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Chapter 16

Chapter 16 - Global Marketing

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Wilfrid Laurier University
Dave Ashberry

Chapter 16 Global Marketing  Competition is no longer local  Canadian companies have to compete with global companies for raw materials, labour, knowledge, and markets for their P/S  Globalization refers to the processes by which P/S, capital, people, info, and ideas flow across national borders  Reduction in trade barriers, standardized laws, globally integrated production processes  Creates a lot of interdependencies among firms and even divisions of firms Growth of the Global Economy: Globalization of Marketing and Production  Driving force for growth in global markets = technology  connects distant parts of the world; Communication is instantaneous  globalization of production (offshoring) = buying P/S from around the world to take advantage of quality and price differences  companies can lower their total production costs, offer higher quality products @ lower prices  GATT = General Agreement on Tariffs and Trade = to lower trade barriers that inhibited the free flow of goods across borders  GATT replaced by WTO = World Trade Organization = its main function is to ensures trade moves as smoothly, predictably, and freely as possible  International Monetary Fund (IMF) = primary purpose is to promote international monetary cooperation, and facilitate the expansion and growth of international trade  World Bank Group = dedicated to fighting poverty and improving the living standards of people in the developing world Assessing Global Markets  Analysis of PEST offers marketers a more complete picture of a country’s potential as a market for products and services Analyzing the Political and Legal Environment  Regulations and laws that either promote (trade liberalization) or inhibit (protectionist) trade and global markets by government or political groups  Trade Sanctions o Penalties/restrictions imposed by one country over another with respect to importing/exporting o Embargo = prohibits trading with a certain country or trading in specific goods by other countries  Tariffs/duty o A tax levied on a good imported into a country o Makes imported goods more expensive OR be imposed to penalize another country for unfair trade practices o Dumping = selling a good in a foreign market at a price that is lower than its domestic price or below its cost  Quotas o Max quantity of a product that may be brought into a country in a specified time period o Reduced availability of imported merchandise  Boycott o Group’s refusal to deal commercially with some organizations to protest against its policies o Trade unions, human rights, or environmental groups  Exchange Control o Regulation of country’s currency exchange rate o Increased Canadian dollar in comparison to the U.S. = cheaper business costs, but more expensive for U.S o Countertrade = trade between 2 countries where goods are traded for other goods and not for hard currency  Trade Agreements (liberalization policy) o Intergovernmental agreement designed to manage and promote trade activities for a specific region o Trading bloc = the countries that have signed the particular agreement o EU, NAFTA, CAFTA, ASEAN etc  Political Risk Analysis o Must weigh the likelihood of certain events (e.g. change in government, violence, etc.) from occurring o Reliance on Export Development Canada and private companies for information and guidance on this risk Analyzing the Economic Environment  The greater the wealth of a country, the better the opportunities for firms  General Economic Environment o Trade deficit = country imports more that it exports o Trade surplus = country exports more than it imports o GDP = market value of P/S produced by a country in a year  Growth means country is expanding, therefore greater opportunities for most P/S  Slowing means decline in consumption and production o Purchasing Power Parity (PPP) = if the exchange rates of 2 countries are in equilibrium, a product purchased in one will cost the same in the other, expressed in the same currency (Big Mac Index)  Undervalued currency gives unfair trade advantage to the country o Human Development Index (HDI) = composite measure of 3 indicators of the quality of life in different countries:  Life expectancy at birth / Educational attainment / Average income according to PPP estimates are sufficient to meet the basic needs of that country  These elements show marketers the measures that drive consumer behaviour  Market Size and Population Growth Rate o Developing countries are experiencing rapid population growth o Developed countries are experiencing either 0 or (-) natural growth rates o Long supply chains are necessary to get P/S to rural areas and increase prices  Real Income o Income adjusted for inflation o Affects consumers’ buying power o Influences how companies market to other countries Analyzing Socio-cultural Factors  Understanding country culture is crucial to success to global marketing initiative  Hofstede believed cultures differ on 5 dimensions: o Power Distance – willingness to accept social inequality as natural o Uncertainty Avoidance – the extent to which society relies on orderliness, consistency, structure, and formalized procedures to address situations that occur in daily life o
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