The Global Marketplace
The Global Marketplace
Previewing the Concepts: Chapter Objectives
1. Discuss how the international trade system, economic, political-legal, and cultural environments affect a company’s international marketing decisions.
2. Describe three key approaches to entering international markets.
3. Explain how companies adapt their marketing mixes for international markets.
4. Identify the three major forms of international marketing organization.
Just the Basics
Chapter Overview
This chapter looks at the special considerations that companies face when they market their brands globally. Advances in communication, transportation, and other technologies have made the world a much smaller place. Almost every firm, large or small, faces international marketing issues.
International trade is booming. Since 1969, the number of multinational corporations in the world’s 14 richest countries has more than tripled, from 7,000 to 24,000. Global competition is intensifying. Foreign firms are expanding aggressively into new international markets, and home markets are no longer as rich in opportunity. If companies delay taking steps toward internationalizing, they risk being shut out of growing markets.
Before deciding to operate internationally, a company must thoroughly understand the international marketing environment. There are many issues to understand regarding the international trade system, such as tariffs, quotas, eMBArgoes, and other barriers to entry. The World Trade Organization was established in the latest round of GATT negotiations. The WTO acts as an umbrella organization, overseeing GATT, the General Agreement on Trade in Services, and a similar agreement government intellectual property. In addition, the WTO mediates global disputes and imposes trade sanctions.
Two factors reflect a country’s attractiveness as a market—the country’s industrial structure and its income distribution. There are also several factors to contend with in the political-legal environment, as well as the cultural environment.
There are several factors that draw a company into the international arena. Global competitors might attack the company’s domestic market by offering better products or lower prices. The company might want to counterattack these competitors in their home markets to tie up their resources. Or the company might discover foreign markets that present higher profit opportunities than the domestic market does. Before going abroad, the company must weigh several risks and answer many questions about its ability to operate globally.
Before going abroad, the company should try to define its international marketing objectives and policies. The company needs to choose how many countries it wants to market in, and it needs to decide on the types of countries to enter. Once the decision has been made to sell in a foreign country, the company must determine the best mode of entry.
Most companies start with exporting, using either indirect or direct exporting. Or it could go into a joint venture, through such means as licensing, contract manufacturing, management contracting, or joint ownership. Finally, the company could make a direct investment by developing assembly or manufacturing facilities. Each form of entry carries its own risks and rewards; the company must weigh these carefully before making final decisions.
Companies that operate in one or more foreign markets must decide how much, if at all, to adapt their marketing mixes to local conditions. At one extreme are global companies that use a standardized marketing mix, selling largely the same products and using the same marketing approaches worldwide. At the other extreme is an adapted marketing mix. In this case, the producer adjusts the marketing mix elements to each target market, bearing more costs but hoping for a larger market share and return. However, global standardization is not an all-or-nothing proposition. Rather, it is a matter of degree.
Finally, companies can manage their international marketing activities in at least three different ways: Most companies first organize an export department, then create an international division, and finally become a global organization.
Chapter Outline
1. Introduction
a. Coca-Cola is a brand that is as American as baseball and apple pie. But from the beginning, Coke was destined to be more than just America’s soft drink.
b. First introduced in 1893, by 1900 Coca-Cola had already ventured beyond America’s borders into numerous countries.
c. Coca-Cola’s worldwide success results from a skillful balancing of global standardization and brand building with local adaptation. For years, the company adhered to the mantra “Think globally, act locally.” The company carefully adapts its mix of brands and flavors, promotions, price, and distribution to local customs and preferences in each market.
d. As a result of its international marketing prowess, Coca-Cola dominates the global soft drink market.
2. Global Marketing in the Twenty-first Century
a. The world is shrinking rapidly with the advent of faster communication, transportation, and financial flows. Products developed in one country are finding enthusiastic acceptance in other countries.
b. International trade is booming.
1. Since 1969, the number of multinational corporations in the world’s 14 richest countries has more than tripled, from 7,000 to 24,000.
2. Imports of goods and services now account for 24% of gross domestic product (GDP) worldwide, twice the levels of 40 years ago.
c. If companies delay taking steps toward internationalizing, they risk being shut out of growing markets.
d. Although the need for companies to go abroad is greater today than in the past, so are the risks.
1. High debt, inflation, and unemployment in many countries have resulted in highly unstable governments and currencies, which limit trade and expose U.S. firms to many risks.
2. Governments are placing more regulations on foreign firms, such as requiring joint ownership with domestic partners, mandating the hiring of nationals, and putting limits on the profits that can be taken from the country.
3. Foreign governments often impose high tariffs or trade barriers in order to protect their own industries.
4. Corruption is an increasing problem—officials in several countries often award business not to the best bidder but to the highest briber.
e. A global industry is one in which the competitive positions of firms in given local or national markets are affected by their global positions.
f. A global firm is one that, by operating in more than one country, gains marketing, production, R&D, and financial advantages that are not available to purely domestic competitors.
1. The global company sees the world as one market. It minimizes the importance of national boundaries and develops “supranational” brands.
Use Key Term Global Firm here.
Use Figure 15-1 here.
Use Application Questions 1 here.
3. Looking at the Global Marketing Environment
a. Before deciding whether to operate internationally, a company must thoroughly understand the international marketing environment.
Use Chapter Objectives 1 here.
The International Trade System
b. When selling to another country, the U.S. firm faces various trade restrictions.
1. A tariff is a tax levied by a foreign government against certain imported products. It may be designed either to raise revenue or to protect domestic firms.
2. A quota sets limits on the amount of goods the importing country will accept in certain product categories. The purpose of the quota is to conserve on foreign exchange and to protect local industry and employment.
3. An embargo, or boycott, totally bans some kinds of imports. It is the strongest form of quota.
4. Exchange controls limit the amount of foreign exchange and the exchange rate against other currencies.
5. Nontariff trade barriers are such things as biases against U.S. company bids or restrictive product standards or other rules that go against American product features.
Use Key Terms Tariff, Quota, Embargo, Exchange Controls, and Nontariff Trade Barriers here.
Use Discussing the Issues 1 here.
c. The General Agreement on Tariffs and Trade (GATT) is a 56-year-old treaty designed to promote world trade by reducing tariffs and other international trade barriers.
1. Since its inception in 1948, there have been eight rounds of GATT negotiations to reassess trade barriers and set new rules for international trade.
i. The first seven rounds reduced the average worldwide tariffs on manufactured goods from 45% to just 5%.
ii. The Uruguay round, the most recent, lasted seven years.
a. It reduced the world’s remaining merchandise tariffs by 30%, boosting global merchandise trade by as much as 10%.
b. It extended GATT to cover trade in agriculture and a wide range of services.
c. It toughened international protection of copyrights, patents, trademarks, and other intellectual property.
d. It established the World Trade Organization (WTO) to enforce GATT rules. The WTO mediates global disputes and imposes trade sanctions.
d. Certain countries have formed free trade zones or economic communities, which are groups of nations organized to work toward common goals in the regulation of international trade.
Use Key Term Economic Community here.
1. The European Community was formed in 1957.
i. European unification offers tremendous trade opportunities for U.S. and other non-European firms.
ii. It also poses threats.
a. European companies will grow bigger and more competitive.
b. Lower trade barriers inside Europe will create only thicker outside walls.
2. In North America, the United States and Canada phased out trade barriers in 1989.
3. In January 1994 the North American Free Trade Agreement (NAFTA) established a free trade zone among the United States, Mexico, and Canada.
4. Given the apparent success of NAFTA, talks are underway to investigate establishing a Free Trade Area of the Americas (FTAA). This free trade zone would include 34 countries stretching form the Bering Strait to Cape Horn, with a population of 800 million.
5. Other free trade areas have formed in Latin America and South America.
Let’s Discuss This
Why would the United States want to enter into free trade agreements? What benefit does it offer? What might be the disadvantages?
e. The trend toward free trade zones has raised some concerns.
1. In the United States, unions fear that NAFTA will lead to the further exodus of manufacturing jobs to Mexico, where wage rates are much lower.
2. Environmentalists worry that companies that are unwilling to play by the strict rules of the U.S. Environmental Agency will relocate to Mexico, where pollution regulation has been lax.
Economic Environment
f. The international marketer must study each country’s economy.
g. Two economic factors reflect the country’s attractiveness as a market: the country’s industrial structure and its income distribution.
1. The country’s industrial structure shapes its product and service needs, income levels, and employment levels.
i. Subsistence economies are those where the vast majority of people engage in simple agriculture.
ii. Raw material exporting economies are countries that are rich in one or more natural resources, but poor in other ways.
iii. Industrializing economies are those where manufacturing accounts10% to 20% of the country’s economy.
iv. Industrialized economies are major exporters of manu-factured goods and investment funds.
Applying the Concept
What kind of goods or services might the United States provide to countries that have a subsistence economy? How about an industrializing economy?
2. The second economic factor is the country’s income distribution.
i. Countries with subsistence economies may consist mostly of households with very low family incomes.
ii. Industrialized nations may have low-, medium-, and high-income households.
iii. In many cases, poorer countries may have small but wealthy segments of upper-income consumers.
iv. Even in low-income and developing countries, people may find ways to buy products that are important to them.
Political-Legal Environment
h. Nations differ greatly in their political-legal environments.
i. At least four political-legal factors should be considered in deciding whether to do business in a given country.
1. In their attitudes toward international buying, some nations are quite receptive to foreign firms, and others are quite hostile.
2. The government bureaucracy reflects the extent to which the host government runs an efficient system for helping foreign com-panies—efficient customs handling, good market information, and other factors that aid in doing business.
3. Political stability is another issue.
i. Governments change hands, sometimes violently.
ii. Even without a change, a government may decide to respond to new popular feelings.
4. Monetary regulations need to be studied.
j. Nations with too little hard currency may want to pay with other items instead of cash, which has led to the growing practice called countertrade. It takes several forms.
1. Barter involves the direct exchange of goods or services.
2. Compensation, or buyback, is where the seller sells a plant, equipment, or technology to another country and agrees to take payment in the resulting products.
3. Counterpurchase is where the seller receives full payment in cash but agrees to spend some portion of the money in the other country within a stated time period.
Use Key Term Countertrade here.
Cultural Environment
k. Each country has its own folk-ways, norms, and taboos. When designing global strategies, companies must understand how culture affects con-sumer reactions in each of its world markets. In turn, they must also understand how their strategies affect local cultures.
1. The seller must examine the ways consumers in different countries think about and use certain products before planning a marketing campaign.
2. Business norms and behaviors vary from country to country.
l. Some critics argue that “globalization” really means “Americanization.”
1. These critics contend that exposure to American values and prod-ucts erode other cultures and westernize the world.
Use Marketing at Work 15-1 here.
Use Focus on Ethics here.
4. Deciding Whether to Go International
a. Any of several factors might draw a company into the international arena.
1. Global competitors might attack the company’s domestic market by offering better products or lower prices.
2. The company might want to counterattack those competitors in their home markets to tie up their resources.
3. The company might discover foreign markets that present higher profit opportunities than the domestic market does.
4. The company might want to reduce its dependence on any one market so as to reduce its risk.
5. The company’s customers might be expanding abroad and require international servicing.
b. Before going abroad, the company must weigh several risks and answer many questions about its ability to operate globally.
c. Because of the risks and difficulties of entering international markets, most companies do not act until some situation or event thrust them into the global arena.
5. Deciding Which Markets to Enter
a. Before going abroad, the company should try to define its international marketing objectives and policies.
b. The company also needs to choose how many countries it wants to enter.
1. Companies must be careful not to spread themselves too thin or to expand beyond their capabilities in too many countries too soon.
c. The company needs to decide on the type of countries to enter.
1. A country’s attractiveness depends on the product, geographic factors, income and population, political climate, and other factors.
d. After listing possible international markets, the company must screen and rank each one.
1. Possible global markets should be ranked on several factors, including market size, market growth, cost of doing business, competitive advantage, and risk level.
2. The goal is to determine the potential of each market, using indicators such as those shown in Table 15-1.
Use Table 15-1 here.
Use Application Questions 3 here.
Use Under the Hood/Focus on Technology here.
6. Deciding How to Enter the Market
a. Once a company has decided to sell in a foreign country, it must determine the best mode of entry.
b. Figure 15-2 shows three market entry strategies, along with the options each one offers.
c. Each succeeding strategy involves more commitment and risk, but also more control and potential profits.
Use Figure 15-2 here.
Use Chapter Objectives 2 here.
Exporting
d. The simplest way to enter a foreign market is through exporting.
e. The company may passively export its surpluses from time to time, or it may make an active commitment to expand exports to a particular market.
1. In either case, the company produces all its goods in its home country.
2. It may or may not modify them for the export market.
f. Companies typically start with indirect exporting, working through independent international marketing intermediaries.
1. Indirect exporting involves less investment because the firm does not require an overseas sales force or set of contacts.
2. It also involves less risk.
g. Sellers may eventually move into direct exporting.
1. The investment and risk are somewhat greater in this strategy, but so is the potential return.
2. A company can set up a domestic export department that carries out export activities.
3. The company can set up an overseas sales branch that handles sales, distribution, and perhaps promotion.
4. The company can also send home-based salespeople abroad at certain times in order to find business.
5. The company can do its exporting either through foreign-based distributors who buy and own the goods or through foreign-based agents who sell the goods on behalf of the company.
Use Key Term Exporting here.
Joint Venturing
h. Joint venturing is where the company joins with foreign companies to produce or market products or services.
1. It differs from exporting in that the company joins with a host country partner to sell or market abroad.
2. It differs from direct investment in that an association is formed with someone in the foreign country.
i. There are four types of joint ventures.
1. Licensing is a simple way for a manufacturer to enter international marketing.
i. For a fee or royalty, the licensee buys the right to use the company’s manufacturing process, trademark, patent, trade secret, or other item of value.
ii. The company thus gains entry into the market at little risk; the licensee gains production expertise or a well-known product or name without having to start from scratch.
iii. Disadvantages include the firm having less control over the licensee than it would over its own production facilities; if the licensee is very successful, the firm has given up these profits, and if and when the contract ends, it may find it has created a competitor.
2. In contract manufacturing, the company contracts with manu-facturers in the foreign market to produce its product or provide its service.
i. The drawbacks of contract manufacturing are decreased control over the manufacturing process and loss of potential profits on manufacturing.
ii. The benefits are the chance to start faster, with less risk, and the later opportunity either to form a partnership with or to buy out the local manufacturer.
3. Under management contracting, the domestic firm supplies man-agement know-how to a foreign company that supplies the capital.
i. Management contracting is a low-risk method of getting into a foreign market, and it yields income from the beginning.
ii. The arrangement is not sensible if the company can put its scarce management talent to better uses or if it can make greater profits by undertaking the whole venture.
iii. Management contracting also prevents the company from setting up its own operations for a period of time.
4. Joint ownership ventures consist of one company joining forces with foreign investors to create a local business in which they share joint ownership and control.
i. A company may buy an interest in a local firm, or the two parties may form a new business venture.
ii. Joint ownership may be needed for economic or political reasons.
iii. The firm may lack the financial, physical, or managerial resources to undertake the venture alone.
iv. Or a foreign government may require joint ownership as a condition for entry.
v. The drawbacks include the fact that the partners may disagree over investment, marketing, or other policies.
Use Key Terms Joint Venturing, Licensing, Contract Manufacturing, Management Contracting, and Joint Ownership here.
Use Discussing the Issues 2 here.
Direct Investment
j. The biggest involvement in a foreign market comes through direct investment—the development of foreign-based assembly or manufacturing facilities.
k. Foreign product facilities offer many advantages.
1. The firm may have lower costs in the form of cheaper labor or raw materials, foreign government investment incentives, and freight savings.
2. The firm may improve its image in the host country because it creates jobs.
3. Generally, a firm develops a deeper relationship with government, customers, local suppliers, and distributors.
4. The firm keeps control over the investment and therefore can develop manufacturing and marketing policies that serve its long-term international objectives.
l. The main disadvantage of direct investment is that the firm faces many risks, such as restricted or devalued currencies, falling markets, or government changes.
Use Key Term Direct Investment here.
Use Application Questions 2 here.
7. Deciding on the Global Marketing Program
a. Companies that operate in one or more foreign markets must decide how much, if at all, to adapt their marketing mixes to local conditions.
1. At one extreme is a standardized marketing mix, selling largely the same products and using the same marketing approaches world-wide.
2. At the other extreme is an adapted marketing mix. In this case, the producer adjusts the marketing mix elements to each target market, bearing more costs but hoping for a larger market share and return.
Use Key Terms Standardized Marketing Mix, Adapted Marketing Mix here.
Use Chapter Objectives 3 here.
Use Discussing the Issues 3 here.
b. Global standardization is not an all-or-nothing proposition but rather a matter of degree.
1. Companies should look for ways to standardize to help keep down costs and prices and to build greater global brand power.
2. But they must not replace long-run marketing thinking with short-run financial thinking. Although standardization saves money, marketers must make certain that they offer what consumers in each country want.
3. Many possibilities exist between the extremes of standardization and complete adaptation.
4. Most international marketers suggest that companies should “think globally but act locally”—that they should seek a balance between standardization and adaptation. These marketers advocate a “glocal” strategy in which the firm standardizes certain core marketing elements and localizes others.
Product
c. Five strategies allow for adapting product and promotion to a global market. See Figure 15-3. Three are product-related strategies and two are promotion-related strategies.
Use Figure 15-3 here.
Use Marketing at Work 15-2 here.
Use Discussing the Issues 4 here.
1. Straight product extension means marketing a product in a foreign market without any change.
i. The first step should be to find out whether foreign consumers use that product and what form they prefer.
2. Product adaptation involves changing the product to meet local conditions or wants.
i. In some instances, products must be adapted to local customs or spiritual beliefs.
3. Product invention consists of creating something new for a specific country market. This strategy can take two forms.
i. It might mean reintroducing earlier product forms that happen to be well adapted to the needs of a given country.
ii. Or a company might create a new product to meet a need in a given country.
Use Key Terms Straight Product Extension, Product Adaptation, and Product Invention here.
Promotion
d. Companies can either adopt the same promotion strategy they used in the home market or change it for each local market.
e. Some global companies use a standardized advertising theme around the world.
f. Colors may need to be changed to avoid taboos in other countries.
g. Some companies use communication adaptation, which is fully adapting their advertising messages to local markets.
h. Media also need to be adapted internationally because media availability varies from country to country.
Use Key Term Communication Adaptation here.
Use Marketing at Work 15-3 here.
Price
i. Companies also face many problems in setting their international prices.
j. Foreign prices will be higher than domestic prices.
1. Price escalation occurs because of added costs of transportation, tariffs, importer margin, wholesaler margin, and retailer margin. Depending on these costs, the product may have to sell for two to five times as much in another country to make the same profit.
Let’s Discuss This
Godiva chocolates began life as a Belgian business, but was acquired by Campbell’s Soup in the 1970s. What factors would affect the difference in price for Godiva between the United States and Europe?
k. Setting prices for goods that a company ships to its foreign subsidiaries can be problematic.
1. If a company charges a foreign subsidiary too much, it may end up paying higher tariff duties even while paying lower income taxes in that country.
2. If the company charges its subsidiary too little, it can be charged with dumping.
i. Dumping occurs when a company either charges less than it costs or less than it charges in its home market.
Distribution Channels
l. The international company must take a whole-channel view of the problem of distributing products to final consumers. Figure 15-4 shows the three major links between the seller and the final buyer.
1. The seller’s headquarters organization supervises the channels and is part of the channel itself.
2. The channels between nations move the products to the borders of the foreign nations.
3. The channels within nations move the products from their foreign entry point to the final consumers.
m. Channels of distribution vary greatly from nation to nation.
1. There are large differences in the numbers and types of inter-mediaries serving each foreign market.
2. The size and character of the retail units abroad also differ.
Use Key Term Whole-Channel View here.
Use Figure 15-4 here.
Use Speed Bump: Linking the Concepts here.
8. Deciding on the Global Marketing Organization
a. Companies manage their international marketing activities in at least three different ways.
Use Chapter Objectives 4 here.
1. A firm normally gets into international marketing by simply shipping out its goods.
i. If its international sales expand, the company organizes an export department with a sales manager and a few assistants.
ii. As sales increase, the export department can expand to include various marketing services so that it can actively go after business.
2. An international division or subsidiary will be formed when companies get involved in several international markets and ventures. They can be organized in several ways.
i. A geographic organization has country managers who are responsible for salespeople, sales branches, distributors, and licensees in their respective countries.
ii. World product groups are each responsible for worldwide sales of different product groups.
iii. International subsidiaries are each responsible for their own sales and profits.
3. In a truly global organization, the company stops thinking of itself as a national marketer who sells abroad and starts thinking of itself as a global marketer.
i. The top corporate management and staff plan worldwide manufacturing facilities, marketing policies, financial flows, and logistical systems.
ii. The global operating units report directly to the chief executive or executive committee of the organization, not to the head of an international division.
Use Discussing the Issues 5 here.
Travel Log
Discussing the Issues
1. Discuss how tariffs, quotas, and nontariff trade barriers can restrict international trade. Why would a government choose to restrict the import of foreign products? How do regional free trade arrangements help to encourage trade between nations?
Tariffs are a tax levied by a foreign government against certain imported products. The tariff may be designed either to raise revenue or to protect domestic firms. Quotas set limits on the amount of goods the importing country will accept in certain product categories. The purpose of the quota is to conserve on foreign exchange and to protect local industry and employment. Nontariff trade barriers include biases against company bids from particular countries or restrictive product standards or other rules that go against foreign products. Certain countries have formed free trade zones, groups of nations organized to work toward common goals in the regulation of international trade. Their purpose is to reduce barriers to the free flow of products, services, finances, and labor among member countries and develop common policies on trade with nonmember nations.
2. What are the advantages and disadvantages of the following types of joint ventures: licensing, contract manufacturing, management contracting, and joint ownership?
With licensing the company enters into an agreement with a licensee in the foreign market. For a fee or royalty, the licensee buys the right to use the company’s manufacturing process, trademark, patent, trade secret, or other item of value. The company thus gains entry into the market at little risk; the licensee gains production expertise or a well‑known product or name without having to start from scratch. In contract manufacturing, the company contracts with manufacturers in the foreign market to produce its product or provide its service. The drawbacks of contract manufacturing are decreased control over the manufacturing process and loss of potential profits on manufacturing. The benefits are the chance to start faster, with less risk, and the later opportunity either to form a partnership with or to buy out the local manufacturer.
Under management contracting, the domestic firm supplies management know-how to a foreign company that supplies the capital. The domestic firm exports management services rather than products. Joint ownership ventures consist of one company joining forces with foreign investors to create a local business in which they share joint ownership and control. A company may buy an interest in a local firm, or the two parties may form a new business venture. Joint ownership may be needed for economic or political reasons. The firm may lack the financial, physical, or managerial resources to undertake the venture alone. Or a foreign government may require joint ownership as a condition for entry.
3. Identify a product that uses a standardized marketing mix and one that uses an adapted marketing mix. Evaluate the appropriateness of that strategy for those products.
Student responses to this question will vary by the products they select. Instructors may wish to use this question to have students evaluate standard-ization strategies for various product types provided by the instructor.
4. Assume you are responsible for introducing the Ford Explorer into Pakistan. Explain what might be changed to the product and/or promotional strategy to make it fit into each of the five cells in Figure 15-3.
Student responses will vary depending upon the specific promotion or product element they are adapting. Instructors can use this question to explore the idea of the adapted marketing mix.
5. Explain the difference between organizing the international marketing function as an export department, international division, and a global organization. What drives the evolution from one organizational form to another?
The volume of international sales activity and the type of market entry mode selected will largely drive the evolution between these different organizational forms.
Application Questions
1. Study the indicators of market potential listed in Table 15-1. Visit your school library and find either a print or online source of data for at least two indicators in each of the six major categories. Which of the information sources you identified seem most and least reliable? What concerns would you have as a marketing manager making market potential evaluations using the least reliable data?
Instructors may desire to combine this assignment with a field trip to the school library, where a reference librarian can spend time helping the class understand the types of information available.
2. You have been asked by your boss to advise her on the best way to enter the Italian market with your company’s new brand of sugar-free ice cream. What mode of entry would you recommend and why? What information would a company need to have before making this decision? For one of the entry modes you did not select, what would have to change for it to become the recommended choice?
Students should base their recommendations on their perceptions of the risks and difficulties involved in going into this market. Instructors may want to encourage students to think about the competencies the firm would likely not have and would need to acquire (i.e., language skills, knowledge of regulations in the foreign country, etc.).
3. Form teams of three students each. Assume that your team has been given responsibility for assessing the attractiveness of entering Mexico with your firm’s line of laptop computers. Evaluate the opportunity of entering Mexico in terms of its economic, political-legal, and cultural environment for the laptop computer. Present your findings to the class.
This question may be best assigned as an outside of class exercise so that students can utilize library resources in researching their response. A twist on this assignment is to give different groups different countries to explore and have the presentation to the class positioned as a contest to see which team can convince the firm to go into their market.
Under the Hood/Focus on Technology
Everybody can use a little help now and then. But where can you go if you are a business owner who needs assistance expanding your operations internationally? Recognizing the need for American businesses to become more competitive in global markets, the U.S. Congress passed legislation to create the Centers for International Business Education and Research (CIBERs) in 1988. Currently, thirty universities from across the country are provided funding to develop programs, conduct research, provide language training, and make available other resources that will aid the international capabilities of businesses, teachers, and students. Visit the CIBER website (http://ciber.centers.purdue.edu/) and examine the type of information that is available to companies wishing to do business internationally. Then respond to these questions.
1. What resources are available to businesses and students to help understand international marketing concerns?
“CIBERs organize events and discussions about international business, provide evening and summer courses in modern languages, and offer consulting and market research services to local companies. Available resources include research reports on international topics in economics, finance, operations management, strategy, organizational behavior, and human resources; programs and events to help faculty members and K-12 educators internationalize their teaching activities; business language course offerings and research in teaching languages for business purposes; and examples of programs which integrate foreign language training and international studies into the business school curriculum.”
2. How might a small business owner interested in expanding the company’s operations to Latin America utilize the CIBER resources?
Information on doing business in the country market research resources, and language resources are available from the CIBER network.
3. What sorts of resources are available for business school faculty interested in advancing the international component of their curriculum?
“CIBER faculty development programs are designed to bring the realities of the global marketplace into the classroom. Programs are offered to faculty members from colleges and universities, community colleges, and secondary schools throughout the United States to enhance their ability to teach issues and concepts of international business. Through faculty development programs focused on Asia, Europ,e and Latin America, teachers at all levels have the opportunity to observe business abroad and visit government agencies, councils, and embassies of other nations. These programs provide preparation in political, economic, environmental and social issues, enabling teachers to pass on an understanding of international business to their students.”
Focus on Ethics
The global marketplace exposes marketing managers to a variety of customs and traditions as companies expand internationally. At times, business practices that may be disapproved of in one country (e.g., hiring from within one’s family or offering gifts to secure business deals) may be common and accepted ways of doing business in other parts of the world. This can cause some concern among managers, who are unsure how to react to cultural differences. A “cultural relativism” approach would suggest that the customs of the local culture be adopted. At the other extreme, an “ethical imperialism” approach means that an individual’s home country rules are correct and should be applied universally.
1. Which approach should be taken? Cultural relativism, ethical imperialism, or some middle position? Explain your choice.
Student responses will vary depending upon students’ attitudes. Instructors should point out that there are both positive and negative ramifications of following either of these philosophical approaches.
2. Are there any guidelines that all companies should follow regardless of where the company operates (e.g., respect human dignity)?
Some basic human rights issues would appear to transcend cultural boundaries and should be universally applied. However, this must be approached with an understanding of what motivates the offending culture from behaving in the non-desired manner (e.g., child labor).
3. How would you express your discomfort with business practices that are considered unethical in your culture, but are acceptable in the local culture you are operating in?
Depending upon the severity of the practice and the importance of the business to the firm, some individuals may choose to overlook some unethical transactions as being a part of the cost of doing business. Organizations must make decisions as to which practices they will go along with and which they will not. Further, individual employees in a company must make decisions regarding whether they will work for firms allowing practices they deem unacceptable or how they might work to change company policy on the issue.
Great Ideas
Barriers to Effective Learning
1. Many students today have traveled internationally, perhaps even studied abroad. However, this chapter will introduce concepts that most likely will not have crossed their minds before. Free trade agreements may be known in name, but not in what they actually do. The analytics of deciding whether to go global and if so, which countries to enter, will certainly not have been encountered before. This chapter will serve as an excellent introduction to these notions.
2. The terms involved in the international trade system (tariff, quota, embargo, etc.) are generally unfamiliar to most students. Go through these carefully and use examples from recent press; the U.S. steel tariffs of 2003 could help illustrate the effect of tariffs, especially since they were removed under pressure from the WTO and several countries.
3. The economic and political-legal environments will also most likely be a mystery to most students. Some students might have done some mission or humanitarian work in foreign countries with economies and political systems vastly different from our own. If you are lucky enough to have them in your class, have them relate their experiences. Economics majors, or those who enjoyed an economics class, may also be able to relate what they have learned about these issues from a different point of view.
4. On deciding whether to go international, many students will believe that it is simply a matter of the company deciding to expand. The concept of being forced to go into other countries because of customers pulling you along, or having to fight a global competitor on your home turf, will surprise some of them. Challenge them to think about how small companies grow, and why they might start selling their goods overseas. Use a local company that sells unique items. How might foreign customers find them? How would they decide that there is a market in another country? You can break the class into teams to work on these types of issues.
5. Countertrade is almost always an issue with undergraduate students. The various types can be very confusing, and so these concepts and terms need to be described very carefully. The examples in the book are quite useful, and you can generally find additional examples in the business press. Joint venturing is slightly easier to understand, but again, using lots of examples will really help the students appreciate the complexities and how these decisions are made.
6. Adaptation versus standardization is generally easy to grasp. Any students who have traveled internationally will probably have eaten in American chain restaurants, such as McDonald’s or the Hard Rock Café. Ask them to relate their experiences, both what was the same and what was different. Also use the example of Coca-Cola in the text as an example of a product that is largely standard around the world, but the marketing mix changes to fit the needs of each region and country.
7. Finally, the complex nature of managing internationally will also be new to students. Discussing the difference between a very small company that is global only because of a website that accepts orders from overseas and a Fortune 500 company that operates in 100 countries, will clearly point out how companies evolve as their globalization progresses.
Student Projects
1. Pick a company that does global marketing and research its efforts. How are they organized? Do they offer different products or services in other countries than they do in their home country?
2. Interview a foreign student about the differences that he or she perceives between his or her country and the United States. Ask him or her about international marketing efforts in his or her country. Based on this interview, suggest some marketing opportunities that might be available in that foreign market.
3. Research the following companies: AstraZeneca (www.astrazeneca.com), American Water (www.amwater.com), and Nestle (www.nestle.com). Where are their corporate headquarters located? Did you know that they were not based in the United States? Would you say they have a standardized or adapted marketing mix?
4. Do research on the WTO (World Trade Organization). Discuss its history. Examine pro and con arguments for its existence. Take a position on the subject yourself and defend your position.
Classroom Exercise/Homework Assignment
Jaguar is the quintessential English touring sedan. As it turns out, however, it is owned by the quintessentially American auto manufacturer Ford Motor Company. Jaguar remains a separate legal entity, but it still reports to Detroit. Go to www.jaguar.com and review the various country websites available.
1. Comment on the marketing mix elements you can see on the different websites.
The students will notice immediately that the product appears to be the same on most country pages. As a matter of fact, the astute will notice that the driver in the S-type sedan on the U.K. page is even on the American side of the car. The U.S. page is somewhat different than the others; rather than showing all models, it focuses on a single new 2004 model that is apparently being showcased in this country. Interestingly, the starting prices for the various models are listed on the U.K., Japan, and Italy sites, but not the others, suggesting that the consumers in these three countries focus on price in their decision making. Or perhaps it might be a regulation in those countries that prices are easily obtainable. Promotion is also basically the same, although a few photos are different site to site. The vast majority of them, however, are the same, as is the look and feel of each country’s site. It is difficult to comment on the distribution aspects in the different countries, because each country’s website is in the native language of the country.
2. How easy is it to find out that Jaguar is owned by Ford? Do you think this is on purpose, or just an oversight?
Student responses will vary. The answer is unknowable, but a very good educated guess is that Jaguar and Ford both want to focus on the branding and positioning of the vehicle. Jaguar has been noted as a prestige brand for generations, while Ford has more of a family-type positioning, along with being known for their durable light trucks. Ford’s positioning would not help sell more Jaguars, while maintaining the Jaguar mystique and improving their quality, will.
Classroom Management Strategies
This chapter contains a lot of information that will be brand new to all students. Each section should be reviewed carefully.
1. The introduction and first section can be covered in 10 minutes. They provide a basis for the remaining content, and the Coca-Cola example in the opening vignette is excellent for setting the stage for the decision to standardize or adapt the marketing mix to each region or country.
2. The next section, Looking at the Global Marketing Environment, has key information in it that the students must understand. Take 10 minutes with this section, paying particular attention to the international trade system and the economic environment. These two subsections cover very important material and new terminology that the students should understand before moving on.
3. Deciding whether to go global and into which markets to move together can be covered in 10 minutes. Table 15-1 should figure prominently in this discussion.
4. How to enter the market is also very important and, again, there are important Key Terms in this section. Spend 10 minutes here and use as many examples as you can for each of the ways to go international.
5. The global marketing program introduces for the first time the marketing mix element decisions that must be made. This should also be discussed for at least 10 minutes, and again, examples are very important here. If you choose to use the Classroom Exercise in this manual, this is a good place to introduce it to the class. The Speed Bump at the conclusion of this section is also very helpful.
6. The various ways to organize the company for global marketing can be covered in 5 to 10 minutes. Again, examples of various firms and how they are organized will be very helpful here. If any students have parents who work in global firms they can be called on to discuss how those companies are organized; visit their websites to gain a clearer understanding. The Classroom Exercise might also be utilized here, as it addresses both marketing mix and organizational issues.
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