International Marketing

26th International Summer UniversityWU 2015 1 of 7

All information is subject to change

26th International Summer UniversityWU (ISUWU) 2015

WU (Vienna University of Economics and Business)

Course Outline

Course Title International Marketing

Instructor

Poh-Lin Yeoh

Bentley University

175 Forest Street

Waltham, MA 02452, USA

[email protected]

Language of

instruction English

Course level Undergraduate

Contact hours Undergraduate courses: 35 contact hours (45 min. each)

Capacity Max. of 25 students

Aim of the course

This course will equip students with the tools and terminology to explore and

understand marketing practices in a global environment. Putting yourself as an

international marketing manager, you will learn the scope and challenge of

international marketing, the dynamic environment of international trade, the

culture, political, legal, and business systems of global markets, the global market

opportunities and finally, the ways to develop global marketing strategies. Students

will also learn to develop a formal analytic framework of decision-making based on

recent developments in the field of International Marketing through the group

project and case studies. This course is designed to provide students with the latest

understanding of global issues, disciplines, competitions and the necessary skills in

making strategic decisions based on a global perspective. The course is real-

world based and the emphasis is more on how-to-do-it rather than what-to-

do.

Learning Objectives

On successful completion of the module, students should be able to:

Analyze economic, political, cultural, and social differences that influence

marketing decision making in a global context

Assess country market attractiveness based on macro as well as micro

economic indicators

Develop marketing mix strategies for different international markets

Understand the potential for the regionalization of marketing mix strategies
mailto:[email protected]



Prerequisites and/or admission requirements

Application requirements are current enrollment in an undergraduate study

program in the field of economics and/or business administration with a minimum

of two years of undergraduate studies before the start of the summer program, and

excellent English language skills.

Teaching Methods

In terms of teaching pedagogy, the course employs a pragmatic, practitioner-

oriented, and participative approach. There will be interactive lectures, videos, and

discussion of cases.

Cases:

Ruths Chris: The High Stakes of International Expansion

Marks and Spencer Enters China

Colgate Max Fresh: Global Brand Roll-out

Pre-course assignment

More details on the reading will be updated soon.

a. Read: Global Marketing this will help prepare you for the Hummus Case (see below)

b. Read the case Hummus Bar: Dipping Into International Markets and answer

the following questions. 3 to maximum 4 A4-pages, 1.5 spacing.

1. Conduct a SWOT analysis of Hummus Bar.

2. Assign a weight to each of the factors (see p.4 of the case). For example,

you could assign GDP per capita a weight of 0.25. The sum of the factors should

be equal to 1.0.

3. Using the variables and weights in part 2, evaluate the 11 cities with the

weighted scoring model. See example below.

4. How should Gotlibovich prioritize the list of foreign markets? Show your

calculations

5. What entry mode is best for Hummus Bar? Will the entry mode vary by your

choice of top3 countries?

Assessment for final grade: The complete pre-course assignment/pre-course

written essay is worth 20% of the final mark.

Deadline: July 20, 2015 email to [email protected]
mailto:[email protected]



Course Contents

Day 1

(August 5)

Introduction to Class and Country Snap Shot

Assignment

Morning:

Read handout: Understanding Global Markets and

Marketing

Objectives

Understand how globalization impacts marketing strategy.

Define what is meant by "global marketing.

Use the CAGE model to understand the differences

between countries.

Determine how a firm is organized according to the EPRG

framework.

Identify three approaches to developing a global

marketing strategy.

Discussion of Video No More "Made in China"? [45 mins.]

Afternoon

Read handout Integrating Global, Regional, and National

Markets

Objectives

Understand the different drivers of industry

globalization.

Understand the difference between various types of

regional economic blocs.

Understand the key issues and concepts associated

with emerging markets, especially the BRIC

countries.

Discuss why there is more regional than global trade.

Determine which emerging markets have the most

potential and why.

Discussion of Video Global Car [electronic resource

(video)] : Who Really Builds the American Automobile? [55

mins.]

Day 2

(August 6)

Morning:

Read handout Analyzing Political and Legal Environments

Objectives

Understand legal barriers to using a global,

standardized marketing mix.

Identify legal issues of international marketing.

Understand the forms of political risk and how

political risk can be managed.

Discussion of Video Cola Wars: Message in a Bottle [50

min.]

Pop Goes Islam [48 mins]

Afternoon:

Review International Marketing Research slides

Objectives

Researching Foreign Markets - A Framework for

Estimating Company Sales Potential in the Foreign

Market

Read handout Entering Global Markets

Objectives

Distinguish between the various options a firm has

for establishing a presence overseas.

Understand the factors that influence the overseas



market entry decision.

Compare the advantages and disadvantages of

equity and non-equity entry modes.

Distinguish between joint ventures and strategic

alliances.

Know the risks involved with different modes of

international market entry

Discussion of Video Five Dimensions of Culture in

Ethiopia, South Africa, and the U.S [39 mins.]

Day 3

(August 7)

Morning:

In class exercise: Case 1: Ruths Chris: The High Stakes of

International Expansion.

Review Global Product Strategy I slides

Objectives

Discuss the product standardization and adaptation

Identify and discuss the main international product

strategies

Afternoon:

Review Global Product Strategy II slides

Objectives

Understand branding in the global marketplace

The impact of country-of-origin effects on product

image and ways to overcome negative country-of-

origin

Discussion of Video P&G Japan: The SK-II globalization

project [20 min.]

Day 4

(August 10)

Morning:

In class case exercise: Case 2: Marks and Spencer Enters

China

Page length: 3 A4-pages, 1.5 spacing

Afternoon:

Review of Global Communication slides

Objectives

Understand the impact of the international

environment on advertising decisions

The different constraints on Global Communication

Strategies

The standardization adaptation debate

Different kinds of international advertising decisions

Discussion of Video Sports Shoe Wars: Battle of the

giants in China [30 min.]



Day 5

(August 11)

Morning:

In class case exercise: Case 3 - Colgate Max Fresh:

Global Brand Roll-out

Page length: 3 4 A4-pages, 1.5 spacing

Discuss with teams 1-4 regarding their country snap

shot assignments

Afternoon

Read handout Setting Global Prices

Objectives

Understand the centrality of pricing in the

international marketing mix

Identify the main competitive, consumer, product

and country factors influencing pricing decisions

Understand how to define objectives, strategies and pricing policies

Distinguish between cost versus market based pricing approaches

Discuss the standardization versus adaptation alternative

Recognize pricing strategies prototypes Price escalation and problems to deal with the

problem

Parallel imports/Grey markets

Discuss with teams 5-8 regarding their country snap

shot assignments

Day 6

(August 12)

Morning and Afternoon

Students should use the class time to finish up on their

assignment and prepare the slides for tomorrows

presentation.

Day 7

(August 13)

Presentations of Country Snap Shots. Each team will

make a 25 minute presentation followed by a 5 min Q&A

Morning: first 4 teams present

Afternoon: Next 4 teams present

Criteria for successful completion of the course

Assignments are considered late if not turned in at the start of each class.

Late assignments will be reduced by 1/3 letter grade for each day late.

Students attendance is mandatory in all classes except in cases of illness.

Students are expected to prepare for and contribute to each class. This is a

very important part of the course. Rather than restating the obvious,

students will be expected to provide informed and insightful comments and

contributions to the subject case or material being addressed. Students are

expected to have read all the chapter handouts/review the power-point

slides before the start of class each day.

Assessment

Individual

Pre-course Assignment 20%

Case Analysis (3 cases) 45%

Participation 10%



Group

Country Snap Shot (Written Assignment and Presentation) 25%

Course literature (cases, papers, online material...)

The following 4 cases are available for download by students

Hummus Bar: Dipping into International Markets? (pre-course assignment)

Ruths Chris: The High Stakes of International Expansion

Marks and Spencer Enters China

Colgate Max Fresh: Global Brand Roll-out

Power-point Slides and Readings

Copies will be made available to students

Country Snap Shot

In order to ensure that each student stays current with global business events and

to learn more about specific countries and how companies respond to doing

business in these countries, you will be asked to use the business press, the

internet and global databases, to investigate the assigned country.

Each team will present no more than 10 slides (10 images in total, minimize drop-

ins and animation) in 15 minutes and then lead a class discussion for 10 minutes

on the marketing key learnings for that country. You will not simply report facts

and figures; rather you will offer marketing advice in the form of marketing

insights. For example, take Japan ---- the distribution system in that country is

very complex with many levels. One takeaway for a global marketer is that there

must be sufficient margin and incentive programs to motivate the many layers of

channel members who may have competing objectives and interests.

Each Country Snapshot presentation should be organized to identify and address

global issues that have a short or long-term effect on specific industries. Your

advice, marketing insights, key learnings and connections must be organized

around several global marketing themes that will be discussed in class. For

example:

Marketing communications: global branding and promotion

Pricing and capturing value

Distribution channels/market access/sales

Alliances, partnerships and joint ventures

Products and services: global product development and innovation

Market entry/market expansion

12 Points for Advice You will receive 2 points for every major insight/reason

and why that is a solid takeaway there must be at least 4 different marketing

principles or topics addressed, e.g., pricing, promotion, distribution and market

entry. No credit will be given for facts only for the connections you make! In

other words, you need to provide useful, actionable sales and marketing advice as

if we were going to enter or expand the market in this country.

8 Points for 2 Case Histories Your presentation should contain one example each

of a success story of a company who is doing well in that country and an example

of a company who failed --- please provide the reasons for success or failure. For

example: Reasons for Wal Marts failure in Japan -

https://globalmarketingtoday.wordpress.com/the-real-world/case-study-1/

Reasons for Coca Colas success in Japan: http://www.coca-

colacompany.com/coca-cola-unbottled/innovation-resilience-key-to-coca-cola-

heritage-in-japan
https://globalmarketingtoday.wordpress.com/the-real-world/case-study-1/http://www.coca-colacompany.com/coca-cola-unbottled/innovation-resilience-key-to-coca-cola-heritage-in-japanhttp://www.coca-colacompany.com/coca-cola-unbottled/innovation-resilience-key-to-coca-cola-heritage-in-japanhttp://www.coca-colacompany.com/coca-cola-unbottled/innovation-resilience-key-to-coca-cola-heritage-in-japan



5 points for Country Snap Shot Presentation

The only hand in will be your 10 slides, speakers notes and exhibits.

Course

level ECTS

Pre-course

workload

In-class

activity

Outside of

class workload

during the

program

Undergraduate 4 approx. 20 hours 27 hours (= 35

teaching units)

approx. 33 hours

CHAPTER 8

Global Marketing

rom the Maharaja Mac: in ln

232 Understanding the Marketplace

In the early years of Russ1an expansion. few private

businesses existed to supply all the mgredients

McOonald's needed to produce Big Macs and fnes. The

company solved the problem by building an enormous

food processing plant outside Moscow But 1t also worked

to cultivate relationships w1t~ local Russian vendors and

contractors. to which it eventually could outsource its

supply chain. Today. a grower who began selling cucum-

bers to McDonald's in 1990 has become the Pickle King

of Russia. dominating the processed foods market 6

How do Legos get from their

manufacturer m Denmark to

a toy store near your home?

Increasing globalization affects not only massive U.S. corporations that activ

ely

search out new markets but also small and medium-sized businesses that increa

s-

ingly depend on goods produced globally to deliver their products and servi

ces.

Few people really think about how globalization affects their daily lives, but j

ust

take a minute to read the labels on the clothing you are wearing right now. Chan

ces

are that most of the items, even if they carry U.S. brand names, were manuf

ac-

tured in another part of the world.

In the United States, the market has evolved from a system of regional market-

places to national markets to geographically regional markets (e.g., Canada a

nd

the United States together) to international markets and finally to global marke

ts.

Globalization refers to the processes by which goods, services, capital, peopl

e,

information, and ideas flow across national borders. Global markets are the res

ult

of several fundamental changes, such as reductions or eliminations of trade ba

rri-

ers by country governments, the decreasing concerns of distance and time w

ith

regard to moving products and ideas across countries, the standardization of Ja

ws

across borders, and globally integrated production processes.

7

Each of these fundamental changes has paved the way for marketing to flour-

ish in other countries. The elimination of trade barriers and other governmen

tal

actions, for instance, allows goods and ideas to move quickly and efficient

ly

around the world, which in turn facilitates the quick delivery of goods to be

tter

meet the needs of global consumers.

As a consequence, consumers have easy access to global products and ser-

vices. When we walk into a toy store, we expect to find Legos from Denmark.

In

the local sporting goods store, we anticipate finding running shoes made in Chi

na

by the German firm, adidas. In the grocery store, we demand out-of-sea

son
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Global Marketing

produce like blueberries from Chile in January. Or consider how a $12 digital cam-era for your keychain, made in Taiwan, could be produced, transported halfway around the world, and sold for so little money at your local Target. These are the questions we will be examining in this chapter.

We begin by looking at how firms assess the potential of a given market, with particular attention to the BRIC countries (Brazil, Russia, India, and China.) Then we examine how firms make decisions to go global, and choose how and what they will sell globally. Then we explore how to build the marketing mix for global products.

ASSESSING GLOBAL MAR.KEr'S Because different countries, with their different stages of globalization, offer mar-keters a variety of opportunities, firms must assess the viability of various poten-tial market entries. As illustrated in Exhibit 8.1, we examine four sets of criteria necessary to assess a country's market: economic analysis, infrastructure and tech-nological analysis, government actions or inactions, and sociocultural analysis. Information about these four areas offers marketers a more complete picture of a country's potential as a market for products and services.

Be 1ir '\r al) sis Csing :\6 ,ics The greater the wealth of people in a country, generally, the better the opportu-nity a firm will have in that particular country. A firm conducting an economic analysis of a country market must look at three major economic factors using well-established metrics: the general economic environment, the market size and population growth rate, and real income.

Evaluating the General Economic Environment In general, healthy economies provide better opportunities for global marketing expansions, and there are sev-eral ways a firm can use metrics to measure the relative health of a particular country's economy. Each way offers a slightly different view, and some may be more useful for some products and services than for others.

To determine the market potential for its particular product or service, a firm should use as many metrics as it can obtain. One metric is the relative level of im-ports and exports. The United States, for example, suffers a trade deficit, which means that the country imports more goods than it exports.8 For U.S. marketers,

Components of a Country Market Assessment

233

Describe the components of a country market assessment.
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L I

11

234 Sevt.on 1 "" Understanding the Marketplace

this deficit can signal the potential for greater competition at home from foreign

producers. Firms would prefer to manufacture in a country that has a trade sur-

plus, or a higher level of exports than imports, because it signals a greater oppor-

tunity to export products to more markets.

The most common way to gauge the size and market potential of an economy,

and therefore the potential the country has for global marketing, is to use stan-

dardized metrics of output. Gross domestic product (GDP), the most widely used

of these metrics, is defined as the market value of the goods and services produced

by a country in a year. Gross national income (GNI) consists of GDP plus the net

income earned from investments abroad (minus any payments made to nonresi-

dents who contribute to the domestic economy). In other words, U.S. firms that

invest or maintain operations abroad count their income from those operations in

the GNI but not the GDP.9

Another frequently used metric of an overall economy is the purchasing

power parity (PPP), 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.10 A novel metric that employs PPP to assess the

relative economic buying power among nations is The Economist's Big Mac Index,

which suggests that exchange rates should adjust to equalize the cost of a basket

of goods and services, wherever it is bought around the world. Using McOonald's

Big Mac as the market basket, Exhibit 8.2 shows that the cheapest burger is in

India, where it costs $1.89, compared with an average American price of $4.07. In

Brazil, the same burger costs $6.16. This index thus implies that the Indian rupee

is 53 percent undervalued, whereas the Brazilian real is 52 percent overvalued, in

comparison with the U .S. dollar.11

These various metrics help marketers understand the relative wealth of a par-

ticular country, though they may not give a full picture of the economic health of a

country, because they are based solely on material output. Nor is a weak dollar

always a bad thing. For U.S. exporters, a weak dollar means greater demand for

Bg Mac Index

Big Mac index, local currency under (-)lover ( + )

valuation against the dollar, %

Switzerland

Sweden

Brazil

Canada

Austra li;o

Euro area

Argentin;o

Ja pan

United Sta te s

Brit a in

South Korea

Mexico

Russia

China

In d ial

0 Raw index

60 30 - 0 + 30 60 90 120150

1 Average of member countries *Average of four cit ies

At market exchange rate on (July 25th) ' Maharaja Mac

Tfoe Economist Newspaper Lomoted. London
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Global Marketing

their products in foreign countries, because they can sell at a lower price.12 Although an understanding of the macroeconomic environment is crucial for managers facing a market entry decision, of equal importance is the understand-ing of economic metrics of market size and population growth rate.

Evaluatmg Market Size and Population Growth Rate Global population has been growing dramatically since the turn of the twentieth century, at least. From a marketing perspective, however, growth has never been equally dispersed. Today, less developed nations, by and large, are experiencing rapid population growth, while many developed countries are experiencing either zero or negative population growth. The countries with the highest purchasing power today may become less attractive in the future for many products and services because of stagt~ated growth. And as we discussed previously, the BRIC countries are likely to be the source of most mar-ket growth.

In response, consumer goods companies are pay-ing close attention to the strong demand in BRIC na-tions. Thus Procter & Gamble, which enjoys a strong advantage in the Chinese market, also is expanding aggressively into India and Brazil (as well as sub-Saharan Africa). 13 With 1.33 billion people, China offers such promise that interna-tional companies such as PepsiCo and Coca-Cola cannot afford not to focus their efforts there. Each company plans to invest more than $2.5 billion immediately in China, with the goal of achieving at leas t double-digit annual growth. Pepsi also plans to build a research and development center for its Asian products to ensure that it correctly targets this new con-sumer market. In some cases, the companies will sell the same products in China and in the United States; in other situations, they are cre-ating new products to meet Chinese consum-ers' tastes. The "Minute Maid Pulpy Super Milky" combines fruit juice, milk powder, whey protein, and coconut bits. Pepsi offers cucurnber-flavored and crispy prawn-flavored

chips.14 Another aspect related to market size and

tion growth pertains to the distribution of population within a particular region; namely, is the population located pri-in rural or urban areas? This distinction determines where and how prod-and services can be delivered. Long supply chains, in which goods pass many hands, are often necessary to reach rural populations in less de-

countries and therefore add to the products' cost. As we noted previ-lndia's 1.16 billion people live overwhelmingly in rural areas, though the is moving toward urban areas to meet the demands of the growing

. and service centers located in major cities such as Bangalore and New T~Is population shift, perhaps not surprisingly, is accompanied by rapid In the middle class. Furthermore, relatively careful banking policies and dependence on exports have helped protect India from the global finan-

. The business impacts of these combined trends of increasing urban-' a growing middle class, a degree of protectionism by the central and a youthful populace make India an absolutely enormous mar-consumer goods.

Mmute Maid Pulpy Super Milky" combines frwt juice. milk powder; whey protem. and coconut bits for the Chinese market.

235
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236

Developed for the Indian

market. the Nano is the world's

cheapest car-about $2.000.

To adjust for India's lower

income. Cadbury International

sells its Dairy Milk Shots for

the equivalent of about four

cents.

Ill', , Understanding the Marketplace

In the capital of India, New Delhi, crowded streets

traditionally were filled with horse-drawn carts,

bicycles, scooters, and taxis. Yet the growing

Indian middle class is demanding more

products previously available only to

the wealthy. Therefore, the Nano,

the world's cheapest car, has

begun to appear, jockeying

for position with the multi-

tude of other vehicles. The

Nano costs only about

100,000 rupees ($2000). It

weighs less than half a

Honda Accord, and it gets

56 miles per gallon. It can

even achieve a top speed of

60 miles per hour, though it

needs 23 seconds to reach that

speed from a standstill. During

the 16-day prebooking period, the

manufacturer received orders for

203,000 of the tiny car.15

Similarly, the prevalence of cell phones has grown with the e

merging Indian

middle class. Fifteen years ago, the country hosted only 5 mi

llion total telecom

connections, and that number included ground lines. Today,

there are more than

752 million.16 The rapid growth rates of indu

stries create significant opportunities

for global companies to sell products. In the telecommunicatio

ns industry, for ex-

ample, sellers of accessories such as ringtones and new batte

ries are enjoying a

greatly expanded market. In general, India's economy is exp

ected to continue to

outpace world growth.

Evaluating Real Income Firms can make adjustments to an

existing product or

change the price to meet the unique needs of a particular co

untry market. Such

shifts are particularly common for low-priced consumer go

ods. For instance,

Procter & Gamble developed a single-use shampoo packet fo

r consumers in less

developed nations that cannot afford an entire bottle at one tim

e. To increase con-

sumption of Coca-Cola in rural India, the company lowered its

price to the equiva-

lent of about 10 cents per bottle; Cadbury International introdu

ced the Dairy Milk

Shots for the equivalent of about 4 centsF Textbook publishers

sell paperback ver-

sions of U.S. books for a fraction of its U.S. price to countries wh

ere students would

not be able to otherwise afford a text. But pricing adjust-

ments aren't only for inexpensive products. Fashion and

jewelry manufacturers also make downward adjust-

ments to their prices in countries where the incomes of

their target markets cannot support higher prices.

Even as multinationals battle for dominance in

emerging economies, local marketers also are becoming

increasingly price competitive in selling their wares, as

the example of India's Tata Motors and its Nano shows.

Local marketers already have strong familiarity with

their markets, existing distribution channels, and g~~

name recognition. These smaller firms can often exhibit

greater flexibility in their pricing to hold on to market

share. The best outcome for everyone involved is not
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g e If

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or tch ICe,

Global Marketing aptcr l tght

just a higher share of an existing market but rather the ongoing development of the market for everyone.18

'llyzing Jnfr aui Terhuologi

!

238

+ +

-------MERCOSUL

Understanding the Marketplace

a "safeguard" provision imposed by the United State

s, which stated that U.S.

companies harmed by Chinese imports could ask for pr

otection from a "surge" of

Chinese alternatives.

Quotas A quota designates the maximum quantity

of a product that may be

brought into a country during a specified time period

. The United States, for in-

stance, allows 1.2 million tons of sugar to be imported

(the quota) without a tariff

because the country generally consumes more than it p

roduces.20 It then monitors

consumption closely to protect domestic sugar farmers.

If demand exceeds supply,

it increases the quota.

Tariffs and quotas can have fundamental and potent

ially devastating im-

pacts on a firm's ability to sell products in another c

ountry. Tariffs artificially

raise prices and therefore lower demand, and quotas

reduce the availability of

imported merchandise. Conversely, tariffs and quotas

benefit domestically made

products because they reduce foreign competition.

Exchange Control Exchange control refers to the reg

ulation of a country's cur-

rency exchange rate, the measure of how much one c

urrency is worth in rela-

tion to another.21 A designated agency in ea

ch country, often the central bank,

sets the rules for currency exchange, though in the U

nited States, the Federal

Reserve sets the currency exchange rates. In recent y

ears, the value of the U.S.

dollar has changed significantly compared with othe

r important world curren-

cies. When the dollar falls, it has a twofold effect on

U.S. firms' ability to con-

duct global business. For firms that depend on imp

orts of finished products,

raw materials that they fabricate into other product

s, or services from other

countries, the cost of doing business goes up drama

tically. At the same time,

buyers in other countries find the costs of U.S. goods

and services much lower

than they were before.

Trade agreements 1mpact the global marketing environmen

t. Here, Uraguayan president Jose Mujica. delivers a speec

h during a

press conference after the Mercosur Extraordmary Summ1

t at Plana/to Palace m Brasdia. Braztl on July 31. 2012.
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Name

European Un1on

NAFTA

CAFTA

Mercosur

ASEAN

Global Marketing

Trade Agreements

There are 27 member countnes of the EU Austna, Belg1um. Bulgana, Cyprus. Czech Republic, Denmark. Eston1a. F1nland. France. Germany. Greece. Hungary. Ireland. Italy. Latv1a. L1thuan1a. Luxembourg. Malta. Netherlands, Poland, Portugal. Roman1a. Slovak1a. Sloven1a. Spa1n, Sweden. and the Un1ted K1ngdom 22 There are f1ve off1c1al cand1date countnes to JOin the EU Croatra. Macedon1a. Turkey. Iceland. and Montenegro

Un1ted States. Canada. and Mex1co

Un1ted States. Costa R1ca, the Dom1n1can Republic. El Salvador. Guatemala, Honduras. and N1caragua

Full members Argent1na. Braz1/. Paraguay, Uruguay. and Venezuela

Brune1 Darussalam. Cambod1a. lndones1a Laos. Malays1a, Myanmar Ph1lrpp1nes. S1ngapore. Tha1land, and V1etnam

h

Trade Ag reements Marketers must consider the trad e agreements to which a particular country is a signatory or the trading bloc to which it belongs. A trade agreement is an intergovernmental agreement designed to manage and promote trade activities for a specific region, and a trading bloc consists of those countries that have signed the particular trade agreement.23 Some major trade agreements cover two-thirds of the world's international trade: the European Union (EU), the North American Free Trade Agreement (NAFTA), Central America Free Trade Agreement (CAFTA), Mercosur, and the Association of Southeast Asian Nations (ASEAN).24 These trade agreements are summarized in Exhibit 8.4. The EU repre-sents the highest level of integration across individual nations, whereas the other agreements vary in their integration levels.

The European Umon has resulted m lowermg rrade barriers and strengthenmg global relationships among member nations

239
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240

IKEA in France.

: .

Sccl1on Understanding the Marketplace

A tetl~ zi 1p; Soc >( ultt I Factor~

Understanding another country's culture is cru-

cial to the success of any global marketing initia-

tive. Culture, or the shared meanings, beliefs,

morals, values, and customs of a group of people,

exists on two levels: visible artifacts (e.g., behav-

ior, dress, symbols, physical settings, ceremonies)

and underlying values (thought processes, beliefs,

and assumptions).25 Visible artifacts are easy to rec-

ognize, but businesses often find it more difficult

to understand the underlying values of a culture

and appropriately adapt their marketing strate-

gies to them.26

For example, IKEA stores across the globe are

open seven days a week-except in France. French

law prevents retailers from selling on Sundays,

and when IKEA tried to challenge the law by keeping one of its stores open,

it

provoked a lawsuit from a French workers' union. Although IKEA would lov

e

to sell over the whole weekend, when it earns approximately one-quarter of i

ts

weekly revenues, neither the workers' unions nor French consumers are likel

y

to change their ways any time soon; leaving Sunday as a day of relaxation con

-

stitutes a fundamental foundation of French culture.27 For the Swiss, a simila

r

prohibition against Sunday retailing may soon fall to the wayside though. If

stores remain closed, Switzerland will continue to lose tourism revenues, be

cause most foreign visitors, who tend to visit on the weekend, are accustome

d

to shopping on Sundays. Opening retail stores on Sundays could mean in

-

creased consumption and wages for workers who work more hours, as well a

s

employment for more people. But the loss of a day traditionally designated fo

r

family time and relaxation might be something the country cannot abide.

28

There may be no completely right answer to this dilemma, but global marketer

s

clearly must be aware of the regulations and cultural norms of the countries

they enter. One important cultural classification

scheme that firms can use is Geert

Hofstede's cultural dimensions concept, which sheds more light on these underly

-

ing values. Hofstede believes cultures differ on five dimensions:

29

1. Power distance: Willingness to accept social inequality as natural.

2. Uncertainty avoidance: The extent to which the society relies on orderliness,

consistency, structure, and formalized procedures to address situations that

arise in daily life.

3. Individualism: Perceived obligation to and dependence on groups.

4. Masculinity: The extent to which dominant values are male oriented. A lower

masculinity ranking indicates that men and women are treated equally in all

aspects of society; a higher masculinity ranking suggests that men dominate

in positions of power.

5. Time orientation: Short- versus long-term orientation. A country that

tends to have a long-term orientation values long-term commitments and

is willing to accept a longer time horizon for, say, the success of a new

product introduction.

To illustrate two of the five dimensions, consider the data and graph in

Exhibit 8.5. Power distance is on the vertical axis and individualism is on the hori

-

zontal axis. Several Latin American countries, including Brazil, cluster high o

n

power distance but low on individualism; the United States, Australia, Canada

,
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Global Marketing .er [ rght

Country Clusters

80 Poland

Gl u c

60 ftl .. "' i5 .. Gl 40 ~ 0 ~

20

.Czech Republic

Cllnada H ~United States ""PI'1 Auftralia

Flnland41JINIMd United Kingdom German, s-Cie Switzert.nd Norway Denmark

0 0 20 40 60 80 100

Ind ividualism Source Based on data avaolable at httpl/wwwgeert-hofstede.com. Data from. Geert Hofstede. Culture's Consequences. 2nd ed (Thousand Oaks. CA Sage. 2001). Repnnted woth permossoon of Geert Hofstede.

and the United Kingdom, in contrast, cluster high on individualism but low on power distance. Using this information, firms should expect that if they design a marketing campaign that stresses equality and individualism, it will be well ac-cepted in English-speaking countries, all other factors being equal, but not be as well received in Latin American countries.

We also find that China scores very high on its time orientation but low in in-dividualism; India has medium to high levels on all five dimensions; and Russia posts notably high uncertainty avoidance and power distance scores. Hofstede is careful to warn that these scores are informative only in a comparative sense, but marketers clearly can use them to design strategies for the varied, promising, BRIC growth markets.30

Another means of classifying cultures distinguishes them according to the im-portance of verbal communication.31 In the United States and most European countries, business relationships are governed by what is said and written down, often through formal contracts. In countries such as China and South Korea, how-ever, most relationships rely on nonverbal cues, so that the situation or context means much more than mere words. For instance, business relationships in China often are formalized by just a handshake, and trust and honor are often more im-portant than legal arrangements.

Overall, culture affects every aspect of consumer behavior: why people buy, who is in charge of buying decisions, and how, when, and where people shop. After marketing managers have completed the four parts of the market assess-ment, they are better able to make informed decisions about whether a particular country possesses the necessary characteristics to be considered a potential market for the firm's products and services. In the next section, we detail the market entry decision process, beginning with a discussion of the various ways firms might ~nter a new global market. Adding Value 8.1 gets the discussion started with one illustrative example.

1 he Aptcrl ) .. tlw 13HIC' Count riPs Change~ in technology, especially communications, have been a driving force for growth m global markets for decades. The telegraph, radio, television, computer,

241

Understand the market1ng opportunities in BRIC countnes.

li

i .
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242 Se to on r, Understanding the Marketplace

Known best for 1ts toothpaste, the Colgate-Palmohve Company

prov1des oral. personal. and home care products and pet nutn-

ton products to consumers around the globe 32 Colgate's strate-

gc plan 1ncludes onternat1onal growth. and the company has bu1lt

brand loyalty and market share 1n emerg~ng markets. as well as a

globalleadersh1p pos1t1on for the sales of toothpaste and tooth-

brushes The roots of th1s success he 1n Colgate's comm1tment to

understand1ng local tastes. educat1ng consumers about the im-

portance of better oral hyg1ene. develop1ng relat1onsh1ps w1th

dental professionals. and support1ng commun1t1es

In lnd1a. for example. Colgate researchers spent two days

1n a rural v11lage study1ng the hab1ts and values of onhab1tants

The ma1n 1ns1ght Mothers hoped desperately for better loves

for the1r ch1ldren The resulting campa1gn stressed the health

mphcat1ons of good oral care hab1ts and offered opportun1t1es

for scholarsh1ps In other countnes. s1m1lar mteract1ons w1th

locals have spawned 1deas for new products. oncludmg a

h1ghly energy efflc1ent toothbrush manufactunng plant 1n

Ch1na that adheres to the h1ghest standards of environmental

protect1on V1s1ts w1th storeowners 1n rural Russ1a led to new

packag1ng opt1ons for use 1n small. crowded shops.

In add1t1on to consumers and store owners. Colgate bu1lds

bonds w1th dental professionals. who are 1n a pos1t1on to en-

dorse the brand and prov1de product samples These relat1on-

sh1ps have prompted S1gn1f1cant numbers of dent1sts and

hyg1en1sts on Braz1l. lnd1a. and Ch1na to recommend Colgate

over any other brand to pat1ents In the Un1ted States. Colgate

IS creatong new t1es w1th hyg1en1sts by prov1d1ng oral health

educat1on tools and 1nv1t1ng the1r part1c1pat1on 1n the compa-

ny's oral health adv1sory board

Colgate's comm1tment to commun1ty support stems from 1ts

global values of canng. cont1nuous Improvement. and global

teamwork In the Unoted K1ngdom, the company teamed w1th the

1nternat1onal retailer Tesco 1n a custom1zable "Share a Smile"

program that benefits local communities A partnership 1n the

Afncan country of Malaw1 promoted healthy oral care hab1ts

By pay1ng close attention to the un1que sociocultural char-

actenstcs of vanous countnes and honong 1ts global product

strateg1es. Colgate 1s able to compete successfully 1n global

and emerg1ng markets. desp1te the aggress1ve compet1t1on 1n

consumer product markets and the challengmg econom1c

cond1t1ons worldwide

Usmg Bollywood actors Shahid Kapoor and

Genelta OSouza. Colgate promotes Ma,, Fresh as part

of tts mtemattonal growth strategy whtch is based on

buildmg brand loyatly and market share m emergmg

markets lrke lndta

and Internet have increasingly connected distant parts of the world. Today, com-

munication is instantaneous. Sounds and images from across the globe are deliv-

ered to TV sets, radios, and computers in real time, which enables receivers in all

parts of the world to observe how others live, work, and play. Perhaps the greatest change facing the global community in recent years has

been the growth and expansion of four countries that together have come to be

known as the BRIC countries: Brazil, Russia, India, and China. Let's examine each

in turn.

Brazil33 Long a regional powerhouse, Brazil's ability to weather, and even thrive,

during the most recent economic storm has transformed it into a global contender.
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Global Marketing ~ tl ht

In whtch of the BRIG countries do each of these classic structures restde?

Currently, Brazil is the world's seventh largest economy, but predicted growth rates indicate it will move into the fifth spot within a few years. This growth has been aided by a large, literate population and the impositions of social programs that have allowed more than half of the 190 million Brazilians to enter the middle class. This large South American democracy welcomes foreign investors. Russia34 The relations between the United States and Russia are a little more com-plicated than for Brazil. Since the fall of the former Soviet Union, Russia has under-gone multiple up- and downturns in its economy. However, its overall growth Prospects appear promising, especially as a consumer market. Long denied access to consumer goods, the well-educated population exhibits strong demand for U.S. products and brands. In particular, the 60 million Russian Internet users are growing at a rate of approximately 15 percent annually. Russia is likely to become Europe's largest online market in the next few years. The country also is negotiating to enter the WTO to improve trade relations with other countries. Russia still faces an aging Ppulation and low birth rates. If these trends persist, Russia's population could

243
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~ . I j'l

244 S et r 1 Understanding th

e Marketplace

Like other countnes m which McDonald's thrives. Brazil

has a strong and growmg middle class.

The retail landscape in lnd1a ts changing Consumers. particu-

larly young ones, are attracted to large modern malls.

decline by one-third in the next half-century. At the same

time, corruption is widespread creating ethical dilemmas for

firms trying to market their goods and services.

lndia35 With more than 1.1 billion people, or approxi-

mately 15 percent of the world's population, together with

expanding middle and upper classes, India is one of the

world's fastest growing markets. With a median age of 25

years, India has one of the youngest populations in the

world. Its young inhabitants increasingly are adopting

global attitudes while living in growing urban centers and

shopping at large malls. The well-educated modern gen-

eration is largely fluent in English, and the highly skilled

workforce holds great attraction for firms that hope to ex-

pand using local talent, especially in technical fields.

India's retail environment is still dominated by millions

of small stores, and lacks modern supply chain management

facilities and systems.36 Recent changes by the Indian g

ov-

ernment, however, have the potential to significantly mod-

ernize the retail landscape. Foreign retailers that carry

multiple brands, like Walmart, are now allowed to own up

to 51 percent of joint ventures in India, whereas previously

these retailers were permitted only to enter into wholesale

joint ventures. Also, retailers that carry only their own brand,

like Nike, can now own 100 percent of their Indian busi-

nesses, whereas in the past they were only allowed to own

up to 51 percent of a partnership with an Indian company.

China37 For most of the twentieth century, China experi-

enced foreign occupation, civil unrest, major famine, and a

Relaxed Indian governmental restnctions now allow foretgn

retatlers that carry their own brand. ltke Levi's, to own 100

percent of their lndtan busmesses.
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Ethical and Societal Dilemma 8.1

By Facebook CEO Mark Zuckerberg's own admtsston, Facebook grew exponenttally for years wtthout a strategtc plan for tnterna-ttonal growth 38 As the company has matured. however. Face-book has refocused 1ts attention on developtng a strategy for Chtna But attempting to combtne the tnherent openness of social networktng wtth China's censorship rules present stgniftcant chal-lenges Add tn local competitors and human nghts advocacy groups concerned w tth government backlash against users. and Facebook may be looktng at the same fate that has befallen other Western technology compantes trytng to expand to the East-tncludtng such markettng gentuses as Google. eBay. and Twitter.39

Global Marketing ( pier F. :; ot 245

Successful entry tnto the Chtnese market requtres a parttc-ular blend of ttmtng. sktll, cultural understandtng. and political savvy. and these factors may not be quite in alignment for Face-book yet The ttming may be wrong because Chtna's autocratic leaders have enforced greater controls on soctal networking and blogging in response to the Arab Spnng upr isings Nor do Facebook executtves appear to have a full grasp of the political and cultural nuances of bus1ness tn Chtna. desp1te a good track record of respecting local cultural values. such as when 1t agreed to block content about Naz1sm in Germany or drawmgs of Muhammad tn Paktstan. And even if Facebook were to navi-gate these challenges safely. Ch1na has a strong. endunng pref-erence for compan1es owned and run by 1ts own people

CEO Mark Zuckerberg (cent er) cla1ms that Facebook will employ d1plomacy m Chma. but censorship tssues are h1gh/y complex

Zuckerberg can (and does) claim that his company w ill em-ploy d1plomacy 1n Ch1na. but censorsh1p 1ssues are highly com-plex For 1nstance. how would Facebook respond to retaltation agatnst users who cnttcize the government?4 For Google. whose m1ss1on statement s1mply advtses. "Don't Be Evtl." such questions became all too pert1nent when hackers 1n Chtna

ga1ned access to the e-matl accounts of prominent human nghts act1v1sts. When Western compan1es have cooperated with the Chinese government. some operations have led to the 1mpnsonment of online act1v1sts.

Censorship has global repercussions too. Blocking a com-ment generated by someone outstde of Chtna. such that read-ers w1th1n Chtna cannot see 1t. w1ll affect access globally But the question is about more than whether users can enJOY all the fun of Facebook When a post on Facebook can lead to Jail t1me. 1t becomes a question of baste human nghts.

strict one-party Communist regime. However, since 1978, China's leadership, while maintaining communist political ideals, has embraced market-oriented economic development, which has led to startlingly rapid gains. For many Chinese, recent developments have dramatically improved their living standards and their levels of personal freedom. Increasing liberalization in the economy has prompted a large increase in China's gross domestic product (GDP); it is now the second-largest econ-omy and the third-largest market for U.S. exports. The U.S. ambassador to China, Gary Locke, has noted: "Everyone that has exported to China reports that what may have started off small builds over time, such that we've seen phenomenal increases

U.S. exports from the United States to China. In fact exports were up some percent last year alone."41 It makes an excellent target for consumer goods, assum-they can be produced at the right price. Yet the country continues to suffer from drastically unequal economic d istri-

which has led to a significant migrant workforce who subsist on part-time, paying jobs. These workers were hit hard by the global financial crisis, which

demand for Chinese exports for the firs t time in years. Furthermore, ac-growth of the 1.3 billion-strong Chinese population slowed as a result of gov-

population controls which limit each family to one child. Although median age is slightly younger than that of the United States currently, at

year~, the application of the one-child policy means that China is one of the rapidly aging countries in the world.

Even as vast numbers of U.S. companies actively target the massive Chinese or explore options for entering it, Ethical and Societal Dilemma 8.1 highlights

challenges that one fam ous potential entrant faces before it makes this choice.
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l 11

246

Identify the various

market entry strategies.

e .. c 0 V

Sect 1. 1 Understanding the Marketplace

CHECK YOURSELF 1. What metrics can help analyze the e

conomic environment of a country?

2. What types of government actions should we be concerned about as we

evaluate a country?

3. What are five important cultural dimensions?

4. Why are each of the BRIC countries viewed as potential candidates fo

r

global expansion?

CHOOSING A GLOBAL EN.TR Y

STRATEGY When a firm has concluded its assessme

nt analysis of the most viable markets for

its products and services, it must then conduct an internal assessment of its cap

a-

bilities. As we discussed in Chapter 2, this analysis includes an assessment of the

firm's access to capital, the current markets it serves, its manufacturing capacit

y,

its proprietary assets, and the commitment of its management to the proposed

strategy. These factors ultimately contribute to the success or failure of a marke

t

expansion strategy, whether at home or in a foreign market. After these interna

l

market assessments, it is time for the firm to choose its entry strategy.

A firm can choose from many approaches when it decides to enter a new

market, which vary according to the level of risk the firm is willing to take. Man

y

firms actually follow a progression in which they begin with less risky strategie

s

to enter their first foreign markets and move to increasingly risky strategies a

s

they gain confidence in their abilities and more control over their operation

s,

as illustrated in Exhibit 8.6. We examine these different approaches that marke

t-

ers take when entering global markets, beginning with the least risky.

Strategic alliance

Risk
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Exporting means producing goods in one country and selling them in another. This entry strategy requires the least financial risk but also allows for only a limited re-turn to the exporting firm. Global expansion often be-gins when a firm receives an order for its product or service from another country, in which case it faces little risk because it has no investment in people, capital equipment, buildings, or infrastructure.42 By the same token, it is difficult to achieve economies of scale when everything has to be shipped internationally. The Swiss watchmaker Rolex sells relatively small numbers of expensive watches all over the world. Because its trans-portation costs are relatively small compared with the cost of the watches, the best way for it to service any market is to export from Switzerland.

Ftal ~Ji. illt->;

Franchising is a contractual agreement between a firm, the franchisor, and another firm or individual, the franchisee. A franchising contract allows the franchisee to operate a business-a retail product or service firm or a B2B provider- using the name and business format developed and supported by the franchisor. Many of

Global Marketing pt E l>t

the best-known retailers in the United States are also successful global franchisors, including McDonald's, Pizza Hut, Starbucks, Domino's Pizza, KFC, and Holiday Inn, all of which have found that global franchising entails lower risks and re-quires less investment than does opening units owned wholly by the firm. However, when it engages in franchising, the firm has limited control over the market operations in the foreign country, its potential profit is reduced because it must be split with the franchisee, and, once the franchise is established, there is always the threat that the franchisee will break away and operate as a competitor under a different name.

-,._and Pizza Hut are successful global franchisors

247

Rolex exports 1ts watches to countries all over the world from its factory in Switzerland.
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248

The jomt venture between Sony

and Encsson was so successful

that Sony purchased the

Encsson mobile handset line

Understanding the Marketplace

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Global Marketing

As we noted, each of these entry strategies entails different levels of risk and rewards for the foreign entrant. But even after a firm has determined how much risk it is willing to take, and therefore how it will enter a new global market, it still must establish its marketing strategy, as we discuss in the next section.

CHECK YOURSELF Which entry strategy has the least risk and why?

2. Which entry strategy has the most risk and why?

C Q()SJNC~ A GLOBAL MAR.KETING SI"?. A'TECI { Just like any other marketing strategy, a global marketing strategy includes two components: determining the target markets to pursue and developing a market-ing mix that will sustain a competitive advantage over time. In this section, we examine marketing strategy as it relates specifically to global markets.

TargPt l\Iarket : Sgnwnt at ion, Targeting, and - )sit ioning Global segmentation, targeting, and positioning (STP) are more complicated than domestic STP for several reasons. First, firms considering a global expansion have much more difficulty understanding the cultural nuances of other countries. Second, subcultures within each country also must be considered. Third, consum-ers often view products and their role as consumers differently in different coun-tries.44 A product, service, or even a retailer often must be positioned differently in different markets.

For example, Ford has en-joyed U.S. success with its "venerable" F-Series trucks for many years,45 but this ve-hicle is not as appealing to the Indian market, where small cars are more popular. So Ford targeted India's small-car 11\arket segment with a new

the Figo. This small ve-technology and archi-were proven in other

in advance, and its derived from con-

research and testing on roads. Many small-car are first-time automo-

owners, so the model also on value for money, fuel efficiency, low

- ......... n ro costs, and tech-

249

' Highlight the similarities and differences between a domestic marketing strategy and a global marketing strategy.

Ford has mtroduced the Figo to first-time value-driven owners m India.

enhancements that im-ride and handling on

.,....... .. ,_.~IUIWUII'L .............. k~

250

Proctor & Gamble targeted

moms on a global basis with

their "Proud Sponsor of Moms"

campa1gn, which ran durmg

the 2012 Summer OlympiCS

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Global Marketing apte E !; t

new product development. Today, retailers such as Zara, financial services firms such as Citicorp, and software firms such as Microsoft are dominating the newest stage of globalization by exploiting their technological skills, while Asian and South and Central American countries dominate the manufacturing of consumer products.51 In the following, we explore the four Ps (product, price, promotion, and place) from a global perspective.

Global Product or Service Strategies There are three potential global product strategies:

Sell the same product or service in both the home country market and the host country.

Sell a product or service similar to that sold in home country but include minor adaptations.

Sell totally new products or services.

The strategy a firm chooses depends on the needs of the target market. The level of economic development, as well as differences in product and technical standards, helps determine the need for and level. of product adaptation. Cultural differences such as food preferences, language, and religion also play a role in product strategy planning.

Russia, one of the largest "new" markets in the world, is notable for its past development, including its long-standing embrace of communism. Consumption was limited, with few foreign options available. However, as this BRIC country moves toward a market-based economy, consumers are happily learning to spend the money they have, even though average monthly income levels hover at around $650. As the retail market expands rapidly, companies closely examine these latest consumers. They have disposable income, because they generally live mortgage free; receive heavily subsidized electricity and gas; have very little debt (because credit was not available under communism); and have little interest in saving, be-cause history has taught them that they were likely to lose any pensions they might have saved. Yet the shift to a market economy also has been marked by terrible levels of corruption, unnecessary bureaucracy, significant income disparity, bribery, and uncertain legislation.52 (For further discussion of a country moving from a communist to a market economy, see the case study at the end of this chapter.)

In such varied cultural settings, bringing even the simplest consumer goods to new markets can be challenging. For example, Campbell discovered that though Russia and China are two of the largest markets for soup in the world, cooks in those countries have unique demands. Chinese consumers drink 320 billion bowls of soup each year, and Russian buyers consume 32 billion servings, compared with only 14 billion bowls of soup served in the United States. However, Chinese cooks generally refuse to resort to canned soup; though the average Chinese consumer eats soup five times each week, he or she also takes great pride in preparing it personally with fresh ingre-dients. In contrast, Russian consumers, though they ~emand very high quality in their soups, had grown tired of spending hours preparing their homemade broths. To identify opportunities in these markets, Campbell sent teams of social anthropologists to study how Chinese and Russian cooks prepare and consume ~up. When it faced further hurdles, it entered into a JOmt venture with the Swire soup company in China. But its efforts in Russia never panned out, forcing ~pbell to withdraw after around four years. That 15

: even with extensive, devoted efforts by an industry Slant, global marketing remains a challenge.53

251

Campbell's research found that Russ1ans eat a lot of soup. and they want time-saving preparation help So it developed broths to enable cooks to prepare soups with their own flair.
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I

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252

The level of economtc devel-

opment affects the global

product strategyConsumers

m the Umted States prefer

larger motorcycles with more

amemties. ltke the Honda

Goldwing on the left with the

air bag deploying Motorcycles

m India are generally smaller

Spam's fashion retailer Zara is

pnced higher in the United

States than in Spain because

tt shtps its merchandise to the

Umted States from Spain by atr.

S cto n , Understanding the Marketplace

The level of economic development also affects the global product stra

tegy be-

cause it relates directly to consumer behavior. Consumers in develope

d countries

tend to demand more attributes in their products than do consumers i

n less devel-

oped countries. In the United States, Honda does not offer its line of "urba

n" motor-

cycles, available in Mexico, China, and India, because the product line

resembles a

motor scooter more than a motorcycle, which does not tend to appeal

to American

consumers. Motorcycles sold in the United States have more horsepowe

r and bigger

frames and come with an array of options that are not offered in other c

ountries.

Referred to as glocalization, some firms also standardize their products

globally

but use different promotional campaigns to sell them. The original Prin

gles potato

chip product remains the same globally, as do the images and themes o

f the promo-

tional campaign, with limited language adaptations for the local mark

ets, though

English is used whenever possible. However, the company changes Prin

gles' flavors

in different countries, including paprika-flavored chips sold in Italy and

Germany. 54

Global expansion can move in various directions. In reverse innovat

ion, for

example, companies initially develop products for niche or underdeve

loped mar-

kets, and then expand them into their original or home markets. F

or example,

General Electric realized that adapting medical diagnostic equipme

nt that had

been developed in the United States to sell it in India was ineffective

. Few Indian

medical providers had sufficient resources to pay $20,000 for the mass

ive machin-

ery. Therefore, GE undertook innovation specific to the Indian marke

t to develop

a battery-operated, portable EKG (electrocardiogram) machine for $

500. Then it

realized that the small, affordable machines would appeal as well to

U .S. emer-

gency medical personnel in the field and therefore globalized its offer

. 55

Firms also can just take an existing product and market it "as is" in all

foreign

markets. Ford Motor Co., for example, envisions a "world" car that wi

ll sell every-

where, as we discuss in Adding Value 8.2.

Global Pricing Strategies Determining the selling

price in the global marketplace is an extremely dif-

ficult task. 56 Many countries still have rules govern-

ing the competitive marketplace, including those

that affect pricing. For example, in parts of Europe,

including Belgium, Ital~ Spain, Greece, and France,

sales are allowed only twice a year, in January and

June or July. In most European countries, retailers

can' t sell below cost, and in others they can' t adver-

tise reduced prices in advance of sales or discount

items until they have been on the shelves more

than a month. For firms such as Walmart and other

discounters, these restrictions threaten their core

competitive positioning as the lowest-cost provider

in the market. Other issues, such as tariffs, quotas,

antidumping laws, and currency exchange policies,

can also affect pricing decisions. 57
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'lg .if-en-,se pe. tee, Uld lets ver-,unt ,ore ,wer core rider ota5 icie!'

V1rg1n1a Woo If famously wrote. A rose 1s a rose 1s a rose" But 1n the world of global market1ng that line has never seemed to hold particularly true Is a car the same as a car the same as a car. the world over?

Prev1ous developments would suggest not Cons1der. for example, our d1scuss1on of the Nano. the 1300-pound m1nr-car that has enJoyed great success 1n lnd1a. Or recall how Ford had to g1ve up on the 1dea of mov1ng F-150 trucks overseas In the Un1ted States. where car buyers love huge SUVs. roads have plenty of room for several cars s1de by s1de. and the car culture is well developed. so b1gger IS often thought of as bet-ter In other areas of the world, huge automob1les are unlikely to prompt much exc1tement

Ford CEO Alan Mulally seems determ1ned to f1nd a car that everyone w1ll apprec1ate. whether they hve 1n New Oelh1, New York, or Newfoundland He chose the name "F1esta." desp1te some concerns that the prev1ous 1terat1on of th1s name was an unpopular, unattractive subcompact in the 1970s Yet the name also IS recogn1zable, and 1t does not suffer from any negat1ve translations or connotations 1n vanous languages (e.g .

Global Marketing 1 lt E1 ht 253

Volkswagen's Bora model sounded too much like "bonng" 1n Engl1sh. so 1t changed the name to Jetta) Therefore, whatever market 1t appeared rn. the one-world car would be the F1esta

Th1s cho1ce offers several benef1ts for the automaker, 1n part1cular. 1t saves on some of 1ts market1ng costs That 1s. Ford needs only one logo for the F1esta. and perhaps even one set of market1ng commun1cat1ons 1n vanous 1nternat1onal markets In add1t1on, 1t prevents consumer confus1on. wh1ch IS common 1n an onlrne world when a company uses the same name for d1fferent lmes For example. the Ford Fus1on 1s a sedan m Europe but an SUV 1n the Un1ted States An onlme shopper who clicks on the wrong l1nk would be ternbly confused

The universal F1esta first entered the European market and soon became the top-selling small car on that cont1nent. A few years later, Ford rolled out the same car 1n the Un1ted States after 1nvest1ng heav1ly 1n determ1n1ng wh1ch features would ap-peal across the board For example. 1t attempted to make the F1esta aesthetically pleas1ng across cultures, w1thout mcreas-lng costs W1thin a year, the F1esta was the top rankrng afford-able small car 1n the U.S. market too.

The Ford Ftesta ts destgned to be sold stmtltarly throughout the world Thts ad from the U K could easily be used m the US

Competitive factors influence global pricing in the same way they do home pricing, but because a firm's products or services may not have the same in the global marketplace as they do in their home country, market

must be adjusted to reflect the local pricing structure. Spain's fashion retailer for instance, is relatively inexpensive in the EU but is priced about 40 percent
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l

254 Sectc I Understanding the

Marketplace

Hey Neighbor, Can You Spare a Battery Pack?

59

R1s1ng fuel costs are chang1ng the way that compames do busi-

ness. In the past. US compan1es would outsource manufactur-

mg obtain matenals from all across the world. and then sh1p

the goods to the final dest1nat1on.

sh1p sail1ng from Shanghai to the Un1ted States today costs

$8,000 compared w1th $3,000 a decade ago. and 1t moves

slower too. tn an attempt to save fuel

Just-1n-t1me (JIT) systems aim to have components arrive

at the exact t ime they are needed. tn an effort to mm1m1ze

warehousmg costs But modern compantes may be forced to

buy wh1chever components are available tn the vtctntty of

thetr place of need. rather than buying the cheapest products

m the world Furthermore. the recall of mtlltons of vehicles by

the world's most famous JIT pract1t1oner Toyota ratsed some

quest1ons about the potential downs1des to JIT If the goal 1s

to meet productton deadl1nes at all costs. IS the result an un-

safe product?

For example. Tesla Motors used to manufacture 1000-pound

automobile battery packs in Thailand. sh1p them to Bnta1n for

1nstallat1on, and then sh1p the nearly assembled cars to the

Un1ted States Th1s model made sense when fuel pnces ranged

around $10 per barrel. but now that the pnce has nsen by

more than tenfold. transportatiOn costs overwhelm such sup-

ply chams Mov1ng goods IS very expensive, and many 1tems.

espec1ally those with smaller marg1ns (e.g. food). have s1mply

become too expens1ve to transport If they were ava1lable and

the transportation costs were passed on to consumers. avoca-

dos from South Afnca would cost a US grocery shopper as

much as a rib eye steak

In the new economy. locat1ng factones close to both the

suppliers of components and final consumers to reduce the

transportation costs IS catch1ng on The result 1s also a boon

for consumers. 1n that they have ready access to the supply

hnes from wh1ch they gather the1r purchases. But for many

compan1es. ex1st1ng supply chams mean that they st1ll rely on

mass1ve conta1ner shtps. Sh1pping a 40-foot container on a

F1nally. due to outsourcing the Untted States may have lost

s1gn1ficant productton skills. However. the advantages of closer

product1on and decreased transportation costs may mean tha

t

more compan1es. espectally those spec1altzmg 1n heavy goods

(e.g.. furniture compan1es IKEA and La-Z-Boy) w1ll be turn1ng to

tncreased domest1c product1on 1n the vanous places they sell

products In all these developments. the questton becomes

whether the greater servtce. safety. and sat1sfaction that local-

Ized sourc1ng m1ght prov1de can offset the cost benef1ts of

global sourctng.

higher in the United States, putting it right in the middle of its m

oderately priced

competition.60 Zara is dedicated to keeping production in Spain, bu

t it also must get

its fashions to the United States quickly, so it incurs additional tr

ansportation ex-

penses, which it passes on to its North American customers. Finally

, as we discussed

previously in this chapter, currency fluctuations impact global pric

ing strategies.

Global Distribution Strategies Global distribution networks for

m complex value

chains that involve middlemen, exporters, importers, and differe

nt transportation

systems. These additional middlemen typically add cost and ul

timately increase

the final selling price of a product. As a result of these cost facto

rs, constant pres-

sure exists to simplify distribution channels wherever possible.

The number of firms with which the seller needs to deal to get

its merchan-

dise to the consumer determines the complexity of a channel. In m

ost developing

countries, manufacturers must go through many different type

s of distribution

channels to get their products to end users, who often lack adeq

uate transporta-

tion to shop at central shopping areas or large malls. Therefore,

consumers shop

near their homes at small, family-owned retail outlets. To reach

these small retail

outlets, most of which are located far from major rail stations or

roads, marketers

have devised a variety of creative solutions. Unilever's strate

gy in India is a

prime example of how a global company can adapt its distributio

n network to fit

local conditions. Unilever trained 45,000 Indian women to serve

as distributors,

who in turn extended Unilever's reach to nearly 100,000 village

s and their 3 mil-

lion residents, all across India. The program generates $250 milli

on each year just

in villages that otherwise would be too costly to serve.

61 For examples of other

new distribution strategies, consider Superior Service 8.1.

Global Communicatio n Strateg1es The major challenge in dev

eloping a global

communication strategy is identifying the elements that need to

be adapted to be
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Global Marketing p r,

effective in the global marketplace. For instance, literacy levels vary dramatically across the globe. Consider again the BRIC nations: In India, approximately 39 per-cent of the adult population is illiterate (and for Indian women, the illiteracy rate surpasses 50 percent), compared with 11 percent in Brazil, 7.8 percent in China, and less than 1 percent in Russia.62 Media availability also varies widely; some countries offer only state-controlled media. Advertising regulations differ too. In an attempt at standardization, the EU recently recommended common guidelines for its member countries regarding advertising to children and is currently initiat-ing a multiphase ban on "junk food" advertising.63

Differences in language, customs, and culture also complicate marketers' abil-ity to communicate with customers in various countries. Language can be particu-larly vexing for advertisets. For example, in the United Kingdom, a thong is only a sandal, whereas in the United States, it can also be an undergarment. To avoid the potential embarrassment that language confusion can cause, firms spend mil-lions of dollars to develop brand names that have no preexisting meaning in any known language, such as Accenture (a management consulting firm) or Avaya (a subsidiary of Lucent Technologies, formerly Bell Labs).

Within many countries there are multiple variants on a language or more than one language. For example, China has three main languages; the written forms produce meaning through the characters used but the spoken forms de-pend on tone and pronunciation. Some firms choose names that sound similar to their English-language names, such as Nike, whose Chinese brand name is pro-nounced "nai ke." Others focus on the meanings of the characters, such that Citibank is known as hui qi yinhang, which means "star-spangled banner bank." Still other firms, such as Mercedes-Benz, have adapted their names for each lan-guage: peng zee in Cantonese for Hong Kong, peng chi in Mandarin for Taiwan, and ben chi in Mandarin for mainland China. Naming is a constant challenge in China, especially to avoid the threat that a brand name evokes unwanted conno-tations, such as when Microsoft realized that the sound of its search engine name, Bing, meant "virus" in China-not the best image for an online company!64

Even with all these differences, many products and services serve the same needs and wants globally with little or no adaptation in their form or message. Firms with global appeal can run global advertising campaigns and simply trans-late the wording in the advertisements and product labeling. Furthermore, as

255

Nike's Chinese brand name is pronounced "na1 ke." wh1ch is very s1m1lar to the English pronunciation. and means Endunng and Persevermg
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256 Sect en 1 Understanding the Marketplace

Social and Mobile Marketing 8.1

Lady Gaga's nearly unsurpassed status 1n modern pop cul-

ture has arnved as the result of her shock tact1cs,

carefully orchestrated med1a blitz, and expert use

of vaned soc1al med1a channels-not to ment1on r

some senous mus1cal talent

Granted. weanng a dress

made of meat and creatmg mus1c

v1deos that veer close to pornog-

raphy w1ll get anyone's attention.

even through trad1t1onal med1a set-

tings And mdeed. nearly 12.000 tra-

ditiOnal med1a stones ment1oned her 1n

2010 65 But Lady Gaga's worldw1de dommat1on

Involves far more

From the t1me she f1rst arnved on the scene 1n

2008. Gaga has been ava1lable to her fans nearly all

the t1me. 1n a vast array of forums In the early days.

she was constantly available for 1nterv1ews, and she

made content. 1nclud1ng v1deos and photos. ava1lable for

mus1c bloggers to post Her 1Phone application. Haus

of Gaga. acts as a portal for her fans. w1dely known

Lady Gaga Is More Popular than

Barack Obama

personally manages her daily posts. even when she

1s backstage at a concert. Gaga keeps

her fans 1nterested by speak1ng to

them d1rectly v1a social med1a Her

Facebook page IS managed by her

w1th the help of others. and she

handles her Twitter account on

her own Th1s authentic one-to-one

contact has strengthened her per-

sonal connect1on w1th her fans.ss

Through these efforts. she has be-

come the most popular hvmg thmg

on Facebook. w1th more than 35 million

Facebook fans. has more Tw1tter followers

than anyone else. at 10 m1llion. even more than

Barack Obama; and has prompted more than

1 b1lhon v1ews on her You Tube channel She 1s

strateg1c 1n her dec1s1ons on what she wears

and what she does. knowmg that people

will be talk1ng about 1t later. Gaga makes

sure that she feeds her fans the content

she wants them to talk about-as "L1ttle Monsters: to stay eas1ly

connected through exclusive con-

tent. v1deos. news. and chats She Lady Gaga can m1x fashton wtth her mustc and get

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