Core Concepts of Marketing by John Burnett - HTML preview

CHAPTER 6

MARKETING IN GLOBAL MARKETS

The creation of the single European market in 1992 was expected to change the way

marketing is done worldwide. It meant the birth of a market that was larger than the U nited

States, and the introduction of European Currency Units (Euros) in place of the individual

currencies of member nations. Experience in multilingual marketing would help non-Euro-

pean companies succeed in this gigantic market. With new technologies such as multilin-

gual processing programs, it would be possible to target potential customers anywhere in

Europe, in any language, and in the same marketing campaign.

Progress toward European unification has been slow-many doubt that complete uni-

fication will ever be achieved. However, on January 1, 1999, 11 of the 15 member nations

took a significant step toward unification by adopting the Euro as the common currency.

These 11 nations represent 290 million people and a $6.5 trillion market. Still, with 14 dif-

ferent languages and distinctive national customs, it is unlikely that the EU will ever become

the "United States of Europe."

Tariffs

Most nations encourage free trade by inviting firms to invest and to conduct business there,

while encouraging domestic firms to engage in overseas business. These nations do not usu-

ally try to strictly regulate imports or discriminate against foreig n-based firms. There are,

however, some governments that openly oppose free trade. For example, many Commu-

nis Lnations desire self-sufficiency. Therefore, they restrict trade with non-Communist nations.

these restrictions vary with East-West relations.

The most common form of restriction of trade is the tariff, a tax placed on imported

goods. Protective tariffs are established in order to protect domestic manufacturers against

competitors by raising the prices of imported goods. Not surprisingly, U.S. companies with

a strong business tradition in a foreign country may support tariffs to discourage entry by

other U.S.

Expropriation

All multinational fi rms face the risk of expropriation. That is, the foreign government takes ownership of plants, sometimes without compensating the owners. However, in many expropriations there has been payment, and it is often equitable . Many of these fac ilities end up

as private rather than

organizations. Because of the risk of expropriation, multi-

national firms are at the

of fo reign governments, which are sometimes uns table, and

can change the laws they enforce at any point in time to meet their needs.

The Technological Environment

level of technological development of a nation affects the attractiveness of doing busi-

ness there, as well as the type of operations that are possible. Marketers in developed nations

cannot take many technological advances for granted. They may not be availab le in lesser-

developed nations. Consider some of the following technologically related problems that

firms may encounter in doing business overseas:

• Foreign workers must be trained to operate unfamiliar equipment.

• Poor transportation

;ncrease production and physical distribution costs .

• Maintenance standards vary from one nation to the next.

• Poor communication

hinder advertising through the mass media.

• Lack of data

facilities makes the tasks of planning, implementing, and

controlling

strategy more difficult.

THE INTER NATIONAL

ENVIRONMENT

The Economic Environment

A nation's economic situation represents its current and potential

to produce goods

and services. The

to understanding market opportunities lies in the evaluation of the

stage of a nation's economic growth.

A way of classifying the economic growth of countries is to divide them into three

groups: (1)

(2) developing, and

less-developed nations. The industrial-

ized nations are generally considered to be the United States, Japan, Canada, Russia, Australia and most of Western Europe

of these nations are characterized by

private enterprise and a

orienta

They have high literacy, modem technology,

and higher per

i;1comes,

Developing nations are

that are making the transitIOn from economies based

on agricultural and raw materials production to industrial economies, Many Latin Ameri-

can nations fit into this category, and they exhibit rising levels of education, technology,

and per capita incomes,

Finally, there are many less developed

in today's

These nations have

low standards of living, literacy rates are low, and technology is very limited .

Usually, the most significant marketing opportunities exist among the industrialized

nations, as they have high levels of

one

the

ingredients for the for-

mation of markets. However, most industrialized nations also have stable population bases,

market saturation for many

already exists.

developing nations, on the other

hand, have growi ng population bases, and although they currently import limited goods and

services, the long-run potential for growth in these nations exists. Dependent societies seek

products that satisfy basic needs-food, clothing, housing, medical care, and education. Mar-

keters in such

must be

information in their market programs,

As the degree of economic development increases, so does the sophistication

the mar-

keting effort focused on the countries,

Th e Competitive Environment

Entering an international market is similar to doing so in a domestic market, in that a firm

seeks to gain a clifferential advantage by investing resources in that market. Often local firms will

imitation strategies,

successfully. When they are successful, their own

nation's

receives a good boost.

they are not successful, the multinational

firm often buys them out.

Japanese marketers have developed an approach to managing product costs that has

given them a competitive advantage over U.S. competitors. A typical American company

will design a new product, then calculate the cost. If the estimated cost is too high, the prod-

uct will be taken back to the drawing board. In Japan, a company typically starts with a

target cost based on the price that it estimates the market is most willing to accept. Prod-

uct

and engineers are then directed

meet the cost target.

approach also

managers to worry less about

costs and more about the role it should

play in gaining market share, Briefly, at Japanese companies like NEC, Nissan, Sharp, and

Toyota, a team charged with bringing a product idea to market estimates the price at which

the product is most likely to appeal to the market. From this first impOltant judgement, all

else follows. After deducting the required profit margin from the selJing price, planners

develop estimates of each element that make up the product's cost: engineering, manufac-

sales, and marketing. U.S. firms tend to bui ld products, figure how much it costs to

build

product, and then ask whether the product can be sold at a profitable price. U.S.

companies tend not to assess what the

will be willing to pay.

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