Chapter 5 Developing a Global Vision Global marketing marketing that targets markets throughout the world Global vision recognizing and reacting to international marketing opportunities using effective global marketing strategies and being aware of threats from foreign competitors in all markets 5 1 Importance of Global Marketing to the US Gross domestic product GDP the total market value of all final goods and services produced in a country for a given time period US exports 1 5 of its industrial production More than 10 million Americans hold jobs that are supported by exports 7 Exports represent approximately 13 of our GDP Every US state has realized net employment gains directly attributed to of employment foreign trade The US exports over 1 7 trillion in goods and services each year National Export Initiative NEI goal is to double US exports over the next 5 years and support 2 million US jobs Negatives of global trade o Millions of Americans have lost jobs due to imports production shifts abroad outsourcing of tech jobs o Millions fear of loosing their jobs o Employers often threaten to outsource jobs if workers do not accept o Service and white collar jobs are increasingly vulnerable to operations pay cuts moving offshore o Job outsourcing sending US jobs abroad Benefits of global trade o Expands economic freedom spurs competition raises the productivity and living standards of people o For less developed countries globalization offers access to foreign capital global export markets and advanced technology 5 2 Multinational Firms Multinational corporation a company that is heavily engaged in international trade beyond exporting and importing moves resources goods services and skills across national boundaries without regard to the country in which its headquarters are located First stage companies operate in one country and sell in others Second stage set up foreign subsidiaries to handle sales in one country Third stage operate an entire line of business in another country Fourth stage executives and core corporate functions are in different countries wherever the firm can gain a competitive advantage Capital intensive using more capital than labor in the production process Global marketing standardization production of uniform products that can be sold the same way all over the world Multi domestic strategy when multinational firms enable individual subsidiaries to compete independently in domestic markets 5 3 External Environment Faced by Global Marketers Factors include culture economic technological development political structure and actions demographic makeup and natural resources China and India emerging as megamarkets Least amount of business regulation fosters the strongest economies Legal structures are designed to either limit or encourage trade o Tariff a tax levied on the goods entering a country o Quota a limit on the amount of a specific product that can enter a country companies o Boycott the exclusion of all products from certain countries or o Exchange control a law compelling a company earning foreign exchange from its exports to sell it to a control agency usually a central bank o Market grouping aka common trade alliance occurs when several countries agree to work together to form a common trade area that enhances trade opportunities example EU o Trade agreement an agreement to stimulate international trade Mercosur Argentina Bolivia Brazil Chile Colombia Ecuador Paraguay Peru Uruguay Venezuela Uruguay Round an agreement to dramatically lower trade barriers worldwide created the World Trade Organization World Trade Organization WTO a trade organization that replaced the old General Agreement on Tariffs and Trade GATT General Agreement on Tariffs and Trade GATT a trade agreement that contained loopholes enabling countries to avoid trade barrier reduction agreements North American Free Trade Agreement NAFTA created the world s largest free trade zone US Canada Mexico Central America Free Trade Agreement CAFTA a trade agreement instituted in 2005 that includes Costa Rica DR El Salvador Guatemala Honduras Nicaragua and US EU European Union a free trade zone encompassing 27 European countries also a political and economic community World Bank an international bank that offers low interest loans advice and information to developing countries International Monetary Fund IMF an international organization that acts as a lender of last resort providing loans to troubled nations and also works to promote trade through financial cooperation Group of 20 G20 a forum for international economic development that promotes discussion between industrial and emerging market countries on key issues related to global economic stability 3 most densely populated nations China India Indonesia Belgium attractive market bc 90 of the population is living in urban setting 5 4 Global Marketing By The Individual Firm Reasons why a company might go global o To earn additional profit a firm may have a unique product or technological advantage management may have exclusive market information saturated domestic markets excess capacity potential for economies of scale Economies of scale average per unit production cost falls as output is increased 5 methods of entering the global market place exporting licensing franchising contract manufacturing joint venture direct investment Exporting selling domestically produced products to buyers in other countries US is the world s largest exporter o Buyer for export an intermediary in the global market who assumes all ownership risks and sells globally for its own account o Export broker an intermediary who plays the traditional broker s role by bringing buyer and seller together raw materials agricultural products mostly o Export agents an intermediary who acts like a manufacturer s agent for the exporter the export agent lives in the foreign market Licensing the legal process whereby a licensor allows another firm to use its manufacturing process trademarks patents trade secrets or other proprietary knowledge Contract manufacturing private label manufacturing by a foreign company Joint venture when a domestic firm buys part of a foreign company or joins with a foreign company to create a new entity Direct foreign investment active ownership of a foreign company or of overseas manufacturing or marketing facilities most risky 5 5 The Global Marketing Mix a few years ago Global media make it possible to bean advertising to audiences unreachable A
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