Global Marketing Management

Masaaki Kotabe & Kristiaan Helsen

Third Edition
John Wiley & Sons, Inc., 2004
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 Chapter 1

Globalization Imperative
 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

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 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 $6.5 trillion in 1998 to $7.6 trillion in
2000.

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 Introduction (contd.)

 According to the World Trade Organization

(WTO), the world’s five exporting countries were
the United States ($781 billion), Germany ($552
billion), Japan ($479 billion), France ($298
billion), and Britain ($284 billion), collectively
accounting for 38 percent of global trade in 2002.
 The Triad Regions (North America, Western
Europe, and Japan) of the world collectively
produce over 80 percent of world GDP.

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 Introduction (contd.)

 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)

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 Introduction (contd.)

will provide many opportunities in global

business.

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 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 are on the rise.
 Need for global cooperation: Global competition
brings global cooperation.

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 1. Why Global Marketing is Imperative
(contd.)
 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.

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 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.
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 2. Globalization of Markets:
Convergence and Divergence (contd.)
 International trade versus international business:
– International trade consists of exports and
imports.
– International business includes international
business trade and foreign production.
 Who manages international trade?
– Intrafirm trade: Trade between MNCs and their
affiliates.

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 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.
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 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).
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 3. Evolution of Global Marketing
(contd.)
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).

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 3. Evolution of Global Marketing
(contd.)
 Global Marketing: Global marketing refers to
marketing activities that emphasize the
following:
1. Standardization efforts.
2. Coordination across markets.
3. Global integration.

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 3. Evolution of Global Marketing
(contd.)
 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.

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 4. Appendix: Theories of International
Trade & 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
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 4. Appendix: Theories of International
Trade & the Multinational Enterprise
(contd.)
– 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.

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 4. Appendix: Theories of International
Trade & the Multinational Enterprise
(contd.)

» 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.

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 4. Appendix: Theories of International
Trade & the Multinational Enterprise
(contd.)
» Decline Stage
 Companies in the developing countries
also begin producing the product and
marketing it in the rest of the world.
 Internalization/Transaction Cost Theory
– Appropriability Regime
– Dominant Design
– Manufacturing and Marketing Ability

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