Global Marketing Management, 5e

Chapter 1
Globalization

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Chapter Overview
1. Why Global Marketing is Imperative
2. Globalization of Markets: Convergence
and Divergence
3. Evolution of Global Marketing

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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 merchandise trade volume grew from
$7.6 trillion in 2000 to $16.3 trillion in 2008.

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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.
BRIC nations Brazil, Russia, China & India as the new
emerging mkts with global business potential
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1. Why Global Marketing is Imperative

Saturation of domestic markets:
Domestic-market saturation in the industrialized countries
Companies look for new marketing opportunities overseas
Development of new mkt opportunities due to economic &
population growth in developing countries
Companies given incentives to venture abroad

Global competition:
Competition around the world, competition has changed in the last
20 yrs
Old companies have declined and new ones have emerged
primarily because of global influences

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 Proliferation of the Internet & e-commerce

Internet on the rise and are now intensifying, open gates for
companies to sell direct to consumers easily across national
boundaries
Advent of e-commerce enable trade to take place between B2B,
B2C, removing the need t go thorough retail channels/middlemen
Customer info & data easily available enable companies to develop
mktg strategies aimed at impt customers & build loyal relationships
on a global basis

Need for global cooperation:

Global competition brings global cooperation.
Eg. In IT industry, collaboration among competitors in R & D (Sony,
IBM, Toshiba, Fujitsu)
Cross border joint venture & mergers & acquisitions
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 By examining the top 100 companies in the world,

profound changes can be observed.
The number of Japanese companies on the list fell from 23 in 2000
to 8 in 2008
The number of U.S. and European firms has stayed relatively
stable since 1990.
One of the biggest changes since 1990 has been the emergence of
China as the new super economic power

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Changes observed in the past 30 years simply reflect that companies from other
parts of the world have grown in size relative to those of the United States.
Pressure is on executives in all countries to do better in the upcoming
decade.
political and economic events have also had an impact on the nature of
global competition:
1). The demise of the Soviet Union.
2). The establishment of the European Union.
3). The establishment of NAFTA.
4). The deregulation and privatization of state-owned industries.
Growth of Eastern Europe and Southeast Asia will also eventually have an
impact on global marketing and business.
Global epitomizes both the intense competitive pressure and the expanding
market opportunities around the world.
Copyright (c) 2007 John Wiley & Sons, Inc.

Top 10 Fortune Global 500 Companies

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Worlds Biggest Economies

http://www.businessinsider.com/the-15-bigg
est-economies-in-the-world-2011-3?op=1
1. US
6. UK
2. China
7.Brazil
3. Japan
8. Italy
4. Germany
9. Russia
5. France
10. Canada
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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.
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2. Globalization of Markets:
Convergence and Divergence
Per capita income is an important determinant of
consumer buying behavior.
When a countrys 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 countrys 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.
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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.
Convergence & divergence in consumer needs in many parts
of the world translates into tremendous opportunities for
companies willing to risk venturing abroad
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2. Globalization of Markets:
Convergence and Divergence
International trade vs International Business:
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 intrafirm trade is a major aspect of global markets.

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2. Globalization of Markets:
Convergence and Divergence

Who manages international trade?

Intrafirm trade: Trade between MNCs and their foreign affiliates.

Comprises 34 % of world trade.
33% of world trade was exports between MNCs and their affiliates.
2/3 of world trade is managed one way or another by MNCs.
For industrialized countries, foreign production (FDI) forms a larger
part of the business than international trade
Most of the worlds FDI is in the US, the European Union (EU), and
Japan.
Over 50% of world trade and over 80% of foreign direct investment is
conducted by three regional economic hubs: the US, the EU and
Japan.
Collectively, these 3 areas are referred to as the triad. The triad is a
group of three major trading and investment blocs in the international
arena.

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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

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

4. Multinational Marketing (many markets; consolidation on
regional basis; regiocentric orientation; standardization
within regions).
5. Global Marketing (international, multinational & geocentric
orientation; companys willingness to adopt a global
perspective; global products with local variations,).

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Exhibit 1-2: Evolution of Global

Marketing

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3. Evolution of Global Marketing

Global Marketing refers to marketing activities that emphasize the

following:
1. Standardization efforts.
2. Coordination across markets.
3. Global integration.
4. Reduction in cost efficiencies and duplication of activities among
national and regional subsidiaries
5. Transfer of products, ideas, brands across subsidiaries
6. Have global customers

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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.
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