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Chapter 16

ADM2320 Chapter 16

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Marzena Cedzynski

Chapter 16 Global Marketing  Globalization: refers to the increased flow or goods, services, people, technology, capital, information, and ideas around the world; has economic, political, social, cultural, and environmental impacts. Growth Of The Global Economy: Globalization Of Marketing And Production  Globalization of production (or offshoring): Refers to manufacturers’ procurement of goods and services from around the globe to take advantage of national differences in the cost and quality of various factors of production (e.g., labor, energy, land, capital).  General Agreement on Tariffs and Trade (GATT): Agreement established to lower trade barriers, such as high tariffs on imported goods and restrictions on the number and types of imported products that inhibited the free flow of goods across borders.  World Trade Organization (WTO): replaced the GATT in 1994; differs from the GATT in that the WTO is an established institution based in Geneva, Switzerland, instead of simply an agreement; represents the only international organization that deals with the global rules of trade among nations. o The only international organization that deals with global rules of trade among nations. o Its main function is to ensure that trade flows as smoothly, predictably, and freely as possible.  International Monetary Fund (IMF): Established as part of the original GATT; primary purpose is to promote international monetary cooperation and facilitate the expansion and growth of international trade.  World Bank Group: A development bank that provides loans, policy advice, technical assistance, and knowledge sharing services to low – and middle – income countries in an attempt to reduce poverty. o It is dedicated to fighting poverty and improving the living standards of people in the developing world. Assessing Global Markets  Because different countries offer marketers a variety of opportunities, firms must assess the viability of a variety of international markets. This assessment is done through an environmental analysis. Four sets of factors are used to assess a country’s market: political/legal, economic, socio- cultural, and technology and infrastructure factors. Analyzing the Political and Legal Environment  Policies aimed at restricting global trade are called protectionist policies, and those that encourage global trade are called liberalization policies.  Trade Sanctions: Penalties or restrictions imposed by one country for importing and exporting of goods, services, and investments. o Embargo: a form of trade sanction that prohibits trading with a certain country or trading in specific goods by other signatory countries.  Tariffs: a tax levied on a good imported into a country. o Tariffs are intended to make imported goods more expensive & thus less competitive with domestic products, which in turn protects domestic industries from foreign competition. o In other cases, tariffs might be imposed to penalize another country for trade practices that the home country views as unfair. o Dumping: the process of selling a good in a foreign market at a price that is lower than its domestic price or below its cost.  Quotas: designates the maximum quantity of a product that may be brought into a country during a specified time period. o Quotas reduce the availability of imported merchandise but they reduce foreign competition.  Boycott: A group’s refusal to deal commercially with some organization to protest against its policies.  Exchange control: refers to the regulation of a country’s currency. o Exchange rate: the measure of how much one currency is worth in relation to another. o A designated agency in each country, often the central bank, sets the rules for currency exchange. o Countertrade: trade between two countries where goods are traded for other goods & not for hard currency.  Trade Agreement: intergovernmental agreement designed to manage and promote trade activities for specific regions. o Trading Bloc: Consists of those countries that have signed a particular trade agreement. Political Risk Analysis  Assessing the level of political, socio-economic, and security risk of doing business with a country.  Such analysis usually involves weighing the likelihood of certain events, such as change in government, violence, and the imposition of restrictive trade policies, taking place over a specified period of time.  This assessment requires sophisticated expertise, which most companies do not possess. Thus, they rely on government agencies and private companies that specialize in this.  Political risk analysis helps to reduce the risk of a company losing its investment or goods and the possibility of harm to its employee. Analyzing the Economic Environment Evaluating the General Economic Environment  Trade deficit: results when a country imports more goods than it exports.  Trade surplus: results when a country exports more goods than it imports. o Signals a greater opportunity to export products to more markets.  Gross Domestic Product (GDP): The market value of the g/s produced by a country in a year; the most widely used standardized measure of output. o GDP growth means that production and consumption in the country is expanding, therefore, there are greater marketing opportunities, for most g/s. o When GDP growth is slowing, it means that the economy is contracting, or that production and consumption are falling, and marketing opportunities for certain g/s will decline.  Purchasing Power Parity (PPP): a theory that states that if the exchange rate of two countries are in equilibrium, a product purchased in one will cost the same in the other, expressed in the same currency.  Human Development Index (HDI): a composite measure of three indicators of the quality of life in different countries: life expectancy at birth, educational attainment, and whether the average incomes are sufficient to meet the basic needs of life in that country. o These measures determine the lifestyle elements that drive consumption. o The HDI is scaled for 0 to 1: countries that score lower than 0.5 are classified as nations with low human development, those that score 0.5 to 0.8 have medium development, and those that score above 0.8 have high human development. Evaluating Market Size and Population Growth Rate  Global population has been growing dramatically. From a marketing perspective, however, the growth has not been equally dispersed. Less developed nations are experiencing rapid populating growth. Developed countries are experiencing either zero or negative natural population growth.  The countries with the highest purchasing power today may become less attractive in the future for many products and services because of stagnated growth.  Another aspect related to population and growth pertains to the distribution of the population within a particular region. This distinction determines where and how products and services can be delivered. Evaluating Real Income  Real income – income adjusted for inflation – affects consumers’ buying power, and thus will influence the marketing mixes companies develop for their overseas markets. Analyzing Socio-Cultural Factors  Understanding another country’s culture is crucial to the success of any global marketing initiative.  Culture exists on two levels: visible artifacts and underlying values. o Visible artifacts are easy to recognize, but businesses often find it more difficult to understand the underlying values of a culture and appropriately adapt their marketing strategies to them.  Geert Hofstede’s cultural dimensions concept: o Power distance: Willingness to accept social inequality as natural. o Uncertainty avoidance: the extent to which the society relies on orderliness, consistency, structure, and formalized procedures to address situations that arise in daily life. o Individualism: Perceived obligation to and dependence on groups. o Masculinity: the extent to which dominant values are male-oriented. A lower masculinity ranking indicates that men and women are treated equally in all aspects of society; a higher masculinity ranking suggests that men dominate in positions of power. o Time orientation:
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