Ch01

Global Marketing Management, 5e
Chapter 1Copyright (c) 2009 John Wiley & Sons, Inc.
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Chapter 1
Globalization
Imperative

Chapter Overview
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1. Why Global Marketing is Imperative
2. Globalization of Markets: Convergence
and Divergence
3. Evolution of Global Marketing
4. Appendix: Theories of International Trade
and the Multinational Enterprise

Introduction
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 Products have been traded across borders
throughout recorded civilization, extending back
beyond the SilkRoadthat once connected East
with West from Xian (China) to Rome (Italy).
 Total world merchandise trade volume grew from
$7.6 trillion in 2000 to $16.3 trillion in 2008.

Introduction
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 Big Emerging Markets (BEMs): In the next ten to
twenty years, BEMs such as the Chinese
Economic Area (CEA: including China, Hong Kong
Region, and Taiwan), India, South Korea, Mexico,
Brazil, Argentina, South Africa, Poland, Turkey,
and the Association of Southeast Asian Nations
(ASEAN: including Indonesia, Brunei, Malaysia,
Thailand, the Philippines, and Vietnam) will
provide many opportunities in global business.

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 Saturationof domestic markets: Domestic-market
saturation in the industrialized parts of the world
and marketing opportunities overseas are
evident in global marketing.
 Globalcompetition: Competition around the
world and proliferation of the Internet have been
on the rise and are now intensifying.
 Needforglobalcooperation: Global competition
brings global cooperation.

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 Internet revolution: The Internet and electronic
commerce (e-commerce) are bringing major
structural changes to the way companies
operate worldwide.
 The term global epitomizes both the competitive
pressure and expanding market opportunities.
 Whether a company operates domestically or
across national boundaries, it can no longer
avoid competitive pressures from around the
world.

Exhibit 1-1: Change in World’s 100 Largest
Companies and Their Nationalities
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and Divergence
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 Per capita income is an important determinant
of consumer buying behavior.
 When a country’s per capita income is less than
$10,000, much of the income is spent on food
and other necessities, and very little disposable
income remains.
 As a country’s per capita incomes reaches
$20,000, the disposable portion of income
increases dramatically.
 This increased disposable income level results
in increased convergent pressures on consumer
buying behavior.

and Divergence
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 People with higher incomes tend to enjoy similar
educational levels, desires for material
positions, ways of spending leisure time, and
aspirations for the future.
 Globalization does not suffocate local cultures,
but rather liberates them from the ideological
conformity of nationalism, with consumers
becoming more receptive to new things.
 Consumers also have a wider, more divergent
“choice set” of goods and services to choose
from.
 In other words, the divergence of consumer
needs is taking place at the same time.

and Divergence
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 International trade consists of exports and
imports.
 International business includes international
trade and foreign production.
 Extensive international penetration of
companies is called global reach.
 International trade and foreign production
activities are managed on a global basis.
 Growth of Multinational Corporations (MNCs)
and intra-firm trade is a major aspect of global
markets.

and Divergence
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Whomanages internationaltrade?
 Intrafirm trade: Trade between MNCs and their
foreign affiliates. Comprises 34 percent of
world trade.
 An additional 33 percent of world trade was
exports between MNCs and their affiliates.
 In other words, two-thirds of world trade is
managed one way or another by MNCs.

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What is marketing?
 Marketing involves the planning and execution
of the conception, pricing, promotion, and
distribution of ideas, products, and services.
 Marketing involves customer satisfaction and
their current and future needs.
 Marketing is much more than selling and
involves the entire company.
 Within marketing strategies, companies are
always under competitive pressure to move
forward both re active ly and pro active ly.

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 Fivestages intheevolutionof globalmarketing
(see Exhibit 1-2):
1. Domestic Marketing (domestic focus; home country
customers; ethnocentric orientation).
2. Export Marketing (indirect vs. direct exporting; country
choice, exports; ethnocentric orientation; home country
customers).
3. International Marketing (markets in many countries;
polycentric orientation; use of multidomestic marketing
when customer needs are different across national
markets).

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4. Multinational Marketing (many markets; consolidation on
regional basis; regiocentric orientation; standardization
within regions).
5. Global Marketing (international, multinational & geocentric
orientation; company’s willingness to adopt a global
perspective; global products with local variations).

Exhibit 1-2: Evolution of Global
Marketing
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 GlobalMarketingrefers to marketing activities
that emphasize the following:
1. Standardization efforts.
2. Coordination across markets.
3. Global integration.

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 Global marketing does not necessarily mean
that products can be developed anywhere on a
global scale.
 The economic geography, climate, and culture
affect how companies develop certain products.
 The Internet adds a new dimension to global
marketing.
 E-commerce retailers gain substantial savings
by selling online.

4. Appendix: Theories of International
Trade & the Multinational Enterprise
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 ComparativeAdvantageTheory
(see Exhibit 1-3)
 Absolute Advantage
 Comparative Advantage
 Commodity Terms of Trade
 Principles of International Trade
 Factor Endowment Theory
 InternationalProduct CycleTheory
(see Exhibit 1-4)
 Economies of Scale

Exhibit 1-3:
Comparative Advantage at Work
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Exhibit 1-4:
International Product Life Cycle
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& the Multinational Enterprise
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 Economies of Scope
 Technological Gap
 Preference Similarity
 Stages of International Product Cycle Theory:
 IntroductionStage
 A U.S. company innovates on a new product in
its home country.

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 GrowthStage
 Product standards emerge and mass
production becomes feasible.
 MaturityStage
 Many U.S. and foreign companies vie for
market share in the international markets.
 DeclineStage
 Companies in the developing countries also
begin producing the product and marketing it
in the rest of the world.

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 Internalization/TransactionCost Theory
 Appropriability Regime
 Dominant Design
 Manufacturing and Marketing Ability

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