Marketing management Chapter 21 pptx

IN THIS CHAPTER, WE WILL ADDRESS THE FOLLOWING QUESTIONS: 1. What factors should a company review before deciding to go 2. How can companies evaluate and select specific foreign markets to enter? 3. What are the major ways of entering a foreign market? 4. To what extent must the company adapt its products and marketing program to each foreign country? 5. How should the company manage and organize its international activities? CHAPTER 21 TAPPING INTO GLOBAL MARKETS •••••••••••i With faster communication, transportation, and financial flows, the world is rapidly shrinking. Products developed in one country—- Gucci purses, Mont Blanc pens, McDonald's hamburgers, Japanese sushi, Chanel suits, German BMWs—are finding enthusiastic accep- tance in others. A German businessman may wear an Armani suit to meet an English friend at a Japanese restaurant, who later returns home to drink Russian vodka and watch an American soap on TV. Consider the international success of Red Bull. iillion-dollar brand in less than 15 years, Red Bull has gained 70 >ercent of the worldwide energy drink market by skillfully con- necting with global youth. Founded in Austria by Dietrich Matescnitz, Red Bull was introduced into its first foreign market, Hungary, in 1992, and is now sold in over 100 countries. Red Bull consists of amino acid taurine, B-comp/ex vitamins, caffeine, and carbohydrates. The drink was sold I originally in only one size—the silver 250 ml (8.3 oz.) can—and received little traditional advertising support beyond animated television commercials with the tagline "Red Bull Gives You Wiiings." Red Bull built buzz about the product through its "seeding program": the company microtargets "in" shops, clubs, bars, and stores, gradually moves from bars and clubs to convenience stores and restaurants, and finally enters supermarkets. It targets "opinion leaders" by making Red Bull available at sports competitions, in limos before Red Bull X-Fighters event, 2004. 668 PART 8 CREATING SUCCESSFUL LONG-TERM GROWTH • III Competing on a Global Basis Two hundred giant corporations, most of them larger than many national economies, have sales that in total exceed a quarter of the world's economic activity. On that basis, Philip Morris is larger than New Zealand and operates in 170 countries. International trade in 2003 accounted for over one-quarter of U.S. GDP, up from 11 percent in 1970. 2 Many companies have conducted international marketing for decades—Nestle, Shell, Bayer, and Toshiba are familiar to consumers around the world. But global competition is intensifying. Domestic companies that never thought about foreign competitors suddenly find them in their backyards. Newspapers report on the gains of Japanese, German, Swedish, and Korean car imports in the U.S. market, and the loss of textile and shoe markets to imports from developing countries in Latin America, Eastern Europe, and Asia. Many companies that are thought to be American firms are really foreign firms. Dannon, Red Roof Inn, Wild Turkey, Interscope, and L'Oreal, for example, are all French-owned. 3 Although some U.S. businesses may want to eliminate foreign competition through protective legislation, the better way to compete is to continuously improve products at home and expand into foreign markets. A global industry is an industry in which the strategic positions of competitors in major geographic or national markets are funda- mentally affected by their overall global positions. 4 A global firm is a firm that operates in more than one country and captures R&D, production, logistical, marketing, and financial advantages in its costs and reputation that are not available to purely domestic competitors. Global firms plan, operate, and coordinate their activities on a worldwide basis. Ford's "world truck" has a European-made cab and a North American-built chassis, is assembled in Brazil, and is imported into the United States for sale. Otis Elevator gets its door systems from France, small geared parts from Spain, electronics from Germany, and special motor drives from Japan; it uses the United States for systems integration. One of the most successful global companies is ABB, formed by a merger between the Swedish company ASEA and the Swiss company Brown Boveri. 5 ABB ABB's products include power transformers, electrical installations, instrumentation, auto components, air- conditioning equipment, and railroad equipment. The company has annual revenues of $32 billion and 200,000 employees. Its motto: "ABB is a global company local everywhere." English is its official language (all ABB man- award shows, and at exclusive after-parties. Red Bull also built its cool image through sponsorship of extreme sports like its X-Fighters events, and unique grass- roots efforts. In cities throughout the world, for example, the company sponsors an annual Flugtag where contestants build flying machines that they launch off ramps into water, true to the brand's slogan! 1 Although the opportunities for companies to enter and compete in foreign markets are significant, the risks can also be high. Companies selling in global industries, however, really have no choice but to internationalize their opera- tions. In this chapter, we review the major decisions in expanding into global markets. > TAPPING INTO GLOBAL MARKETS CHAPTER 21 669 agers must be conversant in English), and all financial results must be reported in dollars. ABB aims to reconcile three contradictions: to be global and local; to be big and small; and to be radically decentralized with central- ized reporting and control. It has fewer than 200 staff at company headquarters in Switzerland, compared to the 3,000 people who populate the Siemens headquarters. The company's many product lines are organized into 8 business segments, 65 business areas, 1,300 companies, and 5,000 profit centers, with the average employee belonging to a profit center of around 50 employees. Managers are regularly rotated among countries and mixed-nationality teams are encouraged. Depending on the type of business, some units are treated as super- local businesses with lots of autonomy, while others are governed with major central control and are considered global businesses. 6 A company need not be large, however, to sell globally. Small and medium-sized firms can practice global nichemanship. The Poilane Bakery sells 15,000 loaves of old-style bread each day in Paris—2.5 percent of all bread sold in that city—via company-owned delivery trucks. But each day, Poilane-branded bread is also shipped via FedEx to loyal customers in roughly 20 countries around the world. 7 For a company of any size to go global, it must make a series of decisions (see Figure 21.1). We'll examine each of these decisions here. ::: Deciding Whether to Go Abroad Most companies would prefer to remain domestic if their domestic market were large enough. Managers would not need to learn other languages and laws, deal with volatile cur- rencies, face political and legal uncertainties, or redesign their products to suit different customer needs and expectations. Business would be easier and safer. Yet several factors are drawing more and more companies into the international arena: a The company discovers that some foreign markets present higher profit opportunities than the domestic market. H The company needs a larger customer base to achieve economies of scale. a The company wants to reduce its dependence on any one market. n Global firms offering better products or lower prices can attack the company's domestic market. The company might want to counterattack these competitors in their home markets. B The company's customers are going abroad and require international servicing. Before making a decision to go abroad, the company must weigh several risks: n The company might not understand foreign customer preferences and fail to offer a com- petitively attractive product. a The company might not understand the foreign country's business culture or know how to deal effectively with foreign nationals. a The company might underestimate foreign regulations and incur unexpected costs. & The company might realize that it lacks managers with international experience. E The foreign country might change its commercial laws, devalue its currency, or undergo a political revolution and expropriate foreign property. Because of the conflicting advantages and risks, companies often do not act until some event thrusts them into the international arena. Someone—a domestic exporter, an international importer, a foreign government—solicits the company to sell abroad, or the company is saddled with overcapacity and must find additional markets for its goods. Most countries lament that too few of their companies participate in international trade. This keeps the country from earning foreign exchange to pay for needed imports. It also raises the specter of domestic companies eventually being hurt or taken over by foreign multinationals. These countries are trying to encourage their domestic companies to grow domestically and expand globally. Many countries sponsor aggressive export-promotion programs to get their companies to export. These programs require a deep understanding of how companies become internationalized. Deciding whether to go abroad Deciding which markets to enter Deciding on the marketing organization FIG. 21.1 Major Decisions in International Marketing 670 PART 8 CREATING SUCCESSFUL LONG-TERM GROWTH < The company logo being carved into a loaf of Poilane bread, which is shipped daily via FedEx to loyal customers in countries around the world. The internationalization process has four stages: 8 1. No regular export activities. 2. Export via independent representatives (agents). 3. Establishment of one or more sales subsidiaries. 4. Establishment of production facilities abroad. The first task is to get companies to move from stage 1 to stage 2. This move is helped by studying how firms make their first export decisions. 9 Most firms work with an independent agent and enter a nearby or similar country. A company then engages further agents to enter additional countries. Later, it establishes an export department to manage its agent relationships. Still later, the company replaces its agents with its own sales subsidiaries in its larger export markets. This increases the company's investment and risk, but also its earning potential. To manage these subsidiaries, the company replaces the export department with an international department. If certain markets continue to be large and stable, or if the host country insists on local production, the company takes the next step of locating production facilities in those markets. This means a still larger commitment and still larger potential earnings. By this time, the company is operating as a multinational and is engaged in optimizing its global sourcing, financing, manufacturing, and marketing. According to some researchers, top management begins to pay more attention to global opportunities when they find that over 15 percent of revenues comes from foreign markets. 10 Deciding Which Markets to Enter In deciding to go abroad, the company needs to define its marketing objectives and policies. What proportion of foreign to total sales will it seek? Most companies start small when they venture abroad. Some plan to stay small; others have bigger plans. Ayal and Zif have argued that a company should enter fewer countries when: a Market entry and market control costs are high. £3 Product and communication adaptation costs are high. H Population and income size and growth are high in the initial countries chosen. n Dominant foreign firms can establish high barriers to entry. 11 How Many Markets to Enter The company must decide how many countries to enter and how fast to expand. Consider Amway's experience: AM WAY Amway Corp., one of the world's largest direct-selling companies, markets its products and services through independent business owners worldwide. Amway expanded into Australia in 1971. In the 1980s, it moved into 10 more countries. By 2004, Amway had evolved into a multinational juggernaut with a sales force of more than 3.6 million independent distributors hauling in S4.5 billion in sales. Established in 1998, Amway India quickly grew to 200,000 active Amway distributors by 2004. Amway currently sells products in 80 countries and territories worldwide. The corporate goal is to have overseas markets account for 80 percent of its sales. This is not unrealistic or overly ambitious considering that Amway already gains 70 percent of its a sales from markets outside North America. 12 > TAPPING INTO GLOBAL MARKETS CHAPTER 21 671 A company's entry strategy typically follows one of two possible approaches: a waterfall approach, in which countries are gradually entered sequentially; or a sprinkler approach, in which many countries are entered simultaneously within a limited period of time. Increasingly, especially with technology-intensive firms, they are born global and market to the entire world right from the outset. 13 Generally speaking, companies such as Matsushita, BMW, and General Electric, or even newer companies such as Dell, Benetton, and The Body Shop, follow the waterfall approach. Expansion can be carefully planned and is less likely to strain human and financial resources. When first-mover advantage is crucial and a high degree of competitive intensity prevails, the sprinkler approach is preferred, as when Microsoft introduces a new form of Windows software. The main risk is the substantial resources involved and the difficulty of planning entry strategies in so many potentially diverse markets. The company must also decide on the types of countries to consider. Attractiveness is influenced by the product, geography, income and population, political climate, and other factors. Kenichi Ohmae recommends that companies concentrate on selling in the "triad markets"—the United States, Western Europe, and the Far East—because these markets account for a large percentage of all international trade. 14 Developed versus Developing Markets Although Ohmae's position makes short-run sense, it can spell disaster for the world econ- omy in the long run. The unmet needs of the emerging or developing world represent huge potential markets for food, clothing, shelter, consumer electronics, appliances, and other goods. Many market leaders are rushing into Eastern Europe, China, and India. Colgate now draws more personal and household products business from Latin America than North America. 15 The developed nations and the prosperous parts of developing nations account for less than 15 percent of the world's population. Is there a way for marketers to serve the other 85 percent, which has much less purchasing power? Successfully entering developing markets requires a special set of skills and plans. Consider how the following companies are pioneer- ing ways to serve these invisible consumers: 16 s Grameen-Phone markets cell phones to 35,000 villages in Bangladesh by hiring village women as agents who lease phone time to other villagers, one call at a time. n Colgate-Palmolive rolls into Indian villages with video vans that show the benefits of toothbrushing; it expects to earn over half of its Indian revenue from rural areas by 2003. H An Indian-Australian car manufacturer created an affordable rural transport vehicle to compete with bullock carts rather than cars. The vehicle functions well at low speeds and carries up to two tons. n Fiat developed a "third-world car," the Palio, that far outsells the Ford Fiesta in Brazil and that will be launched in other developing nations. a Corporacion GEO builds low-income housing in Mexico. The two-bedroom homes are modular and can be expanded. The company is now moving into Chile and southern U.S. communities. s A Latin American building-supply retailer offers bags of cement in smaller sizes to customers building their own homes. These marketers are able to capitalize on the potential of developing markets by changing their conventional marketing practices to sell their products and services more effectively. 17 It cannot be business as usual when selling in developing markets. Economic and cultural differences abound; a marketing infrastructure may barely exist; and local competition can be surprisingly stiff. In China, PC maker Legend and mobile-phone provider TCL have thrived despite strong foreign competition. Besides their close grasp on Chinese tastes, they also have their vast distribution networks, especially in rural areas. 18 Smaller packaging and lower sales prices are often critical in markets where incomes are limited. Unilever's 4-cent sachets of detergent and shampoo have been a big hit in rural India, where 70 percent of the country's population still lives. When Coke moved to a smaller, 200 ml bottle in India, selling for 10 to 12 cents in small shops, bus-stop stalls, and roadside 672 PART 8 CREATING SUCCESSFUL LONG-TERM GROWTH eateries, sales jumped. 19 A Western image can also be helpful, as Coke discovered in China. Part of its success against local cola brand Jianlibao was due to its symbolic values of moder- nity and affluence. 20 Recognizing that its cost structure made it difficult to compete effectively in developing markets, Procter & Gamble devised cheaper, clever ways to make the right kinds of products to suit consumer demand. It now uses contract manufacturers in certain markets and gained eight share points in Russia for Always feminine protection pads by responding to consumer wishes for a thicker pad. 21 Due to a boom in consumer spending, Russia has been the fastest-growing market for many major multinationals, including Nestle, L'Oreal, and IKEA. 22 The challenge is to think creatively about how marketing can fulfill the dreams of most of the world's population for a better standard of living. Many companies are betting that they can do that. i— GENERAL MOTORS After launching Buick in China in 1999, GM poured more than $2 billion into the region over the next five years, expanding the lineup to 14 models, ranging from the $8,000 Chevrolet Spark mini-car to high-end Cadillacs. Although competition in the third-largest car market is fierce, GM was able to secure 11 percent market share in 2004 and reap sizable profits. But initial gains in the Chinese market do not necessarily spell long-term success. After investing to establish the markets, foreign pioneers in television sets and motorcy- cles saw domestic Chinese firms emerge as rivals. In 1995, virtually all mobile phones in China were made by global giants Nokia, Motorola, and Ericsson. Within 10 years, their market share had dropped to 60 percent. To secure and build on its gains, General Motors pledged to invest another S3 billion in the region to • boost capacity and build its reputation. 23 A Russian ad for Nestle s Nescafe. As consumer spending has risen in Russia, the market for products of major multinationals like Nestle has boomed. TAPPING INTO GLOBAL MARKETS CHAPTER 21 673 Regional Free Trade Zones Regional economic integration—trading agreements between blocs of countries—has inten- sified in recent years. This development means that companies are more likely to enter entire regions at the same time. Certain countries bave formed free trade zones or economic communities—groups of nations organized to work toward common goals in the regulation of international trade. One such community is the European Union (EU). 3 EAN UNION Formed in 1957, the European Union set out to create a single European market by reducing barriers to the free flow of products, services, finances, and labor among member countries, and by developing trade policies with nonmember nations. Today, the European Union is one of the world's largest single markets. The 15 member countries making up the EU increased by 10 in May 2004 with the addition of Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. The EU now contains more than 454 million consumers and accounts for 23 percent of the world's exports. It has a common currency, the euro monetary system. European unification offers tremendous trade opportunities for non-European firms. However, it also poses threats. European companies will grow bigger and more competitive. Witness the competition in the aircraft industry between Europe's Airbus consortium and Boeing in the United States. Perhaps an even bigger concern, however, is that lower barriers inside Europe will only create thicker outside walls. Some observers envision a "fortress Europe" that heaps favors on firms from EU countries but hinders outsiders by imposing obstacles such as stiffer import quotas, local content requirements, and other nontariff (nontax) barriers. Also, companies that plan to create "pan-European" marketing campaigns directed to a unified Europe should proceed with caution. Even as the EU standardizes its general trade regulations and currency, creating an economic community will not create a homogeneous market. Companies marketing in Europe face 14 different languages, 2,000 years of histori- cal and cultural differences, and a daunting mass of local rules. NAFTA Closer to home, in North America, the United States and Canada phased out trade barriers in 1989. In January 1994, the North American Free Trade Agreement (NAFTA) established a free trade zone among the United States, Mexico, and Canada. The agreement created a single market of 360 million people who produce and consume $6.7 trillion worth of goods and services annually. As it is implemented over a 15-year period, NAFTA will eliminate all trade barriers and investment restrictions among the three countries. Prior to NAFTA, tariffs on American products entering Mexico averaged 13 percent, whereas U.S. tariffs on Mexican goods averaged 6 percent. )SUL Other free trade areas are forming in Latin America. For example, MERCOSUL now links Brazil, Argentina, Paraguay, and Uruguay. Chile and Mexico have formed a successful free trade zone. It is likely that NAFTA will eventually merge with this and other arrangements to form an all-Americas free trade zone. It is the European nations that have tapped Latin America's enormous potential. As Washington's efforts to extend NAFTA to Latin America have stalled, European countries have moved in with a vengeance. When Latin American countries instituted market reforms and privatized public utilities, European companies rushed in to grab up lucrative contracts for rebuilding Latin America's infrastructure. Spain's Telefonica de Espana spent $5 billion buying phone companies in Brazil, Chile, Peru, and Argentina. In Brazil, seven of the ten largest private companies are European owned, compared to two controlled by Americans. Among the notable European companies operating in Latin America are automotive giants Volkswagen and Fiat, the French supermarket chain Carrefours, and the Anglo-Dutch personal-care products group Gessy-Lever. APEC Twenty-one Pacific Rim countries, including the NAFTA member states, Japan, and China, are working to create a pan-Pacific free trade area under the auspices of the Asian Pacific Economic Cooperation forum (APEC). There are also active attempts at regional economic integration in the Caribbean, Southeast Asia, and parts of Africa. Evaluating Potential Markets Yet, however much nations and regions integrate their trading policies and standards, each nation still has unique features that must be understood. A nation's readiness for different 674 PART 8 CREATING SUCCESSFUL LONG-TERM GROWTH FIG. 21.2 I Five Modes of Entry into Foreign Markets products and services and its attractiveness as a market to foreign firms depend on its economic, political-legal, and cultural environments. Suppose a company has assembled a list of potential markets to enter. How does it choose among them? Many companies prefer to sell to neighboring countries because they understand these countries better and can control their costs more effectively. It is not surprising that the two largest U.S. export markets are Canada and Mexico, or that Swedish companies first sold to their Scandinavian neighbors. As growing numbers of U.S. companies expand abroad, many are deciding the best place to start is next door. At other times, psychic proximity determines choices. Many U.S. firms prefer to sell in Canada, England, and Australia—rather than in larger markets such as Germany and France— because they feel more comfortable with the language, laws, and culture. Companies should be careful, however, in choosing markets according to cultural distance. Besides the fact that potentially better markets may be overlooked, it also may result in a superficial analysis of some very real differences among the countries. It may also lead to predictable marketing actions that would be a disadvantage from a competitive standpoint. 24 Regardless of how chosen, it often makes sense to operate in fewer countries with a deeper commitment and penetration in each. In general, a company prefers to enter countries (1) that rank high on market attractiveness, (2) that are low in market risk, and (3) in which it possesses a competitive advantage. Here is how Bechtel Corporation, the construc- tion giant, goes about evaluating overseas markets. BECHTEL CORPORATION Bechtel provides premier technical, management, and directly related services to develop, manage, engineer, build, and operate installations for customers in nearly 60 countries worldwide. Before Bechtel ventures into new markets, the company starts with a detailed strategic market analysis. It looks at its markets and tries to determine where it should be in four or five years' time. A management team does a cost-benefit analysis that factors in the position of competitors, infrastructure, regulatory and trade barriers, and the tax situation (both corporate and individual). Ideally, the new market should be a country with an untapped need for its products or services; a quality, skilled labor pool capable of manufacturing the product; and a welcoming environment (gov- ernmental and physical). Are there countries that meet Bechtel's requirements? Although Singapore has an edu- cated, English-speaking labor force, basks in political stability, and encourages foreign investment, it has a small population. Although many countries in central Europe possess an eager, hungry-to-learn labor pool, their infrastructures create difficulties. The team evaluating a new market must determine whether the company could earn enough on its investment to cover the risk factors or other negatives. 25 • • • • • • Deciding How to Enter the Market Once a company decides to target a particular country, it has to determine the best mode of entry. Its broad choices are indirect exporting, direct exporting, licensing, joint ventures, and direct investment. These five market-entry strategies are shown in Figure 21.2. Each suc- ceeding strategy involves more commitment, risk, control, and profit potential. Indirect and Direct Export The normal way to get involved in an international market is through export. Occasional exportingis a passive level of involvement in which the company exports from time to time, either on its own initiative or in response to unsolicited orders from abroad. Active exporting takes place when the company makes a commitment to expand into a particular market. In either case, the company produces its goods in the home country and might or might not adapt them to the international market. Companies typically start with indirect exporting—that is, they work through independent intermediaries. Domestic-based export merchantsbuy the manufacturer's products and then sell them abroad. Domestic-based export agents seek and negotiate foreign purchases and are paid a commission. Included in this group are trading companies. Cooperative orga- nizations carry on exporting activities on behalf of several producers and are partly under their administrative control. They are often used by producers of primary products such as • TAPPING INTO GLOBAL MARKETS CHAPTER 21 675 fruits or nuts. Export-management companies agree to manage a company's export activities for a fee. Indirect export has two advantages. First, it involves less investment: The firm does not have to develop an export department, an overseas sales force, or a set of international con- tacts. Second, it involves less risk: Because international-marketing intermediaries bring know-how and services to the relationship, the seller will normally make fewer mistakes. Companies eventually may decide to handle their own exports. 26 The investment and risk are somewhat greater, but so is the potential return. A company can carry on direct exporting in several ways: • Domestic-based export department or division. Might evolve into a self-contained export department operating as a profit center. u Overseas sales branch or subsidiary. The sales branch handles sales and distribution and might handle warehousing and promotion as well. It often serves as a display and customer service center. o Traveling export sales representatives. Home-based sales representatives are sent abroad to find business. • Foreign-based distributors or agents. These distributors and agents might be given exclusive rights to represent the company in that country, or only limited rights. Whether companies decide to export indirectly or directly, many companies use exporting as a way to "test the waters" before building a plant and manufacturing a product overseas. University Games of Burlingame, California, maker of education games that encourage social interaction and imagination, has blossomed into a $50 million-per-year international company through careful entry into overseas ventures. UNIVERSITY GAMES Bob Moog, president and founder of University Games, says his company's international sales strategy relies heavily on third-party distributors and has a fair degree of flexibility. "We identify the international markets we want to penetrate," says Moog, "and then form a business venture with a local distributor that will give us a large degree of control. In Australia, we expect to run a print of 5,000 board games. These we will manufacture in the United States. If we reach a run of 25,000 games, however, we would then establish a sub-contracting venture with a local manufacturer in Australia or New Zealand to print the games." The company now sells in a 28 countries. 27 Using a Global Web Strategy One of the best ways to initiate or extend export activities used to be to exhibit at an overseas trade show. With the Web, it is not even necessary to attend trade shows to show one's wares: Electronic communication via the Internet is extending the reach of companies large and small to worldwide markets. Major marketers doing global e-commerce range from automakers (GM) to direct-mail companies (L.L. Bean and Lands' End) to running-shoe giants (Nike and Reebok) to Amazon.com. Marketers like these are using the Web to reach new customers outside their home countries, to support existing customers who live abroad, to source from international suppliers, and to build global brand awareness. These companies adapt their Web sites to provide country-specific content and services to their best potential international markets, ideally in the local language. The number of Internet users is rising quickly as access costs decline, local-language content increases, and infrastructure improves. Upscale retailer and cataloger The Sharper Image now gets more than 25 percent of its online business from overseas customers. 28 The Internet has become an effective means of everything from gaining free exporting information and guidelines to conducting market research and offering customers several time zones away a secure process for ordering and paying for products. "Going abroad" on the Internet does pose special challenges. The global marketer may run up against govern- mental or cultural restrictions. In Germany, a vendor cannot accept payment via credit card until two weeks after an order has been sent. German law also prevents companies from using certain marketing techniques like unconditional lifetime guarantees. On a wider scale, the issue of who pays sales taxes and duties on global e-commerce is murkier still. [...]... review of academic research on global marketing, see Johny K Johansson, "Global Marketing: Research on Foreign Entry, Local Marketing, Global Management, " in Handbook of Marketing, edited by BartWeitz and Robin Wensley (London: 2002 Sage Publications), pp 457-483 Also see Johny K Johansson, Global Marketing, 2nd ed (New York: 2003 McGraw-Hill;) For some global marketing research issues, see Susan Douglas... 26,1998, pp 218 -226; David M Szymanski, Sundar G Bharadwaj, and P Rajan Varadarajan, "Standardization versus Adaptation of International Marketing Strategy: An Empirical Investigation," Journal of Marketing (October 1993): 1-17; "Burgers and Fries a la Francaise," The Economist, April 17, 2004, pp 60-61; Johny K Johansson, "Global Marketing: Research on Foreign Entry, Local Marketing, Global Management, "... Invisible Global Market," Marketing Management (Winter 2000): 31-35 36 Arundhati Parmar, "Dependent Variables: Sounds Global Strategies Rely on Certain Factors," Marketing News, September 16, 2002, p 4 17 Niraj Dawar and Amitava Chattopadhyay, "Rethinking Marketing Programs for Emerging Markets," Long Range Planiung35, no 5 (October 2002) 37 Warren J Keegan, Multinational Marketing Management, 5th ed (Upper... Deciding on the Marketing Program International companies must decide how much to adapt their marketing strategy to local conditions.33 At one extreme are companies that use a globally standardized marketing mix worldwide Standardization of the product, communication, and distribution channels promises the lowest costs Table 21. 1 summarizes some of the pros and cons of standardizing the marketing program... avoidance How risk tolerant or aversive people are CHAPTER 21 677 678 PART 8 CREATING SUCCESSFUL LONG-TERM GROWTH | TABLE 2 1 1 Global Marketing Pros and Cons Advantages Economies of scale in production and distribution Lower marketing costs Power and scope Consistency in brand image Ability to leverage good ideas quickly and efficiently Uniformity of marketing practices Disadvantages Differences in... lost an estimated $30 million in introducing its condensed soups in England; > TAPPING INTO GLOBAL MARKETS MARKETING INSIGHT CHAPTER 21 GLOBAL STANDARDIZATION OR ADAPTATION? The marketing concept holds that consumer needs vary and that following elements and determine which would add more revenue marketing programs will be more effective when they are tailored to than cost: each target group This also... Prediction," Journal of Marketing (Summer 1982): 54-61; Somkid Jatusripitak, The Exporting Behavior of Manufacturing Firms (Ann Arbor: University of Michigan Press, 1986) 10 Michael R Czinkota and Ilkka A Ronkainen, International Marketing, 5th ed (New York: Harcourt Brace Jovanovich, 1999) 11 Igal Ayal and Jehiel Zif, "Market Expansion Strategies in Multinational Marketing, " Journal of Marketing (Spring... Igal Ayal and Jehiel Zif, "Market Expansion Strategies in Multinational Marketing, " Journal of Marketing (Spring 1979): 84-94 24 Johny K Johansson, "Global Marketing: Research on Foreign Entry, Local Marketing, Global Management, " in Handbook of Marketing, edited by Bart Weitz and Robin Wensley (London: Sage Publications, 2002), pp 457-483 25 Charlene Marnier Solomon, "Don't Get Burned by Hot Markets,"... in new markets) 3 Establish a marketing infrastructure A company must either build marketing infrastructure "from scratch" or adapt to existing infrastructure in other countries 4 Embrace integrated marketing communications A company must often use many forms of communication in overseas markets, not just advertising 5 Establish brand partnerships Most global brands have marketing partners in their international... people of different cultures far outweigh their similarities TAPPING INTO GLOBAL MARKETS CHAPTER 21 691 Marketing D i s c u s s i o n Think of some of your favorite brands Do you know where they come from? Where and how they are made or provided? Do you think it would affect your perceptions of quality or satisfaction? MARKETING SPOTLIGHT Starbucks opened in 1971, at a time when coffee consumption in America . costs. Table 21. 1 summarizes some of the pros and cons of standardizing the marketing program. At the other extreme is an adapted marketing mix, where the producer adjusts the marketing program. England; > TAPPING INTO GLOBAL MARKETS CHAPTER 21 679 GLOBAL STANDARDIZATION OR ADAPTATION? The marketing concept holds that consumer needs vary and that marketing programs will be more effective. and Goodyear have used this approach. Finally, | TABLE 21. 2 | Blunders in International Marketing TAPPING INTO GLOBAL MARKETS CHAPTER 21 683 A Lands' End ad for Germany. Because Germany

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