Global Marketing Management

Chapter 1
Globalization
Imperative

1
Chapter Overview

1. Why Global Marketing is Imperative

2. Globalization of Markets: Convergence
and Divergence
3. Evolution of Global Marketing
4. Appendix: Theories of International Trade and the
Multinational Enterprise

2
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 trade volume in goods and services
grew from $7.6 trillion in 2000 to nearly $11
trillion in 2004.

Chapter
Copyright (c) 2007 John Wiley & Sons, Inc. 3
1
Introduction

 According to the World Trade Organization

(WTO), the world’s five exporting
countries were Germany ($912 billion),
the United States ($819 billion), China
($593 billion), Japan ($566 billion), and
France ($449 billion), collectively
accounting for 36 percent of global trade
in 2004.
 The Triad Regions (North America,
Western Europe, and Japan) of the world
collectively produce over 78 percent of
world GDP in 2004.
Chapter
Copyright (c) 2007 John Wiley & Sons, Inc. 4
1
 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.
Chapter
Copyright (c) 2007 John Wiley & Sons, Inc. 5
1
1. 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.
 Global competition: Competition
around the world and proliferation of
the Internet have been on the rise and
are now intensifying.
 Need for global cooperation: Global
competition brings global cooperation.
Chapter
Copyright (c) 2007 John Wiley & Sons, Inc. 6
1
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.
Chapter
Copyright (c) 2007 John Wiley & Sons, Inc. 7
1
2. 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 (c) 2007 John Wiley & Sons, Inc. 8
1
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.

Chapter
Copyright (c) 2007 John Wiley & Sons, Inc. 9
1
2. 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 (c) 2007 John Wiley & Sons, Inc. 10
1
2. Globalization of Markets:
Convergence and Divergence
Who manages international trade?
 Intrafirm 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 (c) 2007 John Wiley & Sons, Inc. 11
1
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.
Chapter
Copyright (c) 2007 John Wiley & Sons, Inc. 12
1
3. Evolution of Global Marketing (contd.)

 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).
Chapter
Copyright (c) 2007 John Wiley & Sons, Inc. 13
1
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; company’s willingness to adopt a
global perspective; global products with local variations).

Chapter
Copyright (c) 2007 John Wiley & Sons, Inc. 14
1
3. Evolution of Global Marketing

 Global Marketing: Global

marketing refers to marketing
activities that emphasize the
following:
1. Standardization efforts.
2. Coordination across markets.
3. Global integration.

Chapter
Copyright (c) 2007 John Wiley & Sons, Inc. 15
1
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.
Chapter
Copyright (c) 2007 John Wiley & Sons, Inc. 16
1