International Marketing15th edition

Philip R. Cateora, Mary C. Gilly, and John L. Graham Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Introduction• Economic growth and global trade has

extended well into the 21st century• Three multinational markets are crucial: The

Americas, Europe, and Asia• Within each of these markets are fully

industrialized nations, rapidly industrializing nations, and less developed nations

• Time zones, miles, and cultural distances can be a major concern and many U.S. companies have organized their international operations according to these concerns

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Overview• The importance of marketing and economic

development• Stages of economic development, economic

growth factors, objectives of developing countries, infrastructure and development, and marketing’s contributions

• Marketing in developing countries• Big Emerging Markets (BEMs) and the

Americas– NAFTA, DR-CAFTA, MERCOSUR, LAEC, FTAA,

SAFTA

• Strategic Implications for Marketing Roy Philip 3

Global PerspectiveDesnynchronosis? Something George

Clooney Caught Up In The Air?• According to the Encyclopedia Britannica

“Physiological desnychronization” is caused by transmeridian (east-west) travel between different time zones

• Most people find it difficult to travel eastward, adapting a shorter day as opposed to a longer one

• For international travelling executives, jet lag can be a major concern

• Jet lag can cause extreme fatigue, sleep disturbances, loss of concentration, disorientation, malaise, sluggishness, gastrointestinal upset, and loss of appetite

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Marketing and Economic Development (1 of

2)• The stage of economic growth – Affects the attitudes toward foreign business

activity– The demand for goods– The distribution systems found within a

country– The entire marketing process

• Static economy – consumption patterns are rigid

• Dynamic economy – consumption patterns change rapidly

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Marketing and Economic Development (2 of

2)• Economic development is generally

understood to mean an increase in the average per capita gross domestic product (GDP) and implies a widespread distribution of increased income

• Economic development, today, also means rapid economic growth and increases in consumer demand

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Stages of Economic Development (1 of 2)

• The United Nations groups countries into three categories– MDCs (more-developed countries – Canada,

England, France, Germany, Japan, and the United States)

– LDCs (less-developed countries – Asia and Latin America)

– LLDCs (least-developed countries – Central Africa and Asia)

– NICs (Newly Industrialized Countries – Chile, Brazil, Mexico, South Korea, Singapore, and Taiwan)

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Stages of Economic Development (2 of 2)

• NICs (Newly Industrialized Countries)– Countries that are experiencing rapid economic

expansion and industrialization – Do not exactly fit as LDCs or MDCs– Have moved away from restrictive trade practices– Instituted significant free market reforms– Brazil is a good example of an NIC, exporting

everything from alcohol-based fuels to carbon steel. Brazilian orange juice, poultry, soybeans, and weapons compete with U.S. products for foreign markets. The Brazilian aircraft manufacturer, Embraer provides a substantial portion of the commuter aircraft used in the U.S. and elsewhere

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Standards of Living in the Eight Most Populous American

Countries

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Exhibit 9.2

Economic Growth Factors

• Economic growth factors for NICs – Political stability in policies affecting their

development– Economic and legal reforms– Entrepreneurship– Planning– Outward orientation– Factors of production– Industries targeted for growth– Incentives to force a high domestic rate of savings

and to direct capital to update the infrastructure, transportation, housing, education, and training

– Privatization of state-owned enterprises (SOEs) that placed a drain on national budgets

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Information Technology, the Internet, and Economic

Development• New, innovative electronic technologies are key

to a sustainable future for developed and developing nations

• The Internet accelerates the process of economic growth by speeding up the diffusion of new technologies to emerging economics

• The internet allows for innovative services at a relatively inexpensive cost

• Wireless technologies greatly reduce the need to lay down a costly telecom infrastructure to bring telephone service to areas not now served

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Objectives of Developing Countries

• Industrialization is the fundamental objective of most developing countries

• Economic growth is seen as the achievement of social as well as economic goals– Better education– Better and more effective government– Elimination of many social inequities– Improvements in moral and ethical

responsibilities

• Privatization is the norm and currently a major economic phenomenon in industrialized as well as in developing countries

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Infrastructure and Development

• Infrastructure represents those types of capital goods that serve the activities of many industries such as paved roads, railroads, seaports, communication networks, etc.

• The quality of an infrastructure directly affects a country’s economic growth potential and the ability of an enterprise to engage effectively in business

• The less developed a country is – the less adequate the infrastructure is for conducting business

• Countries begin to lose economic development ground when their infrastructure cannot support an expanding population and economy

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Infrastructure of Most Populous American Countries

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Exhibit 9.3

Marketing’s Contributions

• Marketing (or distribution) is not always considered meaningful to those responsible for planning

• Marketing is an economy’s arbitrator between productive capacity and consumer demand

• The marketing process is the critical element in effectively utilizing production resulting from economic growth

• Marketing is instrumental in laying the groundwork for effective distribution

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Marketing in a Developing Country (1 of

3)• Marketing efforts must be keyed to each

situation and custom tailored to each set of circumstances– A promotional program for a population that

is 50% illiterate is vastly different from a program for a population that is 95% literate

• In evaluating the potential in a developing country, the marketer must look at two areas:– Level of market development– Demand in developing countries

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Marketing in a Developing Country (2 of

3)• Level of market development

– Marketer must evaluate existing level of market development and receptiveness

– The more developed an economy, the greater the variety of marketing functions demanded, and the more sophisticated and specialized the institutions become to perform marketing functions

– Part of the marketer’s task when studying an economy is to determine what in the foreign environment will be useful and how much adjustment will be necessary to carry out stated objectives

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Evolution of the Marketing Process

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Exhibit 9.4

Marketing in a Developing Country (3 of

3)• Demand in developing countries - Three

distinct kinds of markets in each country• Traditional rural/agricultural sector• Modern urban/high-income sector• Transitional sector usually represented

by low-income urban slums

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Consumption Patterns in Most

Populous American Countries

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Exhibit 9.5

BEMs and Markets of the Americas

• Big Emerging Markets (BEMs)• The Americas– North American Free Trade Agreement

(NAFTA)– United States – Central American Free Trade

Agreement-Dominican Republic Free Trade Agreement (DR-CAFTA)

– Southern Cone Free Trade Area (MERCOSUR)– Latin American Progress– Latin American Economic Cooperation– FTAA or SAFTA?

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Big Emerging Markets (BEMs)(1 of 2)• The U.S. Department of Commerce estimates that

over 75% of the expected growth in world trade over the next two decades will come from the more than 130 developing and newly industrialized countries

• Big emerging markets share important traits – Are all geographically large– Have significant populations– Represent sizable markets for a wide range of products– Have strong rates of growth or the potential for significant

growth– Have undertaken significant programs of economic reform– Are of major political importance within their regions– Are regional economic drivers– Will engender further expansions in neighboring markets

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Big Emerging Markets (BEMs)(2 of 2)

• Prominent BEMs include India, China, Brazil, Mexico, Poland, Turkey, and South Africa

• Different from developing countries in that they import more than smaller markets and more than economies of similar size

• Because many BEMs lack modern infrastructure, much of the expected growth will be in industrial sectors such as, information technology, environmental technology, transportation, energy technology, healthcare technology, and financial services

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The Americas - NAFTA

• North American Free Trade Agreement (NAFTA – Canada, Mexico, and the United States)– A single market of 360 million people with a $6 trillion GNP– Ratified and became effective in 1994– Requires the removal of all tariffs and barriers to trade over

15 years– All tariff barriers dropped in 2008– Improves all aspects of doing business within North

America – Creates one of the largest and richest markets in the world– Job losses have not been as drastic as once feared, in part

because companies have established maquiladora plants in anticipation of the benefits from NAFTA

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Key Provisions of NAFTA

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Exhibit 9.6

The Americas – DR-CAFTA

• United States – Central American Free Trade Agreement-Dominican Republic Free Trade Agreement (DR-CAFTA – Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the United States)

• Aimed at increasing trade and employment between the seven countries by reducing tariffs

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The Americas – MERCOSUR

• Southern Cone Free Trade Area (MERCOSUR – Argentina, Bolivia, Brazil, Chile, Paraguay, and Uruguay)

• The Treaty of Asuncion, which provided the legal basis for MERCOSUR, was signed in 1991 and formally inaugurated in 1995

• Second-largest common-market agreement in the Americas after NAFTA

• Market of 22o million with a combined GDP of $1 trillion

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The Americas – Latin American Progress

• Most of the countries in Latin America have moved from military dictatorships to democratically elected governments in the last three decades

• Protectionism has given way to privatization and other economic, monetary, and trade policy reforms

• Because of its size (population of 600 million is nearly twice that of the United States and 100 million more than the European Community) and resource base, the Latin American market has always been considered to have great economic and market possibilities

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American Market Regions

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Exhibit 9.7

The Americas – Latin American Economic Cooperation

• Latin American Integration Association (LAIA)• Its long term goal is a gradual and progressive

establishment of a Latin American common market

• It allows members to establish bilateral trade agreements among member countries

• Caribbean Community and Common Market (CARICOM)

• Aim is to achieve true regional integration even having a common currency for all members

• It continues to seek stronger ties with other groups in Latin America and has singed a trade agreement with Cuba

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The Americas – FTAA or SAFTA

• Initially NAFTA was envisioned as the blueprint for a free trade area extending from Alaska to Argentina

• Free Trade of the Americas (FTAA) essentially would stretch from the Bering strait (Canada) all the way south to Cape Horn (Chile)

• South American Free Trade Association (SAFTA) led by Brazil and the other member states of MERCOSUR

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Strategic Implications for Marketing (1 of 2)

• A vast population of the emerging market are viable customers with expanding income

• As a country develops– Incomes change– Population concentrations shift– Expectations for a better life adjust to higher

standards– New infrastructures evolve– Social capital investments made

• When incomes rise, new demand is generated at all income levels for everything from soap to cars

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Strategic Implications for Marketing (2 of 2)

• The “$10,000 Club” is group of consumers with homogenous demands who share a common knowledge of products and brands

• If a company fails to appreciate the strategic implications of the $10,000 Club, it will miss the opportunity to participate in the world’s fastest-growing global consumer segment

• Markets are changing rapidly, and identifiable market segments with similar consumption patterns are found across many countries

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Summary (1 of 2)• Foreign marketers must be able to

– Rapidly react to market changes– Anticipate new trends within constantly evolving

market segments that may not have existed as recently as last year

• As nations develop their productive capacity, all segments of their economies will feel pressure to improve

• The impact of these political, social and economic trends will continue to be felt throughout the world

• IT will speed up the economic growth in every country

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Summary (2 of 2)

• Marketers must focus on devising plans designed to respond fully to each level of economic development

• Big emerging markets may present special problems however, they are promising markets for a broad range of products now and in the future

• Emerging markets create new marketing opportunities for MNCs as new market segments evolve

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