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Chapter globalization imperative, in this chapter, the following content will be discussed: Why global marketing is imperative, globalization of markets: convergence and divergence, evolution of global marketing, appendix: theories of international trade and the multinational enterprise.
GLOBAL MARKETING MANAGEMENT Seventh Edition MASAAKI KOTABKE | KRISTIAAN HELSEN Chapter PowerPoint Globalization Imperative Chapter Overview Why Global Marketing is Imperative Globalization of Markets: Convergence and Divergence Evolution of Global Marketing Appendix: Theories of International Trade and the Multinational Enterprise Chapter Copyright © 2017 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 $6 trillion in 2000 to $16.3 trillion in 2008 • Despite the sharp drop of world merchandise exports down to $12.5 trillion in 2009, total merchandise trade volume bounced back to US$15.2 trillion in 2010 and grew steadily to US$19 trillion in 2014—a growth of 52% over the last years Copyright © 2017 John Wiley & Sons, Chapter Inc Introduction • Big Emerging Markets (BEMs): In the next ten to twenty years, BEMs such as the CEA (China, HK area, Taiwan), India, CIS (Russia, Central Asia, Caucasus states), S Korea, Mexico, Brazil, Argentina, S Africa, Central Europe region, Turkey, and ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam) will provide many opportunities in global business Chapter Copyright © 2017 John Wiley & Sons, Inc Why Global Marketing is Imperative • Saturation of domestic markets: Domestic-market saturation in the industrialized parts of the world and marketing opportunities overseas are evident in global marketing • Emerging markets • Unfavorable domestic economy • Global competition: Competition around the world and proliferation of the Internet have been on the rise and are now intensifying Chapter Copyright © 2017 John Wiley & Sons, Inc Why Global Marketing is Imperative • Global cooperation: Global competition brings global cooperation • 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 Chapter Copyright © 2017 John Wiley & Sons, Inc Exhibit 1-1: Change in World’s 100 Largest Companies and Their Nationalities Chapter Copyright © 2017 John Wiley & Sons, Inc Globalization of Markets: Convergence and Divergence • Per capita income is an important determinant of consumer buying behavior • When a country’s 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 country’s 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 Chapter Copyright © 2017 John Wiley & Sons, Inc 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 Chapter Copyright © 2017 John Wiley & Sons, Inc Globalization of Markets: Convergence and Divergence • 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 intra-firm trade is a major aspect of global markets Chapter Copyright © 2017 John Wiley & Sons, Inc 10 Globalization of Markets: Convergence and Divergence Who manages international trade? – Intra-firm trade: Trade between MNCs and their foreign affiliates Comprises 34 percent of world trade – An additional 33 percent of world trade was exports between MNCs and their affiliates – In other words, two-thirds of world trade is managed one way or another by MNCs Chapter Copyright © 2017 John Wiley & Sons, Inc 11 Evolution of Global Marketing • • • • What is marketing? Marketing involves creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large 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 Chapter Copyright © 2017 John Wiley & Sons, Inc 12 Evolution of Global Marketing • Five stages in the evolution of global marketing (see Exhibit 1-2): Domestic Marketing (domestic focus; home country customers; ethnocentric orientation) Export Marketing (indirect vs direct exporting; country choice, exports; ethnocentric orientation; home country customers) International Marketing (markets in many countries; polycentric orientation; use of multidomestic marketing when customer needs are different across national markets) Chapter Copyright © 2017 John Wiley & Sons, Inc 13 Evolution of Global Marketing Multinational Marketing (many markets; consolidation on regional basis; regiocentric orientation; standardization within regions) Global Marketing (international, multinational & geocentric orientation; company’s willingness to adopt a global perspective; global products with local variations) Chapter Copyright © 2017 John Wiley & Sons, Inc 14 Exhibit 1-2: Evolution of Global Marketing Chapter Copyright © 2017 John Wiley & Sons, Inc 15 Evolution of Global Marketing • Global Marketing refers to marketing activities that emphasize the following: Standardization efforts Coordination across markets Global integration Chapter Copyright © 2017 John Wiley & Sons, Inc 16 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 Chapter Copyright © 2017 John Wiley & Sons, Inc 17 Appendix: Theories of International Trade and the Multinational Enterprise • Comparative Advantage Theory (see Exhibit 1-3) – – – – – • Absolute Advantage Comparative Advantage Commodity Terms of Trade Principles of International Trade Factor Endowment Theory International Product Cycle Theory (see Exhibit 1-4) – Economies of Scale Chapter Copyright © 2017 John Wiley & Sons, Inc 18 Exhibit 1-3: Comparative Advantage at Work Chapter Copyright © 2017 John Wiley & Sons, Inc 19 Exhibit 1-4: International Product Cycle Chapter Copyright © 2017 John Wiley & Sons, Inc 20 Appendix: Theories of International Trade and the Multinational Enterprise – – – – Economies of Scope Technological Gap Preference Similarity Stages of International Product Cycle Theory: • Introduction Stage – A U.S company innovates on a new product in its home country • Growth Stage – Product standards emerge and mass production becomes feasible Continued Chapter Copyright © 2017 John Wiley & Sons, Inc 21 Appendix: Theories of International Trade and the Multinational Enterprise Continued •Maturity Stage – Many U.S and foreign companies vie for market share in the international markets •Decline Stage – Companies in the developing countries also begin producing the product and marketing it in the rest of the world Chapter Copyright © 2017 John Wiley & Sons, Inc 22 Appendix: Theories of International Trade and the Multinational Enterprise • Internalization/Transaction Cost Theory • Resource-Based View and Appropriability Theory – Appropriability Regime – Dominant Design – Operational and Marketing Ability Chapter Copyright © 2017 John Wiley & Sons, Inc 23 ... Wiley & Sons, Inc 14 Exhibit 1- 2: Evolution of Global Marketing Chapter Copyright © 2 017 John Wiley & Sons, Inc 15 Evolution of Global Marketing • Global Marketing refers to marketing activities... Scale Chapter Copyright © 2 017 John Wiley & Sons, Inc 18 Exhibit 1- 3: Comparative Advantage at Work Chapter Copyright © 2 017 John Wiley & Sons, Inc 19 Exhibit 1- 4: International Product Cycle Chapter. .. and proactively Chapter Copyright © 2 017 John Wiley & Sons, Inc 12 Evolution of Global Marketing • Five stages in the evolution of global marketing (see Exhibit 1- 2): Domestic Marketing (domestic