Theme 4

Theme 4

Global Marketing
1. The marketing strategies used by businesses when operating in global markets.
  1. The Ethnocentric Model
    1. No adaption of products and marketing tactics to suit local preferences and tastes. Uniform approach worldwide.
      1. e.g. Apple, Pizza Express, Rolls Royce
  2. The Geocentric Model
    1. Some adaption of products and marketing tactics to suit local preferences and tastes.
      1. e.g. Mcdonalds
  3. The Polycentric Model
    1. All products and marketing tactics are adapted to suit local preferences and tastes.
  4. A Global Marketing Strategy that applies to all global operations.
    1. ~ Producing on a large scale can be cheaper (designs can be standardised so there may be economies of scale
      1. ~ Same marketing campaigns can be used everywhere
        ~ Less time can be spent researching individual markets
        ~ Less time developing products for individual markets
  5. Glocalisation
    1. ~ Sales are likely to increase as each market is specifically targeted
      1. ~ Turnover and profits maximised
        ~ Marketing tactics are ideally suited to the local situation so less likely to cause negative reactions
    2. A combination of the words localisation and globalisation. It involves the development and sale of products to customers around the world which reflect specific local customs, tastes and traditions.
Global market Niches
1. Smaller more specialised parts of a global market. Customer needs are not met by the global mass market.
  1. Advantages of operating in a global niche market
    1. By focusing on a smaller segment of the market, a business is able to offer more specialised services and products which are often more valuable and in greater demand.
      1. Consumer demand in a niche market is usually more price inelastic which means premium prices can be charged.
        Direct competition may be reduced.
        Smaller markets make it easier to get to know your customers better meaning marketing and sales strategies can be more effective.
  2. Disadvantages of operating in a global niche market
    1. Producing on a smaller scale means that economies of scale may not be fully exploited and so average costs will be higher
      1. Market size is ultimately limited
        A successful niche will attract a lot of attention for competition or takeover bids
        Niche markets tend to be based on a narrow consumer interest that could change suddenly
        Over time niche markets may expand into mass markets and so the business may lose the benefits of being a niche producer
Assessment of a country as a production location
1. Infrastructure
  1. Weak or unreliable infrastructure slows down transport system and raises costs.
    1. Makes communications more uncertain or difficult
2. Location in a trade bloc
  1. Common for businesses to locate production facilities inside a trade bloc to minimise trade barriers.
3. Government Incentives
  1. Some countries reduce their business tax rates to encourage FDI
4. Ease of Doing Business
  1. Forming a joint venture can get around problems associated with understanding local rules and regs
5. Political Stability
6. Costs of Production
  1. There is a trade off between the need for cheap labour and labour with the right technical skills
7. Natural Resources
  1. e.g. Mining companies go to where the resources are and export them to where the demand for them is
8. Likely return on investment
Protectionism
1. Involves any policy that restricts international trade in order to minimise competition from foreign producers that are trying to export.
2. TARIFFS
  1. Tax imposed on imports.
3. IMPORT QUOTAS
  1. A physical limit of number of imports allowed into the country.
4. SUBSIDIES
  1. Financial support given to domestic producers to help compete with international firms
5. EMBARGOS
  1. A complete ban of imports into a country. (normally for political reasons.
6. GOVERNMENT LEGISLATION
  1. Imposing regulations to exclude some imports
7. Advantages of Protectionism
  1. Can protect infant industries
    1. Can prevent dumping: where foreign producers sell goods below cost in the domestic market
      1. Can protect jobs
        Can raise government revenue
8. Disadvantages (problems) of Protectionism
  1. Where trade barriers are imposed on a country, retaliation usually follows
    1. Doesn't work for goods that are very price inelastic e.g. land rovers in china
      1. Protection reduces competition, can lead to ineffieciency and higher prices
Trading Blocs
1. A group of countries where barriers to trade are reduced or eliminated between the member countries
  1. Free Trade Areas
    1. NAFTA (north american free trade area) consists of Canada, North America and Mexico
    2. Groups of countries that trade completely freely, with few or no trade boundaries BUT each country retains its own independent trade policies in relation to the rest of the world.
  2. Single Markets/Common Markets
    1. Complete free trade within and a single unified trade policy (CET). Also there is free movement of people within.
2. Benefits and constraints of trade blocs
  1. No tariffs mean members benefit from lower prices
  2. No trade restrictions mean export levels increase within the bloc
  3. Greater possibility of economies of scale
  4. A trade bloc creates a larger market which attracts FDI
  5. A common external tariff can increase costs of goods from outside the bloc (APPLIES TO COMMON MARKETS ONLY)
  6. No protection for domestic industries from competitors within the bloc
  7. Unified regulations may not suit all businesses, especially those without ethical commitments
Global Competitiveness
1. Businesses that import will want an appreciating or stronger £ - as their costs will fall
  1. Businesses that export will want a depreciating or weaker £ - it will make them more competitive
Globalisation
1. Indicators of Growth
  1. GDP - Gross Domestic Product
    1. Measures the value of all the goods and services produced in an economy over one year.
    2. However, measuring growth with GDP can have drawbacks:
      1. Inequality: A country with some very wealthy people will distort the results if most people in that country our living in poverty.
        Exchange rates make comparisons difficult because the values of currencies fluctuate.
        The black economy: Sometimes paid work is not recorded
        Does not take into account cost of living varies from country to country.
  2. Literacy
    1. There is a strong link between literacy rate and economic efficiency and growth.
  3. HDI - Human Development Index
    1. A measure of development based on access to health care, education and national income.
Growing Economies
1. Primary Sector
  1. Secondary Sector
    1. Tertiary Sector
      1. Involves services and other knowledge based industries
        80% of UK GDP
    2. Involves the production and manufacture of tangible goods
      1. Tangible good: Physical products defined by the ability to be touched
  2. Involves the production of raw materials. e.g. Farmers, Fishers, Mining
2. Developed Economies e.g. Europe, North America, Japan, South Korea, Singapore
  1. Economic growth is relatively slow
    1. Tertiary sector is the largest sector
3. Emerging Economies e.g. China, Vietnam, India, Nigeria, Indonesia
  1. Rapid Economic Growth
    1. Primary sector declining, secondary and tertiary sector growing rapidly
      1. Skill levels and educational standards rising all the time
4. Developing Countries e.g. African and Latin American Economies
  1. Usually slow economic growth
    1. Primary sector largest sector
      1. Economic activities will be labour intensive
        Most people poorly educated

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	Created by Seb Body over 7 years ago