Mark 3000 1st Edition Lecture 21Outline of Last Lecture I. Service Marketing II. Dimensions of service quality III. Gaps Model IV. Marketing mix for services Outline of Current lecture I. Assessing Global Markets II. Global Marketing Mix III. Choosing a Global Entry Strategy Current Lecture Global marketingGlobalization: process by which goods, services, capital, people, information and ideas flow across national bordersAssessing Global Markets 1. Economic Analysis: Greater the wealth, Generally better opportunity for a firm a. GDP: Gross Domestic Product, Market value of goods and services produced by a country in a year b. Median Income: the median of the income in a country i. Want to measure real income, purchasing power c. Also look at the Median age of the population: Shows if we need to cater to old or young people d. Trade deficit: when imports are more than exports i. Trade Surplus is opposite e. Purchasing Power Parity: Theory that states that if exchange rates of 2 countries are in a equilibrium a product purchased in one will cost the same in another if expressed in the same currency i. Ex. Big Macs around the world cost different amounts in dollars f. Size of Market: interested in the size of the market and not the population i. Want the size of those individuals with discretionary incomes These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.2. Infrastructure: Basic facilities, services and installations needed by a community to function a. Transportation: Must be a system to transport goods throughout the markets b. Distribution channels must exist to deliver products in a timely manner and at a reasonable cost c. Communication system must e developed to allow consumers to find informationabout products and services available in the marketplace d. Commerce: The Commercial infrastructure must allow markets to function 3. Government actions can influence firms’ ability to sell goods and services a. Tariff: Duty, Tax on good imported into a country i. Part of protectionism b. Quota: designates a maximum quantity of a product that may be brought into a country during a specified time period c. Exchange control: refers to regulation of a countries exchange rate i. The Central bank sets the rule in most countries d. Trade Agreements: Intergovernmental agreements to manage and promote tradeactivities for specific regions i. EU: European Union, 27 countries, Standardized currency regulation and trade practices ii. NAFTA: US, Canada, and Mexico 1. Items produced in these countries are treated as domestic in all e. Other government actions: i. Ownership policies: Some countries have policies that don’t allow international companies to own 50% of a business 1. Wal-Mart in many countries only owns 49% of the stores and has a partner ii. Political Stability: Stable political regimes are required for a business environment iii. Desire for foreign business: if the government is requiring firms to go through a lot of steps then they may be trying to convey the message thatthere is no desire of doing business with them 4. Sociocultural Factors: a. Power distance: willingness to accept social inequality as natural b. Uncertainty avoidance: extent to which society relies on orderliness, consistency etc. c. Individualism: perceived obligation to and dependence on groups d. Masculinity: Extent to which dominant values are male orientede. Time orientation: short vs. long term orientation Business culture: Common set of practices considered acceptable in a business setting Significant differences in values, behaviors, across countries Language problems: When companies translate their message in another language it may give off the wrong meaning Global Marketing Mix: marketers must decide what changes to make to elements of the marketing mix Product or service strategies: 1. Sell the same product or service in both markets 2. Sell similar product with modifications 3. Sell completely new product Promotional strategies: 1. Global market: sending the same message for the same product in the global market 2. Product Adaptation: Marketing the same message but with a different product 3. Globalization: process of firms standardizing product globally but using different promotional campaigns to promote them 4. Innovation: Marketing a new product with a new message a. Reverse innovation: when companies initially develop new products for niche markets and then expand them into the home market Pricing Strategies: Have to consider 1. Tariffs 2. Quotas 3. Anti-dumping policies: Policies preventing predatory pricing (charging a price below the cost of the good or service in order to drive out competitors) in global markets 4. Economic conditions: cannot market a luxury good in a market that does not have high discretionary income 5. Competitive factors: Prices must be adjusted to reflect the local pricing structure Distribution strategies: Involve complex value chains that involve middlemen Some global channels are very long and complex Some consumers only shop at local small stores so it is important to get your product to them Infrastructure issues also impact the channel (ex. Transportation issues) Communication strategies: Need to adapt in order to be effective - Have to keep in mind literacy rates - Countries also have multiple languages and this makes it hard for marketersChoosing a global entry strategy: Firms follow a progression in which they begin with less risky strategies to enter markets and move to riskier activities. 1. Exporting: producing goods in one country and selling them in another a. Least risk but only a limited return 2. Franchising: contractual agreement that allows the franchisee to operate a business using a name and format developed and supported by the franchiser. a. Ex. McDonalds, Pizza Hut b. Less risk and lower investment than wholly owned affiliates but also have to give up control over market operations and profits 3. Strategic Alliance: Collaborative relationship between independent firms a. Do not invest in one another 4. Joint Venture: Formed when a firm entering a market pools its resources with those of a local firm a. Ownership, control and profits are shared b. Also have greater understanding of market and resources 5. Direct investment: A Firm maintains 100% ownership of the operations in a foreign country a. Lots of