Marketing (DECA) by aae14500


									Marketing (DECA)

Chapter 5 - Moving Into a Global Economy

   1. Discuss the impact of international trade on the U.S. economy
   2. Provide Examples of products you consume that are produced in other countries.
   3. Explain why businesses what to sell their products and services in other countries.
   4. Describe five ways that businesses can become involved in international markets.
   5. Discuss how the marketing concept can be used to identify opportunities in international
   6. Identify several categories of information business people need to consider to understand
       international markets.
   7. Describe ways that each of the marketing functions can be designed to meet the needs of
       international markets.
   8. List sources of information and support available to businesses participating in
       international trade.

  I. The United States and International Trade

              The US is the world’s largest producer and economy. The Gross Domestic

              Product (GDP) of the US is. The US also consumes approximately ¼ of all goods

              and services produced in the world.

              International trade - the sale of products and services to people in other countries.

              We are all involved in international trade. If we look at all of the products and

              services that we consume, we will see that much of it was produced in another


              Imports – products and services purchased from another country.

              Exports – products and services that are sold to another country

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Types of products are changing

Although the amount of international trade increases each year, the type of products and services

exchanged between countries changes.

   1. Many countries at one time did not have developed manufacturing capabilities and

       therefore they sold many of their raw materials (timber, coal, petroleum) to other

       countries who were involved in manufacturing but did not have the necessary raw


   2. Today, many countries manufacture products and therefore consume raw materials rather

       than sell them and, as a result, trade has shifted from raw materials to finished goods.

   3. Services are also imported and exported. Examples are banking, education, travel and


Why are businesses going global?

   1. Competition is intense in current markets and sales and profits are declining. Businesses

       begin to look for customers in other countries.

   2. Certain circumstances may force companies to find new markets overseas. Example – the

       birthrate in the US is declining and therefore manufacturers of baby products must try to

       sell their goods in other countries.

   3. If many of your competitors enter the international market, you may feel it necessary to

       do the same.

   4. There is an increasing demand for products. As economies expand throughout the world

       and standards of living increase, consumers are able and willing to spend money on a

       variety of products.

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How do businesses get involved?

   1. Exporting – When businesses have become successful selling products in their own

      country, they may begin to look for additional markets.

          a. Indirect exporting – marketing businesses with exporting experience serve as

              agents for a business and arrange for the sale of the businesses products abroad.

              These agents help inexperienced companied with language, shipping, finances,

              and regulations and laws.

          b. Direct exporting – a company performs all exporting activities and takes complete

              responsibility for marketing its products in another country.

   2. One problem that countries face concerning international trade is the difference between

      imports and exports.

          a. Balance of trade – the difference between a country’s imports and exports. If

              exports are greater than imports, there is a surplus. If exports are less than

              imports, there is a deficit. A deficit shows that a country is sending out more of

              its resources to other countries and that businesses from other countries are

              satisfying the needs of consumers better than the country’s own businesses.

   3. Foreign production – a company owns and operates production facilities in another

      country. Rather than manufacturing a product in one country and then shipping it to

      another country, the entire process is completed in the country where the product is to be

      sold. Advantages include:

          a. Business activities are performed within the country in which the products will be


          b. The time needed to move product from one country to another is reduced.

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          c. People in some countries are concerned about the amount of products being

             purchased from other countries. Foreign production allows manufacturing

             companies to continue to sell their products while responding to the consumer’s

             concern about where the products are manufactured.

   4. Foreign investment – owning all or part of an existing business in another country. Some

      companies may choose to buy an existing business rather than start a new business.

          a. Businesses can move very quickly into another country.

          b. Businesses can use past records to see if it is a good investment.

   5. Joint venture – Independent companies develop a relationship to participate in common

      business activities. For example, three large airlines, Delta, SwissAir, and Singapore

      Airlines agree to purchase 5% of the stock in each other’s companies in order to develop

      an international venture.

   6. Multinational companies – businesses that have operations throughout the world and that

      conduct planning for worldwide markets.

          a. These large companies buy and sell throughout the world.

          b. They develop factories and offices throughout several countries to keep

             operations close to their customers (Coca-Cola, Hilton Hotels, John Deere, IBM).

          c. Employees must understand the cultures of the countries their companies conduct

             business in.

          d. Employees are expected to be able and willing to work with people from all over

             the world.

          e. Thinking globally opens many opportunities for businesses, but also makes

             business and marketing decisions more complex.

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Understanding international markets

Businesses should not assume that all people in a country have the same characteristics, needs,

and interests.

   1. Similarities between marketing within your country and marketing internationally include

       identifying the market and developing a marketing mix.

   2. Differences between marketing within your country and marketing internationally

       include the characteristics of the market, the information needed and how it is obtained,

       and the procedures used in developing each of the marketing mix elements.

The marketing concept highlights opportunities

Business people who do not understand the marketing concept may make important mistakes

when entering a foreign market. They may believe that if a product is successful in their

country, it will be successful in other countries. You cannot use the same types of marketing

strategies that you use at home, in a foreign market. You must study the consumers in each

market to see if they want/need your product. You must determine how the product will be

distributed. You must establish a price and a pricing policy and develop a promotional strategy

that is appropriate for each country and market.

   1. Consumer characteristics – are there enough prospective customers, do they have needs

       for your products or services, do they money available to spend, where are they located

       within the country (transportation and communications media availability).

   2. Culture and customs – the common beliefs and behaviors of a group of people who have

       a similar heritage and experience. Certain marketing methods may or may not be

       appropriate depending on a country’s culture. Family structures, religion, language, and

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      personal habits differ greatly from market to market and failure to recognize these

      differences may result in misunderstanding or mistrust.

   3. Economic environment – marketers must understand the level of economic development

      and the current economic condition of a country.

          a. If a country’s economy is growing, citizens will have more job opportunities and

              more money to spend on products and services.

          b. There are several important measures of the condition of a country’s economy.

              One is the Gross Domestic Product, which is the total value of the goods and

              services produced in a country during the year. Another is the standard of living,

              which is the average value of resources produced by a country based on its total

              population. A final measure is purchasing power, which is the amount of goods

              and services that can be obtained with a specific amount of money.

          c. Inflation – prices increase faster than the value of the goods and services.

          d. Recession – a period of time in which production, employment and income are


   4. Political and legal structure – the stability of the political system is important for

      businesses. Countries develop laws to regulate business.

          a. Quotas – limits on the numbers of specific types of products foreign companies

              can sell in a country.

          b. Tariffs – taxes placed on imported products to increase the price for which they

              are sold.

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          c. Embargo – government bars companies from doing business with a particular

              country. This could be due to human rights violations etc. U.S. firms are barred

              from doing business with Cuba.

          d. Sanctions – Specific business ties with a foreign country are banned. It is illegal

              for an American company to sell nuclear technology to North Korea. A

              government’s attempt at sanctions may be undermined. For example, if

              government A bans the sale of a product to government C but not Government B,

              What do you think could happen?

   5. Technology – Although technology is changing rapidly and consumers have access to

       computers, there are still many differences in technological advances from country to

       country. The same technology may not be used from country to country. For example,

       many countries outside the US use the metric system.

International marketing activities

After business people have gathered the necessary information to understand the new market,

they can develop the marketing mix.

   1. Product/service planning – important activities for international markets include:

          a. Packaging for protection and for easy use by customers

          b. Brand names must be carefully selected to fit the language of the country

          c. Product information or instructions must be written to meet the laws of the

              country and to clearly communicate with the customers

   2. Purchasing – procedures used to purchase products or assist customers in purchasing

       must conform to the country’s laws and customs (contracts and monetary systems).

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   3. Financing – businesses will need to develop relationships with banks and other financial

      organizations in the new country.

   4. Distribution – this may be the most challenging marketing function.

          a. What is the appropriate shipping method from country to country and within the

              country of the new markets?

          b. How much time will it take to process an order and ship the order to the customer.

          c. What are the laws regulating distribution such as taxes, tariffs and quotas.

   5. Pricing – different countries have different monetary systems and different marketing

      costs. The customs of the new country may require a new approach to determining the

      way prices are set, changed and communicated to the customer.

   6. Risk Management – Businesses can take steps to reduce risk. They can buy insurance on

      transported products and there are various organizations established by the US

      government to help protect businesses.

   7. Marketing Information Management – businesses need to identify information needs,

      create methods of collecting and analyzing that information and set procedures for

      ensuring the information is up to date.

   8. Promotion – this is where understanding the country’s culture and customs is very

      important. Promotion relies on effective communication. There are many examples of

      promotional mistakes in translation and choice of words.

   9. Selling – sales people must be aware of the need to be formal or informal, who initiates

      conversations, how a business card is presented, if a gift is required, and proper dress.

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