Global Marketing Management, 5e

Chapter 1
Globalization
Imperative

Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 Chapter Overview
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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

Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 Introduction
3

 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 $7.6
trillion in 2000 to $16.3 trillion in 2008.

Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 Introduction
4

 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.

Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 1. Why Global Marketing is Imperative
5

 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.

Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 1. Why Global Marketing is Imperative
6

 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.

Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 Exhibit 1-1: Change in World’s 100 Largest
Companies and Their Nationalities
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Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 2. Globalization of Markets: Convergence and
Divergence
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 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.
Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1
 2. Globalization of Markets: Convergence and
Divergence
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 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.
Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1
 2. Globalization of Markets: Convergence and
Divergence
10

 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.

Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 2. Globalization of Markets: Convergence and
Divergence
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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.

Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 3. Evolution of Global Marketing
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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.
Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1
 3. Evolution of Global Marketing
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 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).

Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 3. Evolution of Global Marketing
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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).

Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 Exhibit 1-2: Evolution of Global
Marketing
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Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 3. Evolution of Global Marketing
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 Global Marketing refers to marketing activities

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

Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 3. Evolution of Global Marketing
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 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.

Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 4. Appendix: Theories of International Trade &
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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

Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 Exhibit 1-3:
Comparative Advantage at Work
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Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 Exhibit 1-4:
International Product Life Cycle
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Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 4. Appendix: Theories of International Trade &
the Multinational Enterprise
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 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.

Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 4. Appendix: Theories of International Trade &
the Multinational Enterprise
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 Growth Stage
 Product standards emerge and mass production
becomes feasible.
 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.

Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1

 4. Appendix: Theories of International Trade &
the Multinational Enterprise
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 Internalization/Transaction Cost Theory

 Appropriability Regime
 Dominant Design
 Manufacturing and Marketing Ability

Copyright (c) 2009 John Wiley & Sons, Inc. Chapter 1