated both by private enterprise as well as public enterprise. The private enterprise is not permitted to function freely and uncontrolled through price mechanisms. The government intervenes to regulate and control private enterprise in several ways.

Stages of Economic Development

1. Low Income Countries- Low Income Countries are those with a GNI per capita is less than $1005. They constitute 37% of the world population but less than 3% of world GNI.

2.

Lower Middle Income Countries- Lower Middle Income Countries are those with a GNI per capita more than $1006 and less than $3975. They constitute 39% of the world population but less than 11% of world GNI.

3.

Upper Middle Income Countries- Upper Middle Income Countries are those with a GNI per capita more than $3976 and less than $12275. They constitute 7% of the world population but less than 7% of world GNI.
High Income Countries- High Income Countries are those with a GNI per capita more $12275. They constitute 16% of the world population but less than 82% of world GNI.

4.

BEM
BEM refers to Big Emerging Markets. BEMs are those markets that are growing at a faster rate than the world average market growth, from the current stage where it is at present and here the marketers sees a wonderful opportunity for growth in their profitability and related issues. The BEMS are well positioned to move towards the next stage of development economic as well as market.

DEGREE OF ECONOMIC COOPERATION

1. Free Trade Area:- It is a group of countries that
have agreed to abolish all internal barriers to trade among themselves. But countries that belong to a FTA can maintain independent trade policies with nonmember countries. For example: The North American Free Trade Agreement (NAFTA). This agreement was made between Canada, the United States and Mexico to encourages trade between these North American countries.

2. Customs Union:- A customs union is a higher

level of integration because, in addition to free trade among the union member countries, it establishes a common external tariff for third countries.

For example: East African Community

3. Common Market:- In addition to containing the

provisions of a customs union, a common market also removes all barriers to the mobility of people, capital and other resources within the market. For example: The Central American Common Market

4. Economic Union The economic union would

involve the use of single currency, common policies on agriculture, social services and welfare, regional development, transport, taxation and so on. A fully developed economic union requires extensive political unity, which makes it similar to a nation. For example: European Union. The EU participates in the world economy as one economic unit and operates under one official currency, the euro.

The Demographic Environment

The demographic environment refers to the size, distribution, and growth rate of groups of people with different characteristics. The demographic characteristics of interest to marketers relate in some way to purchasing behavior, because people from different countries, cultures, age groups, or household arrangements often exhibit different purchasing behaviors. A global perspective requires that marketers be familiar with important demographic trends around the world as well as within the United States.

 Migration: Geographical shift in the population is becoming an interesting area in the demographic studies. Marketers started identifying the niches in the migrated communities and offered their goods and services. For example- Patrika, a Rajasthan based daily now available throughout the country.
Population Age Mix: National population vary in their age mix. At one extreme is India, a country with a very young population and rapid growth, At the other extreme is Japan, a country with one of the worlds oldest population. Diapers and toys will be more important product in India than in Japan.

 Occupation: Occupation levels have important

implications for a host of decisions .Agriculture is the main occupation of the people in India but the share of other services is growing rapidly. Employees of these categories have high disposable income. This has led to the opening of specialty stores and manufacturing of the luxury items in the country.

Socio-Cultural Environment
The socio-cultural environment refers to factors and trends related to how people live and behave. Cultural factors, including the values, ideas, attitudes, beliefs, and activities of specific population subgroups, greatly affect consumers purchasing behavior.

Elements Of Socio-culture Environment

Language -Language reflects the nature and values of society.
There may be many sub-cultural languages like dialects which may have to be accounted for. Some countries have two or three languages. Language can cause communication problems especially in the use of media or written material. It is best to learn the language or engage someone who understands it well.

Aesthetics -Aesthetics refer to the ideas in a culture concerning beauty and good taste as expressed in the arts -music, art, drama and dancing and the particular appreciation of colour and form. Aesthetic differences affect design, colours, packaging, brand names and media messages.

 Education- Education refers to the transmission of skills, ideas and attitudes as well as training in particular disciplines. Education can transmit cultural ideas or be used for change, for example the local university can build up an economy's performance. Religion- Religion provides the best insight into a society's behavior and helps answer the question why people behave rather than how they behave. Attitudes and values -Values often have a religious foundation, and attitudes relate to economic activities. It is essential to ascertain attitudes towards marketing activities which lead to wealth or material gain, for example, in Buddhist society these may not be relevant.

Cultural Differences
When Nike learned that this stylized Air logo resembled Allah in Arabic script, it apologized and pulled the shoes from distribution.

Political environment
Any company doing business outside its home country should carefully study the government structure in the target country and analyze salient issues arising from the political environment. Nation-states and sovereignty Political risk Taxes Expropriation

Gray Market
-- Gray market channels refer to the legal export/import transactions involving genuine products into a country by intermediaries other than the authorized distributors. -- From the importers side it is known as Parallel Imports. -- Distributors, wholesalers and retailers in a foreign market obtain the exporters product from other business entity. Thus the exporters legitimate distributors and dealers face competition from others who sell the product at reduced prices in that foreign market.

Legal environment
From an international perspective the two major legal systems worldwide can be categorized into: 1. common law 2. code law

Common law: it is based on tradition and depends less on written statutes and codes than on precedent and custom. Common law originated in England and is the system of law found in the United States. Code law: it is based on a comprehensive set of written statutes. Countries with code law try to spell out all possible legal rules explicitly. Code law is basically a Roman law and is found in majority of nations. Countries with code law system have much more rigid laws than those with the common law.

The Technological Environment

The technological environment includes factors and trends related to innovations that affect the development of new products or the marketing process. These technological trends can provide opportunities for new product development, affect how marketing activities are performed, or both.

The Competitive Environment

The competitive environment consists of all the organizations that attempt to serve similar customers.
Brand Competitors

The most direct competition, offering the same types of products as competing firms. For example, Nike is a brand competitor of Reebok as both companies manufacture shoes. Offer different types of products to satisfy the same general need. Dominos Pizza, McDonalds, and Kentucky Fried Chicken are product competitors.

Product Competitors

The Institutional Environment

The institutional environment consists of all the organizations involved in marketing products and services.
Market Research Firms Advertising Retailers

Suppliers

Wholesalers

Customers

Factors for International Marketing:

1.Business Factors 2.Competitive Factors

BUSINESS FACTORS: -- Profitability -- Achieving Economies of Scale -- Growth Factors -- Marketing due to life-cycle -- Uniqueness of Product / Services -- Access to imported inputs -- Spreading R and D cost

Competitive Factors/ Other Factors:

-- The companys domestic market might be attacked by global firms offering better products or at lower prices. -- Counterattack by the domestic firm in the competitors home market. -- Company discovering, some markets presenting higher profit opportunities than the domestic market. -- Company wanting larger customer base in order to achieve economies of scale.

In Continuance:
-- Company wanting to reduce dependence on anyone market. -- Reducing risk

DUMPING
Dumping takes place when a firm or an industry sells products in the world market at prices below the cost of production. REASONS Generally a company dumps when it wants to dominate a world market. After the lower prices of the dumped goods have succeeded in driving out all the competition, the dumping company can exploit its position by raising the prices of its product.

Managements orientation towards international marketingEPRG Concept:

E---- Ethnocentric P---- Polycentric R---- Regiocentric G--- Geocentric

Managements orientation- the EPRG concept revolves around the grand fact that any companys response to global market opportunities depend greatly on the managements assumptions and beliefs, as to how it views the new market opportunity, how it plans to enter the foreign market, how it views the culture, preferences of consumers in a foreign market etc.

The Ethnocentric Orientation:

-- It is a belief which considers- ones own country/culture, products as superior -- It views similarities in all markets/foreign country market. --Products/services/management practices / methods that is being offered/ followed in ones own country/successful in ones own country will be acceptable in other world markets, anywhere. -- Adaptation of the product is not required. -- Shades of egoism encircled herewith

The Polycentric Orientation:

-- Opposite of Ethnocentrism . -- It views each country as unique. -- Each subsidiary is to develop its own unique business. -- Each subsidiary to develop its own marketing strategies to succeed in its own right.

The Regiocentric Orientation:

-- Management views regions as unique. -- Management seeks to develop an integrated regional strategy, to market product/services- in the particular identified region. -- Regions are considered to be one- i.e. consumers having one taste, choice, preferences, one regional identity etc. -- NAFTA, EU, SAARC etc. are examples.

The Geocentric Orientation:

-- The Company views the entire world as a potential market. -- Company strives to develop integrated world market strategies. -- It views similarities and differences in markets and countries. -- It seeks to create a global strategyresponsive to local need sand wants.