This chapter provides an overview of globalization and the evolution of global marketing. It discusses how globalization has increased international trade and competition. Companies have become multinational to gain access to new markets as domestic markets saturate. Global marketing has evolved from an ethnocentric domestic focus to a geocentric global orientation. The chapter also outlines theories of international trade such as comparative advantage theory and international product cycle theory to explain the operations and strategies of multinational enterprises.

1. Chapter 1 Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
1
Global Marketing Management
Masaaki Kotabe & Kristiaan Helsen
Third Edition
John Wiley & Sons, Inc., 2004

2. Chapter 1
Globalization Imperative

3. Chapter 1 Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
3
Chapter Overview
1. Why Global Marketing is Imperative
2. Globalization of Markets: Convergence
and Divergence
3. Evolution of Global Marketing
4. Appendix: Theories of International Trade
and the Multinational Enterprise

4. Chapter 1 Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
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Introduction
 Products have been traded across borders
throughout recorded civilization, extending back
beyond the Silk Road that once connected East
with West from Xian (China) to Rome (Italy).
 Total world trade volume in goods and services
grew from $6.5 trillion in 1998 to $7.6 trillion in
2000.

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Management, Third Edition, 2004
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Introduction (contd.)
 According to the World Trade Organization
(WTO), the world’s five exporting countries were
the United States ($781 billion), Germany ($552
billion), Japan ($479 billion), France ($298
billion), and Britain ($284 billion), collectively
accounting for 38 percent of global trade in 2002.
 The Triad Regions (North America, Western
Europe, and Japan) of the world collectively
produce over 80 percent of world GDP.

6. Chapter 1 Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
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Introduction (contd.)
 Big Emerging Markets (BEMs): In the next ten to
twenty years, BEMs such as the Chinese
Economic Area (CEA: including China, Hong
Kong Region, and Taiwan), India, South Korea,
Mexico, Brazil, Argentina, South Africa, Poland,
Turkey, and the Association of Southeast Asian
Nations (ASEAN: including Indonesia, Brunei,
Malaysia, Thailand, the Philippines, and Vietnam)

7. Chapter 1 Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
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Introduction (contd.)
will provide many opportunities in global
business.

8. Chapter 1 Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
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1. Why Global Marketing is Imperative
 Saturation of domestic markets: Domestic-market
saturation in the industrialized parts of the world
and marketing opportunities overseas are evident
in global marketing.
 Global competition: Competition around the world
and proliferation of the Internet are on the rise.
 Need for global cooperation: Global competition
brings global cooperation.

9. Chapter 1 Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
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1. Why Global Marketing is Imperative
(contd.)
 Internet revolution: The Internet and electronic
commerce (e-commerce) are bringing major
structural changes to the way companies operate
worldwide.
 The term “global” epitomizes both the competitive
pressure and expanding market opportunities.
 Whether a company operates domestically or
across national boundaries, it can no longer avoid
competitive pressures from around the world.

11. Chapter 1 Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
11
2. Globalization of Markets:
Convergence and Divergence
 International trade consists of exports and imports.
 International business includes international trade
and foreign production.
 Extensive international penetration of companies
is called global reach.
 International trade and foreign production
activities are managed on a global basis.
 Growth of Multinational Corporations (MNCs)
and intra-firm trade is a major aspect of global
markets.

12. Chapter 1 Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
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2. Globalization of Markets:
Convergence and Divergence (contd.)
 International trade versus international business:
– International trade consists of exports and
imports.
– International business includes international
business trade and foreign production.
 Who manages international trade?
– Intrafirm trade: Trade between MNCs and their
affiliates.

13. Chapter 1 Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
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3. Evolution of Global Marketing
 What is marketing? Marketing involves the
planning and execution of the conception, pricing,
promotion, and distribution of ideas, products, and
services.
 Marketing involves customer satisfaction and their
current and future needs.
 Marketing is much more than selling and involves
the entire company.
 Within marketing strategies, companies are always
under competitive pressure to move forward both
reactively and proactively.

14. Chapter 1 Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
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3. Evolution of Global Marketing
(contd.)
 Five stages in the evolution of global marketing
(see Exhibit 1-2):
1. Domestic Marketing (domestic focus; home
country customers; ethnocentric orientation).
2. Export Marketing (indirect vs. direct exporting;
country choice, exports; ethnocentric orientation;
home country customers).
3. International Marketing (markets in many
countries; polycentric orientation; use of
multidomestic marketing when customer needs are
different across national markets).

15. Chapter 1 Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
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3. Evolution of Global Marketing
(contd.)
4. Multinational Marketing (many markets;
consolidation on regional basis; regiocentric
orientation; standardization within regions).
5. Global Marketing (international, multinational
& geocentric orientation; company’s willingness
to adopt a global perspective; global products with
local variations).

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Management, Third Edition, 2004
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3. Evolution of Global Marketing
(contd.)
 Global Marketing: Global marketing refers to
marketing activities that emphasize the
following:
1. Standardization efforts.
2. Coordination across markets.
3. Global integration.

18. Chapter 1 Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
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3. Evolution of Global Marketing
(contd.)
 Global marketing does not necessarily mean that
products can be developed anywhere on a global
scale.
 The economic geography, climate, and culture
affect how companies develop certain products.
 The Internet adds a new dimension to global
marketing.
 E-commerce retailers gain substantial savings by
selling online.

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Management, Third Edition, 2004
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4. Appendix: Theories of International
Trade & the Multinational Enterprise
 Comparative Advantage Theory (see Exhibit 1-3)
– Absolute Advantage
– Comparative Advantage
– Commodity Terms of Trade
– Principles of International Trade
– Factor Endowment Theory
 International Product Cycle Theory (see Exhibit
1-4)
– Economies of Scale

21. Chapter 1 Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
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4. Appendix: Theories of International
Trade & the Multinational Enterprise
(contd.)
– Economies of Scope
– Technological Gap
– Preference Similarity
– Stages of International Product Cycle Theory:
»Introduction Stage
A U.S. company innovates on a new
product in its home country.

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Management, Third Edition, 2004
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4. Appendix: Theories of International
Trade & the Multinational Enterprise
(contd.)
»Growth Stage
Product standards emerge and mass
production becomes feasible.
»Maturity Stage
Many U.S. and foreign companies vie for
market share in the international markets.

24. Chapter 1 Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
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4. Appendix: Theories of International
Trade & the Multinational Enterprise
(contd.)
»Decline Stage
Companies in the developing countries
also begin producing the product and
marketing it in the rest of the world.
 Internalization/Transaction Cost Theory
– Appropriability Regime
– Dominant Design
– Manufacturing and Marketing Ability

25. Chapter 1 Kotabe & Helsen's Global Marketing
Management, Third Edition, 2004
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Copyright © John Wiley & Sons, Inc. 2004