5 th Edition Focus on marketing decisions in the global environment global marketing 5 t h EditionGlobal Marketing seeks to develop the different skills a marketing manager needs tobe successful when taking on the three-part tasks of foreign entry, local marketing, and globalglobal management.Excellent examples and cases, many of which are drawn from the author’s rich international marketingexperience, help you move from concept to application.Updated and New Features in the 5th Edition: The Effect of Technology and the Internet on Global Commerce Coverage is introduced early in the text and then integrated throughout the text where appropriate so students experience how technology affects global Foreign Entr y, marketing. Revised coverage of e-commerce in Chapter 17 recognizes the amazing Local Marketing & developments after the emergence of Web 2.0. Global Management Revised Chapter 11: The Global Marketing Strategy This revised chapter is an extended version of the Global Segmentation and Positioning chapter in the fourth edition. The chapter still covers new research MD DALIM #983087 09/12/08 CYAN MAG YEL BLK on global segmentation and positioning, but also adds new material on resource allocation across products and markets. Johny K. Johansson New Chapter 13: Global Branding The new Global Branding chapter extends the branding discussion in the previous edition, and adds new material on brand equity and on the added value that globality confers upon a brand. This chapter also introduces the concept of country branding.For more information and student resources, please visit the text Online Learning Center: www.mhhe.com/johansson5e Johny K. Johansson ISBN 978-0-07-338101-5 MHID 0-07-338101-2 90000 9 780073 381015 www.mhhe.com
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joh81012_fm_i-xix 9/17/08 04:19am Page iii ntt 201:MHBR058:mhjoh4:joh4fm: Global Marketing Foreign Entry, Local Marketing, Fifth Edition & Global Management Johny K. Johansson Georgetown University Boston Burr Ridge, IL Dubuque, IA Madison, WI New York San Francisco St. Louis Bangkok Bogotá Caracas Kuala Lumpur Lisbon London Madrid Mexico City Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto
joh81012_fm_i-xix 9/17/08 04:20am Page v ntt 201:MHBR058:mhjoh4:joh4fm: To my parents, Ruth and Nils Johansson
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joh81012_fm_i-xix 9/17/08 04:20am Page vii ntt 201:MHBR058:mhjoh4:joh4fm: About the Author Johny K. Johansson is the McCrane/Shaker Chairholder in International Business and Marketing in the McDonough School of Business at Georgetown University. An expert in the areas of international marketing strategy and consumer decision making, espe- cially as applied to Japanese and European companies and markets, Johansson has pub- lished over 70 academic articles and chapters in books. He is the author of In Your face: How American Marketing Excess Fuels Anti-Americanism, Financial Times/Prentice Hall, 2004, and (with Ikujiro Nonaka) of Relentless: The Japanese Way of Marketing, HarperBusiness, 1996. He has conducted numerous executive seminars in many coun- tries, including Japan, Germany, Sweden, Hong Kong, Thailand, and India. He has also been a consultant to companies in many countries, including General Electric, Marriott, and Xerox in the United States; Beiersdorft and Ford Werke AG in Germany; Volvo and Electrolux in Sweden; and Honda, Dentsu, and Fuji Film in Japan. Before joining Georgetown’s faculty, Professor Johansson held faculty positions at the University of Washington and the University of Illinois. He also has held many vis- iting appointments in several countries. He was the first Isetan Distinguished Visiting Professor at Keio Business School (Japan) and the first Ford Distinguished Visiting Professor at University of Cologne in Germany. He also has been a visiting professor at New York University, Dalhousie University (Canada), Stockholm School of Eco- nomics, the Catholic University of Leuven (Belgium), the National Defense Academy (Japan), and the International University of Japan. In 1988 he was a Phelps scholar at the University of Michigan. Professor Johansson earned Ph.D. and M.B.A. degrees from the University of Cali- fornia, Berkeley, and his undergraduate degree (Civilekonom) from the Stockholm School of Economics. A Swedish citizen, he lives in Georgetown, Washington, DC, with his wife, Tamiko, and their two daughters, Anna and Sonja. vii
joh81012_fm_i-xix 9/17/08 04:20am Page viii ntt 201:MHBR058:mhjoh4:joh4fm: Preface Global marketing is one of the most exciting fields of business. With the emergence of China, India, Vietnam, Dubai, and other unlikely candidates for global pre-eminence, many people and many companies around the globe now believe in the basic soundness of globalization and free trade. Of course, there are clearly countries, companies, and people who have been shortchanged by the globalization process and who, not surpris- ingly, demand redress. While terrorism cannot—and, fortunately, is not—condoned by anybody sane, at least the antiglobalization activists are raising issues that the global marketer needs to pay attention to. But there are other challenges as well. Global marketing is very demanding profes- sionally. This goes for managing it or learning about it, and also for teaching it. It re- quires not only a good grasp of marketing principles and an understanding of the global environment, but also how the two interact—that is, how the environment im- pacts the applicability of the marketing principles. Good marketing might be good marketing everywhere—but this does not mean it is necessarily the same. The challenge when writing a text in global marketing is how to avoid being over- whelmed by all the curious and amazing differences in the marketing environment in foreign countries. These differences make things fun and enjoyable—but also frustrat- ing, since after a while it is difficult to see if any progress has been made. It is hard to see the forest for the trees. The key is to focus on the marketing decisions that have to be made—and then deal with those environmental factors that directly impact those de- cisions. This is the approach taken in this text. It discusses the complexities of global marketing and clarifies the managerial roles involved, without getting bogged down by the many environmental issues that are only marginally relevant. Key Features When compared to other texts on the subject, Global Marketing still has three main distinguishing features: 1. There are no introductory chapters on “the international environment” of politics, finance, legal issues, and economic regions. With the exception of culture, the book covers the environmental variables on an “as needed” basis, in the various chapters. 2. As opposed to the traditional view of one “marketing manager,” the typical global marketing manager’s job consists of three separate tasks: foreign entry, local mar- keting, and global management. Each requires different skills, as we will see. Our metaphor is that the marketer wears “three hats,” sometimes successively. In foreign entry, in global management, and to a large extent even as a local marketer in a for- eign country, the global marketer needs skills that the home market experience—or the standard marketing text—has rarely taught. The recognition of the three roles helps dispel the notion that “there is no such thing as international or global mar- keting, only marketing.” This sentiment has some truth to it, but mainly in the local marketing portion of the job. 3. The material is based on a foundation of strategy and the theory of the multinational firm—for the most practical of reasons, because the theory helps the marketing manager understand what drives the company expansion abroad and how and when to adapt the various marketing functions involved to local conditions. At the same time, much of the excellent research and tried-and-true teaching ma- terial that global marketers in business and academe have contributed over the years is reflected in the chapters and in the several cases that can be found at the end of each major section. My intent has been to retain and update much of the teaching and instructional material that has made global marketing such an exciting class in many business schools—and made for the start of an exciting managerial career—and to viii
joh81012_fm_i-xix 9/17/08 04:20am Page ix ntt 201:MHBR058:mhjoh4:joh4fm: Preface ix fit the material into a structure that reflects the global marketing management tasks. I have focused on material that is timely and up-to-date, and relevant to the global context. Target Audience and Possible Courses Global Marketing is aimed at the executive, the MBA student, or the senior under- graduate, none of whom is completely new to marketing or to the global environment. I have in mind a reader who is familiar with the basic marketing principles, and who has had some exposure to the international environment and the thrust toward a global economy. I have avoided unnecessarily complicated jargon—the global marketing job is inherently complex, and any opportunity to “keep it simple” has been capitalized on. The three-way partition of the book makes it possible to construct several alterna- tive course outlines from the book. • A complete course on “Global Marketing,” possibly using additional cases, is the “full-course” treatment. • A shorter “Global Marketing Management” course, perhaps for executives, could go straight from the fundamentals in the first three chapters to Part Four, “Global Man- agement,” starting with Chapter 11. This is one approach I have used at Georgetown. • An “International Marketing” course could focus on local marketing and global management, Parts Three and Four. • An “Export Marketing” course could select the foreign entry chapters from Part Two, and then do the local marketing chapters in Part Three plus the pricing and dis- tribution chapters in Part Four, “Global Management.” • At Georgetown I have also used the text in a second-year MBA class titled “Foreign Market Development,” for which I assign Parts Two and Three on foreign entry and local marketing, and then only the first three chapters of Part Four, “Global Management.” New to the Fifth Edition The fifth edition keeps the original structure (Foreign Entry, Local Marketing, Global Management) that has proved successful and popular among users. But based upon user and reviewer feedback, several changes have been introduced in order to make the text more relevant, useful, and up-to-date. The five major changes are: 1. There is a new chapter on “Global Branding” (Chapter 13). This chapter extends the branding discussion in the previous edition, and adds new material on brand equity and on the added value that “globality” confers upon a brand. It also introduces the concept of country branding. 2. The “Global Marketing Strategy” chapter (Chapter 11), leading off Part Four on “Global Management,” is a revised and updated version of the “Global Segmenta- tion and Positioning” chapter in the fourth edition. The chapter still covers new re- search on global segmentation and positioning, but adds new material on resource allocation across products and markets. 3. The “Global Product” and “Global Services” chapters have been consolidated into Chapter 12, made possible by breaking out “Global Brands” into its own chapter. This means the fifth edition has the same number of chapters as the fourth. 4. The region-specific chapters in Part Three on “Local Marketing”—mature markets in Chapter 8, new growth markets in Chapter 9, and emerging markets in Chapter 10—have been updated, taking into account not only economic developments such as China’s and India’s emergence as major players, but also the new Russia, Vietnam, and the Middle East.
joh81012_fm_i-xix 9/17/08 04:20am Page x ntt 201:MHBR058:mhjoh4:joh4fm: x Preface 5. The e-commerce material in Chapter 17 has been updated, revised, and extended, recognizing the amazing developments after the emergence of Web 2.0. There are also several other changes that serve to improve the coverage and incor- porate new thoughts and research findings in global marketing. The local market research discussion in Chapter 7 has been expanded to incorporate more of the mea- surement and sampling difficulties in various countries that jeopardize comparability across markets. And, of course, many of the illustrations of global marketing practice in the “Getting the Picture” boxes have been updated or newly written. Even with these changes, the basic structure of the text is the same as before. The sequence of an initial “Fundamentals” part followed by the three tasks involved in global marketing—foreign entry, local marketing, and global management—has proven resilient. According to instructor and student feedback, the structure facilitates both learning and teaching because it clarifies naturally the sometimes complex responsibilities and relationships that have to be managed in global marketing. Supplements Teaching a global marketing course requires more supplementary material than usual because of the amount of information about foreign countries that has to be provided. No one can master it all. I am pleased to say that the editorial staff at McGraw-Hill/Ir- win has helped me put together what I think is a very strong resource package. The supplements are especially designed by marketing professors, colleagues of mine, to help teachers of this course be more effective. We have taken care to offer the best supplements we could make available. Online Learning Center www.mhhe.com/johansson5e This supplement contains our Instructor’s Manual that is designed to assist instructors in meeting the varied curricular and pedagogical challenges inherent in teaching an In- ternational or Global Marketing course. The manual is particularly sensitive to the needs of various kinds of global marketing classroom situations and includes syllabus construction, pacing of topic coverage and other teaching suggestions, lecture outlines, discussion of end-of-chapter questions and supplemental readings based on the vary- ing perspectives and needs of the instructor. Included in this supplement are discus- sions of the PowerPoint slides and readings. The Test Bank consists of more than 1,400 questions designed to thoroughly test the comprehension of basic terminology and concepts as well as the student’s ability to ap- ply those concepts. The material in each of the text’s 18 chapters is tested by a battery of 60 multiple-choice, 10 short-answer, and 10 essay questions. Also included is a comprehensive set of PowerPoint slides, many new to this edition, including both in-text and out-of-text graphics. Acknowledgements As in the previous editions, I have tried to make the text as fun and interesting to read as possible! You will, of course, judge for yourself whether I have succeeded. Many people have helped. The fifth edition has built upon the contributions and inspiration of many people. First and foremost are my colleagues Claudiu Dimofte and Ilkka Ronkainen, who have been very instrumental in the work on global branding, in research, and for the text. Gary Bamossy, now a valued colleague here at Georgetown, was also very helpful not only with suggestions and reviews, but especially with the new material on the Web 2.0 development. And I want to thank Masoud Kavoossi at Howard University for his help with the new Middle East section, as well as general feedback on the text. My former assistant, Cipriano de Leon, provided independent ideas and views. I am also grateful to Raul Alvarez of Comcast, an international executive who helped revise, update, and improve the text. I also must thank a former student, Nick Matthews, now
joh81012_fm_i-xix 9/17/08 04:20am Page xi ntt 201:MHBR058:mhjoh4:joh4fm: Preface xi with KPMG in Melbourne, whose material and summaries on transfer pricing were in- valuable in the pricing chapter. The environment at Georgetown’s School of Business is still ideal, with its empha- sis on “international” as a school theme, the support of the Dean, and the resources made available through the McCrane/Shaker chair, including a reduced teaching load and secretarial assistance. Friends and colleagues like Michael Czinkota, Paul Almeida, Stan Nollen, Rob Grant, Kasra Ferdows, Tom Brewer, Dennis Quinn, and others in marketing and international business always provide a stimulating environ- ment for global work. The fifth edition owes much to travel, conferences, and colleagues at other acade- mic institutions as well. One conference in particular stands out. In May 2003, I took part in a Harvard symposium organized to celebrate the 30 years since Ted Levitt’s The Globalization of Markets was published. As for travel, the integrative field trips with the Georgetown MBAs to Shanghai in 2006 and Ho Chi Minh City in 2007 were very helpful with new and interesting insights from both academicians and practitioners. In the Middle East, Sheikh Dr. Mohammed Saleh Al-Sharqi, the Chairman of the Emi- rates Educational Services in Fujairah, and Dean Michael Owen at Zayed University in Dubai were very helpful and insightful. So was Per Johansson, my nephew, who is General Manager of Orica Mining Services and runs its venture in Dubai. Teaching ex- ecutive seminars in St. Petersburg also showed what is at stake when shifting a central command economy into a market-oriented society. Among international scholars, Jean-Claude Larreche and Philippe Lasserre at Insead, Pankaj Ghemawat at Harvard, Alan Rugman and Hans Thorelli at Indiana, Nick Pa- padopoulos at Carleton, Tamer Cavusgil at Georgia State, Gary Knight at Florida State, David Tse at University of Hong Kong, Gert Assmus at Tuck, Bodo Schlegelmilch in Vienna, Craig Smith at London Business School, Jagdish Sheth at Emory, John Farley at Tuck, Tage Madsen at Odense, and Masaaki Kotabe and Preet Aulakh at Temple have had a strong impact on my thinking. So have Jean-Claude Usunier at Universite Louis Pasteur in Strasbourg; Christian Homburg at Mannheim University; Masaaki Hirano at Waseda; Saeed Samie at Tulsa; Tomas Hult at Michigan State; Jens Laage-Hellman at Chalmers in Gothenburg; Mosad Zineldin at Vaxjo University; Israel Nebenzahl at Bar-Ilan University; Bernard Simonin, now at Tutts; and Carlos Garcia-Pont at IESE, Barcelona. Tyler Cowen at George Mason University was very insightful in analyzing popular music in the Caribbean. When it comes to global strategy, I have been greatly influenced by George Yip, now Dean at Rotterdam School of Management, Erasmus University, and Ikujiro Nonaka at Hitotsubashi University, both good friends and co-authors; Nick Binedell in Johannesburg; and Tadao Kagono at Kobe University. In global branding, the con- ference held at Georgetown in May 2001 helped my thinking a great deal. Special thanks go to the practitioners who presented their companies’ branding philosophy, especially Hikoh Okuda and Gary Podorowsky of Sony, Dan Bonawitz of Honda, and Allen Adamson at Landor. I also learned much from Rajeev Batra at Michigan; Erich Joachimsthaler, Head of Vivaldi Partners; and Kevin Keller at Tuck. I have benefited from discussions with Pradeep Rau and Sanal Mazvancheryl at George Washington University, Monty Graham at the Institute of International Economics (IIE) in Washington, Susan Douglas at New York University, Chris Macrae of the World Class Branding Network in London, Hiroshi Tanaka at Hosei University in Tokyo, Shigeo Kobayashi of Honda’s Future Research group, and Lia Nikopoulos of Landor Associates. In electronic commerce, I have learned a great deal from Bill McHenry at George- town, Eric Boyd now at James Madison University, and Mikael Karlsson at Reson AB in Stockholm. Among marketing colleagues, I want to single out David Montgomery, now at Singapore Management University; Claes Fornell at Michigan; Philip Kotler at Northwestern; Dominique Hanssens at UCLA; Evert Gummesson at the University of Stockholm; and John Graham at Irvine, who all have helped bridge the gap between in- ternational and noninternational research in marketing.
joh81012_fm_i-xix 9/17/08 04:20am Page xii ntt 201:MHBR058:mhjoh4:joh4fm: xii Preface Some of the practitioners I have had the good fortune to meet and learn from should also be thanked. Eddie Mak, the Director General of Hong Kong Economic and Trade Office was very persuasive about the opportunities in Asia. Paul Stiles with his back- ground on Wall Street and disenchantment with free markets has also influenced my thinking a great deal. Trevor Gunn at Medtronic, Nicholas Lugansky at Bechtel, and James R. Millar at George Washington University provided incisive information about Russian developments. Flip de Jager at Volvo, Chong Lee at LG Korea, Bruce Wolff at Marriott, and John Stabb at Microlog also stand out. So do Saburo Kobayashi; Osamu Iida and Takanori Sonoda at Honda; Masumi Natsusaka at Kao in Tokyo; Masaaki Eguchi also at Kao; Per Surtevall at SIFO, Stockholm; Hermawan Kartajaya of Mark- Plus in Jakarta; Ulf Södergren and Lars-Göran Johansson at Electrolux; Casey Shi- mamoto, formerly of ExecNet, Tokyo; and Jan Segerfeldt of Segerfeldt & Partners in Stockholm. Several of my present and former students provided valuable input of one kind or another, especially Paul Lewis and Mitchell Murata at Georgetown. I am especially grateful to the many people who have given me constructive feedback on the previous editions of the book. In particular, I want to thank Martin Cody of AIM International and Larry Cunningham at the University of Colorado in Denver. Nikolai Ostapenko at the University of Maryland and Georgetown was particularly helpful with the Russian material and with an overall review. Special thanks are due to the case writers who graciously allowed me to use their work in the book: Tamer Cavusgil, now at Georgia State; Per Jenster at Copenhagen Business School; Pamela Adams at Bocconi; Richard Köhler and Wolfgang Breuer at Cologne University; Dave Montgomery at Stanford; Kasra Ferdows at Georgetown; Christian Pinson and Vikas Tibrewala at INSEAD; Sandra Vandermerwe at Imperial College, London; George Yip at London Business School; Chei Hwee Chua, Peter Williamson, and Arnoud de Meyer at Insead; and Eddie Yu and Anthony Ko at City University of Hong Kong. The editorial staff at McGraw-Hill/Irwin deserves a great deal of credit. Laura Spell and Lori Bradshaw were great to work with, encouraging but also prompting me to get on with it. Michael Hruby behind the photos made it clear that there is more to a book than just the writing of it. I also wish to express my appreciation to the following indi- viduals for reviewing the fifth edition: Prema Nakra, Maris College; Jacqueline M. Stravos, Lawrence Technological University; Trini Callava, Miami Dade College; Fred L. Miller, Murray State University; and Roberto Sanchez, Oregon State University. Finally, I want to acknowledge the debt to my family. Tamiko, my Japanese wife, and Anna and Sonja, our two daughters with U.S. passports, faced firsthand the daily challenges of living in a multicultural and globalized city. To all these people I say thank you. I think all of us hope that the new millennium will deliver on the glowing promises of globalization despite a less than fortunate beginning. Washington, DC, July 2008 Johny K. Johansson
joh81012_fm_i-xix 9/25/08 11:02 PM Page xiii ntt 201:MHBR058:mhjoh4:joh4fm: Brief Contents Part One Fundamentals 1 Part Four Global Management 369 Chapter 1 The Global Marketing Task 3 Chapter 11 Global Marketing Strategy 371 Chapter 2 Theoretical Foundations 31 Chapter 12 Global Products and Services 401 Chapter 3 Cultural Foundations 57 Chapter 13 Global Branding 431 CASE 1-1: IKEA’s Global Strategy: Furnishing Chapter 14 Global Pricing 459 the World 85 Chapter 15 Global Distribution 487 CASE 1-2: Globalization Headaches at Chapter 16 Global Advertising 515 Whirlpool 90 Chapter 17 Global Promotion, E-Commerce, and Personal Selling 547 Part Two Foreign Entry 97 Chapter 18 Organizing for Global Chapter 4 Country Attractiveness 99 Marketing 575 Chapter 5 Export Expansion 129 CASE 4-1: Banyan Tree Hotels and Resorts: Chapter 6 Licensing, Strategic Alliances, Building an International Brand from FDI 157 an Asian Base 603 CASE 2-1: Toys “R” Us Goes to Japan 185 CASE 4-2: Texas Instruments: Global Pricing CASE 2-2: Illycaffe (A): Internationalization 189 in the Semiconductor Industry 615 CASE 2-3: Illycaffe (B): The Starbucks CASE 4-3: United Colors of Benetton 621 Threat 193 CASE 4-4: Cathay Pacific Airways: China CASE 2-4: AOL: International Expansion 196 or the World? 632 Part Three Local Marketing 205 CASE 4-5: Hewlett-Packard’s Global Account Chapter 7 Understanding Local Customers 207 Management 640 Chapter 8 Local Marketing in Mature Index 647 Markets 237 Chapter 9 Local Marketing in New Growth Markets 271 Chapter 10 Local Marketing in Emerging Markets 307 CASE 3-1: P&G’s Pert Plus: A Pan-European Brand? 343 CASE 3-2: Levi Strauss Japan K.K.: Selling Jeans in Japan 348 CASE 3-3: Colgate-Palmolive: Cleopatra in Quebec? 357 xiii
joh81012_fm_i-xix 9/17/08 04:20am Page xiv ntt 201:MHBR058:mhjoh4:joh4fm: Contents PART ONE The New Trade Theory 37 CSAs and Country-of-Origin Effects 38 FUNDAMENTALS 1 Firm-Specific Advantages (FSAs) 40 Knowledge-Based FSAs 41 Chapter 1 Marketing-Related FSAs 41 The Global Marketing Task 3 Transferability of FSAs 42 Going Global 5 FSAs and Internalization 44 The New Global Environment 6 FSAs and Transaction Costs 44 Antiglobalization and Terrorism 6 FSAs in the Value Chain 46 Anti-Americanism 7 FSAs, CSAs, and Regionalization 47 Fair Trade 7 Extending Porter’s “Five Forces” Model 48 Global Warming and Green Trade 9 Rivalry 48 The Flat World 10 New Entrants 50 The Dubai Phenomenon 11 Substitutes 50 Regionalization 13 Buyer Power 50 Key Concepts 14 Supplier Power 51 Global Marketing 14 Rivalry between Global Competitors 51 Multidomestic Markets 14 Competitive Strength 51 Global Markets 16 Competitive Repertoire 51 Global Products 16 Global Rivalry 51 Global and Local Brands 17 Strategy and the Three Hats 53 Leading Markets 17 Summary 54 First-Mover Advantages 18 The Product Life Cycle 19 Chapter 3 Why Companies Go Global 20 Cultural Foundations 57 Market Drivers 21 Introduction 59 Competitive Drivers 21 The Meaning of Culture 60 Cost Drivers 22 Culture and Buyer Behavior 60 Technology Drivers 22 Culture and Materialism 61 Government Drivers 23 Culture and the Core Benefit 63 Global Localization 23 Cultures across Countries 65 Developing Knowledge Assets 24 High versus Low Context Cultures 65 P&G New Products 24 “Silent Languages” 66 P&G Advertising 25 Hofstede’s Cultural Dimensions 66 P&G Distribution 25 Gannon’s Metaphors 69 Global Marketing Objectives 25 Culture and “How to Do Business” 70 Three Hats 26 Managerial Styles 70 The Foreign Entry Role 26 Managing Subordinates 71 The Local Marketing Role 26 Culture and Negotiations 72 The Global Management Role 27 Know Whom You Are Dealing With 72 Summary 27 Know What They Hear 73 Know When to Say What 74 Chapter 2 Industrial Buyers 75 Theoretical Foundations 31 The Business Marketing Task 75 Introduction 33 Cultural Conditioning 75 Country-Specific Advantages (CSAs) 33 Organizational Culture 76 Comparative and Absolute Advantages 34 Relationship Marketing 77 The International Product Cycle (1PC) 35 The Limits to Cultural Sensitivity 78 National Competitive Advantages 35 Nonadaptation 78 xiv
joh81012_fm_i-xix 9/17/08 04:20am Page xv ntt 201:MHBR058:mhjoh4:joh4fm: Contents xv Culture and the Three Hats 78 Exporting 131 Foreign Entry 78 Licensing 132 Local Marketing 79 Strategic Alliances (SAs) 132 Global Management 80 Wholly Owned Manufacturing Subsidiary 132 Summary 81 The Impact of Entry Barriers 133 CASE 1-1: IKEA’s Global Strategy: Furnishing the Entry Barriers Defined 133 World 85 The Cost of Barriers 134 CASE 1-2: Globalization Headaches at Whirlpool 90 The Importer’s View 134 Tariff and Nontariff Barriers 135 Government Regulations 136 PART TWO Distribution Access 136 FOREIGN ENTRY 97 Natural Barriers 137 Advanced versus Developing Nations 138 Chapter 4 Exit Barriers 138 Effect on Entry Mode 138 Country Attractiveness 99 The Exporting Option 139 Introduction 101 Indirect Exporting 140 Regional and Country Indicators 101 Direct Exporting 141 Political Risk Research 102 The Exporting Tasks 141 Environmental Research 104 Product Shipment 141 Physical Environment 105 Export Pricing 143 Sociocultural Environment 106 Local Distribution 147 Economic Environment 106 Payment 148 Trade Blocks and Regulatory Environment 106 Legal Issues 151 Systematic Entry Screening 106 After-Sales Support 151 Stage 1—Country Identification 106 Importers as Trade Partners 152 Stage 2—Preliminary Screening 107 Summary 153 Stage 3—In-Depth Screening 108 Stage 4—Final Selection 110 Chapter 6 Personal Experience 111 Country Data Sources 112 Licensing, Strategic Alliances, FDI 157 Researching Competitors 116 Introduction 159 Strengths and Weaknesses 116 Licensing 159 Franchising 161 Competitive Signaling 116 Original Equipment Manufacturing (OEM) 162 Forecasting Country Sales 117 A Basic Equation 117 Strategic Alliances 163 The Rationale for Nonequity SAs 163 Stage of the Product Life Cycle 117 Distribution Alliances 164 Industry Sales 118 Manufacturing Alliances 165 The Build-Up Method 118 R&D Alliances 165 Forecasting by Analogy 118 Joint Ventures 166 An Illustration: TV Penetration 119 Judgmental Forecasts 120 Manufacturing Subsidiaries 166 Outsourcing 167 Time Series Extrapolation 121 Acquisitions 168 Regression-Based Forecasts 121 Forecasting Market Share 123 Entry Modes and Marketing Control 169 Predicting Competition 123 Optimal Entry Strategy 171 The Entry Mode Matrix 171 Identifying Competitors 123 Optimal Modes 172 Domestic Competitors 124 Real-World Cases 173 Foreign Competitors 124 Summary 125 Global Expansion Paths 176 The “Cultural Distance” Effect 176 The International Learning Curve 176 Chapter 5 The Internationalization Stages 177 Export Expansion 129 Born Globals 178 Introduction 130 Waterfall versus Sprinkler Strategies 178 Four Modes of Entry 131 Summary 180
joh81012_fm_i-xix 9/17/08 04:20am Page xvi ntt 201:MHBR058:mhjoh4:joh4fm: xvi Contents CASE 2-1: Toys “R” Us Goes to Japan 185 Product Positioning 248 CASE 2-2: Illycaffe (A): Internationalization 189 Marketing Tactics 250 CASE 2-3: Illycaffe (B): The Starbucks Threat 193 Close-Up: Marketing in Japan 253 CASE 2-4: AOL: International Expansion 196 Market Environment 254 Foreign Trade Agreements 254 PART THREE Competition 254 Market Segmentation 255 LOCAL MARKETING 205 Product Positioning 256 Marketing Tactics 256 Chapter 7 Close-Ups: Marketing in Australia and New Zealand 258 Understanding Local Customers 207 Market Environment 258 Foreign Trade Agreements 259 Introduction 209 Competition 259 Buyer Decision Making 210 Market Segmentation 259 Problem Recognition 211 Product Positioning 260 Search 212 Marketing Tactics 261 Evaluation of Alternatives 212 Close-Up: Marketing in North America 262 Choice 213 Market Environment 262 Outcomes 214 Foreign Trade Agreements 264 Local Buyer Research 215 Competition 264 Problem Definition 215 Market Segmentation 265 Qualitative Research 217 Product Positioning 265 Consumer Surveys 217 Marketing Tactics 265 Trade Surveys 218 Summary 267 Observational Studies 219 Explanatory (Causal) Research 219 Chapter 9 Measurement and Scaling 220 Questionnaire Construction 221 Local Marketing in New Growth Markets 271 Sampling 222 Introduction 273 Fieldwork 222 Two Kinds of Markets 273 Local Market Segmentation 224 The Role of Trade Blocs 274 Segmentation Criteria 224 Market Segmentation 274 Local Product Positioning 227 Product Positioning 274 The Product Space 227 Marketing Tactics 275 Strategic Implications 228 Close-Up: Marketing in Latin America 276 Overcoming Mispositioning 229 Market Environment 277 Changing the Product Space 229 Foreign Trade Agreements 278 Changing Customer Preferences 230 Market Segmentation 279 Three Local Market Environments 231 Product Positioning 279 Marketing Environment 231 Marketing Tactics 280 Marketing Tasks 232 Major Country Markets 283 Country Markets 233 Pan-Regional Marketing 286 Summary 233 Close-Up: Marketing in the New Asian Growth Markets 287 Chapter 8 Market Environment 287 Local Marketing in Mature Markets 237 Foreign Trade Agreements 288 Market Segmentation 289 Introduction 239 Product Positioning 289 Local Marketing in Mature Markets 239 Marketing Tactics 290 Market Segmentation 239 Major Country Markets 293 Product Positioning 239 Pan-Regional Marketing 294 Marketing Tactics 240 Close-Up: Marketing in India 295 Customer Satisfaction 242 Market Environment 296 Close-Up: Pan-European Marketing 243 Market Segmentation 298 Market Environment 244 Product Positioning 299 Foreign Trade Agreements 245 Marketing Tactics 300 Competition 246 Summary 302 Market Segmentation 247
joh81012_fm_i-xix 9/17/08 04:20am Page xvii ntt 201:MHBR058:mhjoh4:joh4fm: Contents xvii Chapter 10 Global Market Planning 375 Local Marketing in Emerging Markets 307 The Boston Consulting Group Portfolio Matrix 376 The GE/McKinsey Matrix 377 Introduction 309 Ford’s Country Matrix 377 Local Marketing in Developing Countries 309 Global Resource Allocation 378 Market Segmentation 310 Global Market Segmentation 381 Product Positioning 311 Macrosegmentation 382 Pricing 311 Diversification versus Focus 385 Distribution 312 A Case Illustration 386 Promotion 312 Targeting Segments 387 Close-Up: Marketing in Russia and the Competitive Analysis 387 NDCs 312 Profitability Analysis 388 Market Environment 313 Global Product Positioning 389 Political and Legal Risks 315 Key Positioning Issues 390 Market Segmentation 316 Global STP Strategies 391 Product Positioning 318 Global Marketing Planning 393 Marketing Tactics 318 Summary 398 Close-Up: Marketing in China 323 Market Environment 323 Chapter 12 Foreign Entry 325 Global Products and Services 401 Hong Kong’s Role 327 Market Segmentation 328 Introduction 403 Product Positioning 328 The Pros and Cons of Standardization 403 Marketing Tactics 329 The Advantages of Standardization 404 Continuous Change 332 The Drawbacks of Standardization 405 Vietnam: Another China? 333 Which Features to Standardize? 406 Close-Up: Marketing in the Middle East 333 Localization versus Adaptation 406 Governing Structures 334 Basic Requirements 407 The Islam Factor 334 Compatibility Requirements 407 Market Environment 335 Multisystem Compatibility 407 Trade Blocs 335 Pitfalls of Global Standardization 408 Market Segmentation 336 Insufficient Market Research 408 Product Positioning 336 Overstandardization 408 Distribution 337 Poor Follow-Up 408 Promotion 338 Narrow Vision 408 Summary 338 Rigid Implementation 409 CASE 3-1: P&G’s Pert Plus: A Pan-European Global Product Lines 409 Brand? 343 Developing New Global Products 410 CASE 3-2: Levi Strauss Japan K.K.: Selling Idea Generation 411 Jeans in Japan 348 Preliminary Screening 411 CASE 3-3: Colgate-Palmolive: Cleopatra in Concept Research 412 Quebec? 357 Sales Forecast 413 Test Marketing 413 PART FOUR Globalizing Successful New Products 414 New Product Success Factors 414 GLOBAL MANAGEMENT 369 Speed of Diffusion 414 Global Services 416 Chapter 11 Characteristics of Services 416 Global Marketing Strategy 371 A Product Equivalence 417 Introduction 372 Service Globalization Potential 419 The Global Marketer’s Mindset 373 Stage of the Life Cycle 419 Selling Orientation 373 Infrastructure Barriers 419 Standardization 374 Idiosyncratic Home Market 420 Coordination 374 Foreign Entry of Services 420 Centralization 375 Foreign Trade in Services 420 The New Global Mindset 375 Service Entry Modes 421 Entry and Exit Barriers 422
joh81012_fm_i-xix 9/17/08 04:20am Page xviii ntt 201:MHBR058:mhjoh4:joh4fm: xviii Contents Controlling Local Service Quality 424 Systems Pricing 474 Critical Incidents in Global Services 424 Price and Positioning 475 Summary 425 Price–Quality Relationships 475 The PLC Impact 476 Chapter 13 Global Coordination 476 Global Branding 431 Pricing Actions against Gray Trade 478 Global Pricing Policies 481 Introduction 432 Polycentric Pricing 481 Brands Defined 434 Geocentric Pricing 481 Global, Regional, and Local Brands 435 Ethnocentric Pricing 481 Extending the Brand Concept 436 Managerial Trade-Offs 482 Nation Branding 436 Summary 483 Place Branding 437 How Brands Function 438 Chapter 15 Risk Avoidance and Trust 438 Global Distribution 487 Longevity and Familiarity 438 Iconic and Experiential 438 Introduction 488 Emotional Drivers 439 Distribution as Competitive Advantage 489 Cultural Differences 439 Rationalizing Local Channels 490 Brand Equity 440 Changing Distributors 490 Brand Valuation 441 Dual Distribution 491 The Advantages of Global Brands 444 Wholesaling 492 The Disadvantages of Global Brands 444 Vertical Integration 492 Global versus Local Brands 445 Types of Wholesalers 493 Acquiring a Local Brand? 446 Retailing 494 The Brand Portfolio 446 Retailing and Lifestyles 495 Globalizing a Local Brand 448 Creating New Channels 496 Changeover Tactics 449 Global Retailing 497 Defending Local Brands 449 Global Logistics 500 The Advantages of Local Brands 450 Competition and Technology 500 Counterfeit Products 452 Air Express 501 Extent of Problem 452 Ocean Carriers 502 Counterfeit Demand 453 Overland Transportation 503 Actions against Counterfeits 454 Warehousing 503 Summary 455 Parallel Distribution 504 Gray Trade 504 Chapter 14 Effects of Gray Trade 505 Global Pricing 459 Channel Actions against Gray Trade 506 Multiple Distribution Channels 508 Introduction 461 Global Channel Design 509 A Global Pricing Framework 461 The FSAs Revisited 509 Pricing Basics 463 Availability of Channels 509 The Role of Costs 463 Channel Tie-Up 509 Experience Curve Pricing 463 Coordination and Control 510 Competition 464 Summary 510 Demand 464 Financial Issues 465 Chapter 16 Exchange Rates 465 Global Advertising 515 Hedging 467 Government Intervention 468 Promotion as a Global Advantage 516 Transfer Pricing 468 The Global Advertising Task 518 Definition 468 The International World of Advertising 518 The Arm’s-Length Principle 469 Advertising Volume 518 Approaches to Transfer Pricing 470 Media Usage 520 Conflicting Objectives 470 Global Media 521 Countertrade 471 Strategic Implications 524 Business Evaluation 473
joh81012_fm_i-xix 9/17/08 04:20am Page xix ntt 201:MHBR058:mhjoh4:joh4fm: Contents xix Pros and Cons of Global Advertising 525 Global Personal Selling 565 Cost Advantages 526 Managing a Sales Force 565 Global Markets 526 Personal Salesmanship 566 Global Products and Brands 526 The Presentation 567 Globalization Examples 527 Be Prepared! 568 The Global Advertiser’s Decisions 528 Handling Objections 569 Strategy 529 Closing Tactics 569 Budgeting and Organization 531 Integrated Marketing Communications 570 The Global Advertising Agency 532 Summary 571 Agency Globalization 532 The Agency’s Task 532 Chapter 18 Message and Creative 535 Organizing for Global Marketing 575 Identical Ads 535 Prototype Advertising 536 Introduction 577 Pattern Standardization 536 The Context 577 Media Selection 537 The Task 577 The Digitalization of Advertising 539 Organizational Structure 578 Close-Up: Goodyear in Latin America 540 A Dominant Regional Structure? 583 1. Preliminary Orientation (September) 540 The Global Network as an Asset 584 2. Regional Meeting to Define Communications Painful History 584 Strategy (October) 540 The Win–Win View 584 3. Advertising Creative Meeting (November) 541 Globalizing Management 586 4. Qualitative Research Stage (November-December) 542 Global Marketing Directors 587 5. Research Review Meeting (January) 542 Global Teams 587 6. Final Creative Review (March) 542 Management Systems 588 Lessons 543 Informal Coordination 588 Summary 543 Coordinating Committees 588 Coordinating Staff 589 Chapter 17 People and Organizational Culture 589 Local Acceptance 589 Global Promotion, E-Commerce, Corporate Culture 591 and Personal Selling 547 The Expatriate Manager 591 Introduction 549 Global Customers 592 Global Sales Promotion 549 Global Account Management 593 In-Store and Trade Promotions 550 Retail Trade Groups 594 Sponsorships 551 Conflict Resolution 594 Event Marketing 552 The Good Global Marketer 597 Cause Marketing 552 Summary 598 Cross-Marketing 553 CASE 4-1: Banyan Tree Hotels and Resorts: Building Product Placement 554 an International Brand from an Asian Base 603 Publicity 554 CASE 4-2: Texas Instruments: Global Pricing in the “GoodNews... 554 ” Semiconductor Industry 615 “... and Bad News” 555 CASE 4-3: United Colors of Benetton 621 Global Public Relations 555 CASE 4-4: Cathay Pacific Airways: China or International Trade Fairs 557 the World? 632 Direct Marketing 558 CASE 4-5: Hewlett-Packard’s Global Account Global Strategy 558 Management 640 Electronic Commerce 559 E-tailing Growth 560 Index 647 Marketing Strengths and Weaknesses 563 Promoting the Site 564
joh81012_ch01_001-030.qxd 8/20/08 9:57 PM Page 1 TEAM-B 201:MHBR058:mhjoh4:joh4ch01: 1 Part Fundamentals The globalization of today’s marketplace makes many new demands on a marketer. Not only are there important decisions to be made about which countries’ markets and segments to participate in and what modes of entry to use, but a marketer must also help formulate the marketing strategies in these countries and coordinate their imple- mentation. He or she must speak for the local markets at headquarters but also explain the need for global standardization to local representatives. It is a job in which proven marketing techniques and face-to-face contacts are invaluable and one that requires a thorough grasp of marketing fundamentals and use of global communications. Part One of this book shows how meeting these complex demands forces the mar- keting manager and his or her organization to reevaluate their marketing strategies. The desire to expand abroad needs to be tempered by a clear understanding of the firm’s strengths and weaknesses. This analysis involves an in-depth reassessment of what makes the company successful at home and whether competitive advantages can be successfully transferred to foreign markets. It also requires an astute appraisal of how the company can best operate in a new cultural environment. It is not surprising that one primary concern, for both the small firm marketing abroad for the first time and the large multinational corporation trying to implement a global strategy, is the feasibility of a global marketing plan. As always, a critical issue for management is knowing not only what the company should do, but what it can do. This is never more relevant than in global marketing with its new and unfamiliar challenges, including the rise of China and India and the challenges from the recent global turmoil.
joh81012_ch01_001-030.qxd 8/20/08 9:57 PM Page 3 TEAM-B 201:MHBR058:mhjoh4:joh4ch01: Chapter 1 The Global Marketing Task “Brave new millennium” After reading this chapter, you will be able to: 1. Explain why the opening of previously closed economies has led to greater global market opportunities but also to the threat of disruptions by terrorism and antiglobalization forces. 2. Judge whether an industry and company is ready for global strategies and should start thinking about standardizing the various marketing mix tools. 3. Identify the many reasons for going abroad, not just sales and profits. A company might enter a foreign market to challenge a competitor, to learn from lead cus- tomers, or to diversify its demand base. 4. Understand why global marketing involves new marketing skills, for example how to enter markets and how to manage the marketing effort in the local foreign market. 5. Separate the job (and career path) of the global marketing manager into three quite different tasks: foreign entry, local marketing abroad, and global management. Chapter 1 describes the reality facing the marketing manager in today’s global firm. As trade barriers are lowered, new growth opportunities in foreign markets open up and new markets are ready to be entered. At the same time, antiglobalization sen- timents are kindled, leading to demands for concessions to local conditions. Foreign competitors enter local markets and previously unchallenged market positions need to be defended. The firm whose managers have a narrow view of its capabilities and its market will fall short. The purely domestic company often does not have enough man- agerial skill, imagination, and competence to respond to the opportunities or the threats of a global marketplace. Only by taking the leap and going abroad into com- petitive markets will a company stretch its resources and build the capability of its managers to a competitive level. Chapter 1 illustrates how open markets and free competition have changed market- ing and how the global marketer is forced by antiglobalization demands to become more than a functional specialist. Today’s marketers must develop skills that help to determine the overall strategic direction of the firm and its place in the local economy. This chapter describes the three main tasks of the complex new global marketing endeavor—foreign entry, local marketing abroad, and global management, each an important component of the strategic capability of the manager and the firm. 3
joh81012_ch01_001-030.qxd 8/20/08 9:57 PM Page 4 TEAM-B 201:MHBR058:mhjoh4:joh4ch01: 4 Part One Fundamentals Globalizing the iPod The iPod, Apple Computer’s breakthrough music player that can store and play thousands of songs (the latest figure is a mind-boggling 40,000) from a handheld computer no bigger than a cigarette pack, provides a striking illustration of what global marketing is all about. When Steve Jobs, CEO of Apple Inc., first introduced the iPod in October 2001, it was received with skepticism. The digital music player was considered only marketable to a small, tech-savvy group of individuals, and the high price (starting at $399) made failure seem inevitable. The downloading of songs to the hard disk of a computer required a Mac computer, and the iPod was not us- able on a standard PC. But Steve Jobs proved critics wrong. Now, years later, iPod’s success has been unmatched by any other digital music product in the world. Millions have been sold internationally at premium prices and it has shot Apple Inc. back into the mainstream market, long dominated by Microsoft’s Windows. The iPod has changed the market for digital music and the consumer demo- graphics. The iPod gives consumers the freedom to control their environment and choose music that fits their mood. Digital music is cool not “geeky,” and the iPod perpetuates the stylishness with its sleek design. These seemingly unimpor- tant features make it the same kind of breakthrough that Sony’s Walkman became back in 1979. With its success in the United States, Apple did not lose time capitalizing on overseas potential. Introducing the iPod in Europe through its existing Mac deal- erships, the sales rapidly rose despite the high price tags. Japan was also pene- trated through the strong dealers already available. The one problem was capacity constraints—the success at home in the United States placed a strain on overseas expansion. But as early as March 2004, international sales of the iPod amounted to 43 percent of revenues, and the company posted a quarterly profit of 46 million U.S. dollars on iPod sales, tripling profits from the year before. Steve Jobs and Apple were not standing still. Pressured by technological devel- opment and competitive imitation, the iPod was continuously upgraded with in- creased capability of storing songs, adding video and photo storage capability. Simultaneously, prices for the original units were coming down. Targeting the huge Windows market, and also to preempt competition, in 2003 Apple devel- oped a model that would work with PCs. Nevertheless, by 2004 Dell and other computer makers offered their own versions of the iPod. Typical of the high-tech industry, Apple also began releasing new models, in- cluding the Mini iPod, which was about as small as a credit card and initially held “only” about 1,000 songs. To overcome the copyright infringement problems of downloading songs the company launched the iTunes Music Store, which allows people to legally download one song at a time off the Internet for $0.99. If younger users do not have a credit card to pay with, parents usually do. Apple has also launched promotional alliances offering free downloads—such as Sprite buy- ers getting a number code for one free song. Since its opening, the online store has sold more that 100 million songs. Apple has also offered its iPod customers a wide range of subproducts that can be used with the iPod, including speakers and designer cases. And since July 2004, BMW drivers have been able to integrate their iPod stylishly into their car’s sound system with a simple plug-in adapter. By 2004, Apple was ready for the huge China market and struck up an alliance with Founder, China’s largest PC distributor. Founder includes the Apple iTunes software (necessary for iPod use) in all of their computers. Wei Xin, chairman of Founder Group and Founder Technology, says, “Digital music is becoming very important to the Chinese PC market, and Apple’s iTunes is the runaway market leader. As the first Chinese company to bundle this innovative software with our PCs, we are excited to provide our customers with the world’s best digital music