Global Markets and Buyers

Class 7

Trends in Global Business

•Internationalization of U.S. Markets•Internationalization of U.S. Business•Growth of Regional Trade Areas

- EU, NAFTA, AFTA, APEC•Move toward free market system by countries in

Latin America, Asia, Eastern Europe•Large Emerging Markets such as Argentina,

China, South Korea, Poland, India•Evolving global middle income households•GATT and World Trade Organization•The TRIAD

Successful Economic Union Requirements

Economic Compatibility

Political Compatibility

Geographic Proximity

Social Compatibility

Weakness in some must be balanced by strengths in others

Market Groups

Patterns of Multinational Cooperation– Regional Cooperation Groups

– Free-Trade Area

– Customs Union

– Common Market

– Political Union

European Trade Areas

* Five founding members.** Awaiting membership.*** Seeking membership.

Belgium Italy Austria* LiechtensteinDenmark Luxembourg Finland* Norway*France The Netherlands Iceland* Sweden*Germany Portugal SwitzerlandGreece SpainIreland United Kingdom

EC Countries and EC Countries and AustriaAustria Poland*** FinlandFinland Sweden Hungary*** Iceland

NorwaySweden

European Community (EC) European Free Trade Area (EFTA)

European Unity (EU) European Economic Area (EEA)

The European Economic Area: EU, EFTA, and Associates

ICELAND

NORWAY

SW

ED

EN

FINLAND

DENMARK

IRELAND

UNITED

KINGDOM

BELGIUM

Netherlands

GERMANY

FRANCE

SPAINPortugal

Switz.

ITALY

Austria

TURKEY

GREECE

ATLANTIC OCEAN

MALTA

EUEFTAEC Associated

A Comparison of the EU and NAFTA

EU 363.3 $ 7.79 $ 21,442

NAFTA 372.0 6.94 18,662

Population GNP GNP(millions) ($ trillions)* (per capita)*

* U.S. $ 1992.

New Multinational Market Groups or Trading Blocks of the 21st Century

European Union

European Economic Area (EC and EFTA)

North American Free Trade Area

Southern Cone-Mercosur

Asean Free Trade Area (AFTA)

Commonwealth of Independent States (CIS)

Central European Free Trade Area (CEFTA)

Trade Groups around the World

http://www.sfecon.com/groups.htm

http://usinfo.state.gov/journals/ites/0398/ijee/ejsubreg.htm

Future (Possible) Multinational Market Groups or Trading Blocks of the 21st Century

Western Hemisphere Free Trade Areas (WHFTA) Canada to Argentina

Asia-Pacific Economic Cooperation (APEC) Pacific Rim Countries including U.S.

U.S./ Canada/Mexico/Japan

South American Free Trade Area (SAFTA) Andean Pact and Mercosur

Chinese Economic Area (CEA) Hong Kong, Taiwan, Coastal Provinces of So. China

U.S./European Union

Many possibilities of Republics of Russia, Baltic States

Possible Regional Trade Groups

Trends sweeping developing countries

Transition from socialist to market-driven economies

Liberalization of trade and investment policies

Transfer of public-sector enterprise to the private sector

Rapid development of regional market alliances

Common Traits of Big Emerging Markets

Are physically large.

Have significant populations.

Represent considerable markets for a wide range of products.

Have strong rates of growth or the potential for significant growth.

Have undertaken significant programs or economic reform.

Are of major political importance within their regions.

Are "Regional Economic Drivers".

Will engender further expansion in neighboring markets as they grow.

Big Emerging Markets

AsiaChina 1,188.0 $ 435.6 $ 367

$ 135.9Indonesia 191.2 126.4 661

63.0India 870.0 238.3 274

42.2South Korea 43.7 296.8 6,799

150.6

Latin AmericaMexico 89.5 333.3 3,722

85.9Argentina 33.1 228.8 6,912

21.2Brazil 156.8 409.2 2,609

55.8

AfricaSouth Africa 39.8 114.8 2,882

17.1

EuropePoland 38.4 83.6 2,178

35.6Turkey 58.8 156.0 2,747

38.9

Possible AdditionsColombia 33.4 43.5 1,303

12.3Thailand 57.8 104.0 1,801

65.1Venezuela 20.3 60.4 2,984

25.2Vietnam 69.5 17.5 252

3.2

Population GDP GDP Trade*(millions) ($ billions) (per capita) ($ billions)

* Imports and exports.SOURCES: "Big emerging Markets," Business America, Special Issue 1994, pp. 59-65 and for additional information, see "Indicators of Market Size for 115 Countries," Crossborder Monitor, August 31,1994.

Developing an international marketing strategy

Segmenting Targeting Positioning

Reasons for Global Market Segmentation

Country Screening Global Market Research Entry Decisions Positioning Strategy Marketing Mix Policy

Bases for Country Segmentation

Demographics Socioeconomic Variables

– stages of economic development Per capita income Culture Political Conditions Behavior-Based Segmentation Life Style

Properties of a Market Segment

Properties– Measurable– Sizable– Accessible– Actionable– Competitive Intensity– Growth Potential

“Think” and “Feel” Country Clusters

Plot of Concentration Versus Category Growth: Chocolate Industry

Chocolate Market

Two-Cluster Solution

Chocolate Market

Three-Cluster Solution

International Positioning Strategies

Global Positioning and Segmentation Strategies– Universal Segment / Uniform Positioning

Theme

– Universal Segment / Different Positioning Themes

– Different Segment / Different Positioning Themes

Global Positioning & Segmentation Strategies

Bases for Global Segments

Geographic Demographic Psychographic Behavior Benefits

Average Monthly Expenditures for Chinese Households National and Urban Areas - 1994

Food (includes eating out) $22.10 $38.00

Savings 11.40 17.00

Clothing 5.60 9.00

Child's Education 4.70 7.00

Home (includes Rent & Utilities) 4.30 8.20

Daily Goods other than Food 3.50 4.80

Medical Expenses & Drugs 2.30 4.00

Entertainment 1.30 3.20

National Urban Areas

SOURCE: Gallup China.

Life Style

Exhibit : Typology of European Car Market

Roper Starch Worldwide Global Study

Shopping Styles– Deal Makers (29%) - love the buying process– Price Seekers (27%) - place primary value on the

product that they are buying– Brand Loyalists (23%) - purchase name brands and

remain true to them– Luxury Innovators (21%) - seek new, prestigious

brands

40,000 consumers in 40 countries

How the World Shops

Source: “How the World Shops,” Advertising Age, June 5, 1995, p.3.

Price Brand Luxury Deal Seekers Loyalists Innovators Makers

India 7.4 34.6 35.8 22.2Saudi Arabia 8.9 14.8 34.4 40.3Mexico 23.4 19.1 19.9 35.0China 23.4 27.9 19.1 35.0Czech Republic 26.9 23.9 25.7 22.6U.K. 27.2 28.7 17.5 25.5Spain 34.4 27.0 18.1 19.6U.S. 36.0 11.3 17.0 37.0Japan 41.0 23.5 7.9 27.1Germany 43.7 16.9 15.7 21.9France 45.5 19.5 8.5 26.6

How the World Shops

Source: “How the World Shops,” Advertising Age, June 5, 1995, p.3.

Luxury Brand Price Deal Innovators Loyalists Seekers Makers

Japan 7.9 23.5 41.0 27.1France 8.5 19.5 45.5 26.6Germany 15.7 16.9 43.7 21.9U.S. 17.0 11.3 36.0 37.0U.K. 17.5 28.7 27.2 25.5Spain 18.1 27.0 34.4 19.6China 19.1 27.9 23.4 35.0Mexico 19.9 19.1 23.4 35.0Czech Republic 25.7 23.9 26.9 22.6Saudi Arabia 34.4 14.8 8.9 40.3India 35.8 34.6 7.4 22.2

How the World Shops

Source: “How the World Shops,” Advertising Age, June 5, 1995, p.3.

Deal Luxury Brand PriceMakers Innovators Loyalists Seekers

Spain 19.6 18.1 27.0 34.4Germany 21.9 15.7 16.9 43.7India 22.2 35.8 34.6 7.4Czech Republic 22.6 25.7 23.9 26.9U.K. 25.5 17.5 28.7 27.2France 26.6 8.5 19.5 45.5Japan 27.1 7.9 23.5 41.0China 35.0 19.1 27.9 23.4Mexico 35.0 19.9 19.1 23.4U.S. 37.0 17.0 11.3 36.0Saudi Arabia 40.3 34.4 14.8 8.9

Emerging Middle Class

Asian Yuppies - Having it all

– Levels of income & purchasing patterns in developing countries v. prosperous economies

– Demand for goods in emerging markets v. mature markets

Market segmentation issues