15 globalization

Midterm #2 Report
Average: C01-38/60, C02 – 40/60
r e b m Nt nedut S
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Correct Answer Number (out of 60)

Midterm #2 Question Review
Question # 48. Brand extension require:

•Brand Extension
•Product Line Extension
•Trading Up/Down
•Supply Chain Extension

Brand Extension and Top Valuable Brands
Brand Extension:
Extend current brand to completely
different product class/category

http://en.wikipedia.org/wiki/Product_lining Source: http://www.interbrand.com/en/best-global-brands

Product Line Extension vs. Trading Up/Down
Product Line Extension: Trading Up/Down:
Add a new product to a product line, Market Segmentation extension.
or add new product category with Add a line extension that is of
different brands better/lower quality.

http://en.wikipedia.org/wiki/Product_lining www.google.com/image

Supply Chain Extension /Stretching
Supply Chain Extension:
Business expansion along supply chain.

http://en.wikipedia.org/wiki/Product_lining www.google.com/image

One Week Ahead Reminding
On November 30th :
•On line forum will be closed
•Team Project Report Due
•Team Peer Evaluation Due
•Last date to submit all bonus assignments &
case studies

7
Reaching Global
Markets

© 2008 McGraw-Hill Ryerson Ltd. All rights reserved.

Agenda

1. Economic Globalization
• What, when, where, why
• Pros & Cons
1. International Marketing Strategies
• Global Environment Scan (PEST)
• Global Market Entry Strategies
• International Marketing Mix
3. Dynamics of World Trade
• Trade Balance
• Canada Prospective

1. ECONOMIC GLOBALIZATION

A new reality: global competition among
global companies for global customers.

Globalization happens on every stage on
Supply Chain.

Boeing 787 Production Network

The final assembly for the Boeing 787 will take place at Boeing plant in Everett,
Washington.

http://bintang.site11.com/Boeing_787/Boeing787_files/Assembly.html

IPOD Production from MIT Media Lab documents
the global supply chain of the things we
use every day.

www.wto.org
1. Apple Engineers – CA, USA
2. Flash Memory –South Korea
3. HDD Input – Japan WTO Initiative to support free
4. Other Parts - Taiwan trade and practical approaches in
+. PCB Assemble & test – Shanghai measuring and analysing trade in
IPOD Production – Shanghai value added.
5. Apples Management – Singapore
Handout -1
http://sourcemap.com/view/163

IPHONE Manufacturers

http://www.kmapple.com/news/skill/1480.html

MCDONALD WORLDWIDE

http://www.bme.eu.com/news/mcdonalds-across-the-world/
http://www.bme.eu.com/news/mcdonalds-across-the-world/

MCDONALD WORLDWIDE SALES

Dollars in millions 2010 2009
Company-operated sales: U.S. $ 4,229 $ 4,295
Europe 6,932 6,721
APMEA 4,297 3,714
Other Countries & Corporate 775 729

Total $16,233 $15,459

http://www.aboutmcdonalds.com/etc/medialib/aboutMcDonalds/investor_relations3.Par.56096.File.dat/2010%20Annual
%20Report%20%28print%29.pdf

BUSINESS

1  Founded in 2000
Electronics OEM
 10 SMT Production Line
 300 trained employees

World Largest Consumer Market

2010 world top 3 luxury consumer markets:
•Japan
•China
•the United States
Handout -2
http://www.mckinsey.com/mgi/publications/india_consumer_market/slideshow/main.asp

http://www.ln.chinanews.com/html/2011-05-06/212336_2.html

GLOBALIZATION

 Causes -
• Outsourcing products to cheaper global suppliers
• Relocating production to more efficient sources
• Offering products to a larger market
• Investing in different economies for higher returns
• Realized by IT and transportation development
 Containerization
 The largest US importer, Wal-Mart, shipped over 575,000 TEUs
of cargo in 2004, or over 11,000 TEUs per week.

http://www.tc.gc.ca/eng/policy/report-acg-containers2006-c3-219.htm

“THE WORLD IS FLAT” vs. “THE WORLD IS NOT FLAT”
 Pros
• increased income, employment
• growth of the global economy
 Cons
• income inequality increased
• Human trafficking (such as child labour) increased
• Environment cost

http://www.disinfo.com/2011/06/why-the-world-isnt-as-flat-as-thomas-friedman-says/

CASE STUDY –
CNS Breathe Right® Strip

1. What are the opportunities/impediments of
CNS taking its Breathe Right® strip into
international markets?

2. Which marketing mix variables (4Ps) should CNS
emphasize the most to succeed in a global arena?

1. What are the opportunities/impediments of CNS
taking its Breathe Right® strip into international
markets?

Opportunities:
• Congestion problems are universal
• “natural” products , non-drug nasal strip
• innovative product
Impediments:
• “International” can’t be treated as one big market
• Market strategy to fit local market is difficult, takes time
and money to identify and implement
• developing new packaging and advertising, educating
potential consumers, and finding efficient distributors and
channels can be costly.

2. Which marketing mix variables (4Ps) should CNS
emphasize the most to succeed in a global arena?

•Product localized
•Skimming price strategy.
•Distribution is very important because of the differences in
channels and the implications it has for positioning.
•Promotion, more specifically publicity, is also very important
because few consumers will know what the product is when it is
first introduced.
•CNS’s experience is that finding a strong partner is critical to its
ultimate success in a country.

2. INTERNATIONAL MARKETING STRATEGIES
• Global Environment Scan (PEST)
• Global Market Entry Strategies
• International Marketing Mix

A GLOBAL ENVIRONMENTAL SCAN

Political-Regulatory Climate
• Political Stability
• Legal System
• Trade Regulations

PEST approach

http://www.worldaudit.org/corruption.htm
Handout -3

Economic Considerations
• Stage of Economic Development
• Economic Infrastructure
• Consumer Income and Purchasing Power
• Currency exchange rates

GDP RANK GDP PER CAPITA RANK

Handout - 4

Porter’s Factor Conditions – 5 Capitals
‣ Natural capital: land and sub-soil resources.
‣ Human capital: labor, experience and skills
‣ Intellectual capital: R&D, patents, brands
‣ Physical capital: infrastructures, buildings
‣ Social capital: reputations, political/legal system

Canada – the best country for business
Handout - 5


World Trade Organization
• European Union – 1993,Single Market
'four freedoms' of: movement of goods, services, people & money.
• North American Free Trade Agreement(NAFTA): 1994
to eliminate barriers to trade and investment between the US,
Canada and Mexico
• World Trade Organization (WTO):1995
 153 countries
 Free trade through negotiation
 Decline of economic protection
• Tariffs
• Quota

FIGURE 7-3 How protectionism
Handout - 6
affects world trade

Social Environment Scan

Every place does business its own way.
Cultural Diversity
• Values
• Customs
• Language
Business Practices
• Relationships & Communication
• Business Meeting Etiquette
• Business Negotiating Etiquette
• Gift Giving Etiquette
• Dressing/Dining Etiquette
http://www.kwintessential.co.uk/etiquette/doing-business-in.html

Deal-killing Faux Pas
• Business card rituals
• Do study carefully upon receiving
• Don’t use as tooth pick, bend, shove in pocket
w/o glance, scribble notes

• It’s ok to act like a foreigner—within limits!
• When to bow
• When to speak English

GLOBAL MARKET-ENTER STRATEGY

FIGURE 7-6 Alternative global market-entry strategies


Examples of Contract-based International Business

‣ Boeing & IPOD - Contractual Manufacturing (OEM, ODM)
‣ FedEex-DTW joint ventures
‣ Coca-Cola and its’ bottler-distributors
‣ McDonalds and its restaurant franchises
($175K franchise fee to operate a McDonalds restaurant)


MULTINATIONALBusiness Strategy
Multinational BUSINESS STRATEGY

Home Country Foreign Country
Home Centralization
(Exporting)

Replication

Foreign Centralization
(Importing)

http://pptbusiness.net/levels-of-multinational-strategy.html
http://pptbusiness.net/levels-of-multinational-strategy.html

Crafting a Worldwide Marketing Program

• Product Strategy - Product adaptation
• Price Strategy - Localized Price
• Promotion Strategy
• Distribution Strategy


PRODUCT ADAPTATION

http://users.telenet.be/worldstandards/driving%20on%20the%20left.htm

Washing machine
with different features

AC Power Plugs

Handout - 7
http://www.gadgets-reviews.com/upcoming/29

Head-to-head
Positioning
Internationally


WORLD MARKET CHALLENGE AND THE FUTURE

• Population Growth and Poverty
• Environmental Issues
• Fair Trade

• Governments’ Efforts
• NGO
• CSR

DYNAMICS OF WORLD TRADE
‣ Global Perspective
‣ Gross Domestic Product (GDP)
‣ Balance of Trade

‣ Canadian Perspective
• The 11 largest exporter and 9 largest importer in the world, trade
represents the lifeblood of the Canadian economy
• It is responsible for as much as 67.6 percent of our gross domestic
product (GDP)
• Exports of goods and services are equivalent to about 30 percent of
our economy (as measured by GDP)

Handout - 8

http://www.international.gc.ca


FIGURE 7-1 Illustrative world trade flows for manufactured
goods and commodities (billions of dollars)


“the most famous Canadians in China”
Have you heard of them?

Mark Rowswell
Norman Bethune

Electronic Contract Manufacturing
• EMS - Electronic manufacturing services is a
term used for companies that design, test,
manufacture, distribute, and provide
return/repair services for electronic
components and assemblies.
• OEM-original equipment manufacturers
• ODM-Original Design Manufacture

http://en.wikipedia.org/wiki/Electronics_manufacturing_services

QUIZ & EXAM ZONE


Concept Check

Among which countries was the North American Free
Trade Agreement was designed to promote free
trade?

Answer:
The North American Free Trade Agreement
(NAFTA), effective since 1994, lifted many trade
barriers between Canada, the United States, and
Mexico.


Concept Check

What is the difference between a multidomestic
marketing strategy an a global marketing strategy?
Answer:

Multidomestic marketing strategy is a multinational firm's
offering as many different product variations, brand
names, and advertising programs as countries in which it
does business. A global marketing strategy is the
standardization of marketing activities when there are
cultural similarities and adopting them when culture
differ.


Concept Check
What variables influence why some companies and
industries in a country succeed globally while others
lose ground or fail?
Answer:

According to Michael Porter, they include:

• Factor conditions, such as natural resources

• Demand conditions

• Related and supporting industries

• Company strategy, structure and rivalry


Concept Check

What is protectionism?

Answer:
Protectionism is the practice of shielding one or
more sectors of a country's economy from foreign
competition through the use of tariffs or quotas.


Concept Check

Semiotics involves the study of:

Answer:
Cultural symbols and their role in the assignment
of meaning for people.


Concept Check

What mode of entry could a company follow if it has
no previous experience in global marketing?
Answer:
Indirect exporting is ideal for the company that
has no overseas contacts but wants to market
abroad.


Concept Check

Products may be sold globally in three ways. What
are they?
Answer:
The three ways products may be sold globally are:
(1) Product extension, (2) Product adaptation, and
(3) Product invention.


Concept Check

What is dumping?

Answer:
Dumping is when a firm sells a product in a foreign
country below its domestic price or below it actual
cost.


Countertrade

‣ Countertrade is the process of using barter rather
than money for making global sales.


Trade Feedback Effect

‣ The trade feedback effect is the phenomenon of
imports affecting exports and vice versa.


Gross Domestic Product

‣ The gross domestic product is the monetary value of
all goods and services produced in a country during
one year.


Balance of Trade

‣ The difference between the monetary value of a
nation’s exports and imports is called the balance of
trade.


Protectionism

‣ Protectionism is the practice of shielding one or more
sectors of a country’s economy from foreign
competition through the use of tariffs or quotas.


Tariffs

‣ Tariffs are a government tax on goods and services
entering a country.


Quota

‣ A quota is a restriction placed on the amount of a
product allowed to enter or leave a country.


Global Competition

‣ Global competition exists when firms originate,
produce, and market their products and services
worldwide.


Strategic Alliances

‣ Global strategic alliances are agreements among two
or more independent firms to co-operate for the
purpose of achieving common goals.


Multidomestic Marketing Strategy

‣ Multinationals using a multidomestic marketing
strategy have as many different product variations,
brand names, and advertising programs as countries in
which they do business.


Global Marketing Strategy

‣ A global marketing strategy is the practice of
standardizing marketing activities when there are
cultural similarities and adapting them when cultures
differ.


Global Consumers

‣ Global consumers consist of customer groups living in
many countries or regions of the world who have
similar needs or seek similar features and benefits
from products or services.


Cross-Cultural Analysis

‣ A cross-cultural analysis involves the study of
similarities and differences among consumers in two
or more nations or societies.


Customs

‣ Customs are the norms and expectations about the
way people do things in a specific country.


Cultural Symbols

‣ Cultural symbols are things that represent ideas and
concepts.


Semiotics

‣ Semiotics is concerned with the correspondence
between symbols and their role in the assignment of
meaning for people.


Back Translation

‣ In back translation, a translated word or phrase is
retranslated into the original language by a different
interpreter.


Consumer Ethnocentrism

‣ Consumer ethnocentrism is the tendency to believe
that is inappropriate or immoral to purchase foreign-
made products.


Currency Exchange Rate

‣ A currency exchange rate is the price of one country’s
currency expressed in terms of another country’s
currency.


Exporting

‣ Exporting is producing goods in one country and
selling them in another.


Joint Venture

‣ When a foreign company and a local firm invest to
create a local business, it is called a joint venture.


Direct Investment

‣ Direct Investment entails a domestic firm actually
investing in and owning a foreign subsidiary or
division.


Dumping

‣ Dumping is when a firm sells a product in a foreign
country below its domestic price or below its actual
cost.


Grey Market

‣ A grey market is a situation where products are sold
through unauthorized channels of distribution.


Global Brand

‣ A brand marketed under the same name in multiple
countries with similar and centrally co-ordinated
marketing programs.


Licensing

‣ Offering the right to a trademark, patent, trade
secret, or other similarly valued items of intellectual
property in return for a royalty or a fee.


15 globalization

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