Global Marketing Test #1 – Case Studies – Flashcards

Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers. An organization that engages in global marketing focuses its resources and competencies on global market opportunities and threats. A fundamental difference between "regular marketing" and "global marketing" is the scope of activities. A company that engages in global marketing conducts important business activities outside the home-country market. For example, as Walmart expands into Guatemala and other Central America countries, it is implementing a market development strategy.

2) When a company succeeds in creating more value for customers than its competitors, that company is said to enjoy"competitive advantage." It is measured relative to rivals in a given industry. For example, Coca-Cola and Pepsi are trying to maintain a competitive advantage in global markets. Globalization presents companies with unprecedented opportunities as well as challenges. Achieving competitive advantage in a global industry requires executives and managers to maintain a well-defined strategic focus. Globalization provides companies with opportunities to develop new products, get new ideas, develop markets, expand brand recognition, and eventually profits.

3) GMS has three dimensions that pertain to marketing management. First, "concentration of marketing activities" such as promotional campaigns or pricing decisions is performed in one or a few country locations. The second, "coordination of marketing activities," refers to the extent to which marketing activities related to the marketing mix are planned and executed interdependently around the globe. Finally, "integration of competitive moves" is the extent to which a firm's competitive marketing tactics in different parts of the world are interdependent. In essence, GMS should enhance the firm's performance on a worldwide basis.

4) A firm's global marketing strategy (GMS) can enhance its worldwide performance. The GMS addresses severalissues. First is the nature of the marketing program in terms of the balance between a standardized (extension)approach to the marketing mix elements and a localized (adaptation) approach that is responsive to country or regional differences. Second is the concentration of marketing activities in a few countries or the dispersal of such activities across many countries. Companies that engage in global marketing can also engage in coordination of marketing activities. Finally, a firm's GMS addresses the issue of global market participation.

5) Coke achieved success in Japan by spending a great deal of time and money to become an insider. The company built a complete local infrastructure with its sales force and vending machine operations. Coke's success in Japan is a function of its ability to achieve "global localization," being as much of an insider as a local company but still reaping the benefits of worldwide operations. The company is adept at adapting sales promotion, distribution, and customer service efforts to local needs. Coke has become one of the brands that have spent time and money getting this experience in unknown territories.

6) The particular approach to global marketing that a company adopts will depend on industry conditions and its source or sources of competitive advantage. McDonald's standardized product is Big Mac which is localized in various countries, such as McAloo Tikka Burger in India. Similar products with local slang names were used adapting to tastes in different countries. For promotion the standardized slogan "I'm lovin' it" is used whereas individual promotion is used in different countries. Freestanding restaurants are a standardized version, which is localized in several countries by having kiosks or home delivery. Similarly, the average price of Big Mac is used as a standard which is localized on the basis of currency fluctuation and affordability.

7) There are several examples where management simply ignores opportunities to pursue global marketing. A company that is "nearsighted" and ethnocentric will not expand geographically. For example, Anheuser-Busch, the brewer of Budweiser beer, lost its independence after years of focusing primarily on the domestic U.S. market. Myopia is also a recipe for market disaster if headquarters attempts to dictate when it should listen. Global marketing does not work without a strong local team that can provide information about local market conditions.

8) A manager who assumes that his or her home country is superior to the rest of the world is said to have an ethnocentric orientation. Polycentric orientation is the opposite of ethnocentric orientation, where a manager assumes that each country in which a company does business is unique. In ethnocentric orientation, foreign operations or markets are typically viewed as being secondary or subordinate to domestic ones. For example Nissan's ethnocentric orientation caused managers to believe that consumers all over the world should and would behave as do the Japanese. In Northern Japan, people would put blankets over the hoods of their cars during cold winters and managers assumed that people in the United States should be able to do the same. Citicorp's financial company executives have polycentric orientation, where the assumption was that each country is different, and there is a need for a localized or adaptation approach.

9) Economic growth in key developing countries creates market opportunities that provide a major incentive for companies to expand globally. Due to the rising per capita incomes in India, China, and elsewhere, the growing ranks of middle-class consumers have more money to spend than in the past. At the same time, slow growth in industrialized countries has compelled management to look ahead for opportunities in nations or regions with high rates of growth. Also, the economic growth has reduced resistance that might otherwise have developed in response to the entry of foreign firms into domestic economies. The worldwide movement toward free markets, deregulation, and privatization is also a driving force. The trend toward privatization is opening up formerly closed markets creating tremendous opportunities.

10) (a) Capital movements have replaced trade as the driving force of the world economy; (b) Production has become "uncoupled" from employment; (c) The world economy dominates the scene; individual country economies play a subordinate role; (d) The struggle between capitalism and socialism is largely over; and (e) The growth of e-commerce diminishes the importance of national barriers and forces companies to reevaluate their business models.

11) (a) Type of economy; (b) Type of government; (c) Trade and capital flows; (d) The commanding heights; (e) Services provided by the state and funded through taxes; (f) Institutions; and (g) Markets.

12) In Centrally Planned Socialism, the state has broad powers to serve the public interest as it sees fit. Ownership of entire industries as well as individual enterprises belongs to the government. The elements of the marketing mix are not used as strategic variables. In Centrally Planned Capitalism, economic system command resource allocation is utilized extensively in an overall environment of private resource ownership. In Sweden, the government controls two-thirds of all expenditures, and the resource allocation is more "command" oriented than "market" oriented. This would be an example of centrally planned socialism although it can have elements of capitalism. China is an example of centrally planned socialism. Two examples of Centrally Planned Capitalism are the US and Canada.

13) These four countries are collectively known as BRIC (Brazil, Russia, India, and China). Microsoft's experience illustrates the nature of the market opportunity in these countries: In fiscal 2008, the software giant's collective revenues from BRIC grew 54%, compared with overall global revenue growth of 18%. Experts predict that the BRIC nations will be key players in global trade even as their track records on human rights, environmental protection, and other issues come under closer scrutiny by their trading partners. The BRIC government leaders will also come under pressure at home as their developing market economies create greater income disparity. BRIS is experience market growth in Microsoft products.

14) These countries are good example of risk-reward trade-off. Many companies have taken the plunge, but many others are still assessing whether to take risk. Belarus and Turkmenistan are rated quite low in the rankings in terms of economic freedom. Russia itself has slipped within the upper-middle-income category. However, there are still some former Soviet-dominated countries which have opportunities for economic growth. It much depends on the actions taken by the Soviet republic. For example, the launching of a military action in Georgia creates a ripple effect and causes economic and political instability.

15) (1) The poor have no money. In Bangladesh villagers spend considerable sums to use village phones operated by local entrepreneurs; (2) the poor are too concerned with fulfilling basic needs to "waste" money on nonessential goods. Consumers who are too poor to purchase a house do buy luxury goods such as televisions and cell phones; (3) the goods sold in developing markets are so inexpensive that there is no room for a new market entrant to make a profit. Since the poor often pay higher prices for many goods, there is an opportunity for efficient competitors to realize attractive margins by offering quality and low prices; (4) people in BOP markets cannot use advanced technology. Residents of rural areas can and do quickly learn to use cell phones and PCs; and (5) global companies that target BOP markets will be criticized for exploiting the poor. A global company offering basic goods and services that improve a country's standard of living can earn a reasonable return while benefiting society.

16) There are several challenges faced by marketers in newly formed countries. For example, some of the smaller countries from the former Soviet Union, including Tajikistan and Uzbekistan, fall into the low- and lower-middle income categories. Sometimes referred to collectively as "the Stans," they present marketers with an interesting challenge. Incomes are low, there is considerable economic hardship, and the potential for disruption is certainly high. Are they problem cases, or are they attractive opportunities with good potential for economic growth? These countries present an interesting risk—reward trade-off; some companies have taken the plunge, but many others are still assessing whether to take the risk.

17) People everywhere need affordable and safe drinking water. Recognizing this fact, Nestlé launched Pure Life bottled water in Pakistan. The Coca-Cola Company recently began to address dietary and health needs of low-income countries by developing a beverage, Vitango, which has several nutritional and health benefits. Technology is another area which can benefit countries all over the world. Intel's World Ahead is developing a $550 computer that is powered by a car battery. Hewlett-Packard engineers are working to develop solar-powered communication devices that can link remote areas to the Internet.

18) GATT was an organization that was handling 300 trade disputes during its half century of existence. It itself had no enforcement power, and the process of dealing with disputes stretched for years. The losing party had the right to ignore the ruling. Therefore, it was referred to as more of a talking rather than enforcing body. WTO provides a forum for trade-related negotiations among its 150 members. The WTO has a Dispute Settlement Body (DSB) that mediates complaints concerning unfair trade barriers and other issues between the WTO's member countries. During a 60-day consultation period, parties to a complaint are expected to engage in good-faith negotiations and reach an amicable resolution. If that fails, the complainant can ask the DSB to appoint a three-member panel of trade experts to hear the case. The panel has nine months within which to issue its ruling. The losing party has the option of turning to a seven-member appellate body. If, after due process, a country's trade policies are found to violate WTO rules, it is expected to change those policies. If changes are not forthcoming, the WTO can authorize trade sanction.

19) There is a Free Trade Area (FTA) which is formed when two or more countries agree to eliminate tariffs and other barriers that restrict trade. However, there are rules of origin that discourage the importation of goods into the member country with the lowest external tariff for transshipment to one or more FTA members with higher external tariffs. Thus, even though the laptop can be shipped via Canada, it will have the label as "made in USA" and therefore subject to duty.

20) Under a customs union, in addition to eliminating internal barriers to trade, members agree to the establishment of common external tariffs. For example, the EU and Turkey initiated a customs union in an effort to boost two-waytrade. In a common market, in addition to the removal of internal barriers to trade and the establishment of common external tariffs, free movement of factors of production such as labor and capital is allowed.NAFTA helps in promoting economic growth through tariff elimination, expanded trade and investment, as well as no restrictions on labor and other factor movements within the three nations. The benefits of continental free trade will enable all three countries to meet the economic challenges of the decades to come. The gradual elimination of barriers to the flow of goods, services, and investment, coupled with strong protection of intellectual property rights will further benefit businessmen, workers, farmers, and consumers. The agreement also leaves the door open for discretionary protectionism.

21) The allure of the Latin American market has been its considerable size, its strategic location, and huge resource base. Many countries are implementing economic reforms such as priority to have a balanced budget and privatization of certain industries. Free markets, open economies, and deregulation are becoming governmental priorities. Tariffs are being lowered, and free trades are being encouraged. Global corporations are encouraged by import liberalization, lower tariffs, and the potential for establishing more efficient regional production. Many observers envision a free trade area within the entire region. The four most important preferential trading arrangements in Latin America are the SICA, the Andean Community, the Common Market of the South (Mercosur), and the Caribbean Community and Common Market (CARICOM). TARIFFS ARE LOWERED AND FREE TRADE IS BEING ENCOURAGED.

22) The Association of Southeast Asian Nations (ASEAN) was established as an organization for economic, political, social, and cultural cooperation among its member countries. Brunei, Indonesia, Malaysia, the Philippines,Singapore, and Thailand were the original six members. Vietnam, Cambodia, Laos, and Myanmar joined later on. Individually and collectively, ASEAN countries are active in regional and global trade. However, all the above-mentioned countries were under different political orders, and the population is very different from the religious and cultural point of view. Some of these countries are advancing rapidly whereas others still have a long way to go.There are different natural resources in each of the member countries. Some have undergone political unrest and wars recently. For example, Singapore transformed itself from a British colony to a vibrant industrial power. One of the reasons for its success is its extremely efficient infrastructure. The Port of Singapore is the world's second-largest container port. It has a high standard of living, second only to Japan. There is 93-percent literacy rate and is very much advanced in business. Many foreign companies are attracted to Singapore. Singapore alone accounts for more than one-third of U.S. trading activities with ASEAN countries.

23) Conducting business in the Japanese market demands understanding, flexibility, ambitions, and long-term commitment. Although the Japanese market has changed from a closed market to just being a tough market, there are still several barriers that need to be overcome. These barriers include differences in business attitude as well as laws. Companies interested in doing business with Japan should be willing and able to provide top-quality products and services. Also, the products and services should be tailored to local tastes. All this requires countless visits and socializing to build trust as well as mutual understanding. Marketers must also master the "keiretsu" system of tightly knit corporate alliances.

24) The ten ASEAN nations are slated to launch an economic bloc called the ASEAN Economic Community (AEC). Although tariffs have been cut in the region, non tariff barriers, including cumbersome labor laws, lack of harmonization in product standards, and bureaucracy, are some of the issues that have yet to be resolved. Also,ASEAN is not a customs union, so import/export activities are conducted with different procedures. As a result, goods can languish in ports for weeks while documents are reviewed and approved. Much work remains to be done before the AEC evolves into a customs union or common market.

25) The European Union has concluded over 20 different trade pacts with other nations. The business environment in Europe has undergone considerable transformation with significant implications for all elements of the marketing mix. For example, there is harmonization of product standards, thereby reducing the number of adaptations needed in each country. Similarly, from a pricing point of view the environment has become more competitive. Common guidelines are also set for promotion and distribution. Thus, all components of the marketing mix are getting standardized and harmonized. Corporations are beginning to treat the entire region as one entity with very little adaptation. For example, France will be able to shop around for distributions of products or services and select the best one in any member country. This selection can be based on cost, quality, or local preferences. Food safety laws can also be made uniform with some modifications that can be adapted. The members in the European Union will find it easier to do business at any of the member countries including setting up of manufacturing plants or headquarters.It will also help in balancing the inventory and moving products from one country to another in case of shortages.

26) The extraordinary political and economic reforms that swept through Central and Eastern Europe in the 1990s attracted the attention of many corporations toward the new 430-million person market. The transition in the region from command to market economies has toppled a number of entrenched institutions. New pacts such as Central European Free Trade association (CEFTA) are being formed. The signatories are pledging cooperation in areas such as infrastructure and telecommunications. The governments of Russia and Belarus agreed to form a customs union and remove border posts between their two countries. Ford opened a $10 million vehicle assembly plant outside Minsk, predicting future economic growth in that region. The markets of central and Eastern Europe present interesting opportunities since they are in the process of transition. Also, with wage rates in these regions being much lower than those in Spain or Portugal, the region offers attractive locations for low-cost manufacturing.

27) One of the issues related to this agreement would be the tariffs on goods imports and exports, which will amount to be a significantly large amount. Tariffs are only one part of the picture. Non tariff restrictions create major bureaucratic obstacles. The use of genetically modified agricultural products such as corn and soy, which are restricted in Europe, will be one of the issues. Another issue concerns the product labeling which is profoundly different in Europe compared to that in the United States. Other issue of concern is related to the cultural diversity.In parts of Europe, some hold view that American cultural exports such as Hollywood movies overwhelm the works of the local film producers. This has prompted European policymakers to demand "carve-outs" that exempt certain industries from the trade pact. All these aspects have to be addressed before any agreement can be signed and implemented.

28) Connection is a key word in conducting business in the Middle East. Those who take the time to develop relationships with key business and government figures are more likely to cut through red tape than those who do not. A predilection for bargaining is culturally ingrained, and the visiting businessperson must be prepared for some old-fashioned haggling. Establishing personal rapport, mutual trust, and mutual respect are essentially the most important factors leading to a successful business relationship. Decisions are usually not made by correspondence or telephone. The Arab businessperson does business with the individual, not with the company. Also, most social customs are based on the Arab male-dominated society. Women are usually not part of the business or entertainment scene for traditional Muslim Arabs.