Global Marketing Management, 5e

Chapter 1 Globalization

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Copyright (c) 2009 John Wiley & Sons, Inc.

Introduction
Products have been traded across borders throughout recorded civilization, extending back beyond the Silk Road that 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.

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Copyright (c) 2009 John Wiley & Sons, Inc.

Introduction
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. BRIC nations Brazil, Russia, China & India as the new emerging mkts with global business potential

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Copyright (c) 2009 John Wiley & Sons, Inc.

1. Why Global Marketing is Imperative

Saturation of domestic markets: Domestic-market saturation in the industrialized countries Companies look for new marketing opportunities overseas Development of new mkt opportunities due to economic & population growth in developing countries Companies given incentives to venture abroad Global competition: Competition around the world, competition has changed in the last 20 yrs Old companies have declined and new ones have emerged primarily because of global influences
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 Proliferation of the Internet & e-commerce Internet on the rise and are now intensifying, open gates for companies to sell direct to consumers easily across national boundaries Advent of e-commerce enable trade to take place between B2B, B2C, removing the need t go thorough retail channels/middlemen Customer info & data easily available enable companies to develop mktg strategies aimed at impt customers & build loyal relationships on a global basis Need for global cooperation: Global competition brings global cooperation. Eg. In IT industry, collaboration among competitors in R & D (Sony, IBM, Toshiba, Fujitsu) Cross border joint venture & mergers & acquisitions
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 Changes observed in the past 30 years simply reflect that companies from other parts of the world have grown in size relative to those of the United States. Pressure is on executives in all countries to do better in the upcoming decade. political and economic events have also had an impact on the nature of global competition: 1). The demise of the Soviet Union. 2). The establishment of the European Union. 3). The establishment of NAFTA. 4). The deregulation and privatization of state-owned industries. Growth of Eastern Europe and Southeast Asia will also eventually have an impact on global marketing and business. Global epitomizes both the intense competitive pressure and the expanding market opportunities around the world.

1. Why Global Marketing is Imperative

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.
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2. Globalization of Markets: Convergence and Divergence

Per capita income is an important determinant of consumer buying behavior. When a countrys 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 countrys 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.
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2. Globalization of Markets: Convergence and Divergence

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. Convergence & divergence in consumer needs in many parts of the world translates into tremendous opportunities for companies willing to risk venturing abroad
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2. Globalization of Markets: Convergence and Divergence

International trade vs International Business:
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 intrafirm trade is a major aspect of global markets.

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2. Globalization of Markets: Convergence and Divergence

Who manages international trade?
Intrafirm trade: Trade between MNCs and their foreign affiliates. Comprises 34 % of world trade. 33% of world trade was exports between MNCs and their affiliates. 2/3 of world trade is managed one way or another by MNCs. For industrialized countries, foreign production (FDI) forms a larger part of the business than international trade Most of the worlds FDI is in the US, the European Union (EU), and Japan. Over 50% of world trade and over 80% of foreign direct investment is conducted by three regional economic hubs: the US, the EU and Japan. Collectively, these 3 areas are referred to as the triad. The triad is a group of three major trading and investment blocs in the international arena.

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3. Evolution of Global Marketing

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 reactively and proactively.
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3. Evolution of Global Marketing

Five stages in the evolution of global marketing (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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3. Evolution of Global Marketing

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

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3. Evolution of Global Marketing

Global Marketing refers to marketing activities that emphasize the following: 1. Standardization efforts. 2. Coordination across markets. 3. Global integration. 4. Reduction in cost efficiencies and duplication of activities among national and regional subsidiaries 5. Transfer of products, ideas, brands across subsidiaries 6. Have global customers

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3. Evolution of Global Marketing

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.
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