Lecture Global marketing management (7th edition): Chapter 1 - Masaaki Kotabe, Kristiaan Helsen

GLOBAL
MARKETING
MANAGEMENT
Seventh Edition
MASAAKI KOTABKE | KRISTIAAN HELSEN

Chapter 1 PowerPoint
Globalization Imperative


Chapter Overview
1.
2.
3.
4.

Why Global Marketing is Imperative
Globalization of Markets: Convergence and
Divergence
Evolution of Global Marketing
Appendix: Theories of International Trade and the
Multinational Enterprise

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Introduction
• Products have been traded across borders
throughout recorded civilization, extending back
beyond the Silk Road that once connected East
with West from Xian (China) to Rome (Italy).
• Total world merchandise trade volume grew from $6
trillion in 2000 to $16.3 trillion in 2008.
• Despite the sharp drop of world merchandise
exports down to $12.5 trillion in 2009, total
merchandise trade volume bounced back to
US$15.2 trillion in 2010 and grew steadily to
US$19 trillion in 2014—a growth of 52% over the
last 5 years.
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Introduction
• Big Emerging Markets (BEMs): In the next ten to
twenty years, BEMs such as the CEA (China, HK
area, Taiwan), India, CIS (Russia, Central Asia,
Caucasus states), S. Korea, Mexico, Brazil,
Argentina, S. Africa, Central Europe region, Turkey,
and ASEAN (Brunei, Cambodia, Indonesia, Laos,
Malaysia, Myanmar, Philippines, Singapore,
Thailand, Vietnam) will provide many opportunities
in global business.

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1. Why Global Marketing is Imperative
• Saturation of domestic markets: Domestic-market
saturation in the industrialized parts of the world and
marketing opportunities overseas are evident in
global marketing.
• Emerging markets
• Unfavorable domestic economy
• Global competition: Competition around the world
and proliferation of the Internet have been on the
rise and are now intensifying.

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1. Why Global Marketing is Imperative
• Global cooperation: Global competition brings
global cooperation.

• Internet revolution: The Internet and electronic
commerce (e-commerce) are bringing major
structural changes to the way companies operate
worldwide.
• The term global epitomizes both the competitive
pressure and expanding market opportunities.
• Whether a company operates domestically or
across national boundaries, it can no longer avoid
competitive pressures from around the world.
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Exhibit 1-1: Change in World’s 100 Largest
Companies and Their Nationalities

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2. Globalization of Markets:
Convergence and Divergence

• Per capita income is an important determinant of
consumer buying behavior.
• When a country’s per capita income is less than
$10,000, much of the income is spent on food and
other necessities, and very little disposable income
remains.
• As a country’s per capita incomes reaches $20,000,
the disposable portion of income increases
dramatically.
• This increased disposable income level results in
increased convergent pressures on consumer
buying behavior.
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2. Globalization of Markets:
Convergence and Divergence
• People with higher incomes tend to enjoy similar
educational levels, desires for material positions,
ways of spending leisure time, and aspirations for
the future.
• Globalization does not suffocate local cultures, but
rather liberates them from the ideological conformity
of nationalism, with consumers becoming more
receptive to new things.

• Consumers also have a wider, more divergent
“choice set” of goods and services to choose from.
• In other words, the divergence of consumer needs is
taking place at the same time.
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2. Globalization of Markets:
Convergence and Divergence
• International trade consists of exports and imports.
• International business includes international trade
and foreign production.
• Extensive international penetration of companies is
called global reach.
• International trade and foreign production activities
are managed on a global basis.
• Growth of Multinational Corporations (MNCs) and
intra-firm trade is a major aspect of global markets.

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2. Globalization of Markets:
Convergence and Divergence
Who manages international trade?
– Intra-firm trade: Trade between MNCs and their
foreign affiliates. Comprises 34 percent of world
trade.
– An additional 33 percent of world trade was
exports between MNCs and their affiliates.
– In other words, two-thirds of world trade is
managed one way or another by MNCs.

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3. Evolution of Global Marketing

•
•
•
•

What is marketing?
Marketing involves creating, communicating,

delivering, and exchanging offerings that have value
for customers, clients, partners, and society at large.
Marketing involves customer satisfaction and their
current and future needs.
Marketing is much more than selling and involves
the entire company.
Within marketing strategies, companies are always
under competitive pressure to move forward both
reactively and proactively.

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3. Evolution of Global Marketing
• Five stages in the evolution of global marketing
(see Exhibit 1-2):
1. Domestic Marketing (domestic focus; home country
customers; ethnocentric orientation).
2. Export Marketing (indirect vs. direct exporting; country
choice, exports; ethnocentric orientation; home country
customers).
3. International Marketing (markets in many countries;
polycentric orientation; use of multidomestic marketing
when customer needs are different across national
markets).

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3. Evolution of Global Marketing
4. Multinational Marketing (many markets; consolidation
on regional basis; regiocentric orientation;
standardization within regions).
5. Global Marketing (international, multinational &
geocentric orientation; company’s willingness to adopt a
global perspective; global products with local
variations).

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Exhibit 1-2: Evolution of Global Marketing

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3. Evolution of Global Marketing
•

Global Marketing refers to marketing activities
that emphasize the following:
1. Standardization efforts.
2. Coordination across markets.
3. Global integration.

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3. Evolution of Global Marketing
• Global marketing does not necessarily mean that
products can be developed anywhere on a global
scale.
• The economic geography, climate, and culture affect
how companies develop certain products.
• The Internet adds a new dimension to global
marketing.

• E-commerce retailers gain substantial savings by
selling online.

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4. Appendix: Theories of International Trade
and the Multinational Enterprise
•

Comparative Advantage Theory (see Exhibit 1-3)
–
–
–
–
–

•

Absolute Advantage
Comparative Advantage
Commodity Terms of Trade
Principles of International Trade
Factor Endowment Theory

International Product Cycle Theory (see Exhibit
1-4)
– Economies of Scale

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Exhibit 1-3: Comparative Advantage at Work

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Exhibit 1-4: International Product Cycle

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4. Appendix: Theories of International Trade
and the Multinational Enterprise
–
–
–
–

Economies of Scope
Technological Gap
Preference Similarity
Stages of International Product Cycle Theory:
• Introduction Stage
– A U.S. company innovates on a new product in its home
country.

• Growth Stage
– Product standards emerge and mass production
becomes feasible.
Continued
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4. Appendix: Theories of International Trade

and the Multinational Enterprise
Continued
•Maturity Stage
– Many U.S. and foreign companies vie for market share in
the international markets.

•Decline Stage
– Companies in the developing countries also begin
producing the product and marketing it in the rest of the
world.

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4. Appendix: Theories of International Trade
and the Multinational Enterprise
• Internalization/Transaction Cost Theory
• Resource-Based View and Appropriability
Theory
– Appropriability Regime
– Dominant Design
– Operational and Marketing Ability

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