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Chapter 1 Kotabe & Helsen's Global Marketing Management, Third Edition, 2004

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Global Marketing ManagementGlobal Marketing Management

Masaaki Kotabe & Kristiaan HelsenMasaaki Kotabe & Kristiaan Helsen Third EditionThird Edition

John Wiley & Sons, Inc., 2004John Wiley & Sons, Inc., 2004

Chapter 1Chapter 1

Globalization ImperativeGlobalization Imperative

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Chapter OverviewChapter Overview

1. Why Global Marketing is Imperative1. Why Global Marketing is Imperative

2.2. Globalization of Markets: ConvergenceGlobalization of Markets: Convergence

and Divergenceand Divergence

3. 3. Evolution of Global MarketingEvolution of Global Marketing

4. 4. Appendix: Theories of International Trade Appendix: Theories of International Trade and the Multinational Enterpriseand the Multinational Enterprise

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IntroductionIntroduction

Products have been traded across borders Products have been traded across borders throughout recorded civilization, extending back throughout recorded civilization, extending back beyond the beyond the Silk RoadSilk Road that once connected East that once connected East with West from Xian (China) to Rome (Italy).with West from Xian (China) to Rome (Italy).

Total world trade volume in goods and services Total world trade volume in goods and services grew from $6.5 trillion in 1998 to $7.6 trillion in grew from $6.5 trillion in 1998 to $7.6 trillion in 2000. 2000.

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Introduction (contd.)Introduction (contd.)

According to the World Trade Organization According to the World Trade Organization (WTO), the world’s five exporting countries were (WTO), the world’s five exporting countries were the United States the United States ($781 billion($781 billion), Germany ), Germany ($552 ($552 billionbillion), Japan ), Japan ($479 billion($479 billion), France ), France ($298 ($298 billionbillion), and Britain ), and Britain ($284 billion($284 billion), collectively ), collectively accounting for 38 percent of global trade in 2002.accounting for 38 percent of global trade in 2002.

The Triad RegionsThe Triad Regions (North America, Western (North America, Western Europe, and Japan) of the world collectively Europe, and Japan) of the world collectively produce over 80 percent of world GDP.produce over 80 percent of world GDP.

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Introduction (contd.)Introduction (contd.)

Big Emerging Markets (BEMs):Big Emerging Markets (BEMs): In the next ten to In the next ten to twenty years, BEMs such as the Chinese twenty years, BEMs such as the Chinese Economic Area (CEA: including China, Hong Economic Area (CEA: including China, Hong Kong Region, and Taiwan), India, South Korea, Kong Region, and Taiwan), India, South Korea, Mexico, Brazil, Argentina, South Africa, Poland, Mexico, Brazil, Argentina, South Africa, Poland, Turkey, and the Association of Southeast Asian Turkey, and the Association of Southeast Asian Nations (ASEAN: including Indonesia, Brunei, Nations (ASEAN: including Indonesia, Brunei, Malaysia, Thailand, the Philippines, and Vietnam)Malaysia, Thailand, the Philippines, and Vietnam)

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Introduction (contd.)Introduction (contd.)

will provide many opportunities in global will provide many opportunities in global business. business.

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1. Why Global Marketing is Imperative1. Why Global Marketing is Imperative

Saturation of domestic marketsSaturation of domestic markets: Domestic-market : Domestic-market saturation in the industrialized parts of the world saturation in the industrialized parts of the world and marketing opportunities overseas are evident and marketing opportunities overseas are evident in global marketing.in global marketing.

Global competitionGlobal competition: Competition around the world : Competition around the world and proliferation of the Internet are on the rise.and proliferation of the Internet are on the rise.

Need for global cooperationNeed for global cooperation: Global competition : Global competition brings global cooperation.brings global cooperation.

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

Internet revolutionInternet revolution: The Internet and electronic : The Internet and electronic commerce (e-commerce) are bringing major commerce (e-commerce) are bringing major structural changes to the way companies operate structural changes to the way companies operate worldwide.worldwide.

The term “The term “globalglobal” epitomizes both the competitive ” epitomizes both the competitive pressure and expanding market opportunities.pressure and expanding market opportunities.

Whether a company operates domestically or Whether a company operates domestically or across national boundaries, it can no longer avoid across national boundaries, it can no longer avoid competitive pressures from around the world.competitive pressures from around the world.

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2. Globalization of Markets: 2. Globalization of Markets: Convergence and DivergenceConvergence and Divergence

International trade consists of exports and imports.International trade consists of exports and imports. International business includes international trade International business includes international trade

and foreign production.and foreign production. Extensive international penetration of companies Extensive international penetration of companies

is called global reach.is called global reach. International trade and foreign production International trade and foreign production

activities are managed on a global basis.activities are managed on a global basis. Growth of Multinational Corporations (MNCs) Growth of Multinational Corporations (MNCs)

and intra-firm trade is a major aspect of global and intra-firm trade is a major aspect of global markets.markets.

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2. Globalization of Markets: 2. Globalization of Markets: Convergence and Divergence (contd.)Convergence and Divergence (contd.)

International trade versus international businessInternational trade versus international business: : – International trade consists of exports and International trade consists of exports and

imports.imports.– International business includes international International business includes international

business trade and foreign production.business trade and foreign production. Who manages international tradeWho manages international trade? ?

– Intrafirm trade: Trade between MNCs and their Intrafirm trade: Trade between MNCs and their affiliates.affiliates.

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3. Evolution of Global Marketing3. Evolution of Global Marketing

What is marketing?What is marketing? Marketing involves the Marketing involves the planning and execution of the conception, pricing, planning and execution of the conception, pricing, promotion, and distribution of ideas, products, and promotion, and distribution of ideas, products, and services.services.

Marketing involves customer satisfaction and their Marketing involves customer satisfaction and their current and future needs.current and future needs.

Marketing is much more than selling and involves Marketing is much more than selling and involves the entire company.the entire company.

Within marketing strategies, companies are always Within marketing strategies, companies are always under competitive pressure to move forward both under competitive pressure to move forward both reactively reactively and and proactivelyproactively..

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

Five stages in the evolution of global marketingFive stages in the evolution of global marketing (see Exhibit 1-2):(see Exhibit 1-2):

1. 1. Domestic MarketingDomestic Marketing (domestic focus; home (domestic focus; home country customers; ethnocentric orientation).country customers; ethnocentric orientation).

2. 2. Export MarketingExport Marketing (indirect vs. direct exporting; (indirect vs. direct exporting; country choice, exports; ethnocentric orientation; country choice, exports; ethnocentric orientation; home country customers).home country customers).

3. 3. International MarketingInternational Marketing (markets in many (markets in many countries; polycentric orientation; use of countries; polycentric orientation; use of multidomestic marketing when customer needs are multidomestic marketing when customer needs are different across national markets). different across national markets).

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

4. 4. Multinational MarketingMultinational Marketing (many markets; (many markets; consolidation on regional basis; regiocentric consolidation on regional basis; regiocentric orientation; standardization within regions).orientation; standardization within regions).

5. 5. Global MarketingGlobal Marketing (international, multinational (international, multinational & geocentric orientation; company’s willingness & geocentric orientation; company’s willingness to adopt a global perspective; global products with to adopt a global perspective; global products with local variations). local variations).

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

Global MarketingGlobal Marketing: Global marketing refers to : Global marketing refers to marketing activities that emphasize the marketing activities that emphasize the following:following:

1.1. Standardization efforts.Standardization efforts.

2.2. Coordination across markets.Coordination across markets.

3.3. Global integration.Global integration.

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

Global marketing does not necessarily mean that Global marketing does not necessarily mean that products can be developed anywhere on a global products can be developed anywhere on a global scale.scale.

The economic geography, climate, and culture The economic geography, climate, and culture affect how companies develop certain products.affect how companies develop certain products.

The Internet adds a new dimension to global The Internet adds a new dimension to global marketing.marketing.

E-commerce retailers gain substantial savings by E-commerce retailers gain substantial savings by selling online.selling online.

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

Comparative Advantage TheoryComparative Advantage Theory (see Exhibit 1-3) (see Exhibit 1-3)– Absolute AdvantageAbsolute Advantage– Comparative AdvantageComparative Advantage– Commodity Terms of TradeCommodity Terms of Trade– Principles of International TradePrinciples of International Trade– Factor Endowment TheoryFactor Endowment Theory

International Product Cycle TheoryInternational Product Cycle Theory (see Exhibit (see Exhibit 1-4)1-4)

– Economies of ScaleEconomies of Scale

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

(contd.)(contd.)– Economies of ScopeEconomies of Scope– Technological GapTechnological Gap– Preference SimilarityPreference Similarity– Stages of International Product Cycle Theory:Stages of International Product Cycle Theory:

» Introduction StageIntroduction StageA U.S. company innovates on a new A U.S. company innovates on a new

product in its home country.product in its home country.

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

(contd.)(contd.)

» Growth StageGrowth StageProduct standards emerge and mass Product standards emerge and mass

production becomes feasible.production becomes feasible.» Maturity StageMaturity Stage

Many U.S. and foreign companies vie for Many U.S. and foreign companies vie for market share in the international markets.market share in the international markets.

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

(contd.)(contd.)

» Decline StageDecline StageCompanies in the developing countries Companies in the developing countries

also begin producing the product and also begin producing the product and marketing it in the rest of the world.marketing it in the rest of the world.

Internalization/Transaction Cost TheoryInternalization/Transaction Cost Theory– Appropriability RegimeAppropriability Regime– Dominant DesignDominant Design– Manufacturing and Marketing AbilityManufacturing and Marketing Ability

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Copyright © John Wiley & Sons, Inc. 2004Copyright © John Wiley & Sons, Inc. 2004