THUNDERBIRD

CHAPTER 1
GLOBALIZATION IMPERATIVE

MR. MURUGA CHINNIAH

January 6, 2009

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AGENDA

1. Why Global Marketing is Imperative

2. Globalization of Markets: Convergence
and Divergence
3. Evolution of Global Marketing
4. Theories of International Trade and the
Multinational Enterprise

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Samuel J. Palmisano, the Chair of the Board,
President, and CEO of IBM:

• “Today’s global corporations are shifting their focus

from products to production-from what things
companies choose to make to how they choose to
make them, from what services they offer to how they
choose to deliver them. Simply put, the emerging
globally integrated enterprise is a company that
fashions its strategy, its management, and its
operations in pursuit of a new goal: the integration of
production and value delivery worldwide. State
borders define less and less the boundaries of
corporate thinking or practice.”

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The Globalized World of Business

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• The global corporation is evolving as a
global network of interconnected and
tightly integrated internal and external
activities designed to satisfy their varied
customer markets in different parts of
the world

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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 trade volume in goods and
services grew from $6.5 trillion in 1998 to
$7.6 trillion in 2000.

Chapter 1 Kotabe & Helsen's6

Global Marketing
ITALY
CHINA

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INTRODUCTION (CONTD.)

• According to the World Trade Organization

(WTO), the world’s five exporting countries were
the United States ($781 billion), Germany ($552
billion), Japan ($479 billion), France ($298 billion),
and Britain ($284 billion), collectively accounting
for 38 percent of global trade in 2002.
• The Triad Regions (North America, Western
Europe, and Japan) of the world collectively
produce over 80 percent of world GDP.

Chapter 1 Kotabe & Helsen's8

Global Marketing
INTRODUCTION (CONTD.)

• Big Emerging Markets (BEMs): In the next ten

to twenty years, BEMs such as the Chinese
Economic Area (CEA: including China, Hong
Kong Region, and Taiwan), India, South
Korea, Mexico, Brazil, Argentina, South
Africa, Poland, Turkey, and the Association of
Southeast Asian Nations (ASEAN: including
Indonesia, Brunei, Malaysia, Thailand, the
Philippines, and Vietnam)

Chapter 1 Kotabe & Helsen's9

Global Marketing
INTRODUCTION (CONTD.)

Will provide many

opportunities in global
business ……..

Chapter 1 10
11
 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.
• Global competition: Competition around the
world and proliferation of the Internet are on
the rise.
• Need for global cooperation: Global
competition brings global cooperation.

Chapter 1 Kotabe & Helsen's

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Global Marketing
Why Global Marketing is
Imperative (contd.)
• 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.

Chapter 1 Kotabe & Helsen's

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Global Marketing
14
 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.

Chapter 1 Kotabe & Helsen's

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Global Marketing
Management Orientations

• Ethnocentric
• Polycentric
• Regiocentric
• Geocentric

Keegan and Green, 16

Chapter 1
Ethnocentric Orientation
• Assumes home country is superior to the rest
of the world; associated with attitudes of
national arrogance and supremacy
• Management focus is to do in host countries
what is done in the home country
– Sometimes called an international
company
– Products and processes used at home are
used abroad without adaptation

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Polycentric Orientation

• Management operates under the assumption

that every country is different; the company
develops country-specific strategies
– Sometimes called a multinational company
– Company operates differently in each host
country based on that situation
• Opposite of ethnocentrism

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Regiocentric Orientation

• Region becomes the relevant

geographic unit (rather than by country)
• Management orientation is geared to
developing an integrated regional
strategy
– European Union
– NAFTA

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Geocentric Orientation
• Entire world is a potential market
• Managerial goal is to develop integrated world
market strategies
• Global companies serve world markets from
a single country and tend to retain
association with a headquarters country
• Transnational companies serve global
markets and acquire resources globally;
blurring of national identity

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Globalization of Markets: Convergence
and Divergence (contd.)
• International trade versus international business:
– International trade consists of exports and imports.
– International business includes international
business trade and foreign production.
• Who manages international trade?
– Intrafirm trade: Trade between MNCs and their
affiliates.

Chapter 1 Kotabe & Helsen's

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Global Marketing
 Evolution of Global Marketing

• What is marketing? Marketing involves the planning

and execution of the conception, pricing, promotion,
and distribution of ideas, products, and services.
• 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.

Kotabe & Helsen's

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Global Marketing
 Evolution of Global Marketing (contd.)

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).

Chapter 1 Kotabe & Helsen's

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Global Marketing
 Evolution of Global Marketing (contd.)

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).

Chapter 1 Kotabe & Helsen's

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Global Marketing
25
 Evolution of Global Marketing (contd.)

• Global Marketing: Global marketing

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

Chapter 1 26
 Evolution of Global Marketing (contd.)

• 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.

Chapter 1 27
 Theories of International Trade & 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

Chapter 1 Kotabe & Helsen's

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Global Marketing
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Theories of International Trade & the
Multinational Enterprise (contd.)

– 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.

Chapter 1 30
Theories of International Trade & the
Multinational Enterprise (contd.)

• Growth Stage
– Product standards emerge and mass
production becomes feasible.
• Maturity Stage
– Many U.S. and foreign companies vie
for market share in the international
markets.

Chapter 1 31
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Theories of International Trade & the
Multinational Enterprise (contd.)
• Decline Stage
–Companies in the developing countries
also begin producing the product and
marketing it in the rest of the world.
• Internalization/Transaction Cost Theory
– Appropriability Regime
– Dominant Design
– Manufacturing and Marketing Ability

Chapter 1 33
Looking Ahead to Chapter 2

The Global Economic Environment

© 2005 Prentice Hall 34

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THE END

Q&A

THANK YOU

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