hi everyone uh so welcome to chapter eight um as I said you know earlier we're not going to be hitting every single chapter in the book because we don't have enough time and there are some things that um you know there's other classes that are going to take a lot of this up more in more detail so I didn't want to I just wanted to give you just a good basic smattering of things as you know as we go through so um so we're going to skip around a little bit uh but but you're still going to get like you know the basic gist of of all of the areas that you need just maybe not as in-depth as um as the chapters would take you but we are going to touch on them in other chapters so chapter 8 is Global Marketing I thought this was important because we are in a global economy no matter what we think no matter what we say the US economy does not live and breathe on its own the Chinese economy does not even breathe on its own the Russian that none of this is on its own it is all impacted by everything else going on in the world um but since we are not all the same marketing has to be done slightly differently in those areas so so let's just talk very quickly we're going to just now they do go into detail on this and I like to kind of give you a little summary of of the initial introduction because it's basically a company that embodies um the essence of the chapter and in this case it's Airbnb right so Airbnb um it it they are they are a global marketer right they what they do is they sell the experience of travel right and it doesn't matter where you're traveling like it's an experience of traveling so they they need to be marketing it in such a way that first of all the wherever the listing is that that advertisement is done in the local language however if you decided you wanted to go somewhere else there is a way to translate that listing to your language so you can see it right so so Airbnb had to adjust for that right they had to they had to have that local Flair and that local respect but they still had to be able to Market that outside of that local area obviously you're not going to sell airbnbs in most cases to somebody who lives there um you know it's just you're when people travel they want to travel away from where they live in most cases so um what Airbnb also had to do is you know make it very easy for people to review listings or to book listings and in certain countries some platforms are forbidden right so if there are countries that can't do things through Facebook Airbnb had to figure out another platform that would be um appropriate for that market for them to use right so that is a it that is the best example of a company that I said you know what we want to be Global we're gonna have to figure out how to make it work even in places where it's just it's not what we think it should be we're going to figure out what it could be and we're going to make it work right so you know so regardless of the language of the channel Airbnb make sure to go to keep its branding intact right its name and branding methods are always consistent which is important um because they want to ensure substantial brand awareness like around the entire world it also designs this overriding strategy to apply globally right um because they're ultimately selling travel they're not selling a specific location you know they can they can do that they can kind of keep it on a higher level so so Airbnb is a great example of a wonderful Global marketer and we're going to jump in here this is not a very long chapter so I'm hoping that this lecture will be a little bit quicker because I know that some of them get a little long but I'm going to jump over to the PowerPoint and we're going to get going okay so chapter 8 Global Marketing we are going to describe the components of a country market assessment we're going to understand the marketing opportunities in the bric countries identify the various Market entry strategies and then highlight the similarities and differences between a domestic marketing strategy and a global marketing strategy so increasing globalization will affect not only U.S corporations that are actively searching out new markets but also small and medium-sized businesses that increasingly depend on the goods produced globally to deliver their products and services okay so it's really it's not just the US sending products out it's the US taking products in and it's U.S companies that need supplies and you know uh you know the parts and pieces that go into their products from those countries as well so what we're going to find out a little bit later in this chapter is that you know dealing with global markets when you're imposing tariffs or quotas does impact local companies and not necessarily in the way you think so we're going to get into that but so but in the United States the market has pretty much evolved from a system of regional marketplaces to National markets and then to geographically Regional markets right so there's Canada the United States are together um you know as a region and then the um the East the European Union is another is another region um but when we do describe it or Define it globalization refers to the processes by which good Services Capital people information and ideas will flow across National borders okay um the elimination of trade barriers actually and other governmental actions allows goods and ideas to move quickly and efficiently around the world which in turn then facilitates a quick delivery of goods to better meet the needs of our Global consumers right so let's begin looking at how we're going to assess these Global markets thank you well because of globalization marketers are presented with a variety of opportunities right which means that firms must assess the viability of various potential Market entries right so when we're going around the circle these are the different ways that we are looking at markets and how amenable those markets might be to our products and to us selling our products in that service or understanding people or services or ideas into that area um so when we do an economic analysis using metrics right we want to look at several things right so the greater the wealth of people in a country the better the opportunity a firm will have right in that particular country we have to look at three major economic factors that might indicate that um the general economic environment Market size and population growth rate and then of course real income which is determined in a very different manner so and we're evaluating the general economic environment using economic metrics um so just thinking about that in general healthy economies are going to provide better opportunities right that's just an obvious thing and there are several ways that a firm can use metrics to measure the relative health of a particular country's economy to determine the market potential for its particular product or service a firm should actually use as many metrics as possible because you want to go in with your eyes wide open one metric is the relative level of imports and exports right um for example if there's a trade deficit it means that the country Imports more than it exports if there's a trade surplus or means a higher level of exports than Imports because signaling a greater opportunity to export products to more markets right um the most common way to gauge the size of a market is and therefore the potential that country has for Global Marketing is to use standardized measures of output like gross domestic product and gross national income now gross domestic product is the most widely used and it is defined as the market value of the goods and services that are produced by a country in a year the gross national income consists of gross domestic product plus the net income earned from other Investments abroad so that could mean just investments in other companies where money is flowing back money is flowing back but not necessarily based on sales of services or Goods another frequently used metric is the purchasing power part parity the PPP let's call that which is a theory that states that if the exchange rates of two countries are in equilibrium a product purchased in one will cost the same in the other if expressed in the same currency okay so that's actually something that um most of us don't think of but it does kind of impact um you know it does does impact a decision to go into a certain Market because that affects your costs as well so very often we'll use what we call the Big Mac index to um to to us as the PPP to assess the relative economic buying power in a nation um this is the metric that is used and this is how much a Big Mac would cost at that particular time in those currencies so you'll see that um that the purchasing power party is not not entirely on point but it does it does give you an idea of the difference of the purchasing power in those areas so we're also going to evaluate Market size and population growth rate okay um the global population has been growing dramatically since the turn of the 20th century um but this growth has never really been equally dispersed which you know which causes a problem when you're trying to be when you're trying to send out a global product today many less developed Nations by and large are experiencing rapid population growth while many of the developed countries are experiencing either zero or negative population growth um so so we need to keep that in mind as well another aspect that is related to um to Market size and population growth pertains to the distribution of the population within a particular region and this is where we're going to talk about rural versus Urban because we know Urban is in a more like a city area and Rural is outside of cities in um less populated areas but what but what you don't realize what that means is that sometimes trying to get products out to a rural area the infrastructure is not as built up as we would expect and the cost of getting those products out there increases dramatically so um so that's actually goes into the consideration it has to because that all goes into the cost of the product and you may not be able to pass that cost on to the consumer which means you could end up losing money uh if you go into a certain Market in the wrong way so the business impacts of these combined trends of increasing urbanization and growing middle class degree of protectionism by a central government which could which happens in India which has happened a lot in India um and a youthful apocalypse is you know makes certain areas of the country um an enormous market for consumer goods but then when we go into evaluating real income this is this is where firms need to make adjustments to existing products or change the price to meet the unique needs of a particular country um right so when we're looking at this we're thinking in settings in which consumers earn very low wages that market is known as the bottom of the pyramid um if there is a very very large impoverished population they still need these consumer goods but they can't pay prices that other countries pay so um you know for example like Netflix will offer subscription plans in certain countries for much less money and those those funds are not available in the United States textbook Publishers will will create paperback versions of their textbooks and sell them much cheaper so that those students will be able to have access to those um you know and and of course that also impacts fashion and jewelry because they want to be able to sell in those markets as well so you have to keep that in mind so we also want to look at like I said before analyzing infrastructure and the technological capabilities within a market right this is the next component infrastructure is defined as the basic facilities services and installations needed for Community or Society to function such as transportation and communication systems water and power lines public institutions such as schools post office and prisons so marketers are especially concerned with the four key elements Transportation distribution channels Communications and commerce um you know obviously we want to be able to get the product out to the buyers distribution channels need to be set up appropriately like if it's a product that needs to be refrigerated do we have refrigerated trucks do we have a way to do this um Communications is there a way to you know to be able to track all of this and of course Commerce is there a way to actually sell the products out there then we have governmental actions which always have to take a big part in this as well um so governmental actions as well as the actions of non-governmental political groups can significantly influence the firm's ability to sell goods and services because they often result in laws or other regulations that either promote the growth of the global market or close off the country and reduce growth the chance of growth over time one of these is with tariffs a tariff is also referred to as a duty um just like so if you go so if you go to the airport you do the free shops basically that means that those products have not been tariffed which means that they are cheaper but if you got them outside of the airport they would have um then the Tariff or the duty would then be included in the price and you would be paying more um so there's a tax levy on Goods imported into a country tariffs often are also often opposed us to penalize other countries for maybe some unfair Trade Practices right um but but what we have to keep in mind is that that's not always good yeah that can make a make a point to the country but it also then impacts those um those those companies within the within your country that are trying to get get the parts and pieces for their products and now those are being tariffed and now it costs more um so because they do inhibit trade some firms are both within and outside the United States actually can suffer substantial losses as a result of tariffs that have been poorly designed or or poorly implemented now I have something very quick to show you about tariffs so give me one second and we'll get this going hold on lighting 15 increases fluorine 10 to 25 if the tariffs go forward this five four is going up ten percent George Obi habib's remodeling business in San Diego is bracing for the new abnormal a 25 tariffs being composed by the US on 200 billion dollars in Chinese Goods up from 10 last year many materials used in home buildings and remodeling them included you've got a lot of things like Granite those are going to be sourced from China small business owners like obviously are worried potential clients due to the tariffs on Chinese Goods will walk at soon to become higher price quotes it takes a long time for customers to digest the new reality of what things cost and in the meantime we have very large overhead and about 50 staff that we need to ensure have continual work his concerns are twofold that many homeowners will put off major improvements like getting the new kitchen and that to attract potential clients you'll need to reduce his profit margin they're in a position where you could be losing 20 or 30 percent of your net profits at the end of the year you're eating some of the cost in other words definitely because we can't pass out all of it to the customer we end up eating it ourselves the alternatives for these are much much more expensive when they're made in the states obvious is clients prefer higher end products manufactured in America fire says but even for these suppliers he's receiving ominous emails hey thanks for our business and they say that our industry is under unprecedented pressure due to terrorism we've waited as long as we can for possible price increases due to these tariffs so this is an American cabinet line but this is built on engineered wood part of the Chinese supply chain to give us a better idea of what the new China tariffs will mean for customers takes us to a work site this is a 75 000 catcher [Music] so yeah as you can see this is a complete gut job Javier view says because of the new increased tariffs they'll need to charge for a renovation like this one six thousand dollars more than he did a year ago six thousand dollars on a 75 000 kitchen is a very big increase and there's a deal breaker it is definitely a deal breaker one of the impacts of the tire is not simply the price increase but also the delay in investment and the delay investment will come from the consumers for example delaying a home remodel rebound a professor of international trade policy at the University of California San Diego so the tariffs could be damaging to the U.S economy it's a big deal it's going to affect U.S consumers you've been studying tariffs and trade for decades now right correct have you seen anything quite like this never seen anything like this I've been having to rewrite my classes essentially the United States would like to think that China will be more hurt by the U.S tariffs then the U.S will be hurt by the Chinese tariffs but that's to be determined I think it's history steps to improve fresh 25 tariffs on nearly 300 billion dollars in Chinese Goods that are currently taxed I think this is a risk we should and can take without damaging our economy in any appreciable way the Trump Administration hopes that ultimately a deal with China will be reached the democrates U.S producers there may be more made in America as a result of the tariffs consumers now are forced to purchase from domestic producers who have higher prices naturally while producers are enjoying this welfare game consumers are losing this title and foreign store in San Diego primarily serves customers who've got tighter budgets this is our wood looking luxury vinyl plank which is one of the most popular items nowadays and where's it from this product is actually Chinese product even with the terrible increases on these products or anything out of China they're still going to be less expensive than an American-made product even with a 2000 that's correct so treatable is bad news for everyone but particularly the middle class and lower income Americans benefit from the very cheap products that are coming from China so let's head down over to the warehouse Veronica tarika as it says about 90 of the products for company sells come from China so if you take a look here you will see made in China here made in China says she's nervous I as manager have to worry about versus my staff's jobs our company wouldn't first round the tariffs on Chinese Goods hit last fall she says sales dropped off pretty much immediately we're talking about 33 so a third Less sales exactly right well you're confident that it's because of a tariff uh yes it was just very very busy when it came to a screeching halt a series [Music] and the new increased round is expected to hit soon the federal will not be subject to the tariffs but good to be loaded on ships in China now will have to pay the Tariff when they arrive so we will see a small delay in the impact of these tariffs about two weeks but the tariffs are literally on their way correct the tires are literally on their way [Music] okay so so that so that that just kind of goes into detail on okay well who really is going to be hurt for the tariffs and is it China or is it us you know I mean and that goes around and around and around and we're never you know we haven't actually figured that out yet I think it kind of goes back and forth aspect um jump back in you just wanted to get through that so you can understand how tariffs really do impact things but now let's go on to another governmental actions quotas and this designates a maximum of a product that may be brought into a country during a specified period of time right so this just limits the amount and so basically limiting the supply and when you use limit Supply demands will naturally increase because you know because you're not having you don't have enough in some cases prices will just go up right so tariffs and quarters can have fundamental and potentially devastating impacts on a firm's ability to sell products or even sell products in another country and even to make their own products to sell within this country exchange control is another and this refers to the regulation of a country's currency exchange rate which is the measure of how one country's currency is worth in relation to another um and trade agreements right trade agreements or something that marketers must consider these trade agreements in which a particular country is a signatory or the trading block of the trading box which it belongs right so the trade agreement is the intergovernmental agreement designed to manage and promote trade within a specific region and a trading block is just those countries that have signed into it so um there are regional trade agreements right such as the usmca which is the updated version of NAFTA uh but the usmca the EU and other regional trade agreements really do account for more than half of the international trade right so these are just predetermined uh rules for trade within these countries and it actually does it does kind of help to solidify at least you know what you're going to get moving forward the problem is when we try to go outside of those trading blocks because now there's more there's additional um concerns because if you because if you're going to bring products into your into a country and then it can freely throw flow throughout the trading block uh somebody isn't getting paid what they need to be getting paid and there could be some problems with that um I know that Trump during his presidency was trying to kind of balance out our trade with China and um I you know and that's where all those weird taxes and tariffs things came from and I think we're still sorting that out now so we also want to analyze the socio-cultural factors right we have to understand another country's culture because that's crucial to the success of any Global Marketing initiative plus you want to make sure that the products that are going there are actually going to be used and people are going to be interested so culture or the shared meanings beliefs morals values and customs of a group of people will exist on two levels right the visible artifacts with how they dress the symbols physical settings traditional ceremonies and then there's the underlying values which are thought processes beliefs and assumptions right so um visible artifacts are very easy to recognize but businesses often find it more difficult to understand the underlying values of a culture and then appropriately adapt their marketing strategies to them and a challenge because a lot of these challenges happen in in the bric countries especially in India um so to address uh to address him some of these issues um you know one cultural classification scheme that firms views is um the Garrett hofsteed's cultural dimensions um hofsted's a concept sheds a lot more light on the underlying values and obviously there are other models for this but Hof seeds seems to be the best one um he actually initially had four dimensions and recently is added two more so these are power distance right which is the willingness to accept social inequality as natural uncertainty avoidance nope uncertainty avoidance is the extent to which the society relies on orderliness consistency structure and formalized procedures to address the situations that arise in daily life right how much how aversity to risk individualism is the perceived obligation to Independence on groups masculinity is the extent to which dominant values are male oriented time orientation is short versus long-term orientation and Indulgence is the extent to which society allows for the gratification of fun and enjoyment needs or suppresses those or regulates those kinds of Pursuits right so here's just a quick thing about about the underlying values um Dolce Gabbana this is actually an ethical and societal dilemma 8.2 in your book that you should probably read um but Dolce Gabbana released videos like satirizing the Chinese dialect and their customs and um so Alibaba and jd.com which is China's two largest e-commerce sites basically removed all Dolce Gabbana products from their online stores and basically borrowed them from being sold in the country so you don't know how things help how people how companies are going to react to things that you do and that's why it's very important to remain respectful to these cultures so here is just an exhibit in the book and we want you to look at this closer in the book but this is kind of the this is the power distance in individualism um in country clusters and so power distance is on the left um individualism is on the right and this is where a lot of the countries Fall right so obviously the United States Australia Canada United Kingdom um you know they fall into higher individualism and lower power distance which means lowering the power distance means they're less willing to accept social inequality whereas when you go into the other side you'll see the countries that are you know more reliant on groups and less uh and and are more prone to uh to being okay with inequalities so let's just look at the appeal of the bric countries right basically bric is Brazil Russia India and China some people think that South Africa should be added to that so it would be brics but South Africa is actually a very small economy and it hasn't quite reached the level where it would join these larger these larger economic opportunities so changes in technology especially Communications have been a driving force for growth in all Global markets but somehow these have been kind of their growth rate has been accelerated or things have changed in these countries that have made them a little bit more amenable or attractive to growth so um I am going to let you read this in the book because if I just go through each of these countries I think you're probably going to fall asleep but I do want to go ahead and show you one more video on something that China has done right so China yes we look at China as a huge opportunity but it can also be a little bit of a thought on our side so let's just take a quick look at that since December 2018 China's biggest companies wow has been rocked by political and legal turmoil Huawei a company that a lot of Americans may not have even heard about it so just recently the FBI is investigating huawei's dealings with this tiny Chicago area startup the Huawei can create a back door to China the Trump Administration has been on a campaign to block Huawei from selling equipment for 5G networks in the U.S and to allies abroad claiming the company poses a national security theft speak to the company's customers and they paint a different picture to them Huawei makes reliable affordable equipment for audiences this is the story of how far away went from a small Time party seller to the Homegrown Tech Giant China always vote for and the West always I am announcing that a grand jury in Seattle has returned an indictment and it alleges 10 federal crimes by two Affiliates of telecommunications corporation for Huawei Technologies there is clearly um a full court press in Washington to make it seem as though hallway proposes a great threat to the future of Western civilizations literally and that's why you saw the Commerce Secretary the FBI director and the acting Attorney General of the United States at a press conference for what we're really not that serious a charge huawei's recent stat with the US began in December the arrest of Manju huawei's CFO and the doctor from the company's Founders then in January the US indicted the company Professor Trade Secrets conspiracy and obstruction of justice stemming from a previous lawsuit brought by team open Bloomberg businessweek discovered that January 28th the same day as the Attorney General's announcement the FBI rated a Huawei owned lab in San Diego under suspicion that had stolen groundbreaking smartphone class technology from another firm but while these troubles aren't anything new having been accused by Cisco in 2002 and Motorola in 2010 of intellectual property since 2012 major U.S telecoms was essentially blackballed Huawei thanks to government pressure which while damaging hasn't done much to slow its progress worldwide Huawei was founded in 1987 by former people's Liberation Army engineer Ren Jing Fay and Shenzhen at the time all of China's telecommunications equipment was imported from abroad red wanted to build a domestic competitor that could rival and eventually surpass foreign companies the company moved quickly from reselling telephone switches made mostly in Hong Kong to designing and Manufacturing its own equipment its early contracts with groups like The People's Liberation Cape Huawei and government connections that needs to grow it is high quality low priced products did the rest they're really good at what they do they build very sophisticated devices that power Wireless Systems and Cellular Systems and Telecom and the sort of backbone of the internet the networking environment and they do it at a much lower price point better equipment lower cost there are other countries other companies primarily in Europe that make this stuff but Huawei is by far the size performance leader at the moment by 2012 Huawei had become the biggest telecoms equipment maker in the world and in 2018 it overtook apple as the second biggest smartphone manufacturer but what could be huawei's biggest success and what scares countries like the us so much is its role in building the backbone of the coming 5G Revolution I think it has a lot to do with the specific character of the 5G world it's going to be far more software driven Which is far more open to very hidden very subversive very discreet backdoors that could allow the level in states or hackers or others to reach all sorts of habits to this end Congress has enacted a ban on government agencies and contractors purchasing Huawei equipment renjang Bay and Huawei always maintained that the business is employee owned and they would not cooperate with any interference from China's government U.S officials like to point out that they may not have to in China passed the law that requires this was in 2017 that requires all companies and all individuals in China to cooperate with intelligence Services if asked to the China Hawks are saying well we don't have to give anyone proof of past Behavior because with that law in the books the potential is there for the government to Simply commandeer and Huawei for its own purposes 5p check will be far more prevalent in daily life than anything we're used to now and the country that controls or builds 5G will simply have more influence than they used to on a global scale so China's long hoped for Tech Giant has finally arrived what remains to be seen is how much more of the world Huawei can conquer and if the U.S can slow it down [Music] so I think that that's very interesting because I did actually I actually owned uh two Huawei phones over the last oh 10 years um that honestly I can say that they were probably one of the best phones I ever owned um I also I didn't work for the guy I didn't work for the US government or anything so there's no issue with me having that kind of phone and honestly even if they were saying what were they going to get from me there's just nothing that was nefarious about it at all so um I think that this is just the tech war that just keeps going on and that they're always going to try to be knocking each other down so um so that that's that's pretty interesting but that is why China can be China can be one of our greatest allies are one of our greatest fears right so um and that's kind of been proven so I'm going to go ahead back to the PowerPoint let's Jump Ahead let's keep going we're in our progress check let's talk about global entry strategies um so when a firm has included its assessment analysis of the most viable markets for its products and services it then has to conduct internal assessment of its capabilities right the SWAT analysis which includes an assessment of the firm's access to Capital the current market it serves its manufacturing capacity its proprietary assets and the commitment of its management to this newly proposed strategy so a firm can choose for many of the approaches when it decides to enter a new market depending on how much risk it's willing to take and here are you know starting at the in the middle of this um of this diagram is the least amount of risk there's also least amount of control okay so then as you go out you get more risky and more control um so let's talk about them right so exporting is the first one it means producing Goods in one country and selling them in another this entry strategy requires the least Financial Risk but it also has a limited return of you know for the exporting firm and very little control um as far as how things are really going to be sold franchising is another way this is a contractual agreement between a firm which is the franchisor and another firmware individual who is the franchisee um the franchising contract allows the franchisee to operate the business a retail product or a service firm or even a B2B using the name and business format that was developed by the franchisor we all know what this is McDonald's Pizza Hut Domino's KFC Starbucks these Starbucks actually is a much fewer franchised locations now than it used to uh because they went through an effort of buying them back but very often most of them don't do that most McDonald's are they're just franchised um so and but but the business model has been established and proven so it's worth it for uh you know for basically a ready-made business people are willing to pay a lot of money um but Global franchising actually does help you to get your brand out there to somebody who is local so you know that they are going that they understand the local area so at lower risk but requires less investment uh then then opening your own but it does have limited control over the market operations in a foreign country its potential profit is reduced because it has to split with the franchisee and once the franchise is established there's always a threat that that franchisee is going to break away and operate as a competitor under a different name because they already have all the equipment and the location so the Strategic Alliance is basically collaborative relationships between independent firms right there's no um that the partnering firms don't create an equity partnership and you know they do not invest in each other they're just kind of saying uh we can provide this and you can provide that let's see if we can put it together and make something work joint ventures take that a step further um because the joint venture is formed when a firm enters a pool with other firms but they actually end up creating a new entity with and each partner has has Equity or a certain ownership control and the profits are shared however they agree to do that um right some countries will require joint ownership of firms that are entering their domestic markets um because you know and there's new regulations affecting multi-line retailers especially entering some of the some of the fastest growing markets like India direct investment will require a firm to maintain 100 ownership of its plants operating facilities and offices within a foreign country which is often through the formation of wholly owned subsidiaries because they need to set up a new business in that country in most cases this does require the highest level of investment exposes The Firm to a huge amount of risk including what could be the loss of everything right because if if there's political instability um you know or or new regulations are are initiated a country can just basically take over your company right the country can just commandeer your your company and all of its assets and you will have no recourse so here is our next progress check so we know we're moving through this let's talk about choosing a goal marketing strategy right the segmentation targeting positioning a little bit more straightforward when you're doing it in your own country when you're doing it outside of the country it becomes a little bit more complex so um so the global marketing strategy will include two components right determining the target markets to pursue and then developing a marketing mix that's going to sustain that competitive advantage in that new market over time that's just that's the basic gist of what you want to do um and and the the problem is that there's always varying degrees of success while doing it so Global segmentation targeting and positioning are more complicated obviously for several reasons first the firms are considering a global expansion have much more difficulty understanding the cultural nuances and subcultures within uh within each country that's considering and also consumers may all may often view products in their role as consumers differently in different countries so when any firm identifies its positioning within a market it has to then decide how to implement its marketing strategies utilizing its own marketing mix so when we're looking at Global products or service strategies um now there's different things you can do right so there's three potential strategies the first one is to sell the same product or service in both your Home Country Market and your host country and this is referred to as globalization you can also sell a similar product that's sold in the home country but with minor adaptations and the last is to just sell a totally new product or service that might be more uh that that the market in that new country might find more amenable right so going into a little bit more detail same product or service this is most this is the most typical method of introducing a product outside the Home Country um because you've already developed all the marketing for it and you might be able to do uh with with minor tweaks and adaptations in the advertising and Communications as opposed to changing the product a similar product or service with minor adaptations um is actually kind of doable like for example when Ikea opened his first store in India it did make minor and thoughtful changes to some of the designs it also changed its menu in its Cafe to include vegetarian and vegan options but also they realize that in that country their floors get cleaned with water so what Ikea did in the design of its of its um displays is it added risers to make sure that that the furniture was lifted up and would not be exposed to that water which could have started to damage the furniture on display so some firms you know will also just standardize their products globally but like I said use different campaigns to sell them if you just want to do a totally new product or service this is based on the level of Economic Development and cultural tastes um because it also affects the global product strategy because it'll relate differently to the consumer so the example that they give here is kitkats right we know KitKat is simple chocolate covered wafer bars sold throughout the world we've seen that they've come out with a couple of different flavors but always the milk chocolate is the the biggest selling they have dark chocolate they might have mint around um holidays they have white chocolate but in Japan it is so popular that they have around 40 different flavors each year 40 different flavors including Wasabi matcha Peach Okinawan sweet potato like these are things that we would never even consider as candy here or flavor for a candy in the United States so the fact that that they can expand that so greatly in another Market is actually really great for um you know for KitKat so let's talk about global pricing strategies right so again here we end up with dealing with all those same governmental things right because all of these things it tariffs the quotas those go into the price so determining the selling price in a global Marketplace is extremely difficult I mean we think it's hard to do it when you're in your domestic Market but when you go outside you've got so many more things to deal with so all of those issues like you know of course that many countries have rules that are governing the competitive Marketplace and how much you can how much you can put something on sale for if it hasn't been sold at the at a higher at the higher price for a certain number of days I mean it's you know you have to you have to be aware of all of this when you decide to enter a new market um competitive factors also influence global pricing in the same way that they do Home Country pricing but because um you know firms products or Services may not have the same positioning in the global Marketplace uh market prices have to be adjusted to reflect the local pricing structure right so then you also are impacted by anti-dumping laws currency exchange and of course those other competitive factors global distribution is is um we touched on it earlier in the chapter it can be a little bit more difficult depending on where you are and how the population is spread out basically if they're mostly in a city you know transportation and getting the products to them is easier than if they're way outside the city on Rural Farms where there's you know maybe maybe there's maybe the roads aren't all paved maybe they don't have uh refrigerated trucks maybe they don't have a really you know a localized place to pick up Goods but global distribution networks form complex value chains just like they do here that involve wholesalers exporters importers and different Transportation Systems so these additional intermediaries typically are cost and ultimately increase the final selling price of a product so you have to that has to be weighed in because certain products just aren't worth that amount of money so if you have to raise the price a lot they're just not going to sell so the number of firms with which the seller needs to deal to get the merchandise to the cus to the consumer determines the complexity of the channel so I mean they're sometimes you know they just some people will just shop at a family-owned store at a small family-owned shop in town and suppliers have to be really creative in how they are getting their products to the to the people to the people where they are when they want to buy it this is the same thing that we've learned earlier is that you've got to be able to get the product to the consumer when they want it and where what also comes in here is an Global Communication strategies this is this is also another layer of complexity that's on this right um the major challenge in developing a Global Communication strategy is identifying those elements that need to be adapted in order to still be effective in the global marketplace right literacy levels will vary dramatically across the globe even in the bric nations in India approximately 71 of the adult population is literate 92 Brazil 96 in China and 99 in Russia um so that is something that needs to be considered um differences in language and customs and culture may also complicate marketers ability to communicate and of course within many countries there are multiple variants of a language so that you know just different dialects like even we have in the United States but even with all these differences many products and services will serve the same needs and wants globally with little to no adaptation in their form or message right other products may require a more localized approach because of the cultural and religious differences that also come into play one of the examples they gave here is is the the what what happens in Vegas stays in Vegas um got slogan that slogan was so prolific because it was just edgy enough in the United States to be like oh that's kind of cool but what they realized when they went to the UK is it wasn't quite edgy enough so they had so I mean this is where like differences in the language and customs and expectations right in Britain that wasn't edgy enough for them they needed it to be even more edgy for them to be interested in saying yeah I want to go there um so so things like that just you know they just they make you I think they're good because they force marketers to up their game in every single way and I think that the more that we are challenged as marketers the better we just become overall at being able to get Goods to people that they want and need um I'm going to show you one more thing um I'm gonna show you one more video and this is interesting because this is like why Starbucks failed in Australia right the Starbucks ever really fail they did let's look at that and I'm gonna and then I will end this lecture for you Starbucks has coffee shops all over the world there are more than 28 000 locations in 76 markets Shanghai to Guantanamo Bay and in China a new Starbucks location opens up every 15 hours but there is one continent that seems uninterested in the hype over the seattle-based coffee change the net continent is Australia it's proven to be one of the toughest markets in the world to break into [Music] that Starbucks closed more than two-thirds of the stores on the continent back in 2008. so what went so wrong with Starbucks in Australia to answer that let's go back to July of 2000 when Starbucks opened its first Australian shop in Sydney from there it expanded fast by 2008 Starbucks had 87 stores across the Continental businesses that have been successful in one country [Music] and trying to grow the Empire too fast Starbucks rapidly opened up multiple locations instead of slowly integrating them into the Australian Market when they launched they launched too rapidly and didn't give the Australian consumer an opportunity to really develop it at the time for the Starbucks brand they also moved into Regional areas into outer suburbs of major cities and so for the Australian achievement it was almost like it was two available to them and so there wasn't this point of differences watch this need for Starbucks and it wasn't an organic Pro it's probably very much store in the U.S in his first seven years in Australia Starbucks accumulating 105 million dollars in losses by 2007 Starbucks Australia was hanging on by a thread taking big loans from the U.S toggling up to 54 million dollars and in 2008 Starbucks in Nassau shutting down 61 stores but of course 2008 was a difficult time for businesses due to the financial crisis along with the Australia closures Starbucks also closed 600 underperforming American stores but even still such a retreat in Australia was embarrassing for the brand when the shutting down 75 stores [Music] for the Australian consumer when they when they did leave the market or at least a large number of vegetables were shut down they didn't really care it's partly because Australians are scores for Choice when it comes Australia's coffee Market is one of the biggest in the world the industry is expected to hit more than 6 billion dollars in total revenue in 2018 they've been immersed in nuances of Cafe culture since the mid-1900s when Italian and Greek immigrants began traveling to the country the immigrants introduced Australians to Espresso by the 1980s Australians were fully engulfed in Cafe culture they've also grown accustomed to Specialty menu items like flat white or an Australian macchiato so cafes in Australia were born out of like the Italian culture and you know meeting a friend with friends knowing your local Barista and it being kind of like a local meeting place where everyone knew each other and that coffee was just a part of that and then Starbucks came in with what is more of an American style like Coffee Culture which is essentially just like is like sugary drinks which most Australians didn't like yeah we have you know local tastes are different so we don't really want to come through those uh you know hundreds of ounces [Music] plus Starbucks charge more than local campaigns so Australians instead opted to pay less for coffee they liked from a local Barista they trusted and so when you come in with this big like Hey we're gonna open all these it just was the complete wrong market for what what the Australian was used to but there's one American coffee company that's thriving in Australia founded in Chicago are now based in Australia Gloria Jean's got the traction in Australia Gloria Jeans has more than 400 Australian locations and so it's more than 35 million consumers in Australia each year so what is Gloria Jeans doing in Australia that Starbucks isn't well the company attributes success to two Australians who franchise the business in their home country when shops are to show up in Australia in 1996. fast forward to today the company has a presence for some reason it's menu the tree offers a wide variety of espresso drinks and Specialty coffee machines failing to adapt its menu to Australian's Coffee Culture proved to be a mistake for Starbucks and the company faces another challenge later this year Italy Starbucks is opening its first store in Milan in late 2018. some of this espresso Italy's rich in Cafe culture but according to Starbucks it's not going to make the same mistakes that it did in Australia the company said that it will develop in Italy with humility and respect for its Coffee Culture it announced it would be opening a rosary which is not your average Cafe it gives customers a chance to see coffee beans roasted and processed before their eyes so there's a chance that it won't struggle like it did in Australia Starbucks isn't emitting the defeat in Australia either Starbucks is staging to come back on the continent in 2014 Starbucks locations in Australia were purchased by the mount Waverly based Withers group Starbucks had seen to see that scented sail to the withers group the company learned a lot so this time it's taking a different approach to putting Starbucks on the continent so if you just think about it as far as a big tourism destination there's a lot of U.S and Chinese tourists and Starbucks has been very successful in China and it makes a lot of sense for them to build out because there are people looking for something that's familiar to them now with 39 locations in Brisbane and Melbourne the Gold Coast and Sydney areas this time it's not looking to appeal to Australians but instead the coffee giant hopes to be a familiar face for tourists visiting popular vacation destinations in Australia pretty Australian has always been a high volume tourist Market not the same thing in international students at our universities have potential opportunities for them and we're starting to see Starbucks enter into some large shopping malls like here in Australia as well Australia welcomed nine million tours from 2017 to 2018. and those International visitors spend more than three billion dollars in 2017 alone so tours could possibly be the key to keeping the company afloat and preventing another downfall foreign so by not understanding the local culture and the underlying beliefs um Starbucks didn't do so well in Australia the first time around so maybe they've learned their lesson um it'd be interesting to see how they're doing now but it did seem like they were far more entrenched coffee chains who understood our Market um better than Starbucks did but so that is going to be it for me for chapter eight so I will see you next time