-Global Marketing
-Global Vision
-Global Firms

[SLIDE 1]

Society, culture, politics, communications, and more are now global. Business cannot ignore the global environment. Even small, local companies might source raw materials or completed products from other nations. Global marketing involves a business looking past a narrow target market and viewing the globe as a potential target.

The growth of global business has been rapid. In 1991, world trade totaled $200 billion. In 2016, just merchandise exports totaled $18 trillion.

In order to do so, what is needed is a global vision – recognition and reaction to international marketing opportunities using effective global marketing strategies, and an awareness of threats from foreign competitors in all markets. One example is Otis, a company focused on “moving products”, including elevators, escalators, and moving walkways. The company employs more than 64,000 people and is present in more than 200 countries. Manufacturing is done in North America, South America, Europe and Asia, while engineering centers are also in multiple nations in those continents.

Remember that globalization is not only about US companies moving abroad. American companies must be aware of the threat of competition from other nations. Most manufactured products sold in the US are not made here. Competition can come from anywhere.

[SLIDE 2]

While all nations depend on international commerce, the amounts vary. Many people think the US is heavily tied to international business, but only 14% of America’s gross domestic product (GDP) is dependent on international trade. Compare that to France, the United Kingdom, and Germany, with 28, 30 and 46% of GDP, respectively, derived from international trade.

GDP is the total market value of all final goods and services produced in a country for a given time period. Note the importance of the word “final”. For instance, if a car brake is produced, put into a car, and exported, counting all the parts would double count the value of the car in terms of GDP, so only the value of the car is included in the export total.

Historically, only the largest companies were heavily involved in import and export. In today’s connected world, with telecommunications, data communications and shipping built for a global economy, even the smallest companies can be involved in the global market. More than 300,000 small and medium size firms export goods from the United States.

[SLIDE 3]

One commonly held concept is that exports are good for an economy while imports are bad. However, as with much of reality, economics are more complex than that simple claim.

One worry is focused on imports from very low wage nations such as China. While they are far lower than in the US, and there is clearly abuse, developing a nation creates demand for workers in that nation. Since 2008, China’s wages have doubled. In addition, almost half of US non-oil imports come from advanced nations such as France, Germany, Ireland and Switzerland. Those nations have higher average wages than in the US, so wage is not the only component in the decision to import. 

Another benefit of imports is that they can create jobs. The US transportation industry manages moving products off of ships, planes, trains and trucks and then works to move those products across the US.

It is also not only finished products that are imported. Sixty percent of US imports are raw materials, components and machinery used to make goods or produce crops.

Grocery stores across the US now have produce year-round that were once only found during US growing seasons. Products from more temperate climates and the Southern Hemisphere are imported to provide a variety of fruit and vegetables throughout the year.

One study states that global trade adds an estimated 29% of purchasing power to the median income American consumer.

[SLIDE 4]

Because of the lower wages in many nations, jobs are often moved overseas so that executives can cut costs. This is known as outsourcing. In the 1990s, one major example was moving call centers out of the USA. With the large number of English speakers in India, Philippines and other nations, many call centers opened in those nations. Manufacturing has been a major sector impacted by outsourcing, as the early mention about China indicates.

However, in recent years, some management teams have realized the limitations of outsourcing. As earlier lessons have pointed out, costs are only one component of the product, which is only one of four components in the marketing mix.

Many companies running call centers overseas began to realize that excellent English is not the only positive factor in customer service. Understanding a customer’s culture can be even more critical. Those companies have begun to move call centers back to smaller American cities and rural areas, called inshoring, where people are more likely to understand the social cues of the customer. While those places are more expensive than nations used for outsourcing, they still are less expensive than in large cities and provide benefits to customer service.

Manufacturers have found that there are product quality concerns in manufacturing in emerging markets. In addition, while global shipping has become more efficient, transportation costs can sometime be larger than any manufacturing cost savings – not to mention that domestic manufacturing can provide faster delivery times.

[SLIDE 5]

Economic decisions are complex and almost always there are both positives and negatives.

The benefits for consumers start at cost competition. Using emerging markets not only means labor costs are lower, but construction and expenses can also create savings in those nations. Competition on lowered costs means lower prices to consumers, increasing purchasing power.

The emerging nations also benefit. They gain access to foreign capital that helps their own citizens. Adding export markets increases GDP. Modern product facilities and new community infrastructure to support the facilities means the nations have access to technology.

Global trade also is a check on governments. Rather than local control over business, governments must look elsewhere and adjust their practices to remain competitive for business.

On the other hand, the major cost for the developed world is increased unemployment. The US has lost millions of manufacturing jobs, with an MIT study indicating that, from 1999 to 2011, the US lost 2.4 million just from Chinese imports. While modern technology is also driving job loses, globalization is a part of that loss.

The loss of jobs means increased government expenditure. While unemployment payments are one part of the cost, there are other related costs. US trade adjustment assistance, payments to the unemployed for jobs lost overseas, total more than $600 million annually. In addition, somebody who loses a manufacturing job cannot immediately move to a job in a growing field such as computer programming. Federal, state and local governments are spending money to retrain people for new positions.

[SLIDE 6]

A company that imports from and exports to many countries is involved in the global environment but does not fit the definition of a multinational corporation. That description goes to a company that does more than trade -- it has operations in multiple nations. 

Companies such as IBM and Caterpillar do not begin as multinationals. They start in one country, then expand to a couple of other countries, and continue to expand over time. They eventually have multiple divisions with separate headquarters, operating separately to address the needs of different regions.

Another indication of a multinational is that a significant part of revenue comes from overseas. For instance, Caterpillar earns 67% of its revenue from overseas business.

[SLIDE 7]

A major question about multinationals is the impact they have on the emerging markets. While the money coming into nations helps, questions about wages, workplace safety, and pollution add to social costs in those nations. In addition, some critics point to manufacturing being more capital intensive -- using more capital than labor – and not significantly changing employment numbers. The result can be a small group of "modern sector" employees that drive up average standard of living but do so by expanding the wage and wealth gap.

In recent years, multinationals have begun to address the concerns with stronger inspection methods and higher involvement in the nations than just hiring workers. For instance, Coca-Cola has trained a half million women in 44 countries to become small-scale businesspeople.

Multinationals have seen one key change in the last few decades. It used to be that many regional operations were very different. The spread of communications and technology has meant that a demand for standardized products and services has changed operations. Global standardization is the production of uniform product that can be sold the same way around the world.

The global growth of smart phones is a clear example of global standardization. The hardware and operating system are standard, while each nation can load the local language into the user interface. At the same time, standardization can drive products, but differentiation still matters. For instance, while the McDonald’s look and feel makes stores seem the same around the world, the menus take into account local preferences. That is sometimes referred to as multidomestic strategy.