The Global Market place

What is a global firm?

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
Otis Elevators
 HQ in Farmington
 Offers products in 200 countries
 83% of its sales comes from outside USA
 Procures elevator door systems from France
 Small parts from Spain
 Electronics from Germany
 Motor drives from Japan
Global Marketing Today
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?
Understanding the Global Marketing
Environment-Internationaltional trade system

Often firms face restrictions on trade between

nations.
 Governments may charge tariffs
 Countries may set Quotas
 Exchange controls
 Nontariff trade barriers
Tariffs are taxes on certain imported products
designed to raise revenue or to protect
domestic firms
Used to force favorable trade behavior from
other nations.

Quotas are limits on the amount of foreign

imports a country will accept in certain
product categories.
Used to conserve on foreign exchange and
protect domestic industry and employment
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 ,or excessive
host –country regulations or enforcement
Economic Environment

Two factors reflect a country’s attractiveness as a

market: Industrial structure and Income
distribution
 Industrial structure
 Industrial structure shapes its products and
service needs, income and employment levels

 Four types of industrial structure

Industrial structure types
 Subsistence economies- Vast majority of people
engage in simple agriculture. Few market
opportunities. Africa
 Raw material exporting economies-Rich in one or
more natural resources but poor in other ways.
Revenue comes from exporting the natural
resources. Good for equipment, tools etc. Attract
foreigners and good for luxury items. Chile(copper
and tin)
..cont
 Industrializing/Emerging economies-Fast growth in
manufacturing resulting in rapid economic growth.
 More import of raw materials needed and machinery
 Few imports of finished goods
 India and china
 Industrial economies-Major exporters of
manufactured goods and services.
 Trade goods amongst themselves
 Export raw materials
 US and Norway
Income distribution
 Industrialised economies may have low-medium and
high income households.
 Subsistence economies consist mostly of low
income families
Cultural Environment
 Marketers must understand what consumers think
and what they use products for e.g. French and
cosmetics, american vs chinese and make up
 Marketers must be aware of cultural norms, taboos
of each country and how culture affect consumer
reactions
Questions?
Deciding How to Enter the Market
Deciding How to Enter the Market

Exporting is when the company produces its

goods in the home country and sells them in a
foreign market. It is the simplest means
involving the least change in the company’s
product lines, organization, investments, or
mission.
 Indirect exporting
 Direct exporting
Deciding How to Enter the Market
Joint venturing is when a firm joins with foreign
companies to produce or market products or services
 Licensing
 Contract manufacturing
 Management contracting
 Joint ownership

Joint venturing differs from exporting in that the company

joins with a host country partner to sell or market
abroad
 Deciding How to Enter the Market
Licensing is when a firm enters into an agreement
with a licensee in a foreign market. For a fee or
royalty, the licensee buys the right to use the
company’s process, trademark, patent, trade
secret, or other item of value.
Deciding How to Enter the Market

Contract manufacturing is when a firm contracts

with manufacturers in the foreign market to
produce its product or provide its service.
Benefits include faster startup, less risk, and
the opportunity to form a partnership or to
buy out the local manufacturer.
Deciding How to Enter the Market

Management contracting is when the domestic

firm supplies management skills to a foreign
company that supplies capital. The domestic
firm is exporting management services rather
than products.
Deciding How to Enter the Market

Joint ownership is when one company joins forces

with foreign investors to create a local
business in which they share joint ownership
and control. Joint ownership is sometimes
required for economic or political reasons.
Questions?