Chapter 19 The Global Marketplace

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Countertrade takes several forms: Barter involves the direct exchange of goods or services,

as when Azerbaijan imported wheat from Romania in exchange for crude oil and Vietnam

exchanged rice for Philippine fertilizer and coconuts. Another form is compensation (or

buyback), whereby the seller sells a plant, equipment, or technology to another country and

agrees to take payment in the resulting products. Thus, Japan's Fukusuke Corporation

sold knitting machines and raw textile materials to Shanghai clothing manufacturer

Chinatex in exchange for finished textiles produced on the machines. The most common

form of countertrade is counterpurchase, in which the seller receives full payment in cash

but agrees to spend some of the money in the other country. For example, Boeing sells aircraft

to India and agrees to buy Indian coffee, rice, castor oil, and other goods and sell

them elsewhere.

Diff: 2 Page Ref: 560

AACSB: Analytic Skills

Skill: Application

Objective: 19-1

144) Why is it important for companies to understand cultural differences and nuances before entering a foreign country's market? Give two examples of cultural differences that would be important for a company to know.

Answer: Before planning a marketing program in a new country, a seller should understand the ways that consumers in that country think about and use the product. To succeed abroad, a company must adapt to local cultural values and traditions rather than trying to force their own. Students' examples will vary, but could include the following: French men use twice as many grooming aids as women, many Chinese eat on the way to work, and religious imagery (such as Hindu gods) used in a promotion could easily be considered offensive.

Diff: 1 Page Ref: 560-561

AACSB: Multicultural and Diversity

Skill: Application

Objective: 19-1

145) Describe the factors that might draw a company into the international arena.

Answer: Any of several factors might draw a company into the international arena. Global

competitors might attack the company's home market by offering better products or lower

prices. The company might want to counterattack these competitors in their home markets

to tie up their resources. The company's customers might be expanding abroad and

require international servicing. Or the company's home market might be stagnant or

shrinking, and foreign markets may present additional sales and profit opportunities. For

example, to offset declines in the U.S. soda market, Coca-Cola and Pepsi are rapidly

expanding their presence in emerging markets such as Russia and China. And whereas

Whirlpool's North American sales slipped by 1 percent last year, its European sales

jumped 12 percent.
Diff: 2 Page Ref: 564

AACSB: Analytic Skills

Skill: Application

Objective: 19-1

146) Discuss the international marketing objectives and policies a company should try to define before going abroad.

Answer: Before going abroad, the company should try to define its international marketing objectives

and policies. It should decide what volume of foreign sales it wants. Most companies start

small when they go abroad. Some plan to stay small, seeing international sales as a small

part of their business. Other companies have bigger plans, seeing international business as

equal to or even more important than their domestic business.

The company also needs to choose in how many countries it wants to market.

Companies must be careful not to spread themselves too thin or to expand beyond their

capabilities by operating in too many countries too soon. Next, the company needs to

decide on the types of countries to enter. A country's attractiveness depends on the product,

geographical factors, income and population, political climate, and other factors. The

seller may prefer certain country groups or parts of the world. In recent years, many

major new markets have emerged, offering both substantial opportunities and daunting


Diff: 3 Page Ref: 564

AACSB: Analytic Skills

Skill: Application

Objective: 19-1

147) Discuss direct and indirect exporting. What are two advantages of exporting?

Answer: Companies typically start with indirect exporting, working through independent international

marketing intermediaries. Indirect exporting involves less investment because the

firm does not require an overseas marketing organization or network. It also involves less

risk. International marketing intermediaries bring know-how and services to the relationship,

so the seller normally makes fewer mistakes.

Sellers may eventually move into direct exporting, whereby they handle their own

exports. The investment and risk are somewhat greater in this strategy, but so is the potential

return. A company can conduct direct exporting in several ways: It can set up a domestic

export department that carries out export activities. It can set up an overseas sales

branch that handles sales, distribution, and perhaps promotion.

One advantage of exporting is that the company produces all of its goods in its home country, so it does not need to invest in manufacturing facilities abroad. Also, exporting involves the least change in the company's product lines, organization, investments, and mission. With exporting, a company can make a minimal commitment to a foreign market and take minimal risks.

Diff: 1 Page Ref: 566

AACSB: Analytic Skills

Skill: Application

Objective: 19-2

148) Compare and contrast the advantages and disadvantages of standardized global marketing and adapted global marketing.

Answer: Companies that use standardized global marketing use largely the same marketing strategy approaches and marketing mix worldwide. On the other hand, with adapted global marketing, the producer adjusts the marketing strategy and mix elements to each target market, bearing more costs but hoping for a larger market share and return. Some global marketers believe that technology is making the world a smaller place and that consumer needs around the world are becoming more similar. This paves the way for "global brands" and standardized global marketing. Global branding and standardization, in turn, result in greater brand power and reduced costs from economies of scale. On the other hand, the marketing concept holds that marketing programs will be more effective if tailored to the unique needs of each targeted customer group. Despite global convergence, consumers in different countries still have widely varied cultural backgrounds and still differ significantly in their needs and wants, spending power, product preferences, and shopping patterns. Standardized global marketing does not take these differences into account, and may therefore be less effective, albeit less expensive.

Diff: 2 Page Ref: 569

AACSB: Analytic Skills

Skill: Application

Objective: 19-3

149) Identify and describe the three product strategies a company entering a foreign market can use.

Answer: A company can choose straight product extension, product adaptation, or product invention. Straight product extension means marketing a product in a foreign market without any change. This involves no additional product development costs, manufacturing changes, or new promotion. But it can be costly in the long run if products fail to satisfy foreign consumers. Product adaptation involves changing the product to meet local conditions or wants. Product invention consists of creating something new for a specific country market. This strategy can take two forms. It might mean maintaining or reintroducing earlier product forms that happen to be well adapted to the needs of a given country. Or a company might create a new product to meet a need in a given country.

Diff: 2 Page Ref: 569

Skill: Application

Objective: 19-3
150) What might drive a company to create international divisions or subsidiaries? Discuss the three ways these divisions can be organized.

Answer: Many companies get involved in several international markets and ventures, such as exporting to one country, licensing to another, having a joint ownership venture in a third, and owning a subsidiary in a fourth. With increased international activity, the company will need to move from simply having an export department to having more specialized international divisions or subsidiaries.

International divisions are organized in a variety of ways. An international division's corporate staff consists of marketing, manufacturing, research, finance, planning, and personnel specialists. It plans for and provides services to various operating units, which can be organized in one of three ways. They can be geographical organizations, with country managers who are responsible for salespeople, sales branches, distributors, and licensees in their respective countries. Or the operating units can be world product groups, each responsible for worldwide sales of different product groups. Finally, operating units can be international subsidiaries, each responsible for its own sales and profits.

Diff: 3 Page Ref: 575

AACSB: Analytic Skills

Skill: Application

Objective: 19-4

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