2. 2-2
Review of Chapter 1
What is Global
Marketing?
How is it different
from regular
marketing?
3. 2-3
Reasons for Global Marketing
Growth
– Access to new markets
– Access to resources
Survival
– Against competitors with lower costs (due to
increased access to resources)
4. 2-4
Global Marketing: What it is and
What it isn’t
Strategy development comes down to two
main issues similar to single country
marketing
– Target market
– Marketing Mix
5. 2-5
The Importance of Global Marketing
For US-based companies, 75% of sales
potential is outside the US.
– About 90% of Coca-Cola’s operating income is
generated outside the US.
For Japanese companies, 85% of potential is
outside Japan.
For German and EU companies, 94% of
potential is outside Germany.
6. 2-6
Standardization versus Adaptation
Globalization (Standardization)
– Developing standardized products marketed worldwide
with a standardized marketing mix
– Essence of mass marketing
Global localization (Adaptation)
– Mixing standardization and customization in a way that
minimizes costs while maximizing satisfaction
– Essence of segmentation
– Think globally, act locally
7. 2-7
Management Orientations
Ethnocentric:
Home country is
Superior, sees
Similarities in foreign
Countries
Regiocentric:
Sees similarities and
differences in a world
Region; is ethnocentric or
polycentric in its view of
the rest of the world
Geocentric:
World view, sees
Similarities and
Differences in home
And host countries
Polycentric:
Each host country Is
Unique, sees differences
In foreign countries
8. 2-8
Forces Affecting Global Integration
and Global Marketing
Driving Forces
– Regional economic
agreements
– Market needs and wants
– Technology
– Transportation and
communication
improvements
– Product development costs
– Quality
– World economic trends
– Leverage
Restraining Forces
– Management myopia
– Organizational culture
– National controls
9. 2-9
Introduction to Chapter 2
Market definition – People or organizations
with needs and wants; both have the
willingness and ability to buy or sell
The global economic environment plays a
large role in the development of new
markets for organizations
17. 2-18
Rank Country GDP (millions of USD)
— World 44,384,871
1 United States 12,455,068
2 Japan 4,505,912
3 Germany 2,781,900
4 People's Republic of China 2,228,862
5 United Kingdom 2,192,553
6 France 2,110,185
7 Italy 1,723,044
8 Spain 1,123,691
11 South Korea 787,624
12 India 785,468
14 Russia 763,720
19 Turkey 363,300
28 Greece 213,698
30 Iran 196,343
73 Bulgaria 26,648
74 Syrian Arab Republic 26,320
87 Cyprus 15,418
95 Iraq 12,602
Source:
World Bank
(2006)
22. 2-23
Gini coefficient
The Gini coefficient is a measure of statistical dispersion most
prominently used as a measure of inequality of income distribution or
inequality of wealth distribution. It is defined as a ratio with values
between 0 and 1: A low Gini coefficient indicates more equal income
or wealth distribution, while a high Gini coefficient indicates more
unequal distribution. 0 corresponds to perfect equality (everyone
having exactly the same income) and 1 corresponds to perfect
inequality (where one person has all the income, while everyone else
has zero income). The Gini coefficient requires that no one have a
negative net income or wealth. Worldwide, Gini coefficients range
from approximately 0.232 in Denmark to 0.707 in Namibia although
not every country has been assessed.
The Gini index is the Gini coefficient expressed as a percentage. Thus
Denmark's Gini index is 23.2%.
23. 2-24
Human Development Index
The Human Development Index (HDI) is an index
combining normalized measures of life expectancy,
literacy, educational attainment, and GDP per capita for
countries worldwide. It is claimed as a standard means of
measuring human development—a concept that, according
to the United Nations Development Program (UNDP),
refers to the process of widening the options of persons,
giving them greater opportunities for education, health
care, income, employment, etc. The basic use of HDI is to
rank countries by level of "human development", which
usually also implies to determine whether a country is a
developed, developing, or underdeveloped country.
25. 2-26
U.S. Multinational in Europe - 1960’s
Fifteen years from now the
world’s third greatest industrial
power, just after the United
States and Russia, may not be
Europe, but American industry in
Europe.
J.S. Servan Schreiber:
Le Defi American, 1967
What Happened?
2-3
27. 2-28
The World Economy – An Overview
The new realities:
– Capital movements have replaced trade as the
driving force of the world economy
– Production has become uncoupled from
employment
– The world economy, not individual countries, is
the dominating factor
28. 2-29
The World Economy – An Overview
The new realities continued:
– 75-year struggle between capitalism and
socialism has almost ended
– E-Commerce diminishes the importance of
national barriers and forces companies to re-
evaluate business models
29. 2-30
Economic Systems
4 main types of economic systems
– Market Capitalism
– Centrally planned socialism
– Centrally planned capitalism
– Market socialism
31. 2-32
Economic Freedom
Rankings of economic freedom among countries
– Ranges from “free” to “repressed”
Variables considered include such things as:
– Trade policy
– Taxation policy
– Banking policy
– Wage and price controls
– Property rights
32. 2-33
Economic Freedom
Free
– Hong Kong
– Singapore
– Ireland
– New Zealand
– United States
– United Kingdom
– Netherlands
– Australia
– Switzerland
Repressed
– Bosnia
– Vietnam
– Laos
– Iran
– Cuba
– Iraq
– Libya
– North Korea
– Congo
33. 2-34
Buying Boom for Asia, 1995-2000
Millions of
households
approaching
$18,000 per year
buying power
Indexed to
Singapore prices
14.4
32.5
73.3
1991 1995 2000
What the added Between 1993 and
middle class will 1995 2000
buy (In million)
Bedrooms 32 116
Living Rooms 16 58
Kitchens 16 58
Bathrooms 32 116
Living space (sq.m.) 1,200 4,350
Large appliances 16 58
Televisions 24 87
Telephones 24 87
Cars 16 58
SOURCE: Bill Saporito, “Where the Global Action Is.”
Fortune, Autumn-Winter 1993, p.64.
34. 2-35
What Would One U.S. Dollar Buy?
(Selected Years)
1985 1987 1988 1992 1993 1994 1995 1996 1997 1999 2000
British Pound 0.86 0.67 0.54 0.56 0.66 0.68 0.63 0.64 0.59 0.62 0.68
French Franc 9.6 7.55 5.4 5.29 5.67 5.55 4.95 5.12 5.94 6.49 7.28
Japanese Yen 250.23 123.32 123.70 126.70 111.08 102.18 93.96 108.78 129.15 102.58 112.21
Swiss Franc 2.25 2.07 1.29 1.41 1.48 1.37 1.18 1.24 1.43 1.58 1.68
EURO 0.99 1.11
Mexico Peso 0.37 2.21 2.28 3.12 3.11 5.31 6.45 7.60 7.92 9.43 9.47
* Foreign Exchange Rates for 1999 and 2000 are the average rate pf exchange in December.
Source: Adapted from www.stat-usa.gov
38. 2-39
Rapidly Developing Economies
The term "rapidly developing economies" is
now being used to denote emerging markets
such as
– The United Arab Emirates,
– Chile and
– Malaysia
that are undergoing rapid growth.
40. 2-41
Stages of Market Development
World Bank has defined four categories of
development
– High-income countries
– Upper-middle income countries
– Lower-middle income countries
– Low-income countries
Based upon Gross National Product (GNP)
41. 2-42
Marketing Opportunities in LDCs
Characterized by a shortage of goods and
services
Long-term opportunities must be nurtured
in these countries
– Look beyond per capita GNP
– Consider the LDCs collectively rather than
individually
– Consider first mover advantage
– Set realistic Deadlines
43. 2-44
Influencing the World Economy
Group of Seven (G-7)
Organization for Economic Cooperation and
Development
The Triad
44. 2-45
The Triad: Trade Between the United States and Canada,
the European Community, and Japan, 1997 ($ billions)
EUROPEAN
COMMUNITY
UNITED STATES &
CANADA
JAPAN
For additional figures see: “Indicators of Market Size for 115 Countries I”
Crossborder Monitor, August, 1994, pp.4-7
97.1 31.4
110.9 68.8
52.7
99.5
45. 2-46
N-11
The Next Eleven (or
N-11) is a short list of
countries named by
Goldman Sachs
investment bank on 1
December 2005 as
having promising
outlooks for investment
and future growth.
47. 2-48
BRIC
BRIC or BRICs are terms used to refer to the
combination of Brazil, Russia, India, and China.
The economies of the BRICs are rapidly
developing and by the year 2050 will eclipse most
of the current richest countries of the world.
48. 2-49
BRICET
"BRIMC" (M for Mexico),
"BRICS" (S for South Africa)
"BRICET" (including Eastern Europe and
Turkey)
have become more generic marketing terms to
refer to these emerging markets.
49. 2-50
Market Characteristics
• Population demographics
- Age distribution, life expectancy, household size, urbanisation
• Income
- Low, Medium and High
- GDP per capita
- Purchasing Power Parity (PPP)
• Consumption Patterns
- Income spent on necessities and luxuries
- Product saturation and diffusion
- Product form differences
50. 2-51
Market Characteristics
Availability and quality of infrastructure
- Distribution networks (road, rail)
- Communication systems for marketing
- Supply and use of energy
Foreign involvement in the economy
- Degree of FDI (foreign direct investments) and the industries
- Investment rules and guidelines
Impact of economic environment on social
development
- urbanisation, life expectancy, literary rates, physical quality of life
index (PQLI)
52. 2-53
Marketing Implications of the
Stages of Development
Product Saturation
Levels
– The percentage of
potential buyers or
households that
own a particular
product
– Graph shows that
in India a private
phone is owned by
1% of the
population
53. 2-55
Balance of Payments
The balance of payments (or BOP)
measures the payments that flow between
any individual country and all other
countries.
54. 2-56
Balance of Payments (2005)
Blue = countries in current account surplus; Red = countries in current account deficit, 2005
57. 2-61
Managed Dirty Float?
Definitions
– Float refers to the system of fluctuating
exchange rates
– Managed refers to the specific use of fiscal and
monetary policy by governments to influence
exchange rates
• Devaluation is a reduction in the value of the local
currency against other currencies
58. 2-62
Managed Dirty Float?
Definitions
– Dirty refers to the fact that central banks, as
well as currency traders, buy and sell currency
to influence exchange rates
59. 2-63
Foreign Exchange Market Dynamics
Supply and Demand interaction
– Country sells more goods/services than it buys
– There is a greater demand for the currency
– The currency will appreciate in value
60. 2-64
Purchasing Power Parity (PPP) –
The Big Mac Index
Is a certain currency over/under- valued compared
to another?
Assumption is that the Big Mac in any country
should equal the price of the Big Mac in the US
after being converted to a dollar price
62. 2-66
Managing Economic Exposure
Economic exposure refers to the impact of
currency fluctuations on the present value
of the company’s future cash flows
– Transaction exposure is from sales/purchases
– Real operating exposure arises when currency
fluctuations, together with price changes, alter a
company’s future revenues and costs
63. 2-67
Managing Economic Exposure
Numerous techniques and strategies have
been developed to reduce exchange rate risk
– Hedging involves balancing the risk of loss in
one currency with a corresponding gain in
another currency
– Forward Contracts set the price of the exchange
rate at some point in the future to eliminate
some risk
64. 2-68
Looking Ahead
Chapter 3 – The Global Trade Environment:
Regional Market Characteristics and
Preferential Trade Agreements
66. 2-70
Market Capitalism
Individuals and firms allocate resources
Production resources are privately owned
Driven by consumers
Government should promote competition
among firms and ensure consumer
protection
68. 2-72
Index of Economic Freedom
In practice, the index measures:
– Size of Government: Expenditures, Taxes, and
Enterprises
– Legal Structure and Security of Property Rights
– Access to Sound Money
– Freedom to Trade Internationally
– Regulation of Credit, Labor, and Business
Return
69. 2-73
Centrally Planned Socialism
Opposite of market capitalism
State holds broad powers to serve the public
interest; decides what goods and services are
produced and in what quantities
Consumers can spend on what is available
Government owns entire industries
Demand typically exceeds supply
Little reliance on product differentiation,
advertising, pricing strategy
Return
71. 2-75
Market Socialism
Economic system in which market
allocation policies are permitted within an
overall environment of state ownership
Examples:
– China
– India
Return
72. 2-76
Low-Income Countries
GNP per capita of $785 or less
Characteristics
– Limited industrialization
– High percentage of population involved in farming
– High birth rates
– Low literacy rates
– Heavy reliance on foreign aid
– Political instability and unrest
Of these, only China and India are BEMs
Return
73. 2-77
Lower-Middle-Income Countries
GNP per capita between $786 and $3,125
Sometimes called less-developed countries
(LDCs)
Characteristics
– Early stages of industrialization
– Cheap labor markets
– Factories supply items such as clothing, tires, building
materials, and packaged foods
3 BEMs: Poland, Turkey, Indonesia
75. 2-79
Upper-Middle-Income Countries
GNP per capita between $3,126 to $9,655
Characteristics
– Rapidly industrializing
– Rising wages
– High rates of literacy and advanced education
– Lower wage costs than advanced countries
Sometimes called newly industrializing economies (NIEs)
3 BEMs: Argentina, Brazil, Mexico, South Africa
Return
76. 2-80
High-Income Countries
GNP per capita above $9,656
Sometimes referred to as post-industrial countries
Characteristics
– Importance of service sector, information processing
and exchange, and intellectual technology
– Knowledge as key strategic resource
– Orientation toward the future
Return
77. 2-81
Group of Seven (G-8)
Leaders from these high income countries work to
establish prosperity and ensure monetary stability
Return
World
Development
Report 2006
79. 2-83
Organization for Economic
Cooperation and Development
30 nations each with market-allocation
economic systems
Mission: to enable its members to achieve
the highest sustainable economic growth
and improve the economic and social well-
being of their populations
www.oecd.org
82. 2-86
The Triad
Dominant economic centers of the world
– Japan
– Western Europe
– United States
Expanded Triad
– Pacific Region
– North America
– European Union
88. 2-92
Economic Integration in Asia
Asia-Pacific Economic Cooperation (APEC)
Association of Southeast Asian Nations
(ASEAN)
East Asia Economic Group
South Asian Association for Regional
Cooperation (SAARC)
89. 2-93
Economic Integration in Africa and the
Middle East
Economic Community of West African
States (ECOWAS)
Afro-Malagasy Economic Union
East Africa Customs Union
West African Economic Community
Maghreb Economic Community
Gulf Cooperation Council (GCC)
