Global Environment

1. GlobalEnvironment BA 523 International Marketing MelikeDemirbag Kaplan, PhD

2. Global Marketing in the 21st Century • The world is shrinking rapidly with the advent of faster communication, transportation, and financial flows. • International trade is booming and accounts for 20 percent of GDP worldwide. • Global competition is intensifying. • Higher risks with globalization.

3. A Global Firm • Operates in more than one country • Gains marketing, production, R&D, and financial advantages not available to purely domestic competitors • The global firm sees the world as one market

4. BasicQuestions • Global firms ask a number of basic questions: • What market position should we try to establish in our own country, in our economic region, and globally? • Who will our global competitors be, and what are their strategies and resources? • Where should we produce or source our product? • What strategic alliances should we form with other firms around the world?

5. Key Influences in the Global Marketing Environment • The International Trade System • Economic Environment • Political-Legal Environment • Cultural Environment

6. KeyInfluences (Trade) • The International Trade System: • Restrictions—tariffs, quotas, embargos, exchange controls, and nontariff trade barriers. • The World Trade Organization and GATT: • Helps trade—reduces tariffs and other international trade barriers. • Regional Free Trade Zones: • Groups of nations organized to work toward common goals in the regulation of international trade.

7. Tariffs & Quotas • Tariffs are taxes on certain imported products designed to raise revenue or to protect domestic firms • Quotas are limits on the amount of foreign imports a country will accept in certain product categories to conserve on foreign exchange and protect domestic industry and employment

8. Exchange Controls & NontariffBarriers • Exchange controls are a limit on the amount of foreign exchange and the exchange rate against other currencies • Nontariff trade barriers are biases against bids or restrictive product standards that go against a particularcountry’s product features

9. GATT & WTO • General Agreement on Tariffs and Trade (GATT): • A 61-year-old treaty • Designed to promote world trade • Reduces tariffs and other international trade barriers • World Trade Organization • Enforces GATT rules • Mediates disputes • Imposes trade sanctions

10. Regional free trade zones such as the European Union, NAFTAor CAFTA help to simplify the process of going global.

11. EconomicEnvironment Economic factors reflect a country’s attractiveness as a market: • Industrial structure • Income distribution

12. EconomicEnvironment • Industrial Structure: • Shapes a country’s product and service needs, income levels, and employment levels. • Four types: • Subsistence economies • Raw material exporting economies • Industrializing economies – EmergingMarkets • Industrial economies

13. EconomicEnvironment • IncomeDistribution • Low-income households • Middle-income households • High-income households • More than half of China’s 1.3 billion consumers can barely afford rice. • More than 400 million Chinese live on less than $2 a day (WB) • Gucci,Cartier, Lexus and Bentley?

14. Emerging Markets

15. What are Emerging Markets? • Regional economic powerhouses -large populations, large resource bases, and large markets • Adopting open door policies to replace their traditional state policies that failed to produce sustainable economic growth. • World’s fastest growing economies • By 2020, the five biggest emerging markets' share of world output will double to16.1 percent from 7.8 percent in 1992. • They will also become more significant buyers of goods and services than industrialized countries • Critical participants in the world's major political, economic, and social affairs.

16. Asia:China, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Thailand Africa and the Middle East: South Africa and Israel Eastern Europe: The Czech Republic, Hungary, Greece, Portugal, Turkey The Former Soviet Union: Russia, Ukraine, and the Baltic's Latin America: Argentina, Brazil, Chile, Mexico, Venezuela http://en.wikipedia.org/wiki/Emerging_markets

17. The 86% Markets • The developed world - GNP of over $10K per capita- constitutes only 14% of the world’s population • 86% of the world – the emerging markets - has a GNP of less than $10K per capita • It is this 86% that represents the future of global commerce

18. Political – Legal Environment • Country’s attitude toward international buying • Government bureaucracy • Political stability • Monetary regulations

19. DemographicEnvironment • IncreasingPopulation • Net increase of 3 peoplepersecond • 93 millionperyear • 98 % occurringin developing countries

20. Aging & Urbanization

21. CulturalEnvironment • The cultural environment refers to factors and trends related to how people live and behave. Values Cultural Factors Ideas Subgroup Activities Beliefs Attitudes

22. CulturalEnvironment • Sellers must examine the ways consumers in different countries think about and use products before planning a marketing program. • Business norms and behavior vary from country to country. • Companies that understand cultural nuances can use them to advantage when positioning products internationally.

23. UnderstandingCultures • LowContext vs. HighContext (Hall, 1976) • CulturalDimensionsTheory (Hofstede, 1980) • Individualism vs. Collectivism • Masculinity vs. Femininity • PowerDistance • UncertaintyAvoidance • LongTermOrientation

28. LG KimchiFridge If you’ve got kimchi in your fridge, it’shard to keep it a secret. Made from fermented cabbage seasoned with garlic and chili, kimchi is served with most meals in Korea. But when it’s stored inside a normal refrigerator, its pungent odor taints nearby foods. That’s why, two decades ago, LG introduced the kimchi refrigerator, featuring a dedicated compartment that isolates smelly kimchi from other foods. Kimchi refrigerators now have become a fixture in 65 percent of Korean homes, and LG is the country’s top-selling manufacturer.

29. Importance of Culture Ignoring cultural differences can result in strong consumer backlash. Nike was forced to pull these shoes from distribution after learning that the stylized shoe logo resembled “Allah” when written in Arabic.

30. Homework • http://deepblue.lib.umich.edu/bitstream/2027.42/39704/3/wp320.pdf • Rethinking Marketing Programs for Emerging Markets. By: NirajDawar and AmitavaChattopadhyay.