BBA 846.pdf - Click Here Upgrade PDF Complete Expanded Features Unlimited Pages Documents KENYATTA UNIVERSITY INSTITUTE OF OPEN LEARNING MASTER OF

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Unformatted text preview: Click Here & Upgrade PDF Complete Expanded Features Unlimited Pages Documents KENYATTA UNIVERSITY INSTITUTE OF OPEN LEARNING MASTER OF BUSINESS ADMINISTRATION CBA 603: GLOBAL MARKETING By: Dr. Maurice Otube Khayota B.A Agric. Econ., M.B.A., M.M.M., P.G. Dip. Insurance Mgt., P.G. Dip. Counseling & Guidance, Ph D Management. Senior Lecturer, School of Business SCHOOL OF HUMANITIES AND SOCIAL SCIENCES @ All rights reserved For private circulation only. 2003/2004 PUBLICATIONS 1 Click Here & Upgrade PDF Complete Expanded Features Unlimited Pages Documents TABLE OF CONTENTS LESSON 1.0. 1.1 1.2 1.3 GLOBAL MARKET AND ITS PARTICIPANTS GLOBAL MARKETING - AN INTRODUCTION GLOBAL MARKET PLACE MAJOR PARTICIPANTS IN GLOBAL MARKETS LESSON 2.0 2.1 GLOBAL TRADE AND MONETARY SYSTEM GLOBAL TRADE: TRADING FRAMEWORK AND GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT) GLOBAL MONETARY SYSTEM 2.2 LESSON 3.0 3.1 3.2. GLOBAL MARKETING OPPORTUNITIES GLOBAL MARKETING OPPORTUNITIES IN DEVELOPED COUNTRIES GLOBAL MARKETING OPPORTUNITIES IN LEAST DEVELOPED COUNTRIES (LDC’s) LESSON 4.0. 4.1 4.2 GLOBAL MARKETING STRATEGY GLOBAL MARKETING INFORMATION SYSTEMS GLOBAL MARKETING STRATEGY AND METHODS OF ENTRY LESSON 5.0. 5.1 5.2 SINGLE ENTRY SYSTEM 0F BOOK KEEPING PRODUCT POSITIONING IN FOREIGN MARKET PRODUCT STANDARDISN VS. ADAPTATION TRADEMARKS, WARRANTIES, SERVICE, PACKAGING, LABELLING GLOBAL PRODUCT OF SERVICE PRODUCTS 5.3 5.4 LESSON 6.0. 6.1 6.2 6.3 6.4 LESSON 7.0. 7.1 7.2 7.3 LESSON 8.0 8.1 GLOBAL PRODUCT PROMOTION POLICY GLOBAL PRODUCT PROMOTION POLICY GLOBAL ADVERTISING STANDARDIZATION ADAPTATION OTHER FORMS OF PROMOTION GLOBAL SALES FORCES AND THEIR MANAGEMENT BRANDS, VS. GLOABAL CHANNEL DECISIONS OVERSEAS MARKETING CHANNEL POLICY AND PHYSICAL DISTRIBUTION CHANNEL DESIGN AND CUSTOMER CHARACTERISTICS SELECTION OF INTERMIDIARIES GLOBAL PRODUCT PRICING POLICY AND ISSUES IN GLOBAL MARKETING EXPORT PRICING 2 Click Here & Upgrade PDF Complete Expanded Features Unlimited Pages Documents LESSON 1 GLOBAL MARKET AND ITS PARTICIPANTS PART 1.1 1.0. GLOBAL MARKEI'ING - AN INTRODUCTION 1.1. LESSON OBJECTIVES After reading this lesson you should be able to know: • • • • • • • • The features of global marketing Definitions of global marketing. Similarity and differences between global marketing and domestic marketing. Importance of global marketing. Basis of global marketing. Benefits of g Global marketing. Global marketing environment. 1.2. LESSON OUTLINE • • • • Introduction Global marketing Global Vs domestic marketing Global Vs export marketing INTRODUCTION Global marketing has received increased attention from governments and business firms in the four decades since the end of the Second World War. Experts are growing year by year. In this context, it is very much essential to understand the features of global marketing, its basic benefits and importance. The most important aspect to study is global marketing environment, which is explained in this chapter. GLOBAL MARKETING Though global marketing has distinct characteristics, it is similar to domestic marketing in terms of technical factors. Marketing process consists of two factors such as technical and social. The technical aspect covers non-human factors such as product, price, brand etc. The basic principles regarding these factors are universally applicable. On the other hand, social aspect of marketing is unique, because it associates with human elements such as behavior of consumers, characteristics of society, which includes customs, attitudes, values etc. It is true that marketing, as a social process is not uniform in different environments. 3 Click Here & Upgrade PDF Complete Expanded Features Unlimited Pages Documents Philip Kotler has defined marketing as “a human activity directed at satisfying needs and wants through exchange process”. From this definition it is clear that there are two sets of variables, such as markets and human needs and a process or a set of techniques related to the conversion of potential exchanges into realized exchanges. It is obvious that the techniques involved will be more or less identical in both domestic and global marketing. But the variables will be totally different in the case of global marketing. Therefore, global marketing can be understood by the following definitions: Terpstra defines global marketing as “marketing carried on across national boundaries.” According to Hess and Coteora, “global marketing is, the performance of business activities that direct the flow of goods and services to consumers or users in more than one nation”. Hence, it could be easily understood that global marketing is distinctive because the exchange process takes place beyond the national frontiers, thereby involving different markets and consumers who might have different wants, needs and behavioral qualities. The existence of more than one market necessarily complicates the marketing process. Every country is an independent sovereign and hence, each Government enacts legislation in order to control foreign trade. Global marketing will have to take care of these barriers. Similarly, foreign exchange regulations, which do not affect domestic marketing, will have considerable impact on financing overseas operations. Likewise human needs and wants will have different attributes in global markets. The complications of global marketing could be easily understood if, one has an idea about the concepts of “controllable and non-controllable” factors. The producer is in a position to control and design marketing mix components such as product, price, place and promotion. Therefore, these factors are referred to as controllable from the point of view of producers. But the total environment in which the marketing mix elements will operate is beyond the control of producers. Hence, such environment is referred to as non-controllable factors. They include the following: 1. Social Factors: Political situation Financial system Marketing Infrastructure Culture Language 4 Click Here & Upgrade PDF Complete Expanded Features Unlimited Pages Documents Climate 2. Economic Factors Commercial policy elements such as tariffs, quotas, licensing, non-tariff barriers Currency restrictions 3. Competition Competition with the producers in the importing country Competition with the exporters from the competing countries Competition with other exporters from one's own country 4. Logistics Availability of required type of transport and infrastructure Cost of transportation 5. Risks: Political risks Commercial risks Natural risks Acts of enemies, pirates etc. GLOBAL MARKETING VS. DOMESTIC MARKETING After understanding the features of global marketing, it is necessary at this stage to analyze the similarities and dissimilarities between global marketing and domestic marketing. Similarities 1. In global markets and domestic markets the fundamental necessity is to satisfy the basic needs of consumers. This is the prime factor for success in both the markets. It involves finding out the customers' wants and how to meet their needs accordingly. 2. Creation of popularity and goodwill are important in both the markets. If a company is able to win the faith of the customers in the market, the task of marketing will be easier in 5 Click Here & Upgrade PDF Complete Expanded Features Unlimited Pages Documents comparison with those who are not able to do so. For this purpose, the marketers should offer guarantees and after-sales service to the customers on fairly extensive scale. 3. Research and development with a view to improvement of existing products and discovery of new products are necessary for both the markets. This would help the marketer to widen his market. 4. Non-human factors such as product, price, place and promotion are similar in both markets. Dissimilarities The following are the important differences between these two marketing concepts: 1. Different Political Entities: Each country has its own political entity and hence they impose several regulations for import and export in order to safeguard their national interest. The global marketers have to observe such restrictions. Some of such restrictions include: (a) Imposition of tariffs and customs duties on import and export with the intention of making the products costly in the importing country and not to ban such entry completely. (b) Quantitative restrictions are imposed in order to restrict trade in specific commodities. The intention behind this restriction is to protect the domestic industries from the competition of foreign commodities. (c) Exchange control is yet another regular restriction imposed by almost all countries. In certain cases the government does not ban the entry of goods but the importer is not allowed the necessary foreign exchange to make the payment or the goods imported. In certain other cases exchange control and quantitative controls are put together with the grant of import license (d) Imposition of more local taxes on imported goods with the objective of making the imported goods costly is also one of the regulations adopted in global marketing. 2. Different Legal Systems: Legal Systems are not uniform in different countries. Most of the countries follow English Common Law as modified from time to time. Japan and Latin American countries are exceptions to this. The existence of different Legal systems make the task of marketers most difficult, as they are not sure as to which, particular system will apply to their transactions. This difficulty brings down the quantum of exports. 3.Different Monetary Systems: Every country has its own monetary system. The exchange rate for each country's currency is 6 Click Here & Upgrade PDF Complete Expanded Features Unlimited Pages Documents fixed by Global Monetary Fund (IMF). Therefore exchange rates are more or less fixed. However, in recent years, the exchange rates are fluctuating and are being determined by demand and supply. Some countries have multiple rates. i.e., different rates are applicable to different transactions. 4. Differences in Market Characteristics: Market characteristics in each market segment are different. For example, demand pattern, channels of distribution, methods of promotion etc., are quite different from market to market. If we consider each country as a separate market, we could understand the existence of different market characteristics. These differences are further increased due to the existence of government controls and regulations. However, this is a difference in degree only. Even within a country, these differences in market patterns may be found from region to region. 5. Variations in Procedures and Documentation: The laws of the country and customs of trade in each country demand different processes and documentary requirements for the import and export of goods and services. The merchants residing in the territory have to comply with these regulations and customs if they want to import or export goods and services. After understanding the distinction between global marketing and domestic marketing, it is essential at this stage to analyze the differences between global marketing and export marketing. GLOBAL MARKETING AND EXPORT MARKETING Both the terms global marketing and export marketing are used interchangeably without difference. But there are differences. Such differences could be studied under the following two heads: a. Scope The scope of global marketing includes the following activities: • • • • Setting up of a branch in a foreign nation for processing, packaging, assembling or even undertaking direct manufacturing through direct investment. Entering into licensing arrangements with foreign markets. Setting up of joint ventures and collaborations in foreign markets. Offering turnkey projects and consultancy services. In addition, global marketing involves research into the needs of foreign markets and evolving suitable marketing strategies. In the case of export marketing the scope is very limited and it includes only the activity of exporting goods and services to the foreign markets. A producer tries to sell his surplus products into foreign markets as and when the demand for such products increases either directly or indirectly. The producer does not make any attempt to have an insight into the potentials of foreign markets by conducting research nor does he attempt to differentiate his marketing mix to 7 Click Here & Upgrade PDF Complete Expanded Features Unlimited Pages Documents suit the needs. b. Approach The other point of difference between export marketing and global marketing is that of approach towards the company's orientation. In the ease of export marketing, the company adopts ethnocentric philosophy, which means home-country orientation. This philosophy gives more importance to the domestic operations than foreign operations. Strategic planning for foreign market is done in the home office and the marketing personnel are primarily home-country nationals. The marketing mix follows domestic patterns. No major changes are made in the products sold in foreign markets; promotion and distribution strategies are essentially the same as in domestic marketing. This ethnocentric position is normally adopted by a small company just entering the global marketing, or by a larger firm whose foreign sales are insignificant. From this, we can understand that the philosophy of a firm exporting goods and services is either to: • Counter domestic competition and export its surplus products, or • Avail of the incentives provided by the home Government. In case of global marketing, the firm's approach in exporting the goods and services is not to avail government's incentive or to counter the domestic market conditions. Here the philosophy of the firm is "Polycentric" which means host Country orientation. Under this approach each foreign country is treated as a separate entity with its own autonomous subsidiary organization. Each of these foreign subsidiaries does its own strategic marketing planning and research. Products are changed to meet local needs. Each subsidiary does its own pricing, promotion and distribution. Therefore, in the case of global marketing, the company is involved seriously in its foreign market, and in export marketing the company's involvement is much less. In global marketing, the company explores the marketing opportunities in the host country. It adopts the host country's environment. It aims at countering government and competitive pressures in the host country. At this stage the firm undertakes global marketing research to identify consumer preferences in the host country and develops appropriate marketing mix. IMPORTANCE OF GLOBAL MARKETING The basis of global marketing is global trade. Therefore, it is essential to study the importance of global trade primarily. This is attempted by taking into consideration the concepts advocated by different economists. Global trade takes place due to the differences in the comparative costs of production between countries as demonstrated by the famous classical economist, David Ricardo. 8 Click Here & Upgrade PDF Complete Expanded Features Unlimited Pages Documents Haberler advocated that the differences in opportunity cost of production of commodities between nations is the base for global trade Eli Heckscher and Bertil OhIin have pointed out that the differences in the cost of production between countries and global trade arises from the fact that factor endowments vary between countries and that factor intensities differ between commodities. Irving Kravis has pointed out that global trade arises as a result of the availability and nonavailability of factors of production. Every country would be interested in import of commodities, which are not readily available domestically. Similarly countries attempt to export goods and services whose domestic supply can be easily expanded beyond the quantity required to satisfy the domestic demand. Global trade has, thus, increased due to the above mentioned factors. It is equally true that the same factors are behind intra-national trade i.e. trading between different regions of the same country. Alfred Marshall, one of the famous classical economists has remarked, "the causes which determine the economic progress of nations belong to the study of global trade. Haberler points out that, "global division of labor and global trade, which enable every country to specialize and to export those things that it can produce cheaper in exchange for what others can provide at a lower cost, have been and still are, one of the basic factors promoting economic well-being and increasing the national income of every participating country". The following discussion gives us a clear idea on the benefits of global marketing. 1. To Meet Domestic Industrial Needs: No country today can survive in isolation. The developing countries need imports of capital equipment, raw materials, and technical knowledge for rapid industrialization and developing the necessary infrastructure. However, most of the developing countries at present aim for export. They give a lot of encouragement for the establishment of export-oriented industries and to increase the existing installed capacity of units producing goods for export markets. 2. Economic Development: An expanding export trade can be a dynamic factor in a country's development process. The country should have to utilize domestic resources to provide technological improvement and improved production at lower costs. For this purpose, industrial development, which is inevitable, is not possible without making exports. Exports and economic development of a country are interrelated. Without exports economic development of higher order cannot be achieved. 3. Profitable Use of Natural Resources: 9 Click Here & Upgrade PDF Complete Expanded Features Unlimited Pages Documents Natural resources are valuable assets of a country, which should be exploited for the benefit of the country. This could be achieved through export. Export earnings could be utilized in establishing industrial units based on different natural resources available in the country. 4. Facing Competition: In a thrust to export more, governments announce several concessions and incentive plans. The domestic producers are thereby motivated to produce more in order to avail of these concessions. 5. Employment Potential: In an effort to increase export, many export oriented industrial units are established on the one hand, and the existing industrial units produce more to get exportable surplus, on the other. This generates new opportunities for employment and increases the existing level of employment. In under-developed countries like Kenya the problem of unemployment is very serious and can be solved to some extent by increasing the level of exports through concerns like Export Processing Zones (EPZs). Importance of Export from the View Point of Individual Firms The following are the motivational factors with reference to the companies in foreign trade. Some of them are discussed here: • Insufficiency of Domestic Demand: If the domestic demand for the product is not sufficient, the firm may take a decision to enter foreign markets. • To Utilize Installed Capacity: If the installed capacity of the firm is much more than the level of demand of the product in the domestic market it can enter the global market and utilize its unutilized installed capacity. • Relative Profitability: Foreign trade is more attractive for its higher rate of profitability. The rate of profitability is also increased by export assistance measures offered by the government of the country. • Increased Productivity: Due to social and technological developments the industrial production will be increased to a greater extent. Therefore there will be higher production at cheaper rate. • Social Responsibility: In order to meet the social responsibility, some business units take the ...
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