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MARK Chapter 8 Notes

by: Kyla Brinkley

MARK Chapter 8 Notes MARK 3001

Marketplace > University of Georgia > Marketing > MARK 3001 > MARK Chapter 8 Notes
Kyla Brinkley
GPA 3.8

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Notes for Chapter 8 in the book with a quick review at the end!
Principles of Marketing
Kimberly Grantham
Class Notes
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This 14 page Class Notes was uploaded by Kyla Brinkley on Wednesday November 18, 2015. The Class Notes belongs to MARK 3001 at University of Georgia taught by Kimberly Grantham in Summer 2015. Since its upload, it has received 67 views. For similar materials see Principles of Marketing in Marketing at University of Georgia.


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Date Created: 11/18/15
Kyla Brinkley MARK 3001 Notes Fall 2015 I. Chapter 8: Global Marketing a. Increasing globalization affects massive US corporations that actively search out new markets as well as smaller businesses that increasingly depend on goods produced globally to deliver their products & services b. In the US the market has evolved: i. Regional marketplaces ii. National markets iii. Geographically regional markets (ex: US/Canada) iv. International markets v. Global markets c. Globalization refers to the processes by which goods, services, capital, people, information, and ideas flow across national borders d. Consumers have easy access to global products and services e. BRIC countries: Brazil, Russia, India, China f. Assessing Global Markets i. Because different countries, with different stages of globalization, offer marketers a variety of opportunities, firms must access the viability of potential market entries ii. Economic Analysis Using Metrics 1. The greater the wealth of people in a country, the better the opportunity a firm will have in that particular country 2. 3 economic factors a firm conducting an economic analysis of a country market must look at: a. Evaluating the General Economic Environment i. Healthy economies provide better opportunities for global marketing expansions ii. There are several ways a firm can use metrics to measure the relative health of a country’s economy iii. To determine the market potential for its good or service, a firm should use as many metrics as it can obtain. Ex: level of imports/exports iv. Trade deficit: results when a country imports more goods than it exports v. Trade surplus: occurs when a country has a higher level of exports than imports vi. Gross domestic product (GDP): defined as the market value of the goods and services produced by a country in a year; the most widely used standardized measure of output vii. Gross national income (GNI): consists of GDP plus the net income earned from investments abroad (minus any payments made to nonresidents who contribute to the domestic economy) 1. US firms that invest or maintain operations abroad count their income from those operations in the GNI not the GDP viii. Purchasing power parity (PPP): a theory that states that if the exchange rates of 2 countries are in equilibrium, a product purchased in one will cost the same in the other, expressed in the same currency 1. Ex: Big Mac Index ix. Various metrics help marketers understand the relative wealth of a country but don’t give a full picture of economic health because based solely on material output x. Weak dollar not always bad: can mean greater demand in other countries because product is cheaper b. Evaluating Market Size and Population Growth Rate i. Less developed nations are experiencing more population growth than developed countries ii. So, the more developed countries that have highest purchasing power today may become less attractive because of stagnated growth iii. BRIC countries are likely to be the source of most market growth, so consumer goods companies are paying close attention to the strong demand in BRIC nations iv. International companies can’t afford to not focus their efforts in BRIC countries v. Sometimes they sell the same products there and sometimes they create new ones to meet consumers’ tastes 1. Ex: Maharaja Mac instead of Big Mac in India vi. Long supply chains in which goods pass through many hands are often necessary to reach rural populations in less developed countries, adding to the product’s cost c. Evaluating Real Income i. Firms can make adjustments to an existing product or change the price to meet the unique needs of a particular country market ii. These shifts are common for low-priced consumer goods iii. Some fashion and jewelry manufacturers also lower prices in countries where the incomes of their target markets can’t support higher prices iv. Local marketers are getting more price competitive as well 1. They already know the market/distribution channels and have good name recognitions 2. More flexible with prices iii. Analyzing Infrastructure and Technological Capabilities 1. Infrastructure: the basic facilities, services, and installations needed for a community or society to function, such as transportation and communications systems, water and power lines, and public institutions like schools, post offices, and prisons 2. Marketers are concerned with 4 key elements of a country’s infrastructure: a. Transportation i. System to transport goods throughout the various markets b. Distribution channels i. To deliver goods timely and at reasonable cost c. Communications i. Must be developed to let customers find info about the products/services available d. Commerce i. Commercial infrastructure, consisting of legal, banking, regulatory systems ii. Allows markets to function iv. Analyzing Government Actions 1. Gov actions and the actions of nongovernmental political groups can significantly influence firms’ ability to sell goods/services because they often result in laws or other regulations that either promote the growth of the global market or close off the country and inhibit growth 2. Tariff: a tax levied on a good imported into a country. AKA: duty a. Intended to make imported goods more expensive and less competitive with domestic products b. Protects domestic industries from foreign competition c. May also be imposed to penalize another country for trade practices the home country views as unfair 3. Quota: designates the max quantity of a product that may be brought into a country during a specific time period a. Ex: US allows 1.2 million tons of sugar to be imported without a tariff because the country generally consumes more than it produces 4. Tariffs artificially raise prices (lowering demand) 5. Quotas reduce availability of imported merchandise 6. But taxes and quotas benefit domestically made products because they reduce foreign competition 7. Exchange control: refers to the regulation of a country’s currency exchange rate: the measure of how much one currency is worth in relation to another a. A designated agency in each country, often the central bank, sets the rules for currency exchange b. In the US the Federal Reserve sets the currency exchange rates c. When the dollar fails, the cost of doing business increases for firms that depend on imports of finished products, raw materials, or services on other countries d. Buyers in other countries find the costs of US goods and services much lower than they were before 8. Trade agreements: intergovernmental agreements designed to manage and promote trade activities for specific regions. Ex: EU, NAFTA, ASEAN (Association of Southeast Asian Nations) a. Trading bloc: consists of those countries that have signed a particular trade agreement b. Marketers must consider the trade agreements to which a particular country is a signatory or the trading block to which it belongs 9. Analyzing Sociocultural Factors a. Understanding another country’s culture is critical to the success of any global marketing initiative b. Culture: the shared meanings, beliefs, morals, values and customs of a group of people i. Exists on 2 levels: 1. Visible artifacts a. Behavior b. Dress c. Symbols d. Physical settings e. Ceremonies 2. Underlying values a. Thought processes b. Beliefs c. Assumptions c. Hard to understand underlying values d. Hofstede’s cultural dimensions i. Power distance: willingness to accept social inequality as natural ii. Uncertainty avoidance: the extent to which the society relies on orderliness, consistency, structure, and formalized procedures to address situations that arise in daily life iii. Individualism: perceived obligation to/dependence on groups iv. Masculinity: the extent to which dominant values are male oriented. Lower masculinity ranking means men & women are treated equally, higher masculinity means men dominate positions of power v. Time orientation: short- vs long-term orientation. A country with long-term orientation values long-term commitments and is willing to accept a longer time horizon for things like the success of a new product introduction vi. Latin American countries (brazil): high power distance, low individualism vii. US, Australia, Canada, UK: high individualism, low power distance viii. China: high time orientation, low individualism ix. India: medium to high for all 5 dimensions x. Russia: high uncertainty avoidance/power distance xi. These scores only informative in comparative sense e. Cultures also classified by importance of verbal communication i. US/Europe: verbal—spoken/written ii. Asia: nonverbal cues, situation/context important f. Culture affects every aspect of human behavior: i. Why people buy ii. Who’s in charge of buying decisions iii. How/when/where people shop v. The Appeal of BRIC Countries 1. Brazil a. 7 largest economy in the world and growing b. Large, literate populations c. Social programs that let over half of the country to enter middle class d. Welcomes foreign investors 2. Russia a. Growth as consumer market b. Strong demand for US products/brands c. Expected to be Europe’s largest online market d. However, aging population/low birth rates: population could decline and corruption is widespread: ethical dilemmas 3. India a. 1.1 billion people: 15% of world population b. Expanding middle/upper classes c. Young population: media age 25 i. Global attitudes ii. Fluent in English d. Retail environment dominated by small stores/lacks modern supply chain management facilities & systems i. Changes by gov are modernizing this ii. Foreign retailers with multiple brands can carry half of joint ventures rather than wholesale joint ventures iii. Retailers with own brand like levis can own all of their Indian businesses rather than partner with an Indian company 4. China a. Embraced market-oriented economic development b. Increased liberalization in the economy has caused large increase in GDP c. Second largest economy d. 3 largest market for US exports e. However, unequal economic distribution: migrant workforce w/ low-paying jobs f. Population slowed with gov populations controls limiting one child per family, also causing rapid aging for population g. Median age 34 years, slightly younger than US g. Choosing a Global Entry Strategy i. When a firm concludes its assessment analysis of the most viable markets for its products/services, must conduct internal assessment of its capabilities ii. Includes: 1. Assessment of firm’s access to capital 2. Current markets it serves 3. Manufacturing capacity 4. Proprietary assets 5. Commitment of management to the proposed strategy iii. Approaches firm can take when entering new market vary according to level of risk firm is willing to take iv. Exporting: producing goods in one country and selling them in another 1. Least financial risk a. No investment in people, capital equipment, buildings, or infrastructure 2. Allows limited return to the exporting firm v. Franchising: a contractual agreement between a franchisor and a franchisee that allows the franchisee to operate a business using a name and format developed and supported by the franchisor 1. Franchising contract allows franchisee to operate business using the name/business format developed & supported by the franchisor 2. Global franchisors: McDonalds, pizza hut, Starbucks, dominos, KFC, holiday inn a. Found that global franchising entails lower risks & requires less investment b. Firm has limited control over market operations in foreign country c. Profit reduced because must split with franchisee d. Threat that franchisee will leave & operate as a competitor w/ different name vi. Strategic Alliance: a collaborative relationship between independent firms, though partnering firms don’t create an equity partnership (don’t invest in each other) 1. May rely on each other to provide training/skills the other lacked 2. Can maintain alliances with other companies vii. Joint Venture: formed when a firm entering a new market pools its resources with those of a local firm to form a new company in which ownership, control, and profits are shared 1. Local partner offers foreign entrant more understanding of the market & access to resources like vendors/real estate 2. Some countries require joint ownership of firms entering their domestic markets a. Problems: partners disagree, gov places restrictions on firms ability to move profits out of the foreign country viii. Direct Investment: when a firm maintains 100% ownership of its plants, operation facilities, and offices in a foreign country, often through the formation of wholly owned subsidiaries 1. Requires highest level of investment 2. High risks: a. Loss of operating and/or initial investments b. Economic downturn can increase risk c. Some firms think these rights are outweighed by high potential returns 3. No potential profits to be shared with other firms h. Choosing a Global Marketing Strategy i. 2 components: 1. Determining the target markets to pursue 2. Developing a marketing mix that will sustain a competitive advantage over time ii. Target Market: Segmentation, Targeting, and Positioning 1. More complicated: a. Firms considering global expansion have more trouble understanding cultural nuances of other countries b. Subcultures within each country should be considered c. Consumers often view products & their role as consumers differently in different countries i. Product, service, retailer must be positioned differently in different markets 2. Company must monitor economic/social trends to protect its position within the market and adjust its products/strategies accordingly 3. Segments & target markets should be defined by more than just geography iii. The Global Marketing Mix 1. Early stages of globalization (1950s-60s) US firms were uniquely positioned in global marketplace— had skills necessary to develop, promote, and market brand name consumer products 2. 1970s-80s, Japanese firms dominated global marketplace: exploited skills in production, materials management, and new product development 3. Today, retailers (Zara), financial services firms (Citicorp) software firms (Microsoft) are dominating newest stage of globalization by exploiting technological skills 4. Today Asian and South American countries dominate manufacturing of consumer products 5. Global Product or Service Strategies a. Sell the same product or service in both home country market & host country b. Sell product or service similar to that sold in home country but include minor adaptations c. Sell totally new products or services d. Strategy firm chooses depends on needs of target market e. Level of economic development & differences in product & technical standards help determine need for/level of product adaptation f. Cultural differences (food, language, religion) also play role in product strategy planning g. Russia has one of the biggest new markets in the world and has transitioned to a market economy with consumers with disposable income h. Global product strategy relates directly to consumer behavior i. Consumers in developed countries demand more attributes in their products than those in less developed countries i. Glocalization: the process of firms standardizing their products globally but using different promotional campaigns to sell them j. Reverse innovation: when companies initially develop products for niche or underdeveloped markets and then expand them into their original or home markets 6. Global Pricing Strategies a. Determining the selling price in the global marketplace is hard b. Many countries still have rules governing the competitive marketplace, including those that affect pricing i. Ex: some European countries can only have sales twice a year: hard for stores like Walmart c. Other issues: tariffs, quotas, antidumping laws, currency exchange policies can affect pricing decisions d. Market prices must be adjusted to reflect the local pricing structure 7. Global Distribution Strategies a. Global distribution networks form complex value chains that involve middlemen, exporters, importers, and different transportation systems b. Additional middlemen add cost, increasing final selling price c. Constant pressure exists to simplify distribution channels wherever possible d. # of firms with which seller needs to deal to get merch to consumer determines complexity of a channel e. Less developed countries: manufacturers have to get product through many distribution channels to get product to end users, who often lack transportation to get to large shopping malls, so product must get to smaller retail outlets near their homes 8. Global Communication Strategies a. Major challenge in developing a global communication strategy: identifying the elements that need to be adapted to be effective in the global marketplace b. Ex: literacy levels & media availability vary around the world c. Differences in language, customs, and culture also complicate marketer’s ability to communicate with customers in various countries i. Translations gone wrong ii. Many countries have multiple variants on a language or more than one language iii. Bing means virus in Chia d. Firms with global appeal can run global advertising campaigns and simply translate the wording in the ads and product labeling e. Other products require a more localized approach because of cultural & religious differences FOR REVIEW: 4 sets of criteria necessary to assess a country’s market: 1. Economic analysis 2. Infrastructure and technological analysis 3. Government actions or inactions 4. Sociocultural analysis Components of a Country Market Assessment  Economic analysis using metrics o General economic environment o Market size and population growth o Real income  Sociocultural analysis o Power distance o Uncertainty avoidance o Individualism o Masculinity o Time orientation  Government actions o Tariff o Quota o Exchange control o Trade agreement  Infrastructure and technology o Transportation o Channels o Communication o Commerce Global Entry Strategies:  Export  Franchising  Strategic alliance  Joint venture  Direct investment


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