Global Marketing Strategy Introduction - Professor Bahman Moghimi - The University of Georgia Tbilisi.pdf

Global Economic Environment
and Scoop and Strategies of
International Marketing
Bahman Moghimi (PhD, DBA, MBA)
Professor/ Academic Staff at School of Business and Administrative Studies
The University of Georgia. Tbilisi
‫ه‬ ‫د‬ ‫ا‬ ‫و‬ ‫د‬ ‫و‬‫جان‬‫د‬ ‫داو‬ ‫م‬
‫ذرد‬ ‫ن‬

PART 3
The Global Economic
Environment and Scoop
Bahman Moghimi (PhD, DBA, MBA)
University of Georgia
Tbilisi

Quotation
Only two things are infinite, the universe and human
stupidity, and I'm not sure about the former!
Albert Einstein
US (German-born) physicist (1879 – 1955)
B.Moghimi@yahoo.co.uk
3

What is Paradigm?
4

B.Moghimi@yahoo.co.uk 6
What is Paradigm?

What is Paradigm Shift?
8

What is Paradigm Shift?
 Information Age
 Buy-Side Market Place
 Competitors
 High Expectations
 High Rate of Change in Buying Behavior
 E-Life !!!!
9

11
The Way To Paradigm Shift ...

12
The Way To Paradigm Shift ….

13
The Way To Paradigm Shift …..

14
Old Economy V.S. New Economy
Old Economy New Economy
Organize by product units
Focus on profitable transactions
Look primarily at financial scorecard
Focus on shareholders
Marketing does the marketing
Build brands through advertising
Focus on customer acquisition
No customer satisfaction measurement
Over-promise, under-deliver
Organize by customer segments
Focus on customer lifetime value
Look also at marketing scorecard
Focus on stakeholders
Everyone does the marketing
Build brands through behavior
Focus on customer retention and growth
Measure customer satisfaction & retention
Under-promise, over-deliver

15
Why do we do business?!!
1. Profit
2. Turn Over
3. Credit

16
Why do we buy goods or services?
 Differentiation
 Price

How much do you pay for a cup of coffee in Tbilisi?
20

AMA Definition of Marketing
Old (1985-2004)
Old (1985-2004)
Marketing is the process of planning and
executing the conception, pricing,
promotion, and distribution of ideas, goods,
and services to create exchanges that will
satisfy individual and organizational
objectives …???
21

New (August 2004+)
New (August 2004+)
"Marketing is an organizational function
and a set of processes for creating,
communicating and delivering value to
customers and for managing customer
relationships in ways that benefit the
organization and its stakeholders."
22

My Definition?
 All the process within the organization in
which we exchange [different types and
models of] value with stakeholders to
create a long-term (life-long) relationships
with [all of] them.
23

The Marketing Mix Variables
Product
Distribution Promotion
Price
Target
Market
24

Product Strategy
Product Strategy
Identifying consumer needs &
wants
New product development
Designing the product
Branding
Packaging
…
25

Distribution Strategy
Distribution Strategy
Physical distribution
Channel management
26

Pricing Strategy
Pricing Strategy
Pricing objectives
Price determination
Pricing policies
27

Promotion Strategy
Promotion Strategy
Advertising
Personal selling
Sales promotion
Publicity, Public Relations
28

What is a Market?
Potential consumers make up
a market, which is:
People
 with the desire and
 with the ability to buy a specific product or service.
29

The Target Market
Marketers usually concentrate their efforts on
certain needs of a specific group of potential
consumers.
This is the target market -- one or more specific
groups of potential consumers toward which an
organization directs its marketing program.
+or - and WHY ??????
30

The Marketing Concept
(a belief system)
The Marketing Concept
(a belief system)
Customer orientation
Coordinated effort by all departments of
the firm to satisfy customers
Emphasis on long term relationships
This is most profitable way to do business
over the long term
31

Marketing’s Dark Side...
 Given the Marketing Concept; why would anyone
criticize Marketing???
1) Marketing unfairly takes the
blame for many business evils
2) Unhealthy products/Waste
3) Focus on Children
4) “Manufacturing” consumer demand
32

Marketing’s Dark Side...
 Does business have more of a “social conscience” today than in
the past?
 1950’s/1960’s
 Yes. Sort of businesses with no ethics…
 Business is “better” than it used to be largely as a result of two
forces:
 Consumer Movement
 Legislation
33

What is Marketing? ..
 Marketing involves in developing product that provides
superior value, and prices, distributes and promotes
them effectively.
 Advertising and selling are only part of a larger marketing
mix- a set of tools that work together to satisfy customer
needs and build customer relationship
Thus marketing is …
 All social and managerial processes by which individuals
and groups obtain what they need and want through
creating and exchange products and value with others
34

International marketing environment
Firm in
international
markets
Culture
and values
Resources Technology
Political
economy
Customers Competitors
35

Reasons for internationalization
 small or saturated home market, no growth or better
opportunities abroad
 excess capacity/resources or unique competence in the firm
 following competitors or customers abroad
 management aspirations/international orientation
 opportunistic response to unsolicited request
 backward or forward integration to reduce costs and increase control
36

International market fragmentation and forces for
consolidation
Increased investment in
capital equipment
Market
fragmentation
Market
consolidation
Differences in consumer tastes
New niche markets
Standardised low-cost products
Competitor acquisition
Differences in culture &
language
Short life cycles
Technical standards
High industry exit costs
Increased marketing expenditures
Rationalization of
production capacity
Corporate and product branding
Market maturity
Low industry entry costs
37

The global connection
• Technology
• Market access
• Competitiveness
• Political economy
38

Impact of technology and market liberalization
on the international firm
Liberalization of international
markets
International
firm
Advances in technology
•information and communications
•transportation
•manufacturing
Emergence of new markets
•Eastern European countries …
•China
•African countries
Regional market integration
•EU ….
•NAFTA …
•MERCOSUR
39

Levitt’s view of global standardization
Standardization provides global scale economies and
experience curve benefits in production, distribution,
marketing and management
Global companies can reduce unit costs which allows them
to price penetrate markets and force non-global
competitors out
‘The global corporation operates with resolute
constancy  at low relative cost  as if the entire
world (or major regions of it) were a single entity;
it sells the same things in the same way
everywhere’ (Levitt 1983)
40

Criticisms of Levitt’s assumptions about
globalization
Levitt’s assumptions
1. Customer needs/interests
becoming increasingly
homogeneous worldwide
2. People around the world
willing to sacrifice preferences
in product features, functions,
design etc. for lower prices
and higher quality
Criticisms of the assumption
• not a universal trend
• diversity of behaviour/tastes within countries
• price-sensitive segments exist but
differentiation is also a valid strategy
• brand loyalty is a source of differentiation
• brand loyalty is effective basis for competition
• increased emphasis on product variety and
service in recent years
The evidence for globalization is not as strong as Levitt and his supporters
maintain.
41

Yip’s globalization drivers
• Market drivers
• Cost drivers
• Competitive drivers
• Government drivers
42

What is international marketing?
Process by which the firm:
• Identifies needs and wants of customers in different international
markets
• Provides products, services and ideas competitively to satisfy needs
and wants of different customer groups
• Communicates information about the products and services
• Delivers the products and services internationally using one or a
combination of foreign market entry modes
43

Providing, communicating and delivering value
Identifying the Value Selecting the Value
Providing the Value
Communicating the Value
Delivering the Value
Source: Bradley, Frank (1995): Marketing Management  Providing, Communicating and Delivering Value, Prentice Hall, Hemel Hempstead, England
44

Technology-product-market decisions
International markets
New
products
New technology
Existing
positions
1 2
3
4
5
6
7 8
Source: adapted from Carroad, P.A. and Carroad, C.A. (1982) ‘Strategic interfacing of R&D and marketing’, Research Management, January, 2833.
45

International market and product
allocation strategies
Over-
investing
Under-
investing
INTERNATIONAL MARKET PORTFOLIO
PRODUCT
PORTFOLIO
Concentrate
d
Diversified
Concentrated Diversified
46

Improving
international marketing
performance
Sales
Growth
Profit
Growth
Market penetration
New product development
International market
development
Global market integration
Increase sales yield
Reduce production costs
Integrate global suppliers
Reduce investment
intensity
Selective market focus
Improved
marketing
performance
47

Strategic differentiation and international
marketing performance
Sources of strategic
differentiation
• Knowledge of markets
and customers
• Product and customer mix
• Channel relationships
• Manufacturing technology
• Organizational culture
Investment
• People, products, services
• International markets
Strategic differentiation
• Provide new customer benefits
• Focus on relevant customer values
Superior operations
• Customized high quality
• Low cost
• Speed to market
Company performance and
profitability
• Returns and sales growth
• Cash flow to support international
operations
48

Product-market mode of entry
decision for the international firm
New
products
Foreign direct
investment
Mode of foreign
market entry
Existing
products
Exporting
Joint venture
Licensing
Product decisions
Market
decisions
International
Domestic
49

Impact of investment critical mass on
company success
Market returns
Resources invested
Above critical mass
Within reach of
critical mass
Below critical mass
50

Stage 5
Implementing international
marketing strategies and
measuring performance
Internationalization of the Firm
A five stage process
Stage 1
Decision to internationalize
Stage 2
Understanding the international
marketing environment
Stage 4
How the firm enters
international markets
Stage 3
Designing the international
marketing programme
51

Process model of international marketing
Scope and
framework
Company
capabilities
Environment
Competitors
Culture
Competitive
advantage
Political risk
Product-
markets profiles
Vision & strategy
Strategy
Market entry
Strategic alignment
Consumer
products
Exporting
Generic
entry strategies
Distribution
Pricing
Services firm
Strategic alliances
FDI
Negotiations
Performance
Industrial
products firm
Stage 1
Stage 2
Stage 3
Stage 4
Stage 5
52

Importance of International
Marketing
International expansion helps firm:
– Keep pace with competition
– Reach a larger market
– Reap higher profits
– Prolong the lifecycle of their products
– Democratization is increased
– Innovation is guaranteed
– ….

Market expansion
Market expansion is a
growth strategy which
involves offering your
existing product/service
to a new market. This
“new market” is
generally outside of the
current geographic
regions in which you
currently operate.
Depending on your
business, you might
have multiple goals to
accomplish with your
market expansion plan B.Moghimi@yahoo.co.uk

Product portfolio
A product portfolio is the collection of all the products or
services offered by a company. Product portfolio analysis
can provide nuanced views on a stock type, company
growth prospects, profit margin drivers, income
contributions, market leadership, and operational risk.
Understanding the concept of product portfolio is essential
for investors conducting equity research by investors or
analysts supporting internal corporate financial planning

The Global Market Portfolio
The Global Market Portfolio represents all assets—stocks,
bonds, real estate, commodities, and other investments
issued by governments and corporations—weighted in
proportion to their relative market values

Market Entry Strategies
When an organization has made a decision to enter an overseas
market, there are a variety of options open to it. These options vary
with cost, risk and the degree of control which can be exercised over
them.
The simplest form of entry strategy is exporting using either a direct
or indirect method such as an agent, in the case of the former, or
countertrade, in the case of the latter. More complex forms include
truly global operations which may involve joint ventures, or export
processing zones. Having decided on the form of export strategy,
decisions have to be made on the specific channels.
Many agricultural products of a raw or commodity nature use agents,
distributors or involve Government, whereas processed materials,
whilst not excluding these, rely more heavily on more sophisticated
forms of access.

Strategies for entry into foreign markets
Cunningham1 (1986) identified five strategies used by firms
for entry into new foreign markets:
i) Technical innovation strategy - perceived and demonstrable superior
products
ii) Product adaptation strategy - modifications to existing products
iii) Availability and security strategy - overcome transport risks by
countering perceived risks
iv) Low price strategy - penetration price and,
v) Total adaptation and conformity strategy - foreign producer gives a
straight copy

Levels of International Marketing
Domestic
Marketing
Export
Marketing
International
Marketing
Global
Marketing
• Least
international
commitment
• Domestic
focus
• Limited
international
commitment
• Involves direct
or indirect
export
• Ethnocentric
• Substantial
international
commitment
• Focus on
individual
countries or
regions
• Polycentric or
Regiocentric
• Extensive
international
commitment
• Focus on
segments,
rather than
countries or
regions
• Geocentric

Different methods
Direct - Agent, distributor,
Government, overseas subsidiary
 Advantages:
 sharing of risk and knowhow,
 may be only means of entry,
 may be source of supply for third
country.
 Disadvantages:
 Partners do not have full control
or management,
 May be impossible to recover
capital,
 disagreement between purchasers
or third party - served markets,
 Advantages:
 host country obtains knowhow,
 capital, technology, employment
opportunities;
 foreign exchange earnings;
 "reputation", "internationalization".
 Disadvantages
 short term investments.
 capital movements, Low control
 employment movements.
 labor laws may change.
 bureaucracy
Indirect - Trading company, export
management Co, piggyback, countertrade

International Philosophy
Corporation &
Business Lines
Human
Resources
Marketing
&
Sales
Manufacturing
& Distribution
Finance
Management
internationalization
philosophy affects
all functional areas
of the corporation.

Ethnocentric Orientation
Guided by domestic market extension concept:
Domestic strategies, techniques, and personnel are
perceived as superior
International customers are considered as
secondary
International markets are regarded primarily as
outlets for surplus domestic production
International marketing plans are developed in-
house by the international division

Polycentric Orientation
Guided by the multi-domestic market concept:
Focuses on the importance and uniqueness of each
international market
Likely to establish businesses in each target country
Fully decentralized, minimal coordination with
headquarters
Marketing strategies are specific to each country
Result: No economies of scale, duplicated functions,
higher final product costs

Regiocentric Orientation
Guided by the global marketing concept:
World regions that share economic,
political, and/or cultural traits are perceived
as distinct markets
Divisions are organized based on location
Regional offices coordinate marketing
activities

Geocentric Orientation
Guided by the global marketing concept:
The world is perceived as a total market with
identifiable, homogenous segments
Targeted marketing strategies aimed at market
segments, rather than geographic locations
Achieve position as low-cost manufacturer and
marketer of product line
Provides standardized product or service
throughout the world

Drivers of International Expansion
Competition
Regional Economic and
Political Integration
Technology
Improvements in Transportation and
Telecommunication
Economic Growth
Transition to Market Economy
Converging Consumer Needs

Drivers of International
Expansion, continued
COMPETITION
McCann Erickson, the
advertising agency,
follows longtime client,
Coke, to all countries
where company is
present

Regional agreements such as
NAFTA, MERCOSUR, and the
European Union lower and
eliminate barriers and promote
trade within common markets.
Subsidiaries are established in
specific markets to take
advantage of free trade within the
region.
REGIONAL, ECONOMIC and POLITICAL INTEGRATION

TECHNOLOGY
• Consumers worldwide
are exposed to similar
products, services, and
entertainment.
• The Web and the
Internet have
revolutionized the way
companies conduct
business.

• Lower cost and higher
quality communication
due to satellite technology,
teleconferencing, and
e-mail
• Efficient transportation due
to containerization and just-
in-time technology
TRANSPORTATION and TELECOMMUNICATIONS

• Emerging middle class with
increasing buying power in
big emerging markets such as
Brazil and India
• Opening of new markets
previously closed, such as the
markets of China and
Vietnam
• Emerging economies are
becoming viable trade
partners
ECONOMIC GROWTH

• Transition of the Eastern Bloc
to a market economy created
important new markets
• Created opportunities to
transform inefficient
government-owned local
companies into successful
enterprises
TRANSITION to a MARKET ECONOMY

• Uniform consumer segments
emerging worldwide: global
teenagers, global elite
CONVERGING CONSUMER NEEDS

Firm-Specific Drivers
BACK to PLS: Global marketing is an opportunity to prolong
product lifecycle by entering growth markets.
Sales
Intro Growth Maturity Decline
Profits
Sales

Firm-Specific Drivers, continued
High New Product Development Costs:
Firm must look beyond home-country
market to recover investment costs

Price competition during maturity drives firm to new
international markets
Standardization, Scale Economies, Cheap Labor
Intro Growth Maturity Decline
Sales
Profits
Sales
Time

Experience Transfers
Experience in one country serves as basis for strategies
in new international markets.

Obstacles to Internationalization
Self-reference Criterion
– Conscious and unconscious reference to own national
culture while operating in the host country
– To counter the impact of the self-reference criterion, the
corporation must select appropriate personnel for
international assignments and engage in sensitivity
training
Government Barriers
– Restrictions placed on foreign corporations by
imposing tariffs, import quotas, and other limitations,
such as restrictive import license awards

Obstacles to Internationalization,
continued
Barriers Imposed by International
Competition
– Blocked channels of distribution
– Exclusive retailer agreements
– Price reductions at the time of market entry
– Advertising blitzes

Review of the Chapter
What is Global
Marketing?
How is it different
from regular
marketing?

Reasons for Global Marketing
Growth
– Access to new markets
– Access to resources
Survival
– Against competitors with lower costs (due to
increased access to resources)

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

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.

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

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

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

Top Ten 2000 U.S. Trading
Partners ($ billions)
Canada $176.4 $229.2 $405.6 -$52.8
Mexico 111.7 135.9 247.6 -24.2
Japan 65.3 146.5 211.8 -81.3
China 16.3 100.0 116.3 -83.8
Germany 29.3 558.7 88.0 -29.5
United Kingdom 41.5 43.5 85.0 -1.9
South Korea 27.9 40.3 68.2 -12.4
Taiwan 24.4 40.5 64.9 -16.1
France 21.0 29.0 50.0 -8.0
Singapore 17.4 19.6 37.0 -2.2
Country U.S. Exports U.S. Imports Total Surplus/
Deficit
2-2

Turkish Trading Partners (2005)
Germany 13%,
UK 8.2%,
Italy 7%,
US 6.9%,
France 5.1%,
Spain 4.2%

Gross National Product TURKEY
Year Population
Total Per Person
Million $ % $ %
1995 61,644 170,081 28.6 2,759 26.3
1996 62,697 183,601 7.9 2,928 6.1
1997 62,480 192,383 4.8 3,079 5.2
1998 63,459 206,552 7.4 3,255 5.7
1999 64,345 185,267 -10.3 2,879 -11.6
2000 67,461 200,002 8 2,965 3
2001 68,618 145,693 -27.2 2,123 -28.4
2002 69,620 180,828 24.1 2,597 22.3
2003 70,717 239,235 32.3 3,383 30.2
2004 71,782 299,475 25.2 4,172 23.3
2005 72,070 360,876 20.5 5,008 20

Gross National Product TURKEY

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)

Gross Domestic Income (Nominal)

Rank Country
GDP (PPP)
$ per capita
1 Luxembourg 69,800
2 Norway 42,364
3 United States 41,399
6 Denmark 34,740
7 Canada 34,273
8 Hong Kong 33,479
9 Austria 33,432
10 Switzerland 32,571
17 Germany 30,579
21 Italy 28,534
30 Greece 22,392
33 Cyprus 21,177
62 Russia 11,041
66 Bulgaria 9,223
74 Iran 7,980
75 Turkey 7,950
107 Azerbaijan 4,601
118 Syria 3,847

Purchasing Power Parity (per capita)

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%.

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.

Human Development Index
2008 update

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

The Nationality of the World’s 100 Largest
Industrial Corporations (by country of origin)
United States 67 47 47 33 32 24 24 36
Germany 13 13 8 12 14 14 13 12
Britain 7 7 5 6 4 1 2 5
France 4 11 5 10 6 12 13 11
Japan 3 7 12 18 23 37 29 22
Italy 2 3 3 4 4 3 4 3
Netherlands-United Kingdom 2 2 2 2 2 2 2 --
Netherlands 1 3 1 1 1 2 2 5
Switzerland 1 1 2 3 3 3 5 3
Argentina -- -- 1 -- -- -- -- --
Belgium -- 1 1 -- -- -- -- 1
Brazil -- 1 -- 1 1 -- -- --
Canada -- 2 3 -- -- -- -- --
India -- -- 1 -- -- -- -- --
Kuwait -- -- 1 -- -- -- -- --
Mexico -- 1 1 1 1 -- 1 --
Venezuela -- 1 1 1 1 -- 1 --
South Korea -- -- 4 2 4 2 4 --
Sweden -- -- 1 2 1 -- -- --
South Africa -- -- 1 1 -- -- -- --
Spain -- -- -- 2 2 -- -- --
Turkey -- -- -- -- 1 -- -- --
China -- -- -- -- -- -- -- 2
1963 1979 1984 1990 1993 1995 1996 2000
2-4

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

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

Economic Systems
4 main types of economic systems
– Market Capitalism
– Centrally planned socialism
– Centrally planned capitalism
– Market socialism

Economic Systems
Market Command
Market
Capitalism
Centrally
Planned
Capitalism
Market
Socialism
Centrally
Planned
Socialism
Private
Resource
Ownership
State
Resource Allocation

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

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

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.

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

The Price of Protectionism
Industry Total Costs to Number of Cost per
Consumers Jobs Saved Job Saved
(in $ millions)
Textiles and
apparel $27,000 640,000 $ 42,000
Carbon Steel 6,800 9,000 $ 750,000
Autos 5,800 55,000 $ 105,000
Dairy products 5,500 25,000 $ 220,000
Shipping 3,000 11,000 $ 270,000
Meat 1,800 11,000 $ 160,000
SOURCE: Michael McFadden, “Protectionism Can’t Protect Jobs,”
Fortune, May11, 1987, pp. 125.

Big Emerging Markets
China
India
Indonesia
South Korea
Brazil
Mexico
Argentina
South Africa
Poland
Turkey ██ Emerging markets██ Developed markets

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.

Stages of Market Development

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)

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

Turkey
Return

Influencing the World Economy
Group of Seven (G-7)
Organization for Economic Cooperation and
Development
The Triad

The Triad: Trade Between the United States and Canada,
the European Community, and Japan, 1997 ($ billions)
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
97.1 31.4
31.4
110.9
110.9 68.8
68.8
52.7
52.7
99.5
99.5

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.

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

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)

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

Balance of Payments
Record of all economic transactions
between the residents of a country and the
rest of the world
– Current account – record of all recurring trade
in merchandise and services, private gifts, and
public aid between countries
• trade deficit
• trade surplus
– Capital account – record of all long-term direct
investment, portfolio investment, and capital
flows

Balance of Payments
• BOP measures the payments that flow between any individual
country and all other countries.

List of the largest trading partners of the US

Overview of International Finance
Foreign exchange makes it possible to do
business across the boundary of a national
currency
Currency of various countries are traded for
both immediate (spot) and future (forward)
delivery
Increases the risk to organizations that are
involved in global marketing

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

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

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

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

Big Mac Index for Selected
Countries

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

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

Looking Ahead
Chapter 3 – The Global Trade Environment:
Regional Market Characteristics and
Preferential Trade Agreements

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

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

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

Centrally-Planned Capitalism
Economic system in which command
resource allocation is used extensively in an
environment of private resource ownership
Examples:
– Sweden
– Japan
Return

Market Socialism
Economic system in which market
allocation policies are permitted within an
overall environment of state ownership
Examples:
– China
– India
Return

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

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

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

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

Group of Seven (G-8)
Leaders from these high income countries work to
establish prosperity and ensure monetary stability
Return
World
Development
Report 2006

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

OECD Members (2006)
Return

The Triad
Dominant economic centers of the world
– Japan
– Western Europe
– United States
Expanded Triad
– Pacific Region
– North America
– European Union

EU Statistics
Return

APEC
Asia Pacific Economic Cooperation
Members
– US, Japan, China, Australasia, Russia, …
Goal
– Lose economic association, forum

Product life-cycle
It is defined as five distinct stages: product development, market
introduction, growth, maturity, and decline. Depending on the stage
a product is in, a company may adopt different strategies along the
product life cycle. For example, a company is more likely to incur
heavy marketing and R&D costs in the introduction stage. As the
product becomes more mature, companies may then turn to improving
product quality, entering new segments, or increasing distribution
channels.
Product life-cycle management is the succession of strategies by
business management as a product goes through its life-cycle. The
conditions in which a product is sold changes over time and must be
managed as it moves through its succession of stages.

Product life-cycle

What are the 5 product strategies in
marketing?
The 5 areas you need to make decisions about are:
PRODUCT, PRICE, PLACE, PROMOTION AND
PEOPLE. Although the 5 Ps are somewhat controllable,
they are always subject to your internal and external
marketing environments.

The Five Most Important Decisions in
International Marketing
The international marketing mix.
The culture.
Legal and regulatory barriers.
Local government rules.
Selling your products and services.

Important branding decisions in international
marketing.

Product decisions
They are decisions about a company's product or service to
meet customer demand and ensure business success.
Product quality, feature, and design are product attribute
decisions. Product attributes, branding, packaging,
labeling, and support services are individual product
decisions.
Types of Product policy decision
– Individual product decision
– Product line decision
– Product mix decision
– Product positioning decision

Product mix
Also known as product assortment or product portfolio, refers
to the complete set of products and/or services offered by a
firm. A product mix consists of product lines, which are
associated items that consumers tend to use together or think
of as similar products or services.
There are five product dimensions: color, configuration, size,
style, and version. These five also have “Width, Length,
Depth and Consistency” included in them. You combine
product dimensions in dimension groups and assign dimension
groups to product masters. The combinations of product
dimensions determine how product variants are defined.

International product strategy
International product strategy regarding global
standardization and local adaptation is one of the
challenges faced by multinational corporations (MNCs).
Some of the global business product characteristics are:
- Price. - Prestige.
- Features. - Timeliness.
- Selection. - Reliability.
- Service. - Responsiveness.
- Convenience - Unrecognized Needs
- The “Cool Factor” such as design or specific age
Reference of the original article: International Product Strategy

Factors Influencing Pricing Strategy
Different approaches to gaining new customers
PLC Position and Innovation Strategies.
Declining Demand.
Supply Chain Disruptions and Inflation.
Reevaluation of Existing Business Relationships.
“Hardship” Price Reduction Requests.
Increased Awareness of the Competition.
Demand for a Customization.
Technology and Systems

Important Factors that Determine the
Fixation of Price
(i) Cost of Production [Who knows ABC accounting?)
(ii) Demand for Product
(iii) Price of Competing Firms
(iv) Purchasing Power of Customers
(v) Government Regulation
(vi) Organizational Objective
(vii) Marketing and Distribution Method Used

factors influencing pricing strategies in the
international markets?
International Marketing Objectives
Cost of Product.
Transportation and Insurance
Customs Costs and Rates
Demand
Business Competition
Exchange Rate
Product Differentiation
Prestige

Have you heard of “Export Finance”?
Export Finance is to finance the purchase of capital goods
through a loan agreement granted to the importer, secured
by sovereign guarantors, among other : Export Credit
Agency (ECA) from the exporter's country, Multilateral /
Bilateral institution, Sovereign / Sub-sovereign obligor
Export financing cncompasses all of the methods and
mechanisms by which firms fund the production, sale, and
delivery of goods and services to foreign buyers, and the
ways they alleviate the risks of doing business abroad

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)

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)

Factors Affecting Channels of Distribution
Different factors affect the choice of a distribution channel and
differ from firm to firm. The choice of suitable distribution
channel is one of the most important decisions to be taken while
marketing products because at the end of the day it will be the
channel that will have an impact on the time and costs of
distribution and the volume of the sales generated by the
company.
Channel infrastructure has also been found to impact pricing and
promotion efforts of the distributors and often they clearly
indicate the role to be played by the intermediaries in the
distribution chain.

Factors Affecting Channels of Distribution
(Company – Intermediary- Distributors-Retailers)
Availability
Legal Constraints
The Extent of Control Desired
Reputation of the Company
Environmental Factors
Legal Factors
Social/ Cultural Considerations
Geographical Segments
Availability of Retailers
Availability of Competition
Inflationary / Recessionary
conditions
Financial Resources of the Company
Managerial Competence
Standardization
Price of the Product
Seasonality
Perishability
Size and Weight
Technical Nature
Consumer or Industrial Product
Size and Frequency of Order
Buying Habits of Customers
After-Sales Service

International marketing is the marketing of products or
services outside of your brand's domestic audience. Think
of it as a type of international trade. By expanding into
foreign territories, brands are able to increase their brand
awareness, develop a global audience, and of course, grow
their business.
International marketing Advertising helps to Remind
customers and prospects about the benefits of your product
or service. Establish and maintain your distinct identity.
Enhance your reputation. Encourage existing customers to
buy more of what you sell.
Advertising in international marketing

OLD Concept: 4 types of Advertising
1. Display Advertising.
– Display advertising, or “banner” advertising, is a type of
advertising that is composed of small digital billboards or banners
that are placed in and around blog posts, keyword search pages,
websites, etc. It could be unmoving images or animated. a form of
horizontal banners at the top of a page or as a vertical banner in the
side margins of a page and are great for telling a fast visual story
while showing off brand identity. They’re usually very visual with
very little text, for example ideal for health and wellness products
that don’t require an in-depth disclaimer in the ad.

2. Video Advertising.
Video ads are quite popular advertising types in today’s digital marketing
environment, and it makes sense why. Video advertisements are eye-
catching, entertaining, and great for telling a complex story that a display
ad simply can’t do. Instream video ads and out-stream video ads are the
primary ways that advertisers will utilize video ads. Instream video
involves placing video ads mid-roll, pre-roll, or post-roll in a video that a
consumer is already watching. The ad itself will be relevant to the content
that the consumer is already watching. An out-stream video ad is a video
ad that is integrated into an article or blog post.

3. Mobile Advertising.
Mobile advertising is now the new norm as more people are
consuming online content through their mobile devices than
ever before. Mobile advertising is, simply, ads that are
optimized for mobile consumption. Mobile ads are quite
broad and can include video, app, display, search, or social
ads. For most brands, video-based social media mobile ads
are a great place to start. In such ads, brands could definitely
benefit from these types of ads on platforms like Instagram.

4. Native Advertising
This form of advertising is simple ad content that is integrated into a piece
of another content. They are considered “non-disruptive” ads and usually
come in the form of sponsored content. These ads will match the style and
flow of the content it appears in without being pushy is disruptive. For
example, pop-up ads and auto-play videos are considered disruptive and
may have a negative impact on one’s potential customer base. Native ads,
on the other hand, are “slipped” into content in a way that is not disruptive
and more attractive to consumers. They can come in the form of blog
posts, videos, photos, etc. in any social network.

Features of International Advertising?
Common characteristics and cultural differences about Product or
Service Offering. In global marketing, a company offers the same
products and services across the board, in multiple countries.
– Marketing Staff.
– Marketing Budget.
– Promotion Tactics.
– Operational Autonomy.
– Social media.
– Customer Engagement. ..
– Advertising.

What is Social media marketing?
Social media marketing (SMM) (also known as digital
marketing and e-marketing) is the use of social media—
the platforms on which users build social networks and
share information—to build a company's brand, increase
sales, and drive website traffic.
Social Media Marketing (SMM) is marketing that targets
social platforms like Facebook, Instagram, TikTok for
brand promotion, target audience growth, driving website
traffic, and increasing sales

Top Benefits of Social Media Marketing
Brand Awareness.
Increase trustworthiness.
Increase levels of customer satisfaction
Increased Revenue.
Increase Traffic & Improved SEO.
Better Customer Service.
Retargeting Opportunities and Engagement rate.
Foster online community.
Possibility to tell authentic stories

The 7 different types of social media
1. Traditional social networking sites (FB, LinkedIn, TikTok, etc.)
2. Social review sites (Yelp and TripAdvisor, etc.)
3. Image and video sharing sites (Instagram, Imgur, and Snapchat etc.)
4. Video hosting sites (YouTube, Vimeo, Dailymotion, etc.)
5. Community blogs (Shared platforms like Medium, Tumblr, etc.)
6. Discussion sites (FB, Reddit, Quora, etc.)
7. Sharing economy networks (Airbnb, Rover, etc)

What is a social media strategy?
A social media
strategy is a plan
that outlines your
social media goals,
the tactics used to
achieve them and
metrics tracked to
measure
performance

Steps in building a successful social media strategy?
1) Set goals for the business
2) Research the audience
3) Research the competitors
4) Choose the social platforms
5) Plan the content
6) Engage the community
7) Grow the following
8. Check and Re-do!

Global Marketing Strategy Introduction - Professor Bahman Moghimi - The University of Georgia Tbilisi.pdf

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