BUS ADM 465 - International Marketing - Exam 1
Five stages in the evolution of global marketing - 1) domestic focus
1) Domestic Marketing domestic focus ethnocentric orientation product development for home country customers decisions made at headquarters
ITO (International Trade Organization):
1st iteration After WW II, the then-big powers negotiated the setting up of the ITO. •Objective: Ensuring free trade among nations.
Five stages in the evolution of global marketing - 2) export marketing
2) Export Marketing exporting to country of choice must choose timing and sequence of entry ethnocentric orientation. because product development still primarily focused on home county customers. decisions still made at headquarters Indirect vs. direct exporting;
Intertwined World Economy
2008-2018: Growth in world merchandise trade volume and real GDP World Trade and GDP have grown in tandem for the last ten years. Both have increased by 26% since 2008. Countries do not solely relying on domestic production. They are exchanging goods and services as well!
Foreign Direct Investment
2017 Ranking U.S CHINA Honk Kong Singapore Netherlands UK BRAZIL Australia Spain INDIA Canada France MExico Germany Italy Indonesia Israel Vietnam South Korea RUSSIA The US continues to hold the largest amount of FDI in the world in 2018 •Half of the FDI inflows were in manufacturing, and about one-fifth were in finance and insurance.
COLOR as an element of Culture (Aesthetics)
Color also has different meanings and aesthetic appeals EXAMPLES In Chinese cultures, red is perceived as a lucky color •During the Beijing 2008 Olympics, many MNCs marketing in China draped their brands in red India Purity Russia Communism Eastern Worn by Brides Western Excitement, danger, love, passion, stop
Types of Regional Economic Arrangements: Common Market
Common Market: In addition, removal of all restrictions on the flow of capital and people among member nations Example: European Union
Increased disposable income level across world-wide consumers results in more and more similar consumption patterns in consumer buying behaviors. This refers to
Convergence of global markets
why is global marketing imperative -Obtaining Scale Economies:
Costs associated with product design, tooling, parts production and product testing can be spread over a large sales base. E.g., Same Mercedes cars are sold all over the world.•
(Floating) Exchange rate & B-O-P Surplus
Country's currency appreciates Exports become more expensive; imports become cheaper B-o-p surplus becomes smaller and goes away
•(Floating) Exchange rate & B-O-P Deficit
Country's currency gets devaluated Imports become more expensive; exports become cheaper B-o-p deficit becomes smaller and goes away
What is NOT true about the definitions of culture?
Culture does not contain subcultures
Cross-Cultural Comparisons
Cultures differ from one another, but usually also share certain similarities Research exists that "classifies" cultures along certain dimensions Cultural classification can help marketers determine how much overlap is possible between the marketing programs in different markets
Fixed Exchange Rate
Currencies pegged to other currencies The currencies of many developing countries are pegged (i.e., fixed) to one of the major currencies or to a basket of major currencies. Objective: To _stabilize___ the value of a currency by directly fixing its value in a predetermined ratio to a different, more stable currency The US dollar is a popular choice for many countries.
Types of Regional Economic Arrangements: Customs inion
Customs Union: In addition, common external tariffs. Example: ASEAN (Brunei, Cambodia, Indonesia, Laos, Philippines, Singapore, Thailand, and more)
Intertwined World Economy - BREXIT
Economic crisis in Europe UK is facing BREXIT BREXIT (British + Exit)•From where? Greece is defaulting The net result of these factors? Increased connectivity________ of countries /economies Need for companies to keep a constant watch on the international economic environment
Cooperative Trade Agreements
Evolution of Cooperative Trade Agreements ITO GATT WTO
Fixed Exchange Rate Example
Example: The Yuan (¥) had been pegged to the $US for a decade at 8.28 yuan to the dollar Over the years, in order to prevent the yuan from rising against the dollar, the Chinese central bank had to buy huge amounts of US$ (i.e., Treasury bills). The Chinese government believed that the fixed exchange rate would provide stability to the Chinese economy as it relies so much on trade with the US. Based on its growing trade surplus with the US and its sustained GDP growth, China has been accused of a "cheap-yuan" policy and has been pressured to revalue its currency. •The Chinese central bank decided on July 21, 2005 to abandon the yuan's peg to the dollar. It also revalued the yuan by 2.1 percent against the dollar. 8.28 yuan/$ in July 2005 → 6.84 yuan/$ in February 2009 → 6.33 yuan/$ in January 2012 → 6.67 yuan/$ in September 2016
How Exchange Rate works
Exchange Rate Currency Value Appreciation GOOD for importer BAD for EXPORTER Currency Value Devaluation BAD for Importer GOOD for Exporter
Factors Influencing Exchange Rates (Political Factors)
Exchange rate control Election year or leadership change
Exchange rates are especially important for marketers because exchange rates typically stable over time. T or F?
FALE. They fluctuate
Managed (dirty) floats refers to the floating exchange rate without any government intervention. T or F?
FALSE
Foreign Direct Investment (FDI)
FDIs and international trade are often complementary. •The increase in foreign direct investment has been promoted by the efforts of many national governments to woo multinationals. •Portfolio investment or indirect investment refers to investments in foreign countries that are withdrawable at short notice, such as investments in foreign stocks and bonds.
Types of Regional Economic Arrangements:
FREE TRADE AREA _: Formal agreement among two or more countries to eliminate tariffs and nontariff barriers. Example: NAFTA (The North American Free Trade Agreement; Now, being re-negociated; USMCA)
Portfolio investment (i.e., foreign INDIRECT investment) refers to the investment in manufacturing and service facilities in a foreign country.
False
Macroeconomic Factors (Relative Inflation EXAMPLE)
Formula to illustrate how inflation changes in two countries can influence the exchange rate (using the euro zone and the US as an example): ( 1+ Inflation Rate of Euro) R t = R 0 * --------------------------- ( 1 + Inflation rate of US$) where R0 = current exchange rate quoted in euro/$ Rt = future exchange rate quoted in euro/$
Long-termism (Cross-Cultural Comparisons)
Future vs. past and present orientations Long-term-oriented societies •China •Japan •South Korea Short-term-oriented societies •Canada •UK •USA People in long-term-oriented societies tend to have values that center around the future (e.g., perseverance, frugality) People in short-term-oriented societies tend to be more interested in the "now"
Political Risk
Government Stability Socioeconomic Conditions Investment Profile Internal Conflict External Conflict Corruption Military in Politics Religious Tensions Law and Order Ethnic Tensions Democratic Accountability Bureaucracy Quality
Gross Domestic Product
Gross domestic product (GDP) refers to the market value of all final goods and services produced within a country in a given period.
History of globalization - growth in world commercial services
Growth in world commercial services was roughly in line with growth in exports of manufactured goods.
Range of hig/low context cultures (Cross-Cultural Comparisons)
HIGH CONTEXT (IMPLICIT) Japanese Arabian Latin American Spanish Italian English (UK) French English (US) Scandinavian German Swiss LOW CONTEXT (EXPLICIT)
Why Global Marketing is Imperative - Global Innovation:
Innovation regarding new products, product improvements, and brand building can be sourced anywhere.
Polycentric orientation is the mindset that each country is unique in both its culture and business practices. Among the five stages in the evolution of global marketing, ________________ belongs to the polycentric orientation.
International marketing
Types of Regional Economic Arrangements: Monetary Union
Monetary Union: Represents the fourth level of integration with a single currency among politically independent countries. Example: EU and the euro
Among the regional economic agreements, __________________ represents the integration with a single currency among politically independent countries.
Monetary union
Free (clean) floats
No government intervention Billions of units of currency are being traded by buyers and sellers
Why Global Marketing is Imperative - Extend the Product Lifecycle:
Older products can be sold in lesser developed countries. •E.g., Used car export to Africa
Purchasing Power Parity (PPP)
One of the most fundamental determinants of the exchange rates is the purchasing power parity (PPP). Idea: The exchange rate between the currencies of two countries makes the purchasing power of both currencies equal. TheEconomist publishes a PPP study every year based on McDonald's Big Mac hamburger, and the "big mac index_" shows whether currencies are at their 'correct' exchange rate.21
Macroeconomic Factors (Economic Growth)
One side: If the domestic economy is growing fast relative to major trading partners, the country's imports tend to rise faster than exports. A strong economy may also lead to greater inflation, resulting in depreciation of the currency Another side: However, if the domestic economic growth attracts a large amount of investments from abroad, it could offset the negative trade effects leading to an appreciation of the domestic currency
Why Global Marketing is Important?
Opportunities in global business abound for those who are prepared. The "successful businessperson in the 21stcentury" will have global awareness and a frame of reference that goes beyond a region or even a country and encompasses the world. To be globally aware is to have Tolerance of cultural differences Knowledge of culture, history, world market potential, and global economic, social, and political trends
Convergence of Global Markets - what does it mean
People with higher incomes tend to enjoy similar educational levels, desires for material positions, ways of spending leisure time, and aspirations for the future.
Managing the Political Environment CHART
Policy Instruments LEGAL ADMINISTRATIVE DIRECT MARKET OPERATIONS Policy Areas MONETARY FISCAL TRADE FOREIGN INVESTMENT INCOMES SECTORAL
Pricing (Culture and the Marketing Mix)
Pricing: •Price-quality perceptions differ across cultures •Pricing and culture also interact in the practice of odd pricing Examples: In many Western countries, "End-9" prices are known to increase unit sales substantially (signal of "good value") In Chinese-speaking cultures, the price-points often end with 8 instead of 9
4 P's
Product Price Place Promotion
Product Policy (Culture and the Marketing Mix)
Product Policy: •Certain products are more "culture-bound" than others Examples: foods, mini-skirt Brand names can help or hurt Examples: Kit Kat in Japan
History of Globalization - silk road
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).
Promotion (Culture and the Marketing Mix)
Promotion: •Cultural variables have a huge influence on a firm's promotion strategy Examples: Key events of a country's cultural calendar often create major marketing opportunities The manner in which customers process marketing communications often hinges on their cultural values and norms
GDP forecasts of largest economies
Prospects in 2024 CHINA U.S. INDIA Japan Indonesia RUSSIA Germany BRAZIL Uk France China and India: In the past 20 years, China's real annual GDP growth rate has averaged 9.5% a year and India's has averaged 5.7%.
The idea behind ___________________ is that the exchange rate between the currencies of two countries makes the purchasing power of both currencies equal.
Purchasing Power Parity
Reason for regional economic agreements
Reason for economic arrangements: Facilitate the economic growth of the participating countries •The existence and growing influence of these groupings implies that nations need to become part of such groups to remain globally competitive. •These regional economic arrangements take many forms, depending on the degree of cooperation and inter-relationships
Elements of Culture (Aesthetics)
Refers to the ideas and perceptions that a culture upholds in terms of beauty and good taste Cultures differ sharply in terms of their aesthetic preferences Aesthetics plays a major role in designing visuals of the product, including components such as the packaging and the logo Color also has different meanings and aesthetic appeals
Elements of Culture (Social Interaction)
Refers to the way in which members of society relate to one another Probably the most crucial expression of social interactions is the concept of kinship Western Countries Family Unit = Nuclear Family Parents & Children Developing Countries Family unit = The extended family A much wider group of only remotely related family members Views on marriage and the role of husband and wife can also be unique to a particular culture
Factors Influencing Exchange Rates (Macroeconomic Factors)
Relative inflation •Balance of payments •Economic growth •Interest rate policy
Elements of Culture (Religion)
Religious norms and taboos often require companies to adapt their marketing mix program EXAMPLE: Gilette razors in Iran Religion shapes the holiday calendar in many countries Religious holidays often steer advertising campaigns The role of women in society is sometimes driven by the local religion
Global marketing is imperative because the U.S. market is no longer providing new demand for an individual company. This is what is called as ___________________________.
Saturation of domestic markets
________________________ refers to people's unconscious tendency to interpret a given situation based on their own cultural experience and belief.
Self-Reference Criterion
Elements of Culture (Value Systems)
Shape people's norms and standards which influence people's attitudes toward objects and behavioral codes For marketers, a critical value distinction is a culture's attitude toward change Societies that are resistant to change are usually less willing to adopt new products Local attitudes toward foreign cultures also matter greatly
Fixed vs. Floating Exchange Rates
Since the 1970s, most "major" nations have had floating currencies (e.g., $, €, ¥) •There are two kinds of floating exchange rates Free (clean) floats Managed (dirty) floats
Elements of Culture
Social Interaction Value systems Language Religion Aesthetics
Aesthetics refers to the ideas and perceptions that a culture upholds in terms of beauty and good taste. T or F?
TRUE
The World economy is interdependent. T or F?
TRUE
The history of globalization goes back to the ancient era, and it can be evidenced by the "Silk Road" that once connected East with West. T or F?
TRUE
Macroeconomic Factors (Interest rate policy)
The central bank controls its discount rate (interest rate charged to banks) Higher interest rates discourage economic activity and tend to reduce inflation which in turn leads to currency appreciation
Power Distance (Cross-Cultural Comparisons)
The degree of inequality among people that is viewed as being acceptable High power distance societies Malaysia •Philippines •Latin American countries •Arab countries Low power distance societies •Israel •Scandinavian countries •US •Germany The rich and powerful in low power distance societies try to look less powerful (E.g., The law of Jante)
Individualism (Cross-Cultural Comparisons)
The degree to which people prefer to act as individuals rather than group members ("me" vs. "we") Individualist societies •USA •Australia •UK Collectivist societies •South Korea •Taiwan •Indonesia In societies that are high on individualism, the focus in on people's own interests and their immediate family's interests In collectivist societies, the interest of the group takes center stage
Uncertainty Avoidance (Cross-Cultural Comparisons)
The extent to which people in a given culture prefer structured situations with clear rules over unstructured ones High uncertainty avoidance societies •Greece •Portugal •France •Japan Low uncertainty avoidance societies •India •Malaysia •UK •Singapore Consumers in high uncertainty avoidance countries value naturalness and freshness People in low (weak) uncertainty avoidance cultures tend to be more easygoing and entrepreneurial
Exchange Rate Pass-Through
The extent to which the German/Japanese companies change their prices in the US market as a result of exchange rate fluctuations
Masculinity (Cross-Cultural Comparisons)
The importance of "male" values (assertiveness, success, competitive drive, achievement) vs. "female" values (solidarity, quality of life, preserving the environment) "Masculine" societies •Japan •Austria •Italy •Mexico "Feminine" societies •Sweden •The Netherlands •Chile •Thailand
Elements of Culture (Language)
The number of living languages is estimated to be 6,912 Words may have different meanings Examples: Snickers bar (knickers) A given gesture often has quite different meanings across culture Examples: Raise a hand and make a circle w/ thumb and forefinger Firms need to decide what languages to use for product labels or advertising copy Multilingual labels are fairly common •In B2B context, English is often used In markets such as China, marketers also need to decide whether to keep the original brand or company name Many MNCs in China have localized their names
GATT (General Agreements on Tariffs & Trade):
2nd iteration After 1950, GATT succeeded ITO as an "informal" forum among countries to reduce trade barriers The main operating principle of GATT was the concept of most favored nations (MFN). MFN: Any country that was a member of GATT and that extended a reduction in tariff to another nation would have to automatically extend the same benefit to all members of GATT There was no enforcement mechanism, and overtime many countries negotiated bilateral agreements. Many nations used non-tariff barriers to get around the spirit of GATT E.g., Quotas, onerous customs procedures etc.
Five stages in the evolution of global marketing - 3) international marketing
3) International Marketing now modifying marketing strategy. Developing and acquiring new national brands shared advertising promotional, and destruction costs. Now its polycentric orientation. because its local product development based on local needs. marketing mix decisions made in each country.
Foreign Direct Investment in History
The overall world inflow of FDIs reached $2.1 trillion in 2016 (highest level since pre-crisis peak) 54% in Developing economies 42% in Developed economies 2.3% in transition economies
Adoption to Cultures of new market
The success of international marketing activities is to a large degree driven by the local cultures Cultural variables may act as barriers or opportunities Global marketers need to become sensitive to cultural differences that influences their thinking, behavior, and decision making
bad habits with Adoption to Cultures
Avoid Self-reference criterion (SRC) and Ethnocentrism Self-reference criterion (SRC) People's unconscious tendency to resort to their own cultural experience and value systems to interpret a given business situation Ethnocentrism The feeling of one's own culture superiority Let's look at how culture and the firm's marketing mix interact
BOP (balance of payment)
BOP of a nation summarizes all the transactions that take place between residents of home country and the rest of the world over a specified time period, usually a month, quarter, or year These transactions include payments for the country's exports and imports of goods and services, financial capital, and financial transfer BOP deficit: Import > Export BOP Surplus: Export > Import
Our Definition of Culture
There are common aspects that span the different formulations of culture People learn culture ("nurture, not nature") A society's culture is passed on ("cultivated") by various peer groups (family, school, etc.) Culture is shared by individuals as members of society Culture consists of many different elements that are interrelated Cultures may be defined by national borders, especially when countries are isolated by natural barriers Cultures may contain subcultures that have little in common with one another Knowledge of a culture requires a deep understanding of its different elements
Historic definitions of Culture
There are numerous definitions of culture... "The collective programming of the mind which distinguishes the members of one group or category from those of another" (Geert Hofstede, 1991) "A learned, shared, compelling, interrelated set of symbols whose meanings provide a set of orientations for members of society" (Terpstra and David, 1991)
Regional Economic Agreements
There are over 120 regional free trade areas worldwide. An evolving trend in international economic activity is the formation of multinational trading blocs. Trading blocs: Group of countries (usually contiguous) that decide to have common trading policies for the rest of the world in terms of tariffs etc. but have preferential treatment for one another.
Most countries have their own currency through which they express the value of their products.
True
International Trade Statistics
US Trade Profile = Merchandise = exports:2nd (1.66 trillion) Impots: 1st(2.61 trillion) Commercial services = exports1st (808 billiob) imports: 1st (536 billion) excluding intra-EU trade, each stat goes down 1.
Top 10 World Traders in 2008 & 2018
United States: 1st to 1st Germany: 2nd to 3rd China: 3rd to 2nd Japan: 4th to 4th France: 5th to 5th UK: 6th to 6th Netherlands: 7th to 7th Italy: 8th to 10th South Korea: 9th to 9th Canada: 10th to GONE Collectively, the top ten traders in merchandise trade accounted for 52% of global trade in 2018.
In international marketing, local attitudes toward foreign cultures matter greatly and can become a huge barrier for the foreign company. In fact, it took 47 years to open the first Starbucks store in Italy because Italian consumers are reluctant to adopt American coffee culture. This implies the importance of understanding __________________________.
VALUE SYSTEMS
_________ has a statutory power to adjudicate trade disputes among countries.
WTO
Elements of Culture (Value Systems EXAMPLES)
Why it took Starbucks 47 years to open a store in Italy? Because coffee is part of italian culture
Political & Legal Environment Introduction
Why marketer should know political and legal environment? •International marketers must abide by various international agreements, treaties and laws •Political and legal climates are inherently related and inseparable, because laws are generally a manifestation of a country's political processes •Fiscal and monetary policy which will affect level of investment, especially FDI •E.g., Interest rate, Tax rates
Commercial services (e.g., banking, travel)
World exports of commercial services have increaesd by 46% in value terms since 2008 and services exports grew by an average annual rate of 3.9%
Multinational Corporations (MNC)
a company that owns or controls 10 percent or more of the voting securities, or the equivalent, of at least one foreign business enterprise. •At present, there are more than 78,000 MNCs with affiliates in foreign countries.
Foreign Direct Investment (FDI)
an alternative to exports. FDI involves investment in manufacturing and service facilities in a foreign country. •E.g., Foxconn: Taiwanese company invests money to build a factory in Wisconsin
BEM's
big emerging markets In the next ten to twenty years, the BEM's will provide many opportunities in global business. BEMs: the Chinese Economic Area (CEA: including China, Hong Kong Region, and Taiwan), India, Mexico, Brazil, Argentina, South Africa, Poland, Turkey, and the Association of Southeast Asian Nations (ASEAN: including Indonesia, Brunei, Malaysia, Thailand, the Philippines, and Vietnam)
•Promotion (Culture and the Marketing Mix) EXAMPLES
high__- context cultures In eye-movement study of pictures of objects, Chinese students spent more time on the background putting the objects in context Communication styles are more indirect and subtle, making use of less copy and more symbols low-context cultures In the same study, American students focused primarily on the central objects of the pictures Advertising uses more copy, factual data, and reasoning
Portfolio investment or indirect investment
refers to investments in foreign countries that are withdrawable at short notice, such as investments in foreign stocks and bonds.
Global Marketing - definition
refers to marketing activities that emphasize the following :1.Standardization in efforts. 2.Coordination across markets. 3.Global integration.
Merchandise Trade (e.g., shoes, clothes, iphone)
world exports of merchandise trade have increased by 20% in value terms since 2008.Exprts of manufactured goods grew at an average annual rate of 2.3%
Other Factors Influencing Exchange Rates
•Balance-of-Payments Political factors - Leadership changes etc. Random factors - E.g., Huge oil reserves discovered
Local Legal Systems and Laws
•Business Practices and the Legal Systems Types of Decisions Issue Pricing Decisions Price fixing Deceptive Pricing Trade Discount Packaging Decisions Pollution Regulations Fair packaging and labeling Product Decisions Patent protection Warranty requirements Product safety Competitive Decisions Barriers to entry Anticompetitive collusion Selling Decisions Bribery Stealing trade secrets Production Decisions Wages and benefits Health and safety requirements Channel Decisions Dealers rights Exclusive territorial distributorships
International Conflicts
•International conflicts and impact on US
Managing the Political Environment
•International managers must be aware of the political environment in which the firm operates •Important to know which environmental facets of the foreign country must be carefully monitored •The _turmoil_____ and mood in a country affect the actions a government will take
Local Law Environment
•Legal systems and the laws they create differ dramatically in countries around the world •Foreign subsidiaries and expatriate employees live within the legal bounds of their foreign market' legal systems, not home country •The international marketing manager must be aware of the laws that will govern all business decisions and contracts
Financial Environment
•Most countries have their own currency through which they express the value of their products (e.g., $, €, ₩) For international trade to occur, the various currencies of the world must be exchangeable This is accomplished through foreign exchange markets
(Pollution) Legal Issues in International Marketing
•Product related issue •Pollution regulations •E.g., South Korea bans disposable coffee cups in 2018 -eg. Netflix international expansion - •Netflix expanded to 190 countries in 7 years
Trademark (Legal Issues in International Marketing)
•Product related issue Intelletucutal Property Protection (trademark) •Trade-Related Aspects of Intellectual Property Rights (TRIPS) •Patent (first-to-file & first-to-invent principles) •Copyright •Trademark
Advertising regulations (Legal Issues in International Marketing)
•Promotion related issues •Advertising regulations •Advertising of "vice Products" (tobacco, alcohol) & pharmaceuticals •Comparative advertising •Content of advertising messages •Advertising targeting children
History of Globalization - world economy
•Since the end of WWII, the world economy has experienced a spectacular growth rate not witnessed before.........
Lesson From Football vs. Soccer
•Soccer is more popular than football in the world.........To be successful in the international business / marketing, you should have a "Soccer" mind-set rather than "Football" mind-set!...........Please put yourself into someone else's shoes. In other words, avoid your tendency to make marketing decisions based on your own belief when you are approaching to international consumers
When a country's currency gets devalued, _______(1)________ become ______(2)________. This is why China, whose economy highly relies on exporting, tried to keep its currency's value lower than its trade partners such as the U.S.
(1) Exports, (2) Cheaper (Cheap Yuan Policy)
Factors Influencing Exchange Rates (Random Factors)
-Unexpected and/or unpredicted events •Fear of uncertainty
WTO (World Trade Organization):
3rd iteration (CURRENT) During the last round of GATT talks, called the Uruguay Round (1986-1994), member countries established the WTO (January 1, 1995) As of 2018, WTO had 164 member countries WTO has ___authority_________ to adjudicate trade disputes among nations (dispute settlement mechanism) and has its own secretariat. Case study: Boeing vs. Airbus Many consider the dispute settlement mechanism the central pillar of the WTO. The WTO's main function is to ensure that trade flows as smoothly, predictably and freely as possible Trade Related Aspects of Intellectual Property Rights (TRIPS): WTO ensures smooth trade flows not only in merchandises and commercial services, but also in intellectual property
Five stages in the evolution of global marketing - 4) Multinational marketing
4) Multinational Marketing now modifying marketing strategy. based on region. Developing and acquiring new national brands based on region. shared advertising promotional, and destruction costs. based on region. Now Regio centric. because you standardize within region BUT NOT ACROSS. decisions made regionally now.
Five stages in the evolution of global marketing - 5) Global Marketing
5) Global Marketing coordinate marketing mix across countries AND regions integrate sourcing and production with marketing. allocate resources to achieve portfolio balance and growth. NOW geocentric. Because its global products, with local variations decisions made jointly with mutual consultation.
Macroeconomic Factors (Relative Inflation)
A country suffering relatively higher inflation rates than other major trading partners will tend to see its currency depreciate Inflation rate: The rate of increase of a price index (e.g., the consumer price index) This idea is "rooted" in the PPP
Q: Why are exchange rates important for marketers?
A: Because exchange rates typically fluctuate! Affect pricing decisions in foreign markets Affect important product-related decisions (e.g., where to manufacture) Affect the attractiveness of foreign markets
Managed (dirty) floats
Allows for a limited amount of government intervention to soften sudden swings in the value of the currency •Nation's central bank may wish to sell or buy their currency on the open market
BRIC countries
Among the BEMs, the BRIC countries (Brazil, Russia, India, China) are often highlighted because of their size.
High/low context cultures (Cross-Cultural Comparisons)
An important classification is that of high vs. low context cultures(Edward Hall) high-context cultures Interpretation of messages rests on contextual cues •E.g., China, South-Korea, Japan low-context cultures Put the most emphasis on written or spoken words •E.g., USA, Scandinavia, Germany
Which country does not belong to the BRIC countries?
Brazil Russia India China SWEDEN
Intro duction to Cultural Environment
Buyer behavior and consumer needs are largely driven by cultural norms Cultural forces are a major factor in shaping a company's global marketing mix program Cultural analysis often pinpoint market opportunities Companies that recognize cultural norms that their competitors have ignored often gain a competitive edge
Distribution (Culture and the Marketing Mix)
Distribution: •Cultural variables can also dictate distribution strategies Examples: Offline vs. Online shopping Which Regions shop online the Most? China Germany UK India United States Japan
Saturation of domestic markets:
Domestic-market saturation in the industrialized parts of the world are evident in global marketing.
Types of Regional Economic Arrangements: Political Union
Highest level of integration (aka nation)
Convergence of Global Markets - income
INCOME is an important determinant of consumer buying behavior. $10,000 OR LESS: Much of the income is spent on food and other necessities, and very little disposable income remains. $20,000 OR MORE: The disposable portion of income increases dramatically. This increased disposable income level results in increased convergent pressures on consumer buying behavior.
Exchange Rate Pass-Through EXAMPLE
In the 1990s, '$' began depreciating against the '¥' and the Deutsche Mark (DM) To maintain the same amount of profit, German and Japanese companies would have had to increase their prices in the US as a result of the weaker dollar Most German car companies raised their prices The Japanese car companies did not raise their prices nearly as much as the German companies did
Why Global Marketing is Imperative - international trade
Increases of the freedom of the movement of goods, services, capital, technology, and people have significantly facilitated international trade. ALSO: Domestic-market saturation in the industrialized parts of the world are evident in global marketing.
U.S. trade partners YTD
MExico: $150.6b (15%) Canada: $146.6b (14.6%) China: $132.0b (13.1%) Japan: $54.3b (5.4%) Germany: $46.7b (4.6%) South Korea: $33.4b (3.3%) United Kingdom: $33.1b (3.3%) France: $23.9b (2.4%) India: $23.5b (2.3%) Taiwan: ITaly: NEtherlands: Vietnam: Brazil: IReland
Growth of MNC
MNCs FDI and % of foreign sales in 2013 GE (US) Royal Dutch Shell (Netherlands/BRitain) Toyota (Japan) Exxon MObil (US) Total (France) BP (Britain) Vodafone (Britain) VOlkswagon (Germany) Chevron (US) Eni (Italy) Enel (Italy) Glencore ( Switzerland) Anheuser-Busch (Belgium) EDF (France) Neslte (Switzerland) E.ON (Germany) GDF (France) Duetsche Telekon (Germany) Apple Computer (US) Honda (Japan)
Among the factors that influence exchange rate, relative inflation is one of the ________________ factors.
Macroeconomic
Factors Influencing Exchange Rates
Macroeconomic Factors Political Factors Random Factors
Big Picture: Consumer Behavior
Marketing 4 P's "Black Box of Consumer Behavior" Psychological background Consumer decision making process Environmental & social influences Response
Which is not a cultural classification scheme that was developed by Hofstede?
Masculinity Power Distance SUSTAINABILITY Individualism
Additional Cross-Cultural Comparisons
The Dutch scholar Geert Hofstede developed another useful cultural classification scheme Power distance •Uncertainty avoidance •Individualism •Masculinity •Long-termism
why is global marketing imperative - internet revolution
The Internet and electronic commerce (e-commerce) are bringing major structural changes to the way companies operate worldwide.
How to be globally aware
To be globally aware is to have27 Tolerance of cultural differences Knowledge of culture, history, world market potential, and global economic, social, and political trends
History of Globalization - world merchandise trade volume increase
Total world merchandise trade volume grew from $7.6 trillion in 2000 to $16.3 trillion in 2008, and to $19.67 trillion in 2018 (+10% from 2017)..........