Introduction
National borders have eroded when it comes to trade. Maintaining an isolationist position as a
country has increasingly become difficult for corporations. An ambitious company may
distribute its goods globally and establish production facilities abroad, agree to joint ventures,
and strive to integrate into foreign markets. In many respects, global marketing obeys the basic
marketing principles you use domestically, but the global scope presents several unique
problems. In this course, you will learn the essentials of global marketing.
A thriving global marketing strategy will analyze foreign market’s potential obstacles and
opportunities, allowing you to develop tactics to penetrate local markets. It balances the need
for localizing products and the marketing message with the need to exploit economies of scale
and reduce costs. You will be able to coordinate distribution networks and navigate
bureaucratic channels. You will also be able to establish emotional connections with your target
markets and begin to establish a viable brand identity.

Determine the Degree of Political Risk
Though globalization has eradicated numerous trade barriers, many dangers still exist.
Developing countries may feel exploited by multinationals and be moved to establish protective
trade barriers. Other countries may reject the free market ideology and see trade as a weapon
in class struggles, while other countries may find their social structures weakened by income
inequalities. Given the saturation of many international markets, companies increasingly turn
to countries whose political and economic stability present obstacles to trade.
By assessing political risks, you can avoid committing resources to business relationships that
political interests may undermine. You cannot assume that all trading partners believe equally
in the principles of free trade. Understanding the political climate can help you determine what
form your trade partnership can reasonably assume and minimize the risks of economic loss
and embarrassment.
Global Marketing
Global marketing is the coordination of resources to satisfy customer needs in an international
context. While the scope of domestic marketing is broad, coordinating internal resources, such
as sales and product development, and external resources, such as distribution channels and
advertising agencies, global marketing must also deal with other stakeholders: governments,
foreign strategic partners, and international regulatory agencies. Your global strategy must
coordinate marketing efforts in individual nations, each posing unique opportunities and risks.
A corporation must also navigate tricky international waters. Trade barriers, political unrest,
suspicion of diplomacy, and ignorance of cultural traditions require a high degree of planning
and vigilance from marketing coordinators.
Levels of Economic Development

A company’s interest in markets is primarily determined by a country’s stage of market
development. At one end of the spectrum reside low-income countries, whose level of
industrialization and purchases of consumer goods is shallow. Often, these countries are
plagued by political unrest, making them unattractive targets for multinational corporations.
Lower-middle-income countries, however, are usually characterized by growing domestic
industries and creating a more viable economic infrastructure. Multinationals see those
markets as opportunities to sell standardized or mature products that have diminished appeal
in more dynamic markets.
Upper middle-income nations are most often experiencing increased industrialization and a
movement toward urban areas. Their low wage costs and better literacy and education make
them attractive to foreign investors interested in joint ventures or sourcing. These countries
can quickly become fierce competitors as they assimilate foreign expertise and sophisticated
production processes. At the top of the economic pyramid, high-income countries require
innovation to break into markets, as many traditional markets are saturated. They can also be
heavily dependent on the service sector and information exchange, creating solid educational
institutions.
In general, the lower a nation’s level of development, the greater the political risk. At times, the
risk may be the disruption of supply chains and markets. A region with an unstable political
climate, such as Eastern Europe after the dissolution of the Soviet Union, is full of dangers, such
as hostile regimes coming into power, ideological factions rising that may expropriate foreign
assets, or tactical maneuvers exploiting anti-imperialist sentiment.
The effects of globalization may engender powerful negative emotions that may force nations
to retrench and assume an isolationist position.
Degree of Global Commitment
Your company’s central marketing commitment may be to domestic markets, and you may only
be interested in the short-term exploitation of foreign markets. Other marketing campaigns
attempt to enter multiple markets sustainably, tailoring their products and marketing efforts to
the needs of specific countries. In such cases, little effort is made to coordinate marketing
efforts across multiple diverse markets and gain a competitive advantage through efficiency
and economy of scale. However, a company fully committed to a global orientation will begin to
create synergies and transcend a relatively fragmented market strategy based on national
boundaries.

In developing its global strategy, Our Global Company Construction Machinery has attempted
to move into multiple markets—the vibrant economy and rapid growth of Brazilian port cities,
border towns of Mexico, and the tourist locales of Central America. While trade with Mexico,
for example, has been radically streamlined by the North American Free Trade Agreement,
other nations have erected trade barriers, from high tariffs and bureaucratic red tape to threats
to foreign ownership posed by hostile regimes. Many of these trade barriers reflect deep
suspicion of United States political involvement in the region, with the practices of fruit
companies and railroads still fresh in the minds of the populace and the government. You must

understand the historical tensions between nations and the recent behavior of multinationals
in the host country.
Barriers to Trade
The world’s economies range from relatively free market economies, where the laws of supply
and demand guide activity and government control are limited, to economies that are rigidly
controlled by the state. Market economies encourage competition and, in general, encourage
international trade and investment. In contrast, state-run economies limit competition and do
not operate according to the philosophical assumptions of free market economies. Local
industries are often protected by tariffs and import duties, erecting insurmountable barriers to
foreign companies.

Types of Trade Alliances
To facilitate international trade, countries have entered into alliances that abolish barriers to
the free movement of goods and services across borders. The benefits of trade alliances are
numerous. Countries may establish standardized parts, cut through bureaucratic red tape,
determine a common currency to stabilize prices, or demolish protectionist tariffs and
restrictions. The first type of trade alliance is the free trade area (FTA), which includes the North
American Free Trade Agreement (NAFTA) and the European Economic Area. In such
agreements, nations eliminate barriers to trade among members but establish independent
trade practices with non-member nations. The movement of goods imported from non-
member nations is carefully regulated to prevent countries with low tariffs from importing
goods at the expense of countries with high tariffs.
A customs union takes the idea of a free trade area further by establishing standard trade
practices with non-members. In contrast, a common market further removes obstacles to the
flow of capital and labor within member countries. A fully developed economic union requires
an even higher degree of coordination and centralization. Economic unions require a single
overarching political framework that can avoid member nations' squabbles and conflicting
agendas and act as a unified entity.

European Union (EU): An economic union of 27 European nations (Europe.eu).
• Border-free travel and economic activity
• Common currency (the euro).
• Governmental bodies: European Parliament, Council of the European Union, and the
European Commission.
NAFTA is a free trade area that includes the United States, Canada, and Mexico
(www.cbp.gov/xp/cgov/trade). Once there, click Trade Programs, International Agreements,
Free Trade Agreements, and then NAFTA.
• Most barriers to trade are removed.
• Involves the gradual elimination of barriers to cross-border investments and the movement of
goods.

Asian-Pacific Economic Cooperation (APEC)
A forum of 21 leading Asian nations that debate economic policy in the region (www.apec.org).
• Establishes non-binding commitments without formal treaties.
• Works toward instituting free trade policies in the region.

Association of Southeast Asian Nations (ASEAN)
Economic association of 10 Southeast Asian nations working toward becoming a free trade
area (www.aseansec.org).
• Attempts to eliminate tariff and non-tariff barriers among members.
• Works toward the creation of currency policies and the investment and integration of
markets.
Andean Group
A free trade area among Bolivia, Chile, Colombia, Ecuador, Peru, and Venezuela.
• Works toward lowering trade barriers among member nations.
• Has created the Andean peso to combat the dollar.
• Establishes trade barriers to non-member countries to protect the group’s industries.
Gulf Cooperation Council (GNC)
A free trade area formed by six Arab states—Kuwait, Bahrain, Qatar, Saudi Arabia, the United
Arab Emirates, and Oman (www.gcc-sg.org).
• Integrates economic development and activity among its member states.
• Abolishes trade barriers and coordinates financial activity.
Other Regional Economic Organizations
Other regional economic organizations include:
• Caribbean Community (CARICOM) (www.caricom.org)
• Central American Integration System (SICA)
• Economic Community of West African States (ECOWAS) (www.ecowas.int)
• Southern African Development Community (SADC) (www.sadc.int)
• Arab Maghreb Union (AMU) (www.maghrebarabe.org/en)
Host-Country Trade Controls
A nation’s expropriation of foreign assets is risky, perhaps turning an international trading
partner into an outcast. Most host nations, however, exercise considerable diplomacy in
controlling the behavior of multinational corporations. A nation may prohibit foreign firms from
entering specific industries directly or acquiring a national firm. It may also severely restrict the
range of products a company may sell in the local market or institute pricing practices that limit
its potential profitability.
A government may also limit the type and quantity of goods imported into the country. Its tariff
system may price goods out of the local market. Governments may ration foreign exchange and
severely restrict trade in countries with limited foreign exchange. Finally, as mentioned

previously, a government may take over the assets of foreign firms despite its depressing effect
on further foreign investment.

How to Determine the Degree of Political Risk
Determining the degree of political risk will allow you to anticipate potential problems and
develop marketing strategies that will enable you to avoid many pitfalls.
To determine the degree of political risk, consider these guidelines:
• Review a host nation’s level of economic development and ensure that the country meets
your needs in terms of market size, buying power, and resources. Avoid nations considered
“train wrecks,” with their history of corruption and instability, as well as low-income countries
that cannot support your industry.
• Understand historical tensions between nations.
— Monitor attitudes toward your country and its trade practices. Globalization has polarized
the populace in many countries, creating resentment among those negatively affected by
international trade imbalances.
— Evaluate the behavior of other multinationals in recent history. How have they inflamed
negative feelings? Do you have a reservoir of historic goodwill from which you will benefit?
— Review your company’s record as a global citizen. How well will the local business
community receive you? Consider localizing your operations to ensure goodwill and community
investment in your company.
• Review ideological differences. Do both you and your trading partner subscribe to the
principles of a free market economy?
• Expand your analysis to include the possible negative impact of trade with specific partners.
Trading with a company suffering from economic sanctions imposed by a political bloc will
strain relations, potentially poisoning the political atmosphere.
• Verify the international trade organizations to which the host nation belongs. International
agreements will broadly regulate hospitable business climates.
• Ensure that your trading partners understand your trade restrictions based on national
security. For example, if you are trading defense technology with an ally, you must ensure that
disseminating this technology to state enemies is strictly forbidden.
• Judge the potential political fallout with your government. Shifts in domestic political
attitudes can undermine your global marketing strategy.
• Evaluate the nature of your strategic alliance. Do you foresee any threats by local partners to
become independent and compete against you? Ensure that your local firm cannot operate
independently but requires the parent company for resources and markets.
• In countries where you feel vulnerable, try not to be extremely visible; mute your presence.
Try not to locate headquarters/factories in prominent urban areas.
• Review all trade barriers.
— To what degree does the host company insist on joint ventures?
— How protectionist is the government in particular industries? What degree of control over
the economy does the government possess?
— Determine if you are competing with “national champions” or industries historically tied to a
nation’s cultural identity.

— Evaluate the liquidity risk of host nations and the risk of currency devaluation.
• Evaluate how dependent the host nation is on your product. Is your product important
enough to exert political pressure by threatening to withdraw it from the market? What
substitute firms could enter the market and perform adequately?