CHAPTER 8 STUDY GUIDE

LO1.
Describe the components of a country market assessment.
LO2.
Understand the marketing opportunities in BRIC countries.
LO3.
Identify the various market entry strategies.
LO4.
Highlight the similarities and differences between a domestic marketing strategy and a global marketing strategy.
CHAPTER OVERVIEW (SUMMING UP)
Describe the components of a country market assessment.
First, firms must assess the general economic environment. For instance, countries with a trade surplus, strong domestic and national products,
growing populations, and income growth generally are relatively more favorable prospects. Second, firms should assess a countrys
infrastructure. To be successful in a particular country, the firm must have access to adequate transportation, distribution channels, and
communications. Third, firms must determine whether the proposed country has a political and legal environment that favors business. Fourth,
firms should be cognizant of the cultural and sociological differences between their home and host countries and adapt to those differences to
ensure successful business relationships.
Understand the marketing opportunities in BRIC countries.
Technology, particularly in the communication field, has facilitated the growth of global markets. Firms can communicate with their suppliers
and customers instantaneously, easily take advantage of production efficiencies in other countries, and bring together parts and finished goods
from all over the globe. Four countries that provide tremendous marketing opportunities are the BRIC nationsBrazil, Russia, India and China.
These countries have large populations that are increasingly interested in the latest goods and services.
Identify the various market entry strategies.
Firms have several options for entering a new country, each with a different level of risk and involvement. Direct investment is the most risky but
potentially the most lucrative. Firms that engage in a joint venture with other firms already operating in the host country share the risk and obtain
knowledge about the market and how to do business there. A strategic alliance is similar to a joint venture, but the relationship is not as formal. A
less risky method of entering a new market is franchising, in which the franchisor allows the franchisee to operate a business using its name and
strategy in return for a fee. The least risky method of entering another country is simply exporting.
Highlight the similarities and differences between a domestic marketing strategy and a global marketing strategy.
The essence of a global marketing strategy is no different from that of a domestic strategy. The firm starts by identifying its target markets,
chooses specific markets to pursue, and crafts a strategy to meet the needs of those markets. However, additional issues make global expansion
more problematic. For instance, should the product or service be altered to fit the new market better? Does the firm need to change the way it
prices its products in different countries? What is the best way to get the product or service to the new customers? How should the firm publicize
its product or service offering in various countries?
EXTENDED CHAPTER OUTLINE
I
A

GROWTH OF THE GLOBAL ECONOMY: GLOBALIZATION OF MARKETING AND PRODUCTION

II ASSESSING GLOBAL MARKETS

Economic Analysis Using Metrics
1
Evaluating the General Economic Environment
2
Evaluating Market Size and Population Growth Rate
3
Evaluating Real Income

B
C

Analyzing Infrastructure and Technological Capabilities

Analyzing Government Actions
1
Tariffs
2
Quotas
3
Boycott
4
Exchange Control
5
Trade Agreements

Analyzing Sociocultural Factors

Check Yourself: Several questions are offered for students to check their understanding of core concepts.

What are key metrics that can help analyze the economic environment of a country?
Answer: Key metrics include gross domestic product, gross national income, purchasing power parity, and the human development
index.

What types of government actions should we be concerned about as we evaluate a country?

Answer: We should be concerned about such government actions as tariffs, quota, boycotts, exchange controls and trade agreement.

What are five important cultural developments?

Answer: They are power distance, uncertainty avoidance, individualism, masculinity, and time orientation.

A
B
C
D
E

Why are each of the BRIC countries viewed as potential candidates for global expansion??
Answer: Brazils ability to weather, and even thrive during, the most recent economic storm, has transformed it into a global contender.
Russia has undergone multiple up- and downturns in its economy. However, its overall growth prospects appear promising, especially
as a consumer market. With more than 1.1 billion people, or approximately 15 percent of the worlds population, together with
expanding middle and upper classes, India is one of the worlds fastest growing markets. Chinas leadership, while maintaining
communist political ideals, has embraced market-oriented economic development, which has led to startlingly rapid gains.

III
CHOOSING A GLOBAL ENTRY STRATEGY
Exporting
Franchising
Strategic Alliance
Joint Venture
Direct Investment
Check Yourself:

Which global entry strategy has the least risk and why?
Answer: Exporting requires the least financial risk but also allows for only a limited return to the exporting firm. It has no investment
in people, capital equipment, buildings, or infrastructure.

Which global entry strategy has the most risk and why?
Answer: Direct investment requires a firm to maintain 100 percent ownership of its plants, operation facilities, and offices in a foreign
country, often through the formation of wholly owned subsidiaries. This entry strategy requires the highest level of investment and
exposes the firm to significant risks, including the loss of its operating and/or initial investments. For example, a dramatic economic
downturn caused by a natural disaster, war, political instability, or changes in the countrys laws can increase a foreign entrants risk
considerably.

IV CHOOSING A GLOBAL MARKETING STRATEGY

A

Target Market: Segmentation, Targeting, and Positioning

The Global Marketing Mix

1
2
3
4

Global Product or Service Strategies

Global Pricing Strategies
Global Distribution Strategies
Global Communication Strategies

Check Yourself:
What are the components of a global marketing strategy?
Answer: A global marketing strategy includes two components: determining the target markets to pursue and developing a marketing
mix that will sustain a competitive advantage over time.

What are the three global product strategies?

Answer: The three potential global product strategies are: Sell the same product or service in both the home country market and the
host country; sell a product or service similar to that sold in home country but include minor adaptations; and sell totally new products
or services.

ANSWERS TO END OF CHAPTER LEARNING AIDS

Marketing Applications
1.

What is globalization? Why is it important for marketers to understand what globalization entails?

Globalization refers to the processes by which goods, services, capital, and people, information, and ideas flow across national borders.
Globalization allows gods and ideas to move efficiently around the world, which in turn, facilitates the quick delivery of goods to better meet the
needs of global consumers. Consumers now have easy access to global products and services. In addition, globalization is important for firms
in identifying new growth opportunities for expansion as well as production.
2.

Moots is a high-end bicycle manufacturer located in Steamboat Springs, Colorado. Assume the company is considering entering the
Brazilian, Chinese, and Indian markets. When conducting its market assessment, what economic factors should Moots consider to make its
decision? Which market do you expect will be more lucrative for Moots? Why?

By taking the perspective of a global marketing professional considering expansion, students should recognize the need for analyses of the
Brazilian, Chinese, and Indian markets and thus recall the key concepts of an economic analysis.
The three key economic factors that Moots should consider are the general economic environment, the population size and growth rate, and real
income. In analyzing the general economic environment, the company might use such indicators as the relative level of imports/exports, the GDP,

PPP, and the HDI to understand to what degree each country has a healthy economy that offers a good opportunity for global bicycle marketing.
In analyzing the population size and growth rate, the company can get a sense of the potential market opportunity both now and in the near
future. Finally, by analyzing real income, Moots can determine whether its product might be priced out of the reach of the market segment it
wants to target.
The more lucrative market for Moots in the long term likely will be China, because of its improving economic environment and large population.
However, Moots must price its product carefully to avoid moving it out of the reach of the majority of the population who are still fairly poor and
rural.
3.

Now consider the political, economic, and legal systems of China, India, and Brazil. Explain why you think one country might be more
hospitable to Moots than the others.

As a follow-up, this question prompts students to examine China, India, and Brazil from another perspective: the political and legal risk. In this
way, students gain a more comprehensive picture of the potential issues and opportunities that exist in either the Chinese, Indian, or Brazilian
markets.
Students should examine the political and legal climates of each of these countries and consider which ones might be most welcoming to export
products.
4.

Colgate sells its products in many countries throughout the world. How would you expect its market position to differ in various countries,
compared with that in the United States? Consider various areas across the globe in formulating your answer.

Colgate should invest in understanding its international markets. Colgate might adapt some of the flavors and benefits of its products to meet
the unique needs of international markets. For example, consumers in India might prefer different flavor profiles than Chinese consumers.
Colgate should consider local brands when positioning its product as well. How will Colgates products compare to products that already exist
in the local marketplace?
5.

CITGO, the petroleum company owned by the Venezuelan government, sells its products throughout the world. Do you anticipate that its
market positioning and advertising differ in different countries? Why or why not?

Student answers will vary. Market positioning and advertising differ in countries. Positioning is based on the respective countrys target market
and how consumers in that market will perceive a product. In addition, customers will refer to a products international brand reputation. The
advertising is different in that it incorporates the countrys customs, beliefs, and product usage dynamics to form an ad that is conducive to that
countrys way of life.
6.

What are the benefits of being able to offer a globally standardized product? What types of products easily lend themselves to global
standardization?

Global products generally rely on one of three strategies: (a) sell the same product in both the home country market and the host country, (b) sell
a product similar to that sold in the home country but include minor local/regional adaptations, or (c) sell totally new products. In examining
these three strategies, students must consider the benefits of a single global product and the type of products that lend themselves to this strategy.
A globally standardized product keeps costs low, because it requires no variation, allows for economies of scale, and can be shipped anywhere in
the world without having to worry about conflicts with local tastes. Products that do not require adaptations based on culture (e.g., food
preferences, language, religion), such as sugar, coffee, and some types of apparel, offer the best options for global standardization.
7. Compare and contrast Fords global marketing strategy for Figo and Fiesta.
The Figo contains technology and architecture proven in other markets as well as features derived from consumer research and testing on Indias
roads. Whereas, the Fiesta is designed to be a one world car.
Quiz Yourself
1. Geert Hofstede's cultural dimensions concept focuses on five dimensions of __________________ in a country.
A. symbols
B. underlying values
C. ceremonies
D. dress
E. visible artifacts
Hofstedes cultural dimensions shed light on underlying values in a country by examining: power distance, uncertainty avoidance, individualism,
masculinity, and time orientation.
2.

NCD company wants to expand into the Mexican market. They have financial resources, want to control business operations, and have had
considerable success marketing to Hispanics in the United States. NCD will likely use ______________ to expand into the Mexican market.

A. franchising
B. exporting
C. a joint venture
D. direct investment
E. a strategic alliance

Direct investment requires a firm to maintain 100 percent ownership of its plants, operation facilities, and offices in a foreign country, often
through the formation of wholly owned subsidiaries This strategy requires the highest level of investment and is relevant for firms with significant
financial resources who want complete control over their foreign operations.
Net Savvy
1.

For many small businesses, the idea of entering a foreign market is frightening. The U.S. national government, as well as most state governments,
now offer assistance designed specifically for small-business owners. Visit the website of the Massachusetts Export Center at
http://www.mass.gov/export/ and examine the types of services it provides. Click on the Export Statistics link. To what five countries did
Massachusetts export the most? Are you surprised?
The exercise allows students to explore the assistance available to businesses looking to enter a foreign market.
The types of services that the Massachusetts Export Center provides include export counseling and technical assistance, international market
research and assessment, international business development assistance, export training programs, and export publications. The top five
countries to which Massachusetts exports are, from most to least, the Netherlands, Canada, Germany, Japan, and the United Kingdom. It is
surprising that the Netherlands received the most exports from Massachusetts since it is much smaller than the other top countries.

2.

adidas is a global brand, yet it alters its promotions to meet local tastes. Go to http://shop.adidas.co.uk/ and visit the U.K. site. Now click on the
US or Canadian sites. How are these websites different?
The product assortment that adidas offers to U.K. customers is different from the product assortment for U.S. and Canadian customers. In
addition, the prices and descriptions are altered to appeal to the unique tastes of the different markets. In addition, the U.K. website shows
support for local U.K. sports clubs and teams. Whereas, the United States and Canadian websites feature North American athletes and teams.
Chapter Case Study: Racing To Capture Chinas Luxury Car Market
1.

Assess China as a potential market for luxury cars. If you worked for a luxury car manufacturer, such as Volvo, would you enter or attempt
to increase your presence in China? What entry strategy would you use? Why?

China has tremendous potential as a market for luxury cars, because it is expected to become the worlds largest market for luxury cars within
the next 5-7 years. However, it is challenging because of the large geography of China and the increasing social and economic gaps. Volvo does
not currently have a strong presence in China. As the population grows though, demand for Volvo may increase. To test the market, Volvo might
consider an export strategy to China before investing directly in Volvo production in China. Ask students what entry strategy that might use to
reach Chinese customers and have them justify their decisions.
2.

Drivers in China approach the luxury car market with a set of strong associations that influence their perceptions of the foreign brands
currently available in the marketplace. Multiple factors affect those consumer attitudes, including history, class, and social status. Why are
these attitudes so entrenched in China, and why do they play such a critical role in shaping car customer preferences?

Culture, class, and consumer attitudes are critical in Chinese consumer consumption. Many of the younger, affluent population are concerned
with status and perceptions. Consumers in China form strong associations with brands, especially luxury automobiles, and believe that these
brand associations are reflections of their lifestyle choices and personal values.
3.

Both Audi and BMW have allied with other companies to target particular market segments. Assess the relative strength of these two very
different positioning strategies.
Audi formed a joint venture with the Chinese carmaker Yiqi in 1988. By the early 2000s Audi was on the list of approved automobiles for the
Chinese central government. BMW, more recently, launched a strategic alliance with Toyota in order to focus on sustainable technologies, like
fuel-efficient engines and lithium batteries. Audis entry into China has given them a 61% increase in Chinese sales, whereas BMW sales in
China are expected to rise by over 85%. Both companies seem to have optimized global strategies that yielded high success rates in China.

4.

BMW has successfully targeted Chinas affluent, young car drivers, but the brands success in that market has also provoked public backlash.
What drives such public hostility to the brand, and how serious a problem is it? What marketing approach, if any, should the company
undertake in response?
Negative public relations can damage a brands reputation significantly. Critics of BMW suggest that BMW caters to the careless, nouveau
riche drivers. Government officials who drive BMWs are more likely to be accused of corruption than officials who drive Audis. Because
public opinion and attitudes are so important in the Chinese consumers decision making process, this negative public opinion could potentially
hurt BMW.