Chapter 1: Marketing in Today’s Business Milieu Part 1: Discover Marketing Management 1-1 McGraw-Hill Education Copyright © McGraw-Hill Education.  All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 1 Learning Objectives Identify typical misconceptions about marketing, why they persist, and the resulting challenges for marketing management. Define what marketing and marketing management really are and how they contribute to firm success. Appreciate how marketing has evolved from its early roots to be practiced as it is today. Recognize the impact of key change drivers on the future of marketing. 1-2 ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom.  No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. 2 Welcome to Marketing Management Marketing is relevant to everyone across all business functions. Marketing your “personal brand” helps you land a job or promotion. 1-3 ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom.  No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. Source: Toyota Motor Sales, U.S.A., Inc. 3 Marketing Misconceptions Catchy and entertaining advertisements. Pushy salespeople. Spam to your e-mail or smartphone. Famous brands and their celebrity spokespeople. Product claims that turn out to be overstated or just plain false. Marketing departments “own” the marketing initiative. 1-4 ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom.  No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. 4 More Marketing Misconceptions Marketing is all about advertising. Marketing is all about selling. Marketing is all about the sizzle. Marketing is inherently unethical and harmful to society. Only marketers market. Marketing is just another cost center in a firm. 1-5 ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom.  No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. Realities: Advertising is just one way that marketing is communicated to potential customers. Marketers have to decide on a mix of marketing communication approaches that (in addition to advertising and personal selling) might also include public relations/publicity, sales promotion, and direct marketing. Marketing also has aspects that involve sophisticated research, detailed analysis, careful decision making, and thoughtful development of strategies and plans. For many organizations, marketing represents a major investment and firms are naturally reluctant to invest major resources without a reasonable level of assurance of a satisfactory payback. M ...

1. Chapter 1:
Marketing in Today’s Business
Milieu
Part 1: Discover Marketing Management
1-1
McGraw-Hill Education
Copyright © McGraw-Hill Education. All rights reserved. No
reproduction or distribution without the prior written consent of
McGraw-Hill Education.
1
Learning Objectives
Identify typical misconceptions about marketing, why they
persist, and the resulting challenges for marketing management.
Define what marketing and marketing management really are
and how they contribute to firm success.
Appreciate how marketing has evolved from its early roots to be
practiced as it is today.
Recognize the impact of key change drivers on the future of
marketing.
1-2
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of

2. McGraw-Hill Education.
2
Welcome to
Marketing Management
Marketing is relevant to everyone across all business functions.
Marketing your “personal brand” helps you land a job or
promotion.
1-3
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Source: Toyota Motor Sales, U.S.A., Inc.
3
Marketing Misconceptions
Catchy and entertaining advertisements.
Pushy salespeople.
Spam to your e-mail or smartphone.
Famous brands and their celebrity spokespeople.
Product claims that turn out to be overstated or just plain false.
Marketing departments “own” the marketing initiative.

3. 1-4
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
4
More Marketing Misconceptions
Marketing is all about advertising.
Marketing is all about selling.
Marketing is all about the sizzle.
Marketing is inherently unethical and harmful to society.
Only marketers market.
Marketing is just another cost center in a firm.
1-5
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Realities:
Advertising is just one way that marketing is communicated to
potential customers.
Marketers have to decide on a mix of marketing communication
approaches that (in addition to advertising and personal selling)
might also include public relations/publicity, sales promotion,

4. and direct marketing.
Marketing also has aspects that involve sophisticated research,
detailed analysis, careful decision making, and thoughtful
development of strategies and plans. For many organizations,
marketing represents a major investment and firms are naturally
reluctant to invest major resources without a reasonable level of
assurance of a satisfactory payback.
Marketing is no more inherently unethical than other business
areas. The accounting scandals at Enron, WorldCom, and other
firms in the early 2000s show that to be true. However, when
some element of marketing proves to be unethical (or even
illegal), it tends to be visible to the general public.
5. Everybody has a stake in the success of marketing.
Regardless of your position in a firm or job title, learning how
to do great marketing is a key professional asset.
6. When management doesn’t view marketing as earning its
keep—that is, marketing being able to pay back its investment
over the long term—it becomes very easy for firms to sub-
optimize their success in the long run by avoiding investment in
brand and product development in favor of cutting costs.
5
Behind the Misconceptions
Marketing is highly visible by nature.
Advertising and sales promotion seen by all.
Marketing metrics: Gauging performance to drive results.
“If it can’t be measured, it can’t be managed.”
Marketing is more than buzzwords.
Often viewed as a “necessary evil.”
Too many quick-fix approaches.
Need to position marketing as a respectable field.
1-6
©McGraw-Hill Education. All rights reserved. Authorized only

5. for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
It seems almost anybody is comfortable talking or tweeting
about elements of marketing—from the week’s advertised
specials at the supermarket to this year’s fashion for kids
heading back to school to the service received at a favorite
vacation hotel—marketing is a topic everyone can discuss!
In the past, marketing has had few useful metrics or measures to
gauge the performance impact of a firm’s marketing investment,
while other areas of the firm have historically been much more
driven by measurement of results. Today measurement of
marketing’s performance and contribution is a focal point in
many firms.
With so much ambiguity historically surrounding the
management and control of marketing consultants and authors
look to make a quick buck by selling their latest and greatest
ideas complete with their own catchy buzzwords for the
program.
6
Toward the Reality
of Modern Marketing
Marketing is a central function and set of processes essential to
any enterprise.
Leading and managing the facets of marketing is a core business
activity.
1-7
©McGraw-Hill Education. All rights reserved. Authorized only

6. for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Source: GEICO
Effective marketing management isn’t about buzzwords or quick
fixes. Nor is the essence of marketing really about the kinds of
stereotypical viewpoints identified earlier in this section. In
today’s business milieu, marketing is a central function and set
of processes essential to any enterprise.
7
Defining Marketing:
Peter Drucker
Peter Drucker, circa 1954
“There is only one valid definition of business purpose: to
create a customer.….the business enterprise has two—and only
two—business functions: marketing and innovation.
Peter Drucker, circa 1973
“Marketing is so basic that it cannot be considered a separate
function (i.e., a separate skill or work) within the business… It
is the whole business seen from the customer’s point of view.”
1-8
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

7. 8
Defining Marketing: AMA
“Marketing is the activity, set of institutions, and processes for
creating, communicating, delivering, and exchanging offerings
that have value for customers, clients, partners and society at
large.”
American Marketing Association, 2007
1-9
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
• Focuses on the more strategic aspects of marketi ng, which
positions marketing as a core contributor to overall firm
success.
• Recognizes marketing as an activity, set of institutions, and
processes—that is, marketing is not just a “department” in an
organization.
• Shifts the areas of central focus of marketing to value—
creating, communicating, delivering, and exchanging offerings
of value to various stakeholders.
9
Considerations when
Defining Marketing
Marketing’s Stakeholders
Internal and external.
Societal Marketing

8. Members of society at large are stakeholders.
Green Marketing
Environmentally friendly.
Sustainability: Meeting needs without harming future
generations.
1-10
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Internal stakeholders: finance, accounting, production, quality
control, engineering, human resources, and many other areas in
a firm.
External stakeholders: customers, vendors, governmental
bodies, labor unions, and many others.
Sustainability practices have helped socially responsible
organizations incorporate doing well by doing good into their
overarching business models so that both the success of the firm
and the success of society at large are sustained over the long
term.
10
Core Marketing Concepts
Value is the ratio of the bundle of benefits a customer receives
from an offering compared to the costs incurred by the customer
in acquiring that bundle of benefits.
Exchange occurs when people give up something of value to

9. them for something else they desire to have. Exchange usually
involves money but can involve trade or barter of time, skill,
expertise, intellectual capital.
1-11
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
For Exchange to Take Place
There must be at least two parties.
Each party has something that might be of value to the other.
Each party is capable of communication and delivery.
Each party is free to accept or reject the exchange offer.
Each party believes it is appropriate or desirable to deal with
the other party.
1-12
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Source: Burberry
Usually an exchange is facilitated by money, but not always.
Sometimes people trade or barter nonmonetary resources such
as time, skill, expertise, intellectual capital, and other things of
value for something else they want.

10. Each party is capable of communication and delivery. Each
party is free to accept or reject the exchange offer. Each party
believes it is appropriate or desirable to deal with the other
party.
12
Marketing’s Roots
and Evolution
1-13
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
13
Pre-Industrial Revolution
Products were customized.
One-to-one marketing.
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

11. 14
Production Orientation
Maximizing mass production via assembly line.
Assumes customers will go the producer.
“If you build it, they will come.”
As Henry Ford said, “People can have the Model T in any
color—so long that it’s black.”
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
For the early part of the 20th century, the focus was on this
production orientation of improving products and production
efficiency without much regard for what was going on in the
marketplace. In fact, consumers snapped up this new pipeline of
reasonably priced goods, even if the products didn’t give much
choice in style or function.
15
Sales Orientation
Salespeople need to push the product.
Production capacity increased post-WW1.
New competitors flooded the market.
More sophisticated financial markets pressured firms to increase
sales volume and profitability.
Created the image of the pushy salesperson.
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of

12. McGraw-Hill Education.
For years, the most vivid image of a salesperson in the public
eye was that of the peddler, the classic outside salesperson
pushing product on customers with a smile, promise, and
handshake. Gradually, customers of all kinds grew wary of
high-pressure selling, sparking laws at all levels to protect
consumers from unscrupulous salespeople. For many customers,
the image of marketing became permanently frozen as that of
the pushy salesperson. And just as with the production
orientation, to this day some firms still practice mainly a sales -
oriented approach to their business.
16
Marketing Concept
After World War II:
Pent-up demand for consumer goods and services.
Euphoric focus on family and getting back to normal.
Increased production for consumer goods.
Sophisticated marketing research enabled by mainframe
computers.
Marketing concept spread in the 1960s and 70s:
Led to allowing the market to decide what products it wanted
which gave rise to marketing planning.
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

13. The marketing concept is an organization-wide customer
orientation with the objective of achieving long-run profits.
GE wrote the following to stockholders in its 1952 Annual
Report (in this historical period, the assumption was that
business professionals would be male):
[The marketing concept]. . .introduces the marketing man at the
beginning rather than at the end of the production cycle and
integrates marketing into each phase of the business. Thus,
marketing, through its studies and research, will establish for
the engineer, the design and manufacturing man, what the
customer wants in a given product, what price he is willing to
pay, and where and when it will be wanted. Marketing will have
authority in product planning, production scheduling, and
inventory control, as well as in sales distribution and servicing
of the product.
17
Marketing Mix
Mid-1960s: The 4 Ps, or marketing mix
Product, price, place, promotion.
Today: More sophisticated view of 4 Ps
Products are offerings; focus is on solutions.
Place is complex supply chains.
Price is viewed as value; benefits/price.
Promotion uses high-tech media.
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

14. In the mid-1960s, a convenient way of teaching the key
components was developed with the advent of the marketing
mix, or 4Ps of marketing, originally for product, price, place,
and promotion.20 The idea was that these fundamental elements
comprise the marketer’s “tool kit” to be applied in carrying out
the job. It is referred to as a “mix” because, by developing
unique combinations of these elements, marketers set their
product or brand apart from the competition. Also, an important
rubric in marketing is the following: making a change in any
one of the marketing mix elements tends to result in a domino
effect on the others.
A favorite marketing professor at the University of South
Florida referred to “Place” as Pu-distribution”.
The product is now regarded broadly in the context of an overall
offering, which could include a bundle of goods, ser- vices,
ideas (for example, intellectual property), and other
components, often represented by strong overarching branding.
Many marketers today are more focused on solutions than
products—the characterization of an offering as a solution is
nice because of the implication that a solution has been
developed in con- junction with specific, well-understood
customer wants and needs.21 Price today is largely regarded in
relationship to the concept of value. Place has undergone
tremendous change. Rather than just connoting the process of
getting goods from Point A to Point B, firms now understand
that sophisticated, integrated supply chain approaches are a
crucial component of business success. And finally, to grasp the
magnitude of changes in promotion since the 1960s one need
only consider the proliferation of high-tech media options
available to marketers today, from the Internet to cell phones
and beyond.

15. 18
Beyond the Marketing Concept
1-19
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Differentiation Orientation
Market Orientation
Relationship Orientation
One-to-One Marketing
Differentiation and Market Orientation
Differentiation Orientation
Clearly communicates how the firms products from competitors.
Market Orientation
Implementation of the marketing concept.
Includes customer orientation: The customer is at the core.
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

16. Differentiation orientation uses different product messages
through different media to target very specifically defined
customer groups.
20
Relationship and One-to-One Marketing
Relationship Orientation
Focuses on customer retention.
CRM drives customer satisfaction and loyalty.
One-to-One Marketing
Advocates a learning relationship so that the firm can offer
customized products and services.
Mass customization.
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Differentiation orientation uses different product messages
through different media to target very specifically defined
customer groups.
21
Change Drives Impacting the Future of Marketing
Shift to product glut and customer shortage.

17. Shift in information power from marketer to customer.
Shift in generational values and preferences.
Shift to distinguishing Marketing (“Big M”) from marketing
(“little m”).
Shift to demanding return on marketing investment.
1-22
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Shift to Product Glut and Customer Shortage
The balance of power is shifting between marketers and their
customers, both in B2C and B2B markets.
Not only is a customer orientation desirable, but also in today’s
market it is a necessity for survival.
New Market Realities: competitors proliferate, all secrets are
open secrets, innovation is universal, information overwhelms
and depreciates, easy growth makes hard times, and customers
have less time than ever.
1-23
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Fred Wiersema, in his book The New Market Leaders, builds a
powerful case that the balance of power is shifting between

18. marketers and their customers, both in business-to-consumer
(B2C/end user) markets and business-to-business (B2B)
markets. He identifies “six new market realities” in support of
this trend: Competitors proliferate, all secrets are open secrets,
innovation is universal, information overwhelms and
depreciates, easy growth makes hard times, and customers have
less time than ever.
23
Shift in Information Power from Marketer to Customer
Customers of all kinds have nearly limitless access to
information about companies, products, competitors, other
customers, and even detailed elements of marketing plans and
strategies.
1-24
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Customers are empowered to access boundless information
about all kinds of products and services on the Internet.
For competitive reasons, firms have no choice but to be more
open about their businesses and products. Even if they wanted
to, firms can’t stop chat rooms, independent Web sites, Web
logs or blogs, and other customer-generated modes of
communication from filling Web page after Web page with
information, disinformation, and opinions about a company’s
products, services, and even company dirty laundry.
24

19. Shift in Generational Values and Preferences
Impacts the firm’s message and the method by which that
message is communicated.
Impacts marketing in terms of human resources.
Generational changes are nothing new.
1-25
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
©Imeh Akpanudosen/Getty Images
Gen Y consumers tend to be much more receptive to electronic
commerce as a primary mode of receiving marketing
communication and ultimately purchasing than are prior
generations.
Generational differences in attitudes toward work life versus
family life, expectations about job satisfaction and rewards, and
preferred modes of learning and working (e.g., electronic versus
face-to-face) affect the ability of firms to hire people into
various marketing-related positions.
25
Distinguishing Between Marketing
(“Big M”) and marketing (“little m”)
Marketing (Big M)
Strategic marketing, means a long-term, firm-level commitment
to investing in marketing – supported at the highest
organization level – for the purpose of enhancing organizational
performance.

20. marketing (little m)
Tactical marketing, which serves
the firm and its stakeholders at
a functional or operational level.
1-26
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Marketing (Big M) serves as a core driver of business strategy.
That is, an understanding of markets, competitors, and other
external forces, coupled with attention to internal capabilities,
allows a firm to successfully.
• Make sure everyone in an organization, regardless of their
position or title, understands the concept of customer
orientation.
• Align all internal organizational processes and systems
around the customer.
• Find somebody at the top of the firm to consistently champion
this Marketing (Big M) business philosophy.
• Forget the concept that the marketing department is where
Marketing (Big M) takes place.
• Create market-driving, not just market-driven, strategies.
marketing (little m) almost always takes place at the functional
or operational level of a firm. Specific programs and tactics
aimed at customers and other stakeholder groups tend to
emanate from marketing (little m). But marketing (little m)
always needs to be couched within the philosophy, culture, and

21. strategies of the firm’s Marketing (Big M). In this way,
Marketing (Big M) and marketing (little m) should be quite
naturally connected within a firm, as the latter tends to
represent the day-to-day operationalization and implementation
of the former. Everything from brand image, to the message
salespeople and advertisements deliver, to customer service, to
packaging and product features, to the chosen distribution
channel—in fact, all elements of the marketing mix and
beyond—exemplify marketing (little m).
26
Shift to Justifying the Relevance and Payback of the Marketing
Investment
How can management effectively measure and assess the level
of success a firm’s investment in various aspects of marketing?
Metrics must be designed for key benchmarks for improvement.
1-27
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Marketing Metrics
1-28
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

22. Marketing is a fuzzy field. Marketing has often historically
viewed itself as working within gray area comfort zones of a
business. That is, if what marketing contributed was mostly
creative in nature, how can the impact of such activities
effectively be measured? For the marketer, this can be a
somewhat attractive position to be in, and historically many
marketers probably took advantage of the idea that their
activities were above measurement. Those days are over.
If it can’t be measured, it can’t be managed. As with all aspects
of business, effective management of the various aspects of
marketing requires quantification of objectives and results. The
marketing plan is one of the most important elements of a
business plan. Effective planning requires metrics.
Is marketing an expense or an investment? Practicing marketers
tend to pitch marketing internally as an investment in the future
success of the organization. As an investment, it is not
unreasonable that expected returns be identified and measured.
CEOs and stockholders expect marketing accountability.
Leading consulting firm McKinsey & Company uses its
Marketing Navigator to translate complex Marketing Return on
Investment (MROI) data into simplified visualizations to help
its clients make better marketing investment decisions.
McKinsey believes that better MROI begins with better
objectives, and communicating marketing as an investment, not
a cost
28
Marketing is a fuzzy field.

23. If it can’t be measured, it can’t be managed.
Is marketing an expense or an investment?
CEOs and stockholders expect marketing accountability.
CHAPTER 2:
Marketing Foundations: Global, Ethical, sustainable
McGraw-Hill Education
Part 1: Discover Marketing Management
Copyright © McGraw-Hill Education. All rights reserved. No
reproduction or distribution without the prior written consent of
McGraw-Hill Education.
1
Learning Objectives
Identify the various levels in the Global Marketing Experience
Curve.
Learn the essential information components for assessing a
global market opportunity.
Define the key regional market zones and their marketing
challenges.

24. Describe the strategies for entering new global markets.
Recognize key factors in creating a global product strategy.
Learn the importance of ethics in marketing strategy, the value
proposition, and the elements of the marketing mix.
Recognize the significance of sustainability as part of marketing
strategy and the use of the triple bottom line as a metric for
evaluating corporate performance.
2
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
2
Marketing Is Not Limited By Borders
Worldwide distribution networks, sophisticated communication
tools, greater product standardization, and the Internet have
opened world markets.
Large and small companies do business globally.
Opportunities are greater than ever but so are risks.
Global customers needs may lead to product adaptation.
3
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

25. While the opportunities have never been greater, the risks have
also never been higher. Global marketing mistakes are
expensive. The international competitive landscape includes
sophisticated global companies as well as successful local
organizations. The operating environment varies dramatically
around the world creating real challenges for companies moving
into new markets. Global customers demand different products,
which means that successful products in a company’s local
market frequently have to be adapted to new markets.
3
The Global Experience Learning Curve
4
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Four distinct stages:
No foreign marketing
Foreign marketing
International marketing
Global marketing
The global experience learning curve moves a company through
four distinct stages: no foreign marketing, foreign marketing,
international marketing, and global marketing. The process is
not always linear; companies may, for example, move directly
from no foreign marketing to international marketing without
necessarily engaging in foreign marketing. In addition, the
amount of time spent in any stage can vary; some companies
remain in a stage for many years.

26. 4
Companies with
No Foreign Marketing
Companies with no direct foreign marketing may still do
business with international customers through intermediaries or
limited direct contact.
They may fulfill unsolicited orders but these are incidental.
5
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Of course, any company with a website is now a global
company as someone can visit the site from anywhere in the
world, but companies with no foreign marketing consider any
sales to an international customer as incidental.
5
Companies with
Foreign Marketing
Company follow existing customers into foreign markets.
Develops local distribution and service representation:
By using local intermediaries.
Or by establishing its own direct sales force.
Key activities are done in the home country but modified for
international markets.
6
©McGraw-Hill Education. All rights reserved. Authorized only

27. for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Global markets are important enough for management to build
international sales forecasts, and manufacturing allocates time
specifically to international production. At this point,
international markets are no longer an afterthought but, rather,
an integral, albeit small, part of the company’s growth model.
6
International Marketing
Firm begins to manufacture products outside the home market.
Global markets are essential to corporate growth.
Firm establishes an international business division or unit.
Management may still have a “domestic first” mindset.
7
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
International marketing aligns the company’s assets and
resources with global markets, but, in the vast majority of
companies, management still takes a “domestic first” approach
to the business. As a result, the corporate structure still divides
international and domestic markets.

28. 7
Global Marketing
Global marketing firm views the world as a single market with
many different segments.
Fifty percent or more of revenue comes from international
markets.
Global marketing firms see segments that may or may not align
with country boundaries. International marketing firms define
markets along traditional political boundaries.
Moving to global marketing depends on research critical for
decision makers.
8
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
8
Ten Examples of Global Companies and their Expansion in
Global Markets
EXHIBIT 2.2Years to ExpansionU. S. CompanyFirst
Expansion29Wal-Mart (est. 1962)1991 - Wal-Mart opens two
units in Mexico City.20Hewlett-Packard (est. 1939)1959 – HP
sets up a European marketing organization in Geneva,
Switzerland, and a manufacturing plant in Germany.26Tyson
Foods (est. 1963)1989 - Tyson establishes a partnership with a
Mexican poultry company, to create an international
partnership. 25 Caterpillar (est. 1925)1950 – Caterpillar Tractor

29. Co. Ltd. in Great Britain is
founded.19Home Depot (est. 1979)1998 – Home Depot enters
the Puerto Rican market
followed by Argentina.18Gap (est. 1969)1987 - The first Gap
store outside the United States
opens in London on George Street.12Goodyear (est. 1898)1910
- Goodyear’s Canadian plant opens. 10FedEx (est. 1971)1981 -
International delivery begins with service to Canada.1PepsiCo
(est. 1965)1966 - Pepsi enters Japan and Eastern Europe.
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
9
The Global Experience Learning Curve
There are five components of essential information that relate to
global marketing experience and international expansion:
Economic environment
Culture and societal trends
Business environment
Political and legal changes
Specific market conditions
10
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

30. Economic environment. An accurate understanding of the
current economic environment, such as gross domestic product
(GDP) growth, inflation, strength of the currency, and business
cycle trends, is essential. Also, depending on the company’s
target markets (consumer or business), additional economic data
on consumer spending per capita (consumer products) or
industrial purchasing trends (business products) are also needed
to facilitate decision making.
Culture, societal trends. Understanding a global market’s
culture and social trends is fundamental for consumer products
and helpful for business-to-business marketers. Cultural values,
symbols and rituals, and cultural differences affect people’s
perception of products while B2B companies must learn local
cultural practices to recruit employees and establish good
business relationships.
Business environment. Knowledge of the business environment
is essential for companies moving into foreign markets where
they will invest significant resources. Ethical standards,
management styles, degree of formality, and gender or other
biases are all critical factors that management needs to know
before entering a new market.
Political and legal changes. Local political changes can create
significant uncertainties for a business. Developing countries
frequently limit the flow of money out of a country, making it
harder for a foreign company to transfer money back home.
Labor laws also vary widely around the world
Specific market conditions. Before entering a foreign market, a
company has some understanding of the specific market
conditions for its own products as a result of its existing

31. business knowledge. However, it is unlikely a company has in-
depth knowledge about market trends, competitors, and unique
market characteristics.
10
Emerging Markets
For most of the Twentieth Century, world economic growth
came from the Triad (Western Europe, the United States, and
Japan).
For the past 25 years, growth has been in emerging markets.
Seventy-five percent of growth will come from emerging
markets, mainly China and India.
11
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Multinational Regional Market Zones
Multinational regional market zones consists of a group of
countries that create formal relationships for mutual economic
benefit through lower tariffs and reduced trade barriers (for
example, NAFTA and the European Union).
They usually form as a result of four forces: economic factor s,
geographic proximity, political factors, and cultural similarities.
12
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

32. Economic By enlarging the trading area and creating a market
zone, each country benefits economically and the market zone
has more power in the global marketplace.
Geographic proximity Transportation and communication
networks are more likely to connect countries close to one
another, making it easier to facilitate market zone activities.
Other issues such as immigration also tend to be handled more
effectively when the distance between partners is minimized.
Political Closely related to increased economic power is
increased political clout, particularly as smaller countries form
broad political alliances. A prerequisite for effective political
alliances among countries is general agreement on government
policies. Countries with widely disparate political structures
find it difficult to accommodate those differences in a political
alliance.
Culture similarities, such as having a shared language, among
alliance partners also facilitate markets zones as shared cultural
experiences encourage greater cooperation and minimize
possible conflicts from cultural disparities.
12
Top Four Regional Market Zones
EXHIBIT 2.7
Reprinted Courtesy of European Commission
13
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further

33. distribution permitted without the prior written consent of
McGraw-Hill Education.
Mercosur, the most powerful market zone in South America,
was inaugurated in 1995 and includes the economies of South
America: Argentina, Bolivia, Brazil, Chile, Paraguay, and
Uruguay. With over 200 million people and a combined GDP of
more than $1 trillion, it is currently the third-largest free trade
area in the world.
ASEAN (Association of Southeast Asian Nations) was founded
in 1967 and comprises 10 countries in the Pacific Rim (Brunei
Darussalam, Indonesia, Malaysia, Philippines, Cambodia, Laos,
Myanmar, Singapore, Thailand, and Vietnam). After the 1997–
1998 Asian financial crisis, the group added China, Japan, and
South Korea. While the relationships with these “plus 3”
countries are less developed than the full member countries, the
combined economic activity of all participants makes ASEAN a
powerful global economic force.
Europe The European Union is the most successful regional
market zone and it is also one of the oldest. Founded more than
50 years ago by six countries (Belgium, France, Italy,
Luxembourg, the Netherlands, and West Germany) with the
Treaty of Rome, the EU now includes 28 countries spanning all
of Europe. One of the most difficult challenges for many
member states is meeting targeted government spending and
total debt limits. The EU has become one of the most dominant
economic entities in the world, with economic output exceeded
only by the United States, and its currency, the euro, is one of
the leading world currencies. The European Union’s influence
extends far beyond economics because member countries grant

34. the EU significant political and social power to enact laws,
create taxes, and exert tremendous social influence in the lives
of citizens.
Americas The most significant market zone in the Americas is
the alliance of the United States, Canada, and Mexico, which is
commonly referred to by the treaty that created the alliance,
NAFTA (North American Free Trade Agreement). NAFTA
created the single largest economic alliance and has eliminated
tariffs between the member countries for more than 19 years.
13
Select the Global Market
Deciding which countries to enter can be high risk as poor
decisions lead to high costs and poor long-term investments.
Identify Selection Criteria: View competition, target market
size, and growth rate. What is the size of investment? How long
will it take to become profitable?
Company Review: Does the company have the personnel,
managerial, and financial resources to enter the market?
14
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Market selection criteria incorporate the nature of the
competitive environment, including both local and global
competitors, as well as target market size and future growth
rates. Marketing managers need to know which markets will be
the easiest and which will be the most difficult to enter. In
addition, the size and future growth potential of international

35. markets is critical in making the long-term commitment to
manufacture in an international market.
Moving into new foreign markets brings greater risk to the
company. As a result, decision makers must consider whether
their company philosophy, personnel skill sets (principally in
critical areas such as marketing and logistics), organizational
structure, management expertise, and financial resources
support the move into new countries
Comparing the analysis of market opportunities with company
characteristics drives the final selection as management looks
for the best fit between each country’s mix of
opportunities/threats and the company’s strengths/weaknesses.
14
Key Company Characteristics in Global Market Expansion
EXHIBIT 2.10
15
Company
Characteristics
Philosophy
Objectives
Products
Management/
Marketing
Skills
Resources
Financial

36. Limitations
Organization
Management
Style
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
15
Develop Global Market Strategies: Exporting
Exporting requires minimal investment and risk.
Ten percent of all global economic activity.
The Internet has increased both domestic and international sales
through the use of credit cards and other payment systems plus
global delivery systems like FedEx and UPS and DHL. Amazon
has gone global.
Exporters provide expertise in global shipping.
Distributors know local market conditions best.
Direct sales force is expensive but needed with technology or
high-end industrial products.
14
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

37. Exporter and Distributor. The next of level of exporting
involves having country representation, which can take several
forms. Exporters are international market specialists that help
companies by acting as the export marketing department. They
generally do not have much contact with the company, but
exporters provide a valuable service with their knowledge of
policies and procedures for shipping to foreign markets. For
small companies with little or no international experience,
exporters expedite the process of getting the product to a
foreign customer.
Distributors represent the company and often many others in
foreign markets. These organizations become the face of the
company in that country, servicing customers, selling products,
and receiving payments. In many cases, they take title to the
goods and then resell them. The primary advantages are that
distribu- tors know their own local markets and offer a company
physical representation in a global market, saving the company
from committing major resources to hire and staff its own
operations. The disadvantages are lack of control since
distributors do not work directly for the company and lower
profitability resulting from the distributor’s markup.
Direct Sales Force. Staffing a direct sales force in foreign
markets is a significant step for a company moving into global
markets. It is expensive to staff and maintain a local sales team
in a foreign market; however, companies will often make the
commitment because of the level of control and expertise
offered by company-trained salespeople. For some industries,
creating a direct sales force is required because customers will
demand that company salespeople be in the country. This is
often the case in the technology and high-end industrial product
industries.
16
Market Entry Strategy: Contractual Agreements

38. Contractual agreements are non-equity relationships with
another company, often in the target country.
Licensing: May be required by law, direct importing may be
restricted, or the company has limited financial resources.
Franchising: Franchise agreements allow the firm to retain
control of quality. It has low capital investment, rapid
expansion, local market knowledge.
17
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Contractual agreements allow a company to expand
participation in a market by creating enduring, nonequity
relationships with another company, often a local company in
that market. Most often these agreements transmit something of
value such as technology, a trademark, a patent, or a unique
manufacturing process in return for financial compensation in
the form of a licensing fee or percentage of sales.
Licensing. Companies choose licensing when local partnerships
are required by law, legal restrictions prohibit direct importing
of the product, or the company’s limited financial resources
limit more active foreign participation. Companies seeking to
establish greater presence in a market without committing
significant resources can choose to license their key asset
(patent, trademark) to another company, effectively giving the
company the right to use that asset in that market. Small and
medium-sized companies with a specific product competence
that lack the willingness or expertise to invest heavily in
foreign operations can identify a license partner in a particular
foreign market to manufacture products or provide critical

39. services such as local distribution.
Franchising, as a global market entry strategy, really took off in
the 1990s and has been the first point of entry for many retailers
looking to expand international operations. McDonald’s, Burger
King, KFC, and others have created large franchising networks
around the world. Nearly two-thirds of McDonald’s restaurants
are outside the United States. Combining low capital
investments, rapid expansion opportunities, and local market
expertise, franchising offers many advantages as a market entry
strategy. However, there are also challenges. Worldwide,
consumer tastes vary significantly and franchisors need
sufficient resources to create products that will meet demands
of global customers while maintaining quality control.
17
Market Entry Strategy: Strategic Alliances
Strategic alliances spread risk of foreign investment among
partners. For example, they dominate the airline industry with
oneworld, Skyteam, and Star.
International joint ventures allow companies to enter markets
that would be closed because of legal restrictions or cultural
barriers. They are formed by two or more companies that share
management duties in a defined structure and also hold equal
equity positions. They cannot be formed by individuals.
18
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

40. Market Entry Strategy: Direct Foreign Investment
Direct foreign investment is the riskiest strategy, but it offers
potential for long-term growth.
The following factors are important to consider: timing, legal
issues, transaction costs, technology transfer, product
differentiation, and marketing communication barriers.
19
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Timing—unknown political or social events, competitor
activity.
Legal issues—growing complexity of international contracts,
asset protection.
Transaction costs—production and other costs stated in various
currencies.
Technology transfer—key technologies are more easily copied
in foreign markets.
Product differentiation—differentiating a product without
increasing cost.
Marketing communication barriers—local market practices vary
a great deal.
19
Organizational Structure Choices
Decision-making authority becomes more complicated with
added layers of authority and differences in global time zones.
Clearly defined protocols for decision-making are needed.
The degree of centralization affects resource allocation and

41. personnel. Organizational structure can be centralized,
decentralized, or regionalized.
20
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
The primary advantages of a more centralized structure include
greater control and, as a result, more consistency across the
organization. It is also more efficient in creating centers of
expertise that bring together knowledgeable people to address
key organizational issues (for example, R&D, legal, and IT).
Decentralized organizations, on the other hand, offer a hands -on
management approach that facilitates rapid response to
changing market conditions. The regional organization seeks to
combine advantages of both approaches by centralizing key
functions while pushing decision making closer to the global
market.
20
Choose Structure
Global product lines works for firms with a broad, diverse range
of products; for example, Siemens.
Geographic regions builds autonomous regional organizations
that work well when local government relationships are critical;
for example, Halliburton.
Matrix structure is a hybrid of the first two and is used by most
global firms.
21
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further

42. distribution permitted without the prior written consent of
McGraw-Hill Education.
21
Product Choices
21
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Direct product extension means no changes in the product.
There are no extra R&D or manufacturing costs
Product adaptation means the product is changes to meet local
market needs and legal requirements. Product changes range
from regional to city levels.
Backward product invention takes a discontinued product from
one market and introduces it into another.
Forward product invention creates new products for new
markets.
22
Consumer Issues
Quality is viewed differently around the world.
Fitting the product to the culture is a challenge with brand

43. names, product colors and features.
Brand strategy decisions reflect either a global, regional, or
local brand.
The country-of-origin effect is the positive or negative
perception of the product based on the producing country.
23
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Quality The perception of quality varies drastically around the
world, which makes it hard for a company developing or
adapting a product for a global market. What works in one
market may fail in another, as cell phone manufacturers have
learned. In Europe, Japan, and the United Sates, cell phones
must have a roaming capability to be successful, but Chinese
consumers do not consider it an important feature.
Fitting the Product Language differences have created unique
and occasionally humorous examples of marketing mistakes.
When Coca-Cola introduced Diet Coke in Japan, initial sales
were disappointing until the company realized that Japanese
women do not like the concept of dieting and the Japanese
culture relates dieting to sickness (not a desired connection with
a product). The company changed the name to Coke Light,
which has been much more effective around the world.
Brand Strategy Companies often seek to create a unified
branding strategy around the world. In some cases this is
effective. Coca- Cola, Caterpillar, Apple, Kellogg, BMW, and
others have created powerful global brands. As companies
acquire local brands, one of the first decisions is whether to
fold a local brand into a global brand. Companies have to

44. consider local conditions, but, when possible, companies are
harmonizing brands to build brand awareness and extend
marketing communication dollars.
The country-of-origin effect is the influence of the country of
manufacture, assembly, or design on a customer’s positive or
negative perception of a product.31 “Made in Japan,” “Made in
Italy,” “Made in the United States”—each has meaning to
customers and infers that a product has certain qualities based
on its country of origin. Such perceptions can change over time.
23
International Channel Structures
EXHIBIT 2.11
Reprinted from Philip R. Cateora and John L. Graham,
International Marketing, 13e, 2007.
24
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Market Channel Issues
Channel factors include cost, capital, control, coverage,
character, and continuity.
25
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

45. Cost Estimating channel costs includes: (1) the initial
investment in creating the channel and (2) the cost of
maintaining the channel. As companies expand into new
markets, many search for ways to increase the efficiency of
local distribution systems by eliminating unnecessary
middlemen, thereby shortening the channel to the customer.
Capital An inadequate global market distribution system is
expensive both in terms of adding cost to the product and
creating long-term damage to the brand and the company’s
reputation. If a channel network is already in place, the
investment is low; however, if the company needs to develop or
greatly improve an existing system, the cost can be very high.
Control The more control the company wants in the channel the
more expensive it is to maintain. As a result, companies
generally look for a balance between channel control and cost.
The complexity of global supply chains coupled with lack of
local market knowledge make the task of creating a distribution
system so expensive that all but the most accomplished global
marketers rely on local distribution networks in foreign
markets.
Coverage Local distribution networks around the world may
lack full exposure to a given market. Even in the United States,
for example, complete coverage of a consumer market
necessitates multiple distribution channels. As a result, it is
necessary to evaluate which distribution network best reaches
the target customers, which may not necessarily be the network
with the widest distribution. Targeting upper- and middle-class
consumers in China requires extensive distribution in cities

46. along the coast (Beijing, Shanghai, and Guangzhou) but
minimal distribution in the rest of the country.
Character The long-term nature of channel decisions makes
character an issue in selecting the best channel partner. The
capabilities, reputation, and skills of the local channel partner
should match the company’s characteristics. A service-oriented
company should look for local channel partners with a
reputation for excellent service and high customer satisfaction.
Continuity Changing a distribution system creates anxiety
among customers and gives competitors an opportunity to take
advantage of inevitable inefficiencies and disruption of service.
Identifying channel partners with a long-standing presence in
the market provides some security; however, the best local
partners are also the most difficult to establish a relationship
with as they frequently already have established involvement
with competitors.
25
Marketing Communications: Advertising
Four advertising strategies:
Global marketing themes.
Global marketing with local content.
Basket of global advertising themes.
Local market ad generation.
26
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

47. The first strategy creates global marketing themes adjusting
only the color and language to local market conditions. The
basic ad template remains unchanged throughout the world. A
second strategy, global marketing with local content, keeps the
same global marketing theme as the home market but adapts it
with local content. Local content is incorporated in a
standardized template to encourage a local look and feel to the
ad. This includes images as well as written copy, but the ad still
relates to the same global marketing message. A third approach
is a basket of global advertising themes. Here related but
distinct ads built around several marketing messages are
generated, often by the company’s lead advertising agency, and
local marketers select the ads that best fit their specific market
situation. Finally, some companies allow local market ad
generation. Marketers have the authorization to create local ads
that do not necessarily coordinate with global marketing
messages. However, this strategy still requires coordination at
higher levels in the company to ensure consistent quality.
26
Other Marketing Communications
Personal selling: Companies need sensitivity in selecting,
hiring, and training their global sales force to accommodate
local business cultures.
Sales promotion: The need to stimulate consumer trial and
purchase can be greater outside the U.S.
Public relations: The expansion of global communications has
greatly increased the importance of international public
relations.
27
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

48. Personal Selling The salesperson–customer relationship is
dramatically different around the world. In the United States,
the relationship is very business- focused and less personal. In
Latin America and Asia, the relationship is much more personal.
Actual business negotiations often do not begin until a personal
relationship has been established. Companies need sensitivity in
selecting, hiring, and training their global sales force to
accommodate local business cultures.
Sales Promotion A relatively small part of U.S. marketing
communication budgets is allocated to sales promotion;
however, this can be a significant component of marketing
communication strategy in global markets. The need to
stimulate consumer trial and purchase can be greater. Both
PepsiCo and Coca-Cola sponsor traveling carnivals to outlying
villages in Latin America with the purpose of encouraging
product trial.38
Public Relations The expansion of global communications has
greatly increased the importance of international public
relations. Companies realize that dealing with crises must be
done quickly and effectively as global news organizations move
instantly on stories around the world. Getting the company’s
perspective on a story requires coordination by the company and
public relations consultants before release to the public. Public
relations can also enhance other elements of a marketing
communications strategy. When companies introduce new
products, they frequently schedule them to coincide with press
conferences and news cycles in other countries.
27

49. Pricing
With a one-world price, the company assigns one price for its
products in every global market. Examples include oil and
diamonds.
A local-market-conditions price reflects the response to
competitors in the local area.
A cost-based price does not reflect local conditions and is based
on cost-plus-final markup.
28
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
One World Price The company assigns one price for its products
in every global market. In theory, this approach enables a
company to standardize other elements in the marketing mix and
simplifies financial forecasting. In reality, this strategy is not
followed very often. While price is constant, the cost to
produce, distribute, and market the product varies dramatically,
creating wide fluctuations in profit margins.
Local Market Conditions Price The company assigns a price
based on local market conditions with minimal consideration for
the actual cost of putting the product into the market.
Responding to the market is certainly vital in assigning the final
price, but local conditions may not reflect the reality of
bringing the product to market for an international company.
Local competitors do not incur the transportation costs,
potential tariffs, and other related expenses of bringing a
product in a foreign market. As a result, companies must be
particularly sensitive to local market pricing when setting their
price.

50. Cost-Based Price This strategy considers cost plus markup to
arrive at a final price. While the focus on costs precludes
charging an unprofitable price, it does not consider actual
market conditions. If costs are high as a result of tariffs or
transportation, the final price may be too high for the market.
28
Price Escalation
Product export costs.
Tariffs, import fees, taxes.
Exchange-rate fluctuations.
Middlemen and transportation costs.
29
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Price escalation occurs when products are moved from the home
market to the target country.
Product export costs: Differences in the product configuration,
packaging, and documentation raise the cost of many products
for international markets. A key internal cost issue is transfer
pricing, or the cost companies charge internally to move
products between subsidiaries or divisions. If companies charge
too high a price internally, it can make the final product price
uncompetitive because the local subsidiary must add a markup
to arrive at a final price.
Tariffs, import fees, taxes: Governments all around the world
impose tariffs, fees, and taxes on imported products to protect

51. industries in their home market and increase their revenue.
Exchange rate fluctuations: For many years, the U.S. dollar was
the standard for all international contracts, which tended to
minimize currency fluctuations as everything was priced in
dollars. Now, currencies float and products are priced using a
market basket of currencies. Since currencies can easily float 15
to 20 percent against each other, the assigning of currency
values in international contracts is critical. Increasingly,
companies want contracts written in their home currency to
protect their risk of loss due to currency fluctuations.
Middlemen and transportation costs: Creating a channel for
global markets extends the number of channel members and
increases costs. Each channel partner requires compensation,
which raises the final price to the customer. Moreover,
transportation costs increase as the distance to a local market
increases.
29
Global Pricing Issues
Dumping refers to the practice of charging less than actual costs
or less than the product price in the company’s home markets.
Gray Marketing involves the unauthorized diversion of branded
products into global markets. Gray markets distributors (who
are often authorized distributors) divert products from low -price
to high-price markets.
30
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

52. Global Pricing Issues In addition to price escalation, there are
two other global pricing issues. The first, dumping, refers to
the practice of charging less than actual costs or less than the
product price in the company’s home markets. The World Trade
Organization and most national governments have outlawed this
practice and, if dumping is proven, a government can impose a
tax on those products. Dumping is generally not a problem when
global markets are strong; however, the willingness to price
export goods based on marginal costs rather than full costs
increases when markets weaken. The second major issue is the
gray market, which involves the unauthorized diversion of
branded products into global markets. Gray market distributors
(who are often authorized distributors) divert products from
low-price to high-price markets. Companies should carefully
watch unusual order patterns among their distributors because
that can signal a gray market problem.
30
Ethics: At the Core of Successful Marketing Management
Ethical leadership, culture, and policies are essential for ethical
decision making. One example of ethical failure is Volkwagen’s
deception of emission reporting cost the firm billions of dollars.
Ethics in marketing is key to establishing and maintaining
customer relationships.
Legal requirements are the baseline for marketing ethics.
31
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

53. Some argue that companies only need to meet legal obligations
in their marketing activities. However, successful marketers
today understand that the law is only the “baseline” of expected
behavior and generally lags behind societal norms and opinion.
In some respects, this is good, as opinions can change quickly
and companies need stability in strategic planning and
implementation. However, following the law does not mean the
company is doing all it can do or even should do in its
marketing efforts. On the other hand, marketing ethics
encompasses a societal and professional standard of right and
fair practices that are expected.
31
Ethics and the Value Proposition
Value equals benefits divided by price.
How customers view a company’s ethics is key in evaluating the
value proposition.
Once trust is broken, it is very difficult to get it back. Consider
Wells Fargo’s fake accounts and Johnson & Johnson’s talcum
powder being linked to ovarian cancer.
32
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
You will recall that value is the net benefits (or costs)
associated with a product or service. The buyer considers all the
benefits, then subtracts all the costs, and arrives at a value for
the product. One of the key considerations is the buyer’s trust
or belief that the company will keep its promises with regard to

54. the product experience, warranty, service, and a host of other
interactions. When the customer does trust the company, that is
a major benefit, but when trust does not exist, it is a significant
cost.
32
Ethics and Elements of the Marketing Mix: Product
Use marketing research data that ensures privacy and
confidentiality.
Define market segments that do not discriminate against any
particular segment.
Develop products that are safe and select materials that are not
harmful to users.
Manufacture products using materials that are safe for users, in
conditions that are safe for employees.
Clearly define and honor warranties and service agreements.
33
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Ethics and Elements of the Marketing Mix: Price
Disclose the full price to customers before purchase.
Do not engage in unethical pricing practices such as price
discrimination, price fixing, or predatory pricing.
Fully disclose any other bundled pricing before customer’s
purchase.
34
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of

55. McGraw-Hill Education.
Ethics and Elements of the Marketing Mix: Distribution
Unfair pressure should not be put on channel members.
Channel members should not use manipulative sales techniques
on other channel members.
Data privacy confidentiality should occur throughout the
channel.
No channel members should exert undue pressure on customers
to purchase products that are unnecessary or not needed.
35
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Ethics and Elements of the Marketing Mix: Marketing
Communications
No deception or misrepresentation should occur in any
marketing communications to any stakeholders (customers,
investors, employees).
High-pressure or manipulative sales techniques should not be
used by salespeople or messaged in advertising.
36
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

56. Code of Marketing Ethics
Most companies today create a code of ethics that defines the
company’s values.
The American Marketing Association’s code of ethics refers to
six values: honesty, responsibility, fairness, respect,
transparency, and citizenship.
37
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
Many companies embrace ethical values similar to AMA’s in
their corporate codes of ethics. At the same time, companies
increasingly see a need to supplement their corporate codes of
ethics with a discussion of specific ethical marketing practices.
The goal is to provide clarity for marketing managers as they
make critical marketing decisions that frequently involve an
ethical component. The focus on ethics in marketing speaks to
the essential role of marketing in the organization and the
impact of ethical (and unethical) decisions on organizational
performance.
37
Sustainability:
Right and the Good Strategy

57. Doing well by doing good.
Environmental laws grew out of the problems of the Great
Depression of the 1930s.
The Green movement was founded on environmental concerns
and resource utilization issues and came to be known as
sustainability.
Today sustainability includes issues like an educated workforce,
greater connection and support of local communities, and
linking policies and strategy.
38
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
38
Triple Bottom Line: Stakeholders
EXHIBIT 2.13
39
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

58. In Chapter 1 we identified the various groups, called marketing
stakeholders, that interact with or are impacted by marketing,
and they are key to understanding the triple bottom line. These
stakeholders are shown again in Exhibit 2.13. Originally
presented by John Elkington in his book Cannibals with Forks:
The Triple Bottom Line of 21st Century Business, the triple
bottom line brings accountability to the various interests of
marketing (business) stakeholders. The traditional approach,
financial accounting, was useful for shareholders, but what
about customers, suppliers, government agencies, and many
others? The triple bottom line (TBL) is a metric for evaluating
not only the financial results of the company but the broader
social equity, economic, and environmental considerations as
well. Consider the impact of the TBL in marketing management
using the people, planet, and profit approach outlined
graphically in Exhibit 2.14.
Many, if not most, organizations still focus exclusively on
profit as the sole metric of success. However, companies are
increasingly realizing that success needs to include other
metrics, like people. This type of change begins with
management acknowledging that there are success objectives
beyond profit, then creating metrics, strategies, and tactical
plans to implement that change. From there, training and
education is needed to raise employee awareness that, over
time, leads to a change in culture. As marketing employees
(sales, customer service, and others) are often the customer’s
point of contact with the company, this becomes an important
first step. Ultimately, companies today now actively look for
ways to “give back” to the community. Disney, for example,
allows employees time off to work with community
organizations of their choice. In addition, the company will
match donations from employees to community organizations.
39
Triple Bottom Line
EXHIBIT 2.14

59. 40
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
A second TBL metric is the planet, and marketers are very
involved in decisions that impact the planet. From sustainable
sourcing of materials to efficient, environmentally sensitive
supply chains, marketers are evaluating critical processes to
maximize the environmental impact while meeting corporate
objectives related to cost and product quality. Over time,
companies like Starbucks have been successful in developing
“ethically sourced” coffee that is socially responsible and
environmentally safe. The company was instrumental in creating
the C.A.F.E. (Coffee and Farmer Equity) practices, which set
forth guidelines around four key areas: quality, economic
accountability and transparency, social responsibility, and
economic leadership. Companies are accepting greater
responsibility not only for their own manufacturing but for their
suppliers’ business practices as well. In some cases, such as
Nike, this was the result of public pressure to reduce unhealthy
employee work conditions at their suppliers. Nike and others
are now proactively evaluating their suppliers to maintain the
same environmental standards and working conditions as they
themselves do. Finally, profit remains an important metric in a
sustainable company. While considering the impact of
marketing decisions on people and the planet, marketing
managers must still meet financial objectives for the company
to be successful. For example, consider the impact of a
company’s sustainability decisions on customer product choice

60. decisions. Some target markets, such as Millennials, consider
sustainability an important factor in their decision making. This
means companies have to adapt their products, distribution,
marketing communications, and pricing to incorporate
sustainability into their overall marketing strategy. The
challenge is not limited to B2C markets, but is increasingly
prevalent in B2B markets as well. IBM, for example, invests
heavily in a variety of sustainable activities and has won awards
for its focus on the environment and sustainable development.
Customers, employees, and other stakeholders—not to mention
shareholders—expect companies to be able to balance profit
goals and objectives with people and planet objectives.
40
Part 1: Challenges to Present-Day Marketers 0.5-1 page answer
1. In your own words, identify three of the greatest challenges
to present-day marketing managers. Do NOT refer to the text,
or any outside reference.
2. Provide a real-world example of each of the challenges you
identified.
3. For EACH of the examples you gave, provide a recommended
solution (or solutions) to overcoming the challenge.
Part 2: (1 page answer)
Healthy Happy Homes
After two decades of real estate investing, Healthy Happy
Homes’ owner wanted to combine two personal passions: real
estate and living a quality, healthy life. After creating a Healthy
Home Checklist to review the environmental quality of the
living space (i.e., fabric, floor, cleaning supplies, air quality,
area hazards, etc.), Healthy Happy Homes provides

61. consultations with renters, current owners, potential buyers/
sellers to analyze and improve the quality of the living
environment to guide purchasing and/or renovation decisions.
In addition to the Healthy Home Checklist, Healthy Happy
Homes has generated a content-based educational series on
social media and speaking events to inform business and
individuals about seeking, developing, and maintaining a
quality living environment.
To complement the mission, Healthy Happy Homes has
compiled a database of businesses and contractors that provided
checklist-approved quality environmental services such as
organic fabric window treatments, clean air floors, organic
cleaning supplies, and quality construction materials.
Mission:
To empower/enable the highest quality of living in the purest
environment
Healthy Happy Homes has a mission statement yet is missing
the goals that will serve in the development of measurable,
achievable objectives for growing its business. Using the
sample mission and goals in the example case a model (example
on next page), and after reviewing the description of Happy
Healthy Homes, write three to five goals with bullet points.
As you are working on your objectives, consider these guiding
questions:
Mission: Big picture vision
· Does mission describe the overall “why” a company exists?
· What unique vision does the Mission Statement describe?
· What core values and principles does the company
represent?
Objectives: Measurable, obtainable outcomes

62. · How does your company maintain profitability?
· How does your company present customer service?
· What core values define your company’s growth, marketing,
and interaction?
· What aspects of managing change and marketing are
important to your company?
· What expectations do you have for your company and
customer interaction
Sample Mission and Objectives
Realty Business Leaders (RBL)
RBL began in 1996, to provide supportive digital technology
solutions for professionals in the real estate industry. They
serve agents, brokers, and investors in both residential and
commercial applications. They provide online, digital, and print
resources and tools for generating leads, supporting individual
agents and brokers to successfully grow and manage their
businesses. RBL’s cloud -based subscriptions provide total
access to marketing and sales software such as websites,
customer relationship management (CRM), lead generation, goal
tracking, and training materials that support conversion of
prospects into clients.
Mission:
To empower real estate industry professionals in exceeding
property buyers’ and sellers’ expectations through innovative,
accessible technology
Sample Goals:
Goal 1: Provide exceptional, best practice, innovative lead
generation tools
a. Provide exclusive qualified lead generation

63. b. Generate real-time analytics to provide intuitive activity and
insights
c. Provide leads that are compatible with CRM
Goal 2: Provide individual agent tools
a. Provide agents with industry best customer relationship
management platform
b. Grant access to agent-run website with tools to maximize the
transaction process
c. Enable access to best practices education and training to
support continued professional growth
Goal 3: Support brokers with beyond market standard tools
a. Sustain a state-of-the-art CRM system to enable maximum
efficiency for broker’s team
b. Provide robust lead routing to support broker’s team success
c. Create enhanced branding materials that enable broker’s team
to demonstrate true professionalism
d. Deliver the most innovative tools and education that meet the
needs of the changing real estate industry
Mission
The mission is an essential piece of every business. It
articulates an organization’s purpose, or reason for existence
and generally discusses what the organization hopes to become
(i.e. its strategic vision). A strong mission statement becomes
the foundation for decisions and core values and a compass of
sorts for leading the business in the right directions. It is a tool
for guiding the customer service and staff expectations as well.
When a business is starting out or going through change,
defining a mission statement is a critical step.
A company’s mission statement and goals should feel
symbiotic. The mission is broad and needs goals to direct
achievement; while the goals have limited value without the
vision captured within the mission. The mission statement may

64. also serve as a guide for whom the business serves and how it
serves them.
Goal
To monitor and evaluate a mission statement, it is essential to
incorporate goals. These goals outline the connection between
the mission and the operational aspects of the business. The
outcome of the goals will help to drive the development of
objectives that can be used to precisely measure the business’s
effectiveness in living up to the mission statement.