Global Marketing Management, 8E Warren J Keegan Solution Manual

Global Marketing Management, 8E By Warren J. Keegan

Email: Richard@qwconsultancy.com

Chapter 1: Introduction to Global Marketing Leaning Objectives •

Summarize the evolution of marketing

•

Identify the three basic principles of marketing

•

Discuss global marketing practices and strategies

•

Discuss the growth of global market opportunities

•

Compare and contrast management orientations

•

Describe the driving forces behind the increased pace of global integration

•

Identify three restraining forces that hinder global marketing efforts Chapter Overview

Global marketing is the process of focusing the resources and objectives of a company on global marketing opportunities. Companies engage in global marketing for two reasons: to take advantage of opportunities for growth and expansion, and to survive. Companies in globalizing industries that fail to pursue global opportunities will eventually lose their domestic markets because they will be pushed aside by stronger and more competitive global competitors. Company management can be classified in terms of its orientation toward the world.

Lecture Outline I.

Marketing: A Universal Discipline (p. 3) a. The Marketing Concept (p.3) i. The New Concept of Marketing and the Four P’s ii. The Strategic Concept of Marketing

II.

The Three Principles of Marketing (p. 6)

a. Customer Value and the Value Equation b. Competitive or Differentia Advantage c. Focus III.

Global Marketing: What It Is and What It Is Not (p. 7) a. The Standardization Debate

IV.

Globalization and Global Marketing (p. 12)

V.

Management Orientations (p. 15) a. Ethnocentric Orientation b. Polycentric Orientation c. Regiocentric and Geocentric Orientations

VI.

Driving and Restraining Forces (p. 18) a. Driving Forces i. Technology ii. Regional Economic and Political Agreements iii. Market Needs and Wants iv. Transportation and Communication Improvements v. Product Development Costs vi. Quality vii. World Economic Trends viii. Leverage 1. Experience Transfers 2. Scale Economies 3. Resource Utilization

4. Global Strategy ix. The Global/Transnational Corporation b. Restraining Forces (p. 26) i. Management Myopia and Organizational Culture ii. National Controls and Barriers VII.

Outline of This Book (p. 27)

VIII.

Summary (p. 27) Tables and Figures

Figure 1-1

Marketing is Everything (p. 4)

Figure 1-2

Value Chain Boundaryless Marketing (p. 6)

Figure 1-3

Key Marketing Principles (p. 6)

Table 1-1

Examples of Global Marketing Strategies (p. 10)

Table 1-2

Total Motor Vehicle and Parts Sales Worldwide, 2009 (p. 13)

Table 1-3

The World’s Largest Corporations by Market Value (p. 14)

Table 1-4

The Global 2000: The Largest Corporations by Revenue (p. 15)

Figure 1-4

Orientation of Management and Companies (p. 16)

Figure 1-5

Global Integration (p. 18) Sidebar

Sidebar 1-1

Nokia “Blinded by the Light” (p. 24) Suggested Answers to Discussion Questions

1.

What are the basic goals of marketing? Are these goals relevant to global marketing?

Marketing activities represent an organization’s efforts to satisfy customer wants and needs by offering products and services that create value. These goals are relevant in virtually every part of the world. However, when an organization pursues market opportunities outside of its home country (domestic) market, managers may need an understanding of additional conceptual tools and guidelines.

2.

What is meant by global localization? Is Coca-Cola a global product? Explain.

The phrase “global localization” represents an attempt to capture the spirit of the rallying cry for organizations in the 1990s, namely “think globally, act locally, and manage regionally.” Most students will agree that Coca-Cola is a global product by virtue of the fact that it is available in more than 195 countries in red cans bearing the product’s distinctive signature style. It must be noted, however, that customer service efforts are adapted to the needs of particular markets, e.g. vending machines in Japan.

Thus, Coca-Cola is both global and local.

3.

Describe the difference among ethnocentric, polycentric, regiocentric, and geocentric management orientations.

The premise of an ethnocentric orientation is that home country products and management processes are superior. An ethnocentric company that neither sources inputs from, nor seeks market opportunities in, the world outside the home country is a domestic company. A company that does business abroad while still presuming the superiority of the home country may be classified as an international company. Such a company relies on an extension strategy whereby it would export, without adaptation, products designed for the domestic market. The polycentric orientation that predominates at a multinational company leads to a view of the world in which

each country market is different from the others. The marketing mix in a polycentric, multinational company is adapted by local country managers operating with a high degree of autonomy. Managers who are regiocentric or geocentric in their orientations recognize both similarities and differences in world markets. Markets opportunities are pursued using both extension and adaptation strategies. The regiocentric and geocentric orientations are characteristic of global or transnational companies.

4.

Identify and briefly describe some of the forces that have resulted in increased global integration and the growing importance of global marketing.

Driving and restraining forces are presented in Figure 1-5. Driving forces include regional economic agreements such as NAFTA, converging market needs and wants, technology advances such as the Internet and global TV networks, transportation improvements, the need to recoup high product development costs in global markets, the need to improve quality through R&D investment, world economic trends such as privatization and, finally, opportunities to use leverage. Restraining forces include management myopia, an ethnocentric corporate culture, and the continuing presence of national controls that create trade barriers.

5.

Define leverage and explain the different types of leverage utilized by companies with global operations.

Webster’s New World Dictionary defines “leverage” as an “increased means of accomplishing some purpose.” A global company can take advantage of several types of leverage in pursuit of corporate goals such as profit or revenue growth. These

include experience transfers, scale economies, enhanced resource utilization, and global strategy.

6.

What, in your view, is the future of a company such as Nokia? Will it be able to continue as an independent company? Why? Why not?

There has been a consolidation trend in most world industries and the telecommunication industry is no exception. A key example is the Sony and Erickson merger in 2001, which was to have created a powerhouse in the industry. It hasn’t really worked out that way. Despite the fairly tenuous results of this merger, the consolidation trend should continue. Can Nokia remain an independent powerhouse?

Likely not. As pressure on profits mount and the potential of economies of scale, particularly in the telecommunication handset industry, more consolidation should occur.

7.

What are some major trends in the world that will affect marketing?

There are numerous driving forces affecting global integration and global marketing.

These include: technology, regional economic agreements, market needs and wants, transportation and communications improvements, rising product development costs, quality issues and the growth of transitional/global companies.

Chapter 2: The Global Economic Environment Learning Objectives •

Summarize significant historical changes in the global economic environment

•

Identify trends in the world economy that affect global marketing decisions

•

Describe how economic measures of freedom help drive or hinder global business expansion and growth

•

Describe the stages of market development

•

Explain how global income distribution and population patters affect marketing decisions

•

Discuss the balance of payments and global trade patterns Chapter Overview

The economic environment is a major determinant of global market potential and opportunity. Global marketers should factor into their marketing strategies the profound changes in the world economy and understand that global competition is now a feature of almost every national market. Centers of economic activity are shifting dramatically across the globe and across regions due to demographic changes, economic liberation, technological developments, and, over the next decade, an estimated one billion new consumers in emerging markets demanding products and services. Today, with the exception of North Korea, almost all countries have mixed economic systems with a major reliance on market allocation.

Lecture Outline I.

The World Economy – An Overview (p. 38)

II.

The World Economy: Important Trends (p. 39) a. Economic Activity Will Shift From West to East

b. Aging Worldwide Population Will Demand Increasing Levels of Productivity and Efficiency c. Changing Industry Structures and Emerging New Models of Corporate Organization Will be Characteristic of Growing Global Competition d. The Demand for Natural Resources Will Continue to Grow, Resulting in Growing Pressure on an Already Strained Global, Natural Environment e. Scrutiny of Global Firms’ Worldwide Practices Will Increase as the Reach and Scale of Global Firms Expand; Increasing Regulation Will Shape the Structure and Conduct of Whole Industries f. The Economics of Information Will be Transformed as the Ubiquitous Nature of Information Expands g. Talent Pools Have Become Global in Nature; Assimilating Talent into the Leadership Structure of a Global Company Will be a Competitive Advantage III.

The Market State: Varying Degrees of Economic Freedom (p. 46)

IV.

Stages of Market Development (p. 49) a. Low-Income Countries b. Lower-Middle-Income Countries c. Upper-Middle-Income Countries d. High-Income Countries

V.

Income and Purchasing Power Parity Around the Globe (p. 57)

VI.

International Comparison Program (ICP) of the World Bank (p. 61)

VII.

Actual Individual Consumption (p. 62)

VIII.

The Location of Population (p. 63)

IX.

Global Trade and Investment (p. 64) a. The Balance of Payments

X.

Global Trade Patterns (p. 65)

XI.

Exchange Rates (p. 67)

XII.

Degrees of Economic Cooperation (p. 69) a. Free Trade Area b. Customs Union

c. Common Market d. EU (European Union) e. Asia-Pacific Economic Cooperation (APEC) f. Commonwealth of Independent States (CIS) g. MERCOSUR (SCCM) h. North American Free Trade Agreement (NAFTA) i. Association of Southeast Asian Nations (ASEAN) XIII.

Summary Tables and Figures

Table 2-1

Index of Economic Freedom World Rankings (p. 48)

Table 2-2

World Bank List of Country Income Groups (p. 50)

Table 2-3

Countries Classified by Income – 2011 (p. 51)

Table 2-4

Stages of Economic Development (p. 59)

Table 2-5

GNP and PPP Per Capita, Top 10 Countries (p. 60)

Table 2-6

Richest Countries in the World GDP (PPP) (p. 60)

Figure 2-1

Rank Shift in GDP 2010 vs. 2020 (p. 61)

Table 2-7

Actual Individual Consumption per Capita (p. 62)

Table 2-8

Top 10 Highest Populated Countries (p. 63)

Table 2-9

Estimated 2010 Current Account Balances (p. 64)

Figure 2-2

Average PPP Consumption Across 146 Countries (p. 66)

Figure 2-3

Growth in Volume of World Merchandise Trade and GDP (p. 66)

Figure 2-4

GDP and Merchandise Trade by Region (p. 67)

Figure 2-5

Big Mac Index (p. 68)

Table 2-10

Degrees of International Economic Integration (p. 69) Sidebars

Sidebar 1

20 Major Economies of the G20 (p. 58)

Sidebar 2

Bunfight (p. 68)

Suggested Answers to Discussion Questions 1.

What are the stages of national market development, and what percentage of world income is found in each of the stages? Why is this information important to global marketers?

The stages of development include low-income countries (<$1025 GNP per capita; 36 countries); lower-middle-income countries ($1036-$4035; 54 countries); uppermiddle- income countries ($4036-$12,475; 54 countries); and high-income countries (GNP per capita >$12,475; 70 countries). While it is not necessary for students to memorize the income level and stage of market development for every country, they should have a general fell for which countries fall into which category. This information helps a marketer to define their target markets.

2. What are the major trends in the world economy in the first two decades of the 21st century? How do these trends impact global marketing decisions? Cite several subtrends that relate, in your opinion, to these major trends. a. Economic Activity Will Shift From West to East b. Aging Worldwide Population Will Demand Increasing Levels of Productivity and Efficiency c. Changing Industry Structures and Emerging New Models of Corporate Organization Will be Characteristic of Growing Global Competition d. The Demand for Natural Resources Will Continue to Grow, Resulting in Growing Pressure on an Already Strained Global, Natural Environment

e. Scrutiny of Global Firms’ Worldwide Practices Will Increase as the Reach and Scale of Global Firms Expand; Increasing Regulation Will Shape the Structure and Conduct of Whole Industries f. The Economics of Information Will be Transformed as the Ubiquitous Nature of Information Expands g. Talent Pools Have Become Global in Nature; Assimilating Talent into the Leadership Structure of a Global Company Will be a Competitive Advantage A business leader’s ability to assess trends in a rapidly changing competitive marketplace, and use these to appropriately gauge their impact on profitability of the firm, is a critical competence. Subtrends could include 1. A growing world-wide middle class demand for goods and service and 2. Increased demand from this expanding consumer base will place increasing stress on already constrained resources and create unsustainable environmental degradation.

3. What is the pattern of income distribution in the world today? How is it different than even 10 years ago? What are the implications of these patterns of income distribution across the globe for the strategic marketer?

As indicated in Table 2-2, p. 50, the high-income countries are those with a per capita of greater than $12,475. The 70 countries that qualify as high-income account for approximately 32% of countries. Generally speaking, income distribution has become more equalized across the world’s population base. Today, approximately 50% of the world’s population can be categorized as living in upper- or lower-middle income countries (108 upper- and middle-income countries/214 total countries). The number

of countries qualifying as high-income has risen dramatically over the past years. The share of the population in the developing world has been halved from 52% to 25%.

Global extreme poverty is projected to drop to about 15% of global population by 2015. As the overall living standards of the world continue to increase, new and expanding markets for consumer goods are opening.

4. A manufacturer of online gaming devices is assessing the world market potential for her products. She asks you if she should consider emerging countries as potential markets. How would you advise her?

Emerging countries should indeed prove attractive. Although the per capita income in emerging countries is low, in many instances it is rapidly growing. Consider Indonesia (per capita income has risen from $250 (in 1985) to $2,050 (in 2009).

Residents are experiencing increases in discretionary (disposable) income. As a result, domestic consumer markets are expanding. These consumers are no longer just living day-to-day, but are earning relatively substantial incomes, not all of which is needed to survive.

5. Are income and standard of living the same thing? What is meant by the term standard of living; how is it best measured and why?

Income reported in dollars measure the total value of all goods and services produced in an economy at a given rate of exchange. However, standard of living reflects what products and services are available to a nation’s people and how much their incomes will buy. Income figures that have been adjusted to indicate purchasing power parity are a better way to compare standard of living. Of course, upper-income segments may enjoy a higher standard of living than other segments. Also, as noted in the text,

a low-income country’s standard of living may be higher than income figures suggest if the government, for little or no cost, provides education, health care, and housing.

6. Describe the importance of international trade alliances and economic cooperation agreements. In your view, are these beneficial to the global marketer? If so, why? If not, why not?

Most of the forms of economic integration discussed eliminate tariffs and quotas among member nations. As free trade agreements and foreign-trade zones develop as an important indicator of globalization and the economic interdependence between countries and across regions, global firms increasingly face decisions about where best to source and establish manufacturing. Companies need to optimize their understanding and knowledge of how best to utilize if not exploit FTAs and their regulatory, administrative, legal, and often judicial strategies for regional competitiveness in the global marketplace.

7. Interview several local business owners to determine their attitude toward world trade. Why, in your opinion, do they hold these attitudes and on what factual information or experience are they based?

Answers to this assignment will vary dramatically based on the student and their access to local business owners. It is important here to encourage the students to delve deeply into the possible attitudes that may be driving the owners’ opinions and to seek out the information on which their opinions/attitudes are based.

Chapter 3: The Political, Legal, and Regulatory Environments of Global Marketing Learning Objectives •

Describe how the political environment affects global marketing decisions

•

Discuss the functions of international law and the legal issues that affect global businesses

•

Explain the significance of intellectual property rights, antitrust laws, and licensing agreements to global marketers

•

Describe the nature of corruption in the global business environment

•

Discuss the rising use of arbitration among international firms

•

Explain the roles of regulatory agencies and trade agreements in international trade Chapter Overview

The legal and political environment of global marketing is the set of governmental institutions, political parties, and organizations that are the expression of the people in the nations of the world. In particular, anyone engaged in global marketing should have an overall understanding of the importance of sovereignty to national governments. The political environment varies from country to country, and risk assessment is crucial. It is also important to understand a particular government’s actions with respect to taxes, dilution of equity control, and expropriation. The legal environment consists of laws, courts, attorneys, and legal customs and practices. Although these environments are complex, astute marketers plan ahead to avoid situations that might result in conflict, misunderstanding, or outright violation of national laws.

Lecture Outline I.

The Political Environment (p. 77) a. Nation-States and Sovereignty b. Political Risk

c. Taxes d. Dilution of Equity Control e. Expropriation II.

International Law (p. 80) a. Common Versus Code Law

III.

Sidestepping Legal Problems: Important Business Issues (p. 82) a. Establishment b. Jurisdiction c. Intellectual Property: Patents and Trademarks d. International Trademark Filings e. Antitrust f. Licensing and Trade Secrets

IV.

Bribery and Corruption (p. 91) a. Forms of Corruption b. Estimating the Pervasiveness and Magnitude of Corruption c. Characteristics of Countries with High Perceived Corruption d. Anticorruption Laws and Regulations

V.

Conflict Resolution, Dispute Settlement, and Litigation (p. 95) a. Alternatives to Litigation for Dispute Settlement

VI.

The Regulatory Environment (p. 98) a. The European Union b. The World Trade Organization and Its Role in International Trade

VII.

Ethical Issues (p. 100)

VIII.

Summary (p.101) Tables and Figures

Table 3-1

Top 10 Law Firms in the World (p. 82)

Figure 3-1

Software Piracy Rates (p. 86)

Table 3-2

Foreign Company Trademark Filings (p. 88)

Table 3-3

Lawyers: An International Comparison (p. 96)

Table 3-4

International Economic Organizations (p. 98)

Table 3-5

Uncommon Laws in the EU (p. 100)

Sidebars Sidebar 1

National Controls Create Barriers for Global Marketing (p. 78)

Sidebar 2

The Multilateral agreement on Investment (p. 83)

Sidebar 3

Software Piracy (p. 85) Web Sites

www.uspto.gov for U.S. information www.european-patent-office.org for information about Europe Suggested Answers to Discussion Questions 1. What is sovereignty? Why is it an important consideration in the political environment of global marketing?

The term “sovereignty” is defined in the chapter as “supreme and independent political authority.” Sovereignty is a central consideration in several global business issues today. For example, Europe views the U.S. Helms-Burton legislation against Cuba to be an unacceptable extension of sovereignty outside the U.S. “extraterritorial sovereignty” is also invoked by those who object to the constraints that the Foreign Corrupt Practices Act places on U.S. businesses.

2. The political risk scores for Taiwan and the United States were identical in June of 2011. Do you agree that these countries have an identical level of political risk? Why? Why not?

Political risk – the risk of a change in government policy that would adversely impact a company’s ability to operate effectively and profitably – can deter a company from investing abroad. The level of political risk is inversely proportional to a country’s stage of economic development. All other things being equal, the less developed a country, the greater the political risk. The political risk of high-income countries is quite limited as compared with countries at earlier stages of development. It is for

these reasons that even though the risk scores may be the same, the levels of political risk are different.

3. St. Ambrose said, “When you are in Rome live in the Roman style; when you are elsewhere live as they live elsewhere.” Do you agree with his advice? Why? Why not?

At a general level, this is wise advice. In order to be readily assimilated into the local cultural environment, it is important to understand (though no necessarily embrace) local culture and customs. If you find the local customs to be legally, morally or ethically in contradiction with your and/or you home country’s view, then it is best to err on the side of caution and not totally “live as they live.”

4. Briefly describe some of the differences that relate to marketing between the legal environment of a country that embraces common law as opposed to a country that observes civil law.

Common-law countries follow the Anglo-Saxon tradition of relying on precedent established by past judicial decisions. Civil-law countries look to codes as the sources of authority. Under civil law the judicial system is divided into civil, commercial and criminal law thus commercial law has its own administrative structure. In code-law countries, intellectual property rights must be registered whereas in common-law countries, some – such as trademarks but not patents – are established by prior use.

5. Global marketers can avoid legal conflicts by understanding the reasons conflicts arise in the first place. Identify and describe several legal issues that relate to global commerce. What alternatives are available from a marketing perspective?

To prevent international legal problems related to marketing, a company should hire a legal firm with international experience in the countries where it is doing business.

Table 3-1 shows the leading international law firms and the percentage of lawyers outside the home country.

6. You are a sales representative of a multinational corporation traveling on business in West Africa. As you are leaving country X, the passport control officer at the airport tells you there will be a passport “processing” delay of one hour.

You explain that your plane leaves in 30 minutes and the next plane out of the country does not leave for three days. You also explain how valuable your time is (at least $300 an hour) and that it is urgent that you catch the flight you have reserved. The official listens carefully to your appeal and then “suggests” that a contribution of $1000 would definitely assure your passport clearance priority treatment, and considering how valuable your time is, it is quite a bargain. Would you comply with the “suggestion?” Why? Why not? If you would not comply, what would you do? If you comply with the suggestion, have you violated any laws? Explain. If the official requests $25, have you violated any laws?

Bureaucratic corruption consists of isolated transactions executed by individual public officials that abuse their office. These transactions include the demand for bribes and would cover the situation described in the scenario. Additionally, this situation is a form of according-to-rule corruption. According-to-rule corruption exists when bribes are made/received in order to receive preferential treatment for something that a public official can legally do. While the activity described in the

scenario would be considered a form of bribery, paying the ‘fee’ would facilitate your clearance and get you on your way. The $$ amount is irrelevant.

7. “See you in court” is one way to respond when legal issues arise. What other approaches are possible?

Arbitration can be faster, easier, and less expensive than litigation. Arbitration bodies include the International Chamber of Commerce, the New York Convention, the American Arbitration Association, and the Swedish Arbitration Institute.

8. If you were Nike, what would you do to prevent negative publicity regarding reports of unsafe factory conditions?

This is both a legal and an ethical problem. Nike sources their manufacturing and therefore does not legally own any of the factories where their shoes are produced.

Therefore, legally they are not at fault regarding unsafe conditions. However, this does present an ethical issue. Nike sources their goods in countries with low wages and poor labor regulations so technically these factories are operating legally given the local laws. Does this absolve them of any responsibility? No. Ethical issues are at stake. After receiving some negative publicity, Nike has set up a program to monitor their suppliers. Now the question becomes “Do they enforce this program of standards?” It might serve Nike well if they engaged in some proactive programs (also known as favorable publicity) by offering safe working conditions to the employees, providing housing, etc.

Chapter 4: Social and Cultural Environment Learning Objectives •

Describe the components of culture and society that affect global marketing

•

Use Maslow’s hierarchy of needs to explain cultural universals

•

Compare and contrast cultural classification methods

•

Discuss methods for improving cultural understanding and perception

•

Explain the significance of environmental sensitivity to global marketing

•

Discuss cross-cultural complications and possible solutions Chapter Overview

Culture, a society’s “programming of the mind,” has both a pervasive and changing influence on each national market environment. Global marketers must recognize the influence of culture on all aspects of life including work habits and consumption of products. Human behavior is a function both of a person’s own unique personality and that person’s interaction with the collective forces of the particular society and culture in which he or she has lived. When global marketers refer to culture, they include psychological factors such as values, beliefs, and social attitudes; sociological factors such as status, roles, and norms; and anthropological factors such as symbols, signs, and customs. These factors are the focus of cultural analysis. Cultural analysis helps global marketers choose appropriate marketing strategies and organizational structure and processes, helping improve profitability and reduce the risk of costly blunders. Marketers employ two broad approaches to cultural analysis. They use standardized cultural classification to group countries where similar marketing strategies and appeals are likely to be effective. Marketers also use approaches such as Maslow’s hierarchy, Hofstede’s

typology, and the self-reference criterion to unlock clues about cultural differences and similarities. In addition, marketers use ethnographic and other nonsurvey approaches.

Lecture Outline I.

Basic Aspect of Society and Culture (p. 105) a. The Search for Cultural Universals b. Communication and Negotiation c. Social Behavior

II.

Analytical Approaches to Cultural Factors (p. 111) a. Maslow’s Hierarchy of Needs b. Standardized Cultural Classifications c. Hofstede’s Cultural Typology d. Project Globe e. Inglehart’s World Values Survey f. Schwartz’s Cultural Value Orientations g. Leung and Bond’s Social Axioms h. Ethnographic and Other Nonsurvey Approaches

III.

Living, Working and Thriving in Different Cultures (p. 123) a. Understanding the Complexity of Identity b. Self-Reference Criterion and Perception c. Environmental Sensitivity

IV.

Cross-Cultural Complications and Suggested Solutions (p. 129) a. Training in Cross-cultural Competency

V.

Summary (p. 131) Tables and Figures

Figure 4-1

Culture Layers (p. 108)

Figure 4-2

Maslow’s Hierarchy of Needs (p. 111)

Figure 4-3

Maslow’s Hierarchy of Needs: The Asian Equivalent (p. 113)

Table 4-1

Hofstede’s Dimensions of National Culture (p. 115)

Table 4-2

Project GLOBE Cultural Dimensions (p. 116)

Figure 4-4

Prototypical Structure of Schwartz’s Dimensions (p. 118)

Table 4-3

Schwartz’s National Culture Dimensions (p. 118)

Figure 4-5

Co-Plot of Countries on Schwartz’s Cultural Orientation (p. 119)

Figure 4-6

Co-Plot of Countries on Cultural-Level Social Axioms (p. 120)

Table 4-4

Leung and Bond’s Cultural Dimensions of Social Axioms (p. 122)

Table 4-5

High- and Low-Context Cultures Sidebars

Sidebar 4-1

The Use of Ethnography in International Banking (p. 123)

Sidebar 4-2

A Matter of Culture: “Sincerely” (p. 126)

Sidebar 4-3

High- and Low-Context Cultures (p. 129) Suggested Answers Discussion Questions

1. What is culture? Is there such a thing as a cultural universal or cultural universals? If your answer is affirmative, give an example of a cultural universal.

If it is negative, explain why there is no such thing.

Anthropologists and sociologists define culture as “ways of living” built by a group of human beings, which are transmitted from one generation to another. A cultural universal is a model of behavior that exists across cultures. George Murdock’s classic study identified a number of cultural universals including athletic sports, body adornment, cooking, mealtime and music. While stylistic preferences in music may vary from country to country, there is evidence that regional styles are gaining acceptance around the world.

2. Can Hofstede’s cultural typologies help marketers better understand cultures outside their home country? Is you answer is yes, explain how, and if it is no, explain why not.

Yes, Hofstede’s cultural typologies can help marketers understand some cultures outside their home country but if Westerners are seeking a better understanding of Asian culture, they can benefit from the findings of the Chinese Value survey. This

survey revealed a dimension of Asian culture called “Confucian Dynamism” that helps explain the growth of Asian economies. Specifically, virtuous behavior in Asian culture is reflected in persistence, observing ordered relationships, thrift, and a sense of shame.

3. Explain the self-reference criterion. Go to the library and find examples of product failures that might have been avoided through the application of the SRC. The self-reference criterion is a conceptual tool that helps a person eliminate ethnocentric bias when perceiving other cultures. One should ask oneself, “Am I making assumptions or drawing conclusions based on my own home-culture experience and biases?” The chapter outlines a four-step process for eliminating SRC bias. One failure that can be traced to SRC is the failed launch of Snapple in Japan. In mid-1995, Snapple’s Japanese sales amounted to 2.4 million bottles per month; by mid-1995, they had fallen to 120,000 bottles per month. The bits of fruit floating in the beverages turned off Japanese consumers. Quaker Oats, Snapple’s corporate parent, did not want to adapt the drinks to Japanese preferences. A marketing consultant in Tokyo commented, “The way they handled Snapple’s launch fit right into the stereotypical image of the shortsighted American firm totally preoccupied with immediate results.” In the words of another marketing consultant in Japan, “For all the talk about the Americanization of lifestyles here, Japanese taste buds remain traditional. (Source: Norihiko Shirouzu, “Snapple in Japan: How a Splash Dried Up,” The Wall Street Journal (April 15, 1996), pp. B1, B3).

4. What is the difference between a low-context culture and a high-context culture?

Give an example of a country that is an example of each type, and provide evidence for your answer. How does this apply to marketing?

In a low context culture, messages are explicit; words carry most of the information in communication. In a high-context culture, less information is contained in the verbal par of the message. Advertising copy in different countries often reflects this difference. When the auto brand Infiniti (Japan) was first introduced in the US, the commercials showed fields and rocks but no car. The commercials failed in the US where more emphasis is placed in print copy on describing the car or conveying an image in TV ads.

5. Schwartz identifies embeddedness vs. autonomy, egalitarianism vs. hierarchy, and mastery vs. harmony as national cultural dimensions. In what way do national cultural dimensions affect marketing practices in your country?

In Western cultures, the emphasis is on autonomy and egalitarianism. This assumes individuals are responsible for their own actions and make decisions based on their own personal understanding of a given situation. Such cultural orientations promote the importance of novelty, broadmindedness, creativity, curiosity and change.

Applying the theory systematically across cultures has the potential for unlocking valuable behavioral insights, which can be reflected in a company’s marketing mix. It provides a comprehensive and nearly universal set of cultural values for use in marketing activities such as segmentation positioning, and designing advertising content.

6. What can global marketers do and what issues might they need to address in their marketing planning to launch a new product in a national market that traditionally resists change?

According to Hofstede, uncertainty avoidance is the extent to which people feel threatened by (and try to avoid) uncertainty and ambiguity (e.g., “change”). Where uncertainty avoidance is high, societies typically employ strict laws and rules, safety and security measures, and dogmatic philosophical and religious beliefs to minimize uncertainty. In an effort to increase the likelihood of a successful product launch in such an environment, it would be to the company’s best interest to proceed slowly and provide potential consumers with abundant information regarding the benefits of the new product and fully explaining any potential issues that may arise during and after the launch.

7. Take an element of the marketing mix and describe how cultural analysis and factors may impact its planning, execution, and design with respect to a new product launch.

Every element of the marketing mix (product, place, price, promotion) is vulnerable to and at the mercy of all aspects of a society’s culture. Any aspect of culture may have a significant impact on the planning, execution and design of a proposed new product launch.

8. With respect to global branding, are there elements of culture that need to be considered? If your answer is yes, what are they? If your answer is no, why not?

When considering a global brand for your product, it is important to consider any and all aspects of the target population’s culture. You do not want to unwittingly offend

your potential target market by an (unknowingly) offensive brand name, design or color. It is necessary for the global marketer to analyze every individual market considered for entry to be assured of your brand’s cultural acceptance.

Chapter 5: Global Customers Learning Objectives •Summarize the characteristics of the world’s major regional markets •Discuss marketing challenges and opportunities in low-income countries •Explain the significance of customer value in global marketing •Describe the three key concepts of diffusion theory Chapter Overview The entire world is growing. Every world region, including Africa, will continue to grow, and developing countries will grow faster than the rich countries. The shortage of goods and services is the central problem of transitioning economies and low-income countries.

While these countries may pose certain challenges for marketers, they represent potentially attractive markets for many consumer product companies. Marketers should apply basic marketing concepts to ensure that products are designed that fit the needs and incomes of these markets. All buyers go through a similar process in making a purchase decision; however, they will make different purchases since they will respond to the unique economic, social and cultural, political and governmental, environmental, competitive, and personal factors that influence buyer decisions. The process that buyers go through is summarized in diffusion theory, a marketing universal.

Lecture Outline I.

The Global Marketing Plan (p. 138)

II.

Regional Market Characteristics (p. 138) a. European Union b. Russia c. North America d. Asia-Pacific

i. China ii. Japan iii. India iv. Indonesia v. Oceania e. Latin America and the Caribbean i. Brazil f. Middle East and Africa i. Israel ii. Sub-Saharan Africa III.

Marketing in Low-Income Countries (p. 158)

IV.

Global Buyers (p. 159) a. Customer Value and the Value Equation b. Diffusion Theory i. The Adoption Process ii.

Characteristics of Innovations

iii. Adopter Categories iv. Diffusion of Innovations in Pacific Rim Countries V.

Summary (p. 164) Tables and Figures

Table 5-1

List of Top 50 Countries by GDP (p. 136)

Table 5-2

World Data (p. 138)

Figure 5-1

Euro-US Dollar Exchange Rate: 1999-2012 (p. 140)

Table 5-3

Marketing Strategies in the European Community (p. 141)

Table 5-4

Interbrand 2011 Ranking: Top 100 Brands (p. 142)

Figure 5-2

People’s Republic of China’s Nominal GDP 1952-2005 (p. 147)

Table 5-5

Western and Asian Cultural and Marketing Values (p. 150)

Figure 5-3

Indonesia (p. 152)

Table 5-6

Latin America and the Caribbean (p. 153)

Table 5-7

Brazil (p. 154)

Figure 5-4

Adopter Categories (p. 163)

Sidebars Sidebar 5-1

The Chuppies Are Here (p. 148)

Sidebar 5-2

Indonesia: A Necklace of Equatorial Emeralds (p. 151)

Sidebar 5-3

In Africa, Mobile Phones Do the Work of Computers (p. 157) Suggested Answers Discussion Questions

1. What are the major characteristics of the world’s regional markets?

In many ways, consumers around the world are becoming more alike. Several market segments, like the very wealthy, teenagers, and technocrats even transcend national borders. Yet, marketers should consider economic, demographic and cultural information in each international market.

2. Which region is the fastest growing? Why The fastest growing region of the world is Asia-Pacific. Asia-Pacific, due to its enormous population size and fast-growing economies, is a region that no marketer can afford to ignore. In fact, 10 of the 27 countries ranked as “emerging markets” by The Economist, due to their economic liberalization and potential for trade, are in Asia-Pacific. The five economic “tigers” of East Asia—Japan, South Korea, Taiwan, Singapore, and China— have forged the fastest industrial revolutions the world has ever seen. The first four are high-income nations, and the fifth, China, has a high-income market and economic segment which is larger that that of any of the other countries except Japan. Behind them are three countries—Thailand, Malaysia, and Indonesia—which are poised to repeat the gains of the first set of “tigers.”

3. What is the significance of the value equation for global marketers?

For any organization operating anywhere in the world, the essence of marketing is to surpass the competition at the task of creating perceived value for customers. The value equation is B (benefits) divided by P (price) equals V (value). Companies can reduce

price or add benefits to increase the value. The question for global marketers is how to create benefits that may be perceived differently in various countries.

4. Do you agree with James Fallows’ characterization of the “Asian model” in the opening chapter quote? Is it possible to achieve high income levels without political democracy?

“The Chinese leadership is trying to demonstrate that a country can have a powerful modern economy without allowing its the individual freedoms that the Western World calls “human rights.” The entire “Asia Model” is based on a variant of this proposition: that it is possible to become as strong as the Western world without embracing its permissive ways.” This is an emotional charged question based on politics and economics of which there are many different “right” answers. Although Americans may find this difficult to accept, one could argue that this is a form of American elitism and that America does not necessarily practice what it preaches.

Chapter 6: Global Marketing Information Systems and Research Learning Objectives •

Describe the purpose and components of global marketing information systems

•

Distinguish between the surveillance and search modes of scanning

•

Discuss the sources of market information

•

Explain the steps of the formal marketing research process

•

Discuss the role of global marketing research in the decision-making process

•

Describe the challenges and benefits of global marketing research Chapter Overview

Information is one of the most basic ingredients of a successful marketing strategy. The global marketer must scan the world for information about opportunities and threats and make information available via a management information system. Scanning can be accomplished by keeping in touch with an area of interest through surveillance or by actively seeking out information by means of search. Information can be obtained from human and documentary sources or from direct perception. Formal research is often required before decisions can be made regarding specific problems or opportunities. After developing a research plan, data are collected using either primary or secondary sources.

Research findings must be presented clearly to facilitate decision making. Global marketing research presents a number of challenges. One is the simple fact that research on a number of markets may be required, some of which are so small that only modest research expenditures can be made. Secondary data from some countries may be distorted; also, comparability may be an issue. A final issue is how much control headquarters will have over research and the overall management of the organization’s information system.

Lecture Outline I.

Overview of Global Marketing Information Systems (p. 168) a. Information Subject Agenda b. Scanning Modes: Surveillance and Search

II.

Sources of Market Information (p. 172) a. Human Sources b. Documentary Sources c. Internet Sources i. Creating Business Value Through Social Media Analytics d. Web Analytics e. Direct Perception

III.

Formal Marketing Research (p 177) a. Step 1: Identifying the Research Problem i. Latent Versus Incipient Markets b. Step 2: Developing a Research Plan c. Step 3: Collecting Data i. Secondary Data ii. Primary Data and Survey Research 1. Sampling d. Step 4: Analyzing Research Data i. Demand Pattern Analysis ii. Income Elasticity Measurements iii. Market Estimation by Analogy iv. Comparative Analysis v. Cluster Analysis e. Step 5: Presenting the Findings

IV.

Linking Global Research to the Decision-Marking Process (p. 188)

V.

Current Issues in Global Marketing Research (p. 189) a. Headquarters Control of Global Marketing Research b. The Marketing Information System as a Strategic Asset

V.

An Integrated Approach to Information Collection (p. 192)

VI.

Summary (p.193) Tables and Figures

Table 6-1

Six Agenda Categories for a GBI System (p. 170)

Table 6-2

Industry/Marketing Information Web Sources (p. 174)

Figure 6-1

10 Largest Global Markets (p. 178)

Figure 6-2

Top Countries with the Highest Online Research Spend (p. 178)

Figure 6-3

Family Size and Number of Retail Stores in China (p. 180)

Table 6-3

Example U.S. Customs Data (p. 181)

Table 6-4

The Global Marketing Investment Decision (p. 188)

Table 6-5

Age Classifications from Consumer Survey (p. 190) Sidebars

Sidebar 6-1

Market Research in India is Challenging (p. 167)

Sidebar 6-2

Perry Ellis Deploys a Valuable Growth Tool (p. 169)

Sidebar 6-3

The Rise of Online Survey Research (p. 182)

Sidebar 6-4

Market Research in China (p. 189) Suggested Answers to Discussion Questions

1. What is the major source of information for headquarters executives of global companies?

Research has shown that headquarters executives of global companies obtain as much as two-thirds of information they need from personal sources. Headquarter executives generally acknowledge that company executives overseas are the people who know best what is going on in their area.

2. What are the different modes of information acquisition? Which is the most important for gathering strategic information?

Different modes of information acquisition include human sources, documentary sources, Internet sources, direct perception and formal marketing research. See response to Question 1.

3. Assume that you have been asked by the president of your organization to devise a systematic approach to scanning. The president does not want to be surprised by major market or competitive developments. What would you recommend?

A starting point for a global MIS is a list of subjects about which information desired.

The resulting “subject agenda” should be tailored to the specific needs and objectives of the company. A general framework is outlined in Table 6-1 “Six Subject Agenda Categories for a Global Business Intelligence System.” These consist of markets, competition, foreign exchange, and prescriptive information. At this point either surveillance or search modes can be used. In the surveillance mode, the marketer engages in informal information gathering. The search mode is characterized by more formal activity. Duplication of effort (several executives reading the same publication) should be eliminated by developing a research plan. Once the information is gathered, it should be digest and distributed.

4. Outline the basic steps of the marketing research process.

1. Identify the research problem 2. Develop a research plan 3. Collect data 4. Analyze research data 5. Present the findings 5. What is the difference between existing, latent, and incipient demand? How might these differences affect the design of a marketing research project?

In the first stage of the research process, identifying the research problem, the question of types of demand arises. A latent market is, in essence, an undiscovered

segment. It is a market in which demand would materialize if an appropriate product were available. Incipient demand is demand that will emerge if a particular economic technological, political or sociocultural trend continues. If a company offers a product before the trend has taken root, it will have little market response.

6. Describe some of the analytical techniques used by global marketers. When is it appropriate to use each technique?

Some of the analytic techniques used by global marketers are: demand pattern analysis, income elasticity measurements, market estimation by analogy, comparative analysis and cluster analysis. Because of the specific nature of these techniques, it is best to consult the section “Step 4 Analyzing Research data” in the text.

Chapter 7: Segmentation, Targeting and Positioning Learning Objectives •

Understand the concepts of segmentation, targeting and positioning and their importance as global marketing tools

•

Describe the common attributes used to segment world markets

•

Identify the major criteria for targeting world market opportunities and selecting a target market strategy

•

Describe the importance of product positioning and identify the major global product positioning strategies Chapter Overview

Through global market segmentation, the similarities and differences of potential buying customers can be identified and grouped. Demographics, psychographics, behavioral characteristics, and benefits sought are common attributes used to segment world markets. After marketers have identified segments, the next step is targeting. The identified groups are evaluated and compared; the prospect(s) with the greatest potential is selected from among them. The groups are evaluated on the basis of several factors: segment size and growth potential, competition, and compatibility and feasibility. After evaluating the identified segments, marketers must decide on an appropriate targeting strategy. The three basic categories of global target marketing strategies are standardized marketing, concentrated marketing, and differentiated marketing. Finally, companies must plan a way to reach their chosen target market(s) by determining the best positioning for their product offerings. Here, marketers devise an appropriate marketing mix to fix the product in the mind of the potential buyers in the target market. High-tech and high-touch positioning are two strategies that can work well for a global product.

Lecture Outline I.

Global Market Segmentation (p. 196) a. Geographic Segmentation b. Demographic Segmentation c. Psychographic Segmentation i. Backer Spielvogel & Bates’s Global Scan ii. D’arcy Massius Benton & Bowles’ Euroconsumer Study iii. Young & Rubican’s Cross-Cultural Consumer Characterizations d. Behavior Segmentation e. Benefit Segmentation f. Vertical Versus Horizontal Segmentation

II.

Global Targeting (p. 205) a. Criteria for Targeting i. Current Segment Size and Growth Potential ii. Potential Competition iii. Compatibility and Feasibility b. Selecting a Global Target Market Strategy i. Standardized Global Marketing ii. Concentrated Global Marketing iii. Differentiated Global Marketing

III.

Global Product Positioning (p. 207) a. High-Tech Positioning i. Technical Products ii. Special-Interest Products b. High-Touch Positioning i. Products that Solve a Common Problem ii. Global-Village Products iii. Products that Use Universal Themes

IV.

Summary (p. 211) Tables and Figures

Figure 7-1

Importance of Market Definition Criteria (p. 198)

Table 7-1

Psychographic Profile of Porsche’s American Customers (p. 200)

Figure 7-2

BSB’s Global Scan Segmentation Study (p. 202)

Table 7-2

Y&R’s 4Cs (p. 203) Sidebars

Sidebar 7-1

McDonald’s in Indonesia (p. 196)

Sidebar 7-2

BlackBerry’s Pie Slice (p. 197)

Sidebar 7-3

Global Marketing in Action (p. 208) Suggested Answers to Discussion Questions

1. What is a global market segment? Pick a market that you know something about, and describe the global segments for this market.

Global market segmentation is the process of dividing the world into distinct subsets of customers that behave in the same way or have similar needs. Or as one author put it, it is “the process of identifying specific segments – whether they be country groups or individual consumer groups – of potential customers with homogeneous attributes who are likely to exhibit similar buying behavior. Teenagers are a good example of a global market segment. No matter where you go in the world, teens are wearing jeans, eating at a McDonald’s, listening to the same music and complaining about their parents.

2. Identify the major geographic and demographic segments in global markets.

Geographic segmentation is dividing the world into geographic subsets. The advantage is proximity; markets in geographic segments are closer to each other and easier to visit. However, just because the markets are in the same geographic area does not meant that they are similar. The major regional geographic markets (discussed in Chapter 5) are: the European Union, Russia, North America, AsiaPacific, Latin American and the Caribbean, and the Middle East and Africa.

Demographic segmentation is based on measurable characteristics of population such as age, gender, income, education and occupation.

3. What is positioning? Why is it an important tool for the global marketer?

Positioning is the location of your product in the mind of your customer. Thus, one of the most powerful tools of marketing is not something that a marketer can do to the product or to any element of the marketing mix: positioning is what happens in the mind of the customer. The position that a product occupies in the mind of a customer depends on a host of variables, many of which are controlled by the marketer.

4. Some marketing experts believe that positioning should be the fifth P of the four P’s of marketing. Do you agree? Why? Why not?

Should positioning be the 5th P? You can argue this either way. One prominent study suggests that global positioning is most effective for product categories that approach either end of a “high-touch/high-tech” continuum. Both ends of the continuum are characterized by high levels of customer involvement and by a shared “language” among consumers. If this is to be believed, than positioning may very well be considered the 5th P. However, opposing views do also exist.

5. Amazon.com has been an early winner in the on-line book business. Which market segments has Amazon served? Are the Amazon target market segments in the United States and the rest of the world identical?

In the U.S., Amazon appeals to the mass market. It has books for children, students, business, travel, people engaged in hobbies, etc. In many parts of the world, the illiteracy rate is quite high and incomes are so low as to not afford such pleasures as books, therefore these are not target markets for Amazon. In addition, a computer

facilitates ordering from Amazon.com and the penetration of personal computers with Internet access varies considerably around the world.

6. Smoking is on the decline in high-income countries where the combination of longer life expectancy, education, income, and legal action has created a powerful anti-smoking campaign. Global tobacco companies are shifting their focus from high income to emerging markets where the combination of rising income and the absence of anti-smoking campaigns is leading to ever-increasing demand for cigarettes. Is this shift in focus by global tobacco companies ethical?

What, if anything, should residents in high-income countries do about the rise in smoking in emerging markets?

The answer to this question can be controversial. It is not unethical for a company to search for new markets as the home market becomes stagnant or is saturated. In fact, this is standard business practice. The issue then becomes cigarettes, not geographic expansion. A student from an emerging market may argue – Well, if they are so bad, why doesn’t the US government ban them? Or, who are you to tell us how to live our lives?

Chapter 8: Global Entry and Expansion Strategies Learning Objectives •

Identify the decision criteria for global market entry

•

Describe the process of selecting an export market

•

Compare and contrast global market entry methods

•

Discuss global market expansion strategies Chapter Overview

Companies can choose from among a wide range of alternatives when deciding how to participate in markets around the world. Exporting, licensing, joint ventures, and ownership by acquisition or direct investment expansion each offer distinct advantages and disadvantages. Sourcing from a local or third-country supplier allows a company to enter new markets without investing in additional production capacity. Close cooperation with an overseas distributor can provide market access and market feedback. Licensing is a strategy to monetize intellectual property, know-how, and brand equity with minimal investment. Franchises can take a proven domestic business model overseas with rapid global penetration. Joint ventures offer companies the opportunity to share risk and combine value-chain strengths. Direct ownership similarly requires a major commitment of resources, both capital and managerial. Market expansion strategies can be developed in matrix form to assist managers in thinking through the various alternatives. The options include country and market concentration, country concentration and market diversification, country diversification and market concentration, and country and market diversification. The preferred expansion strategy will depend upon a company’s stage of development.

Lecture Outline I.

Decision Criteria for International Business (p. 214)

a. Political Risk b. Market Access c. Factor Costs and Conditions d. Country Infrastructure e. Foreign Exchange f. Creating A Product-Market Profile g. Market Selection Criteria i. Market Potential ii. Market Access iii. Shipping Costs and Time iv. Potential Competition v. Service Requirements vi. Product Fit h. Visits to the Potential Market II.

Entry and Expansion Decisions and Alternatives (p.219) a. “Going Global” Decision Criteria

III.

Exporting and Export Sourcing (p.222)

IV.

Organizing for Exporting (p.223) a. In-House Export Organization b. Organizing in the Market Country i. Licensing ii. Franchising c. Product Sourcing d. Investment: Joint Venture and FDI e. Ownership/Investment

V.

Marketing Expansion Strategies (p.232) a. Four Market Expansion Strategies

VI.

Alternative Strategies: Stages of Development Model (p.234)

VI.

Summary (p. 237) Tables and Figures

Figure 8-1

Ownership, Control and Risk (p. 220)

Figure 8-2

Marketing Expansion Strategies (p. 233)

Table 8-1

Stage of Development of the Transnational Corporation (p. 234)

Table 8-2

Stages of Development I (p. 234)

Figure 8-3

Orientation of Management and Companies (p. 235)

Table 8-3

Stages of Development II (p. 236)

Table 8-4

Stages of Development III (p. 237) Sidebars

Sidebar 8-1

International Paper Company’s International Expansion (p. 213)

Sidebar 8-2

External Independent Export Organizations (p. 223)

Sidebar 8-3

A Word of Caution (p. 225)

Sidebar 8-4

Yellow Tail Enters the US – The Distributor Model (p. 225)

Sidebar 8-5

KFC Enters China – The Franchise Model (p. 228)

Sidebar 8-6

Tropicana Enters the Japanese Market (p. 230)

Suggested Answers to Discussion Questions 1. Why should a company consider expanding globally?

The most basic answer to this question is: Making the decision to enter international markets is in the best interest of the company.

2. What are the alternative tools or strategies for expanding internationally? What are the major advantages and disadvantages of each strategy?

Licensing Advantages: •

Low-cost entry alternative.

•

Allows licensor to circumvent tariffs, quotas, or similar export barriers discussed in Chapter 8.

•

Limits political risk and risk of expropriation.

Disadvantages:

•

A limited form of participation; licensor generally has no control over marketing program associated with product produced under license.

•

Financial upside limited by royalty rate.

•

Licensees can become competitors.

Joint Ventures Advantages: •

Allows for sharing of risk and combining complementary strengths, especially local market knowledge of target market partner.

•

May be the entry mode most strongly supported by target market government.

Disadvantages: •

Corporate cultures and other interests of foreign partner and local partner may clash.

•

Lack of mutual understanding frequently leads to “divorce.”

•

Sharing means less control than in 100 percent ownership.

Direct Investment/Acquisition/Ownership Advantages: •

Acquisition can profit instant market access.

•

Provides opportunities for technology transfer to parent.

Disadvantages: •

Problems may arise from efforts to integrate acquisitions into parent company.

•

Requires greatest commitment of capital and managerial effort.

•

Investment and ownership may evoke suspicion about foreign company exploitation. American companies in particular may be targets of accusations about “cultural imperialism.” Political risk is higher compared with other entry modes.

3. You work for a specialty process-control manufacturer in Indiana. The president comes to you with a license offer from a Chinese conglomerate. In return for sharing your company’s patents and process know-how, the Chinese company will pay a license fee of 5 percent of the ex-factory price of all products sold under license. The president asks for your advice. What would you tell her?

Assuming your company is a small manufacturer with limited international experience, and assuming that the picture for both market and sales (market share) potential are promising, licensing can be an attractive entry mode. It is possible that entry into the Chinese market could be expedited by following this approach, especially if distribution would be a problem. However, the company must carefully study the geographic scope of the agreement. Should licensed product be marketed only in China? Another concern for the company is that the licensee will become a stronger competitor once it has absorbed your know-how. The company may wish to investigate other potential licensees before making a final decision. The company must also ensure that its patents are protected in China. Overall, as Root (1994, 119) notes, “managers can rationally choose licensing as a primary entry mode only when they compare the expected profitability of a proposed licensing venture with the expected profitability of alternative entry modes.” Root suggests profit contribution

analysis based on projections of incremental revenues and incremental costs associated with the licensing agreement.

Source: Franklin R. Root, Entry Strategies for International Markets (New York: Lexington Books), 1994.

4. What criteria should be assessed when evaluating potential global markets?

Six criteria should be assessed (p. 218): 1. Market Potential 2. Market Access 3. Shipping Costs and Time 4. Potential Competition 5. Service Requirements 6. Product Fit. Market potential can be derived from secondary information especially government sources. Market access refers to the entire set of national controls that apply to imported merchandise and any restrictions that the home-country government might have. If shipping costs are high and shipping time is long, the market potential may be affected. Using a country’s commercial representative can derive potential competition. If service is required, can it be delivered at a cost consistent with the size of the market? And, if the answers to the above criteria are favorable and it is profitable, a final decision can be made on how well the product fits the market in question.

5. Why would a firm consider forming a partnership with a competitor? What are some examples of this being beneficial or destructive? In what industries has this proved successful?

There are many reasons why a firm would consider forming a partnership with a competitor. Foremost among these is that such a partnership may allow the company to cost effectively enter and prosper in the foreign market. The local foreign partner brings to the table advantages the firm does not have, whether that advantage is financial, logistical, cultural, manufacturing or a combination of these. Some of the examples of successful companies engaging in such practices are Sony, Toyota, VW and Apple. Industries in which such partnerships have proven successful include electronics and automotive.

6. Why is there no ‘ideal’ market entry strategy?

There is no ‘ideal’ market entry strategy because there are so many variables that must be considered individually and together. The selection criteria include the following key factors: 1. Market entry potential is an estimate that includes the target market size and an estimate of the company’s competitive strength in the market. 2.

Market growth potential. 3. Market/country impact on the overall competitiveness. 4.

Another factor is proximity, language, and cultural “distance.” The question is not only which markets are attractive and easy to enter but also which markets should be part of a company’s global marketing strategy.

Chapter 9: Competitive Analysis and Strategy Learning Objectives •

Define strategy

•

Describe the forces that influence industry competition

•

Discuss the causes and effects of global competition

•

Differentiate between broad market and narrow target strategies

•

Describe the three classifications for strategic positions

•

Explain how strategic intent facilitates competitive innovation

•

Discuss the theory of hypercompetition Chapter Overview

Today, many companies are discovering that industry competition is changing from a purely domestic to a global phenomenon. Thus, competitive analysis must also be carried out on a global scale. Global marketers must also have an understanding of national sources of competitive advantage. Porter has described four determinants of national advantage. Factor conditions include human, physical, knowledge, capital, and infrastructure resources. Demand conditions include the composition, size, and growth pattern of home demand. The rate of home-market growth and the means by which a nation’s products are pulled into foreign markets also affect demand conditions. The final two determinants are the presence of related and supporting industries and the nature of firm strategy, structure, and rivalry. Porter notes that chance and government also influence a nation’s competitive advantage.

Lecture Outline I.

Strategy Defined (p. 243)

II.

Industry Analysis Forces Influencing Competition (p. 244)

a. Five Forces i. Threat of New Entrants ii. Threat of Substitute Products iii. Bargaining Power of Suppliers iv. Bargaining Power of Buyers v. Rivalry Among Competitors III.

Global Competition and National Competitive Advantage (p. 248) a. Factor Conditions i. Human Resources ii. Physical Resources iii. Knowledge Resources iv. Capital Resources v. Infrastructure Resources b. Basic Versus Advanced Factors c. Generalized Versus Specialized Factors d. Demand Conditions e. Related and Supporting Industries f. Firm Strategy, Structure, and Rivalry g. Other Forces Acting on the Diamond i. Chance ii. Government h. Other Nonmarket Factors i. Single or Double Diamond?

IV.

Competitive Advantage and Strategic Models (p. 256) a. Generic Strategies for Creating Competitive Advantage b. Broad Market Strategies i. Cost-Leadership Advantage ii. Differentiation c. Narrow Target Strategies i. Focused Differentiation ii. Cost Focus

V.

Strategic Positions (p. 261) a. Variety-Based Positioning b. Needs-Based Positioning c. Access-Based Positioning d. Which Position to Take?

VI.

Competitive Innovation and Strategic Intent (p. 263) a. Layers of Advantage b. Changing the Rules c. Collaborating d. Hypercompetition?

VII.

Summary (p. 268)

Tables and Figures Figure 9-1

Strategy Formulation, Stage I (p. 242)

Figure 9-2

Strategy Formulation, Stage II (p. 242)

Figure 9-3

Forces Influencing Competition in an Industry (p. 245)

Figure 9-4

Determinants of Nations’ Competitive Advantage (p. 250)

Figure 9-5

Influences on the Development of Industries (p. 255)

Figure 9-6

Influences on Domestic Rivalry (p. 256)

Figure 9-7

The Complete System (p. 257)

Figure 9-8

Generic Competitive Strategies (p. 258)

Figure 9-9

Motorcycle and Related Products Revenue Distribution (p. 260)

Table 9-1

Strategic Positions (p. 262)

Sidebars Sidebar 9-1

IKEA – Creating Unique Value (p. 241)

Sidebar 9-2

IKEA – Cost Focused (p. 257)

Suggested Answers to Discussion Questions 1. How can a company measure its competitive advantage? How does a firm know if it is gaining or losing competitive advantage?

Competitive advantage is defined in Chapter 9 as arising from “a match between a firm’s distinctive competencies and the factors critical for success within its industry.” When a company achieves this match, it will deliver superior perceived value relative to competitors. This definition suggests that, first of all, a company must have a clear understanding of three things: its distinctive competencies, the industry in which it competes, and the overall business environment. If a firm’s distinctive competencies allow it to attain the low-cost position in its industry, it cannot afford to lose ground to rivals seeking to leapfrog it. If a company competes via differentiation, it must be continually innovative to maintain or enhance the perceived uniqueness of its products. Beyond this, it is necessary for a company to assess customer perceptions.

2. Outline Porter’s five forces model of industry competition. How are the various barriers of entry relevant to global marketing?

The five forces model, a business school staple for nearly a quarter of a century, is shown in Figure 9-1. The first force, the threat of new entrants, depends on the presence or absence of barriers to entry. As industries globalize, the threat of new entrants into national markets increases. The issue of government policies is at the heart of the trade dispute between Komatsu and Caterpillar. Similarly, access to distribution channels may be blocked to deter would-be entrants. Strong global brands may also constitute a barrier to entry by providing product differentiation. The second

force, the threat of substitute products, limits a company’s ability to raise prices.

Global competitive pressures often compel companies to search for manufacturing sources in low-wage countries. Bargaining power of buyers is the third force. In the retailing industry, Wal-Mart wields tremendous buying power. Bargaining power of suppliers, the extent to which a company is the “900-pound gorilla” in its industry, can be very high in a global industry. A good example of the bargaining power of suppliers is OPEC. Finally, rivalry among competitors can be especially intense in global industries such as automobiles, consumer electronics, and pharmaceuticals.

3. What are three strategic positions identified by Michael Porter? a. Variety-based: Based on a firm’s decision to carry out a limited number of activities related to delivering a limited product or service. b. Needs-based: Occurs when a company attempts to deliver a value to a specific customer segment by carrying out activities to satisfy a comparatively broad set of needs of those customers. c. Access-based: This is the ability of a firm to uniquely reach a specific market in an access-based position.

4. Identify three strategic positions. Pick a successful company that you know and identify that company’s strategic position.

Variety-based: Vanguard, Bic Needs-based: IKEA Access-based: CARmike Cinemas 5. Give an example of a company that illustrates each of the four generic strategies that can lead to competitive advantage: overall cost leadership, cost focus, differentiation, and focused differentiation.

Overall cost leadership: Bic, Wal-Mart

Cost focus: IKEA, Kia Differentiation: Apple, Gillette, Swatch, Nike Focused differentiation: Harley-Davidson 6. What is the relationship, if any, between Porter’s four generic strategies and his three strategic positions?

Cost leadership is characteristic of variety-based positioning; companies that are customer needs-based practice differentiation, and customer access-based companies focus on particular market segments.

7. Briefly describe Hamel and Prahalad’s framework for competitive advantage.

Hamel and Prahalad argue that, while Western companies have been preoccupied with outdated concepts such as generic strategies, competitors in Japan have developed a true vision, long-term aspirations, and the discipline to achieve the vision. Strategic intent, in essence, represents an obsession with winning. At the core of the concept are core competencies that link related products. A case in point is Honda’s expertise at engine design. Competitive advantage is achieved when a company develops layers of competencies. It should be noted that some industry observers have found fault with Hamel and Prahalad’s work. For example, how exactly does a company go about identifying its core competence? Does the mere obsession with winning lead to success? What if a company is obsessed with winning but it has joined the wrong battle?

8. How can a nation achieve competitive advantage?

Porter identifies four determinants of national competitive advantage: •

Factor conditions

•

Demand conditions

•

Related and supporting industries

•

Firm strategy, structure, and rivalry

In the United States, for example, the patient monitoring equipment industry thrived due to sophisticated demand and an active domestic rivalry. The robotics industry in Japan benefited from public policy decisions that led to government support to stimulate domestic demand. In robots, automobiles, consumer electronics, and other industries in Japan, fierce domestic rivalries are the rule. In Italy, the ceramic tile industry thrived thanks to high per capita demand, vigorous domestic rivalry, and an abundance of available factors. National competitive advantage is the sum of the company competitive advantages in a country. It is derived from company strategy formulation and implementation. It is not to be confused with national endowments or national natural resources. A country may have, for example, an outstanding educational system or an inferior system. In general, a better system is an advantage, but merely having an outstanding educational system does not, per se, lead to competitive advantage. Nor does having a poor system preclude competitive advantage. National competitive advantage should not be confused with comparative advantage, which refers to the economic fact that a country can gain from specialization and trade. Every country can take advantage of the law of comparative advantage, and every country that protects local industry presents an obstacle to the realization of the gains from comparative advantage.

9. Do you agree with D’Aveni that no action or strategic advantage can be sustained for long? Why? Why not?

This certainly is a question that can be answered both ways. One could use GE as an example of a company that has sustained strategic advantage for a long time.

Conversely, according to D’Aveni, the only source of a truly sustainable competitive advantage is the company’s ability to manage its dynamic strategic interactions with competitor’s frequent movements that maintain a relative position of strength in each of four arenas: cost versus quality, timing and know-how, entry barriers and deep pockets. He believes that each of these arenas is “continuously destroyed and recreated by the dynamic maneuvering of hypercompetitive firms.” D’Aveni is also in agreement with Drucker who states, “Innovative organizations spend neither time nor resources on defending yesterday. Systematic abandonment of yesterday alone can transfer their resources…for work on the new.” Given these two arguments, however, it would be extremely difficult to sustain strategic advantage.

Chapter 10: Product Decisions Learning Objectives •

Explain basic product concepts

•

Discuss the general strategies for product positioning

•

Identify the factors that influence product saturation, design, and image

•

Describe five strategic alternative for global product positioning

•

Discuss the process of new product development Chapter Overview

The product is a key element of a marketing program. Global marketers face the challenge of formulating a coherent global product strategy for their companies. Product strategy requires an evaluation of the basic needs and conditions of use in the company’s existing and proposed markets. Marketers should be able to categorize their products according to the markets they serve (local, national, international, and global products) in order to define the opportunities for each in global markets. Marketers must consider many factors when designing products for global markets including preferences, costs, regulations, compatibility, and attitudes toward a product’s country of origin. Five strategic positioning alternatives are open to companies pursuing global market expansion for their products: product/communications extension, product extension/communications adaptation, product adaptation/communications extension, dual adaptation, and product invention.

Lecture Outline I.

Basic Concepts (p. 271) a. Products: Definition and Classification b. Products: Local, National, International, and Global

i. Local Products ii. International Products iii. Global Products and Global Brands II.

Product Positioning (p. 277) a. Attribute or Benefit b. Quality/Price c. Use/User d. High-Tech Positioning e. High-Touch Positioning

III.

Product Saturation Levels in Global Markets (p. 279)

IV.

Product Design Considerations (p. 280) a. Preferences b. Cost c. Laws and Regulations d. Compatibility

V.

Attitudes Toward Country of Origin (p. 282)

VI.

Global Product Positioning: Strategic Alternatives (p. 283) a. Strategy 1: Product/Communication Extension (Dual Extension) b. Strategy 2: Product Extension/Communication Adaptation c. Strategy 3: Product Adaptation/Communication Extension d. Strategy 4: Dual Adaptation e. Strategy 5: Product Invention f. How to Choose a Strategy

VII.

New Products in Global Marketing (p. 288) a. Identifying New-Product Ideas b. New-Product Development Location c. Testing New Products in National Markets

VIII.

Summary (p. 291) Tables and Figures

Table 10-1

Product Categorization Frameworks (p. 272)

Figure 10-1

Global Brands Characteristics (p. 275)

Table 10-2

2011 Ranking of the Top 100 Brands (p. 276)

Figure 10-2

Global Product Planning Strategic Alternatives (p. 284)

Table 10-3

Major Perspectives of Global Marketing Strategy (p. 288)

Table 10-4

Forbes’ List of the World’s Most Innovative Companies (p. 289)

Figure 10-3

Innovation Framework for Consumer Products (p. 290) Sidebars

Sidebar 10-1

Swatch Group (p. 270)

Sidebar 10-2

Riding the Green Wave on Four Wheels (p. 277)

Suggested Answers to Discussion Questions 1.

What is the difference between a product and a brand?

A product can be defined as a collection of tangible and intangible attributes. The former include physical features, design attributes, and packaging. The chrome on a Harley-Davidson motorcycle is a physical attribute, as are cupholders in a minivan.

Intangible product attributes include such things as reputation, mystique, or a distinguished heritage. A brand is defined in the text as a symbol about which consumers have beliefs or perceptions. A more complete definition would describe a brand as a complex bundle of images, promises, and experiences in the customer’s mind that represent a promise by a particular company about a particular product. In other words, a brand represents the relationship that marketing has established.

2.

What are the differences among a local, an international, and a global product or brand? Cite examples.

A local product or brand is perceived to have potential in a single national or regional market. Cape Cod Potato Chips is an example cited in the text. Vegemite is a vegetable food spread popular only in Australia. International products are those

originally intended for the home-country market for which extension possibilities exist. For example, GE has experienced success exporting full-sized refrigerators to Japan where consumers have responded favorably to the simple designs. A typical Japanese refrigerator from Matsushita, for example, has three doors and a special chilling compartment for fish. Global products are designed to meet the needs of a global market rather than the needs of an individual country market. The Apple iPod, Colgate’s Total toothpaste, and Cisco Systems’ network routers are all examples of products developed for the global market.

3.

What criteria should global marketers consider when making product design decisions?

A standardized global product platform can offer potential cost savings. Customer preferences, costs, country laws and regulations, and environmental compatibility are all noted in the text as factors affecting design decisions. For example, the European Union means a common harmonized standard for many products. This creates an opportunity for many companies to design pan-European products, subject to remaining cultural differences between European countries. However, product safety provisions in Europe are still established on country-by-country basis.

4.

How can buyer attitudes about a product’s country of origin affect marketing strategy?

If buyers feel positively about a country, a company should consider playing up the country-of-origin in its marketing communications. For example, Volkswagen’s “Fahrvehrgnugen” campaign from the early 1990s proclaimed the company’s German roots, even though many of the cars it sells are assembled in low-wage countries like

Mexico. Made in the U.S.A. is part of the appeal of Harley-Davidson; similarly, Switzerland is synonymous with high-quality watches in various price ranges. Russia and South Africa are two countries in which policy makers and business leaders have an uphill battle in combating negative country-of-origin perceptions. While Russia is synonymous with high-quality vodka (a fact played up in ads for Stolichnaya), few other consumer products benefit from an association with the former Communist country. Similarly, South Africa produces very fine wines at attractive prices, but American consumers have been unresponsive even though apartheid has ended.

Vietnam is another country that may encounter negative bias, at least in the United States. Over time, lingering biases may evaporate and attitudes can be changed.

Meanwhile, in countries for which negative biases exist, country of origin should be downplayed in packaging and marketing communications.

5.

Identify several global brands. What are some of the reasons for the global success of the brands you chose?

Depending on what a particular student’s home country is, he or she may mention Coca-Cola, Apple, Samsung, Mercedes-Benz, or Nike. As discussed in the text, Coke positioning and strategy are the same in all countries; it projects a global image of fun, good times, and enjoyment. Coke is “the real thing.”

6.

Briefly describe various combinations of product/communication strategies available to global marketers. When is it appropriate to use each?

The five strategies and their uses are: •

Product-Communications Extension, used when a product fulfills the same function and use conditions are the same;

•

Product Extension/Communication Adaptation, used when the product fulfills different functions but use conditions are the same;

•

Product Adaptation/Communication Extension, used when a product fulfills the same function but use conditions are different;

•

Product/Communication Adaptation, used when both need fulfilled and use conditions are different;

•

Invention, used to satisfy needs on a worldwide basis using a new communications strategy.

Chapter 11: Pricing Decisions Learning Objectives •

Discuss basic pricing concepts

•

Identify the environmental factors influencing price

•

Compare and contrast objectives and methods of global pricing strategies

•

Discuss the issues associate with gray marketing

•

Explain the causes and effects of dumping

•

Discuss transfer pricing issues and alternatives

•

Distinguish between three global pricing strategies Chapter Overview

Pricing decisions are a critical element of the marketing mix that must reflect costs and competitive factors. There is no absolute maximum price, but for any customer, price must correspond to the customer’s perceived value of the product. The aim of most marketing strategies is to set a price that corresponds to customers’ perceptions of value in the product and at the same time does not “leave money on the table” (i.e., set a price that is lower than consumers are willing to pay for a product or service). Generally, a company must charge what a product is worth to the customer, cover all costs, and provide a margin for profit in the process. Pricing strategies include market skimming, market penetration, and market holding. Pricing decisions must also take into account the price escalation that occurs when products are shipped from one country to another.

Dumping - selling products in international markets at prices below those in the home country or below the cost of production - and parallel importing are two particularly contentious pricing issues.

Lecture Outline I.

Basic Pricing Concepts (p. 295) a. Cost b. The Experience Curve c. Competition d. Demand

II.

Environmental Influences on Pricing Decisions (p. 298) a. Currency Fluctuations b. Exchange Rate Clauses c. Pricing in an Inflationary Environment d. Government Controls and Subsidies e. Competitive Behavior f. Price and Quality Relationships

III.

Global Pricing Objectives and Strategies (p. 301) a. Market Skimming b. Penetration Pricing c. Market Holding d. Cost Plus/Price Escalation e. Using Sourcing As a Strategic Pricing Tool

IV.

Gray Market Goods (p.305)

V.

Dumping (p. 306)

VI.

Transfer Pricing (p. 308) a. Cost-Based Transfer Pricing b. Market-Based Transfer Price c. Negotiated Transfer Prices d. Tax Regulations and Transfer Prices i. Sales of Tangible and Intangible Property ii. Competitive Pricing iii. Importance of Section 482 Regulations e. Duty and Tariff Constraints

f. Joint Ventures Global Pricing – Three Policy Alternatives (p. 313)

VII.

a. Extension/Ethnocentric b. Adaptation/Polycentric c. Invention/Geocentric d. Actual Pricing Practices VIII.

Summary (p. 316) Tables and Figures

Table 11-1

Global Marketing Pricing Checklist (p. 295)

Figure 11-1

Experience Curve (p. 296)

Table 11-2

Global Pricing Strategies (p. 299)

Table 11-3

Exchange-Rate Clauses (p. 299)

Table 11-4

Price Escalation (p. 303)

Table 11-5

Transfer Pricing Methods for Selected Countries (p. 310) Sidebars

Sidebar 11-1

Open to Discussion: Contrarian Views of James Bovard (p. 307)

Sidebar 11-2

Pricing Reeboks in India (p. 313)

Suggested Answers to Discussion Questions 1.

What are the three basic factors affecting price in any market? What considerations enter into the pricing decision?

One factor is the price floor, which can be linked to product cost or some other consideration. For example, in the fall of 1996, Florida tomato growers concerned about cheap tomatoes from Mexico persuaded the U.S. Government to impose a price floor of 21 cents per pound on Mexican tomatoes. A second basic factor is the price ceiling, an upper limit created when comparable products are available. As industries globalize, consumers should enjoy lower prices unless national or regional protective barriers are erected to imports. In the U.S., for example, when Cadillac introduced the

Catera several years ago, it came with a sticker price of $29,995. The same model sold as the Opel Omega in Germany for $5,000 more. The U.S. market for entry-level luxury cars is crowded with imported nameplates, and price competition in the entrylevel category is fierce among Lexus, Infiniti, Mercedes-Benz, and BMW. In the Mercosur countries, on the other hand, external tariffs on motor vehicles are still as high as 70 percent. Thus, many consumers in Brazil, Argentina, Uruguay, and Paraguay must buy locally-produced vehicles at high prices. Finally, between these two extremes there is an optimum price. Many Japanese companies have struggled to find the optimum price in view of a strong and fluctuating yen.

Some pricing considerations noted in Chapter 11 include: •

Whether or not a product’s quality is reflected in the price;

•

How to price to different segments;

•

Determining how much latitude to adjust prices the market will permit if the firm’s costs change;

• 2.

Enforcement of dumping laws in particular country markets.

Identify some of the environmental constraints on global pricing decisions.

Students should recall the discussion in an earlier chapter concerning currency fluctuations as an important consideration in global marketing. Inflation is another factor in the economic environment that may force a company to make frequent price changes. Government regulations can hinder or prohibit a company’s efforts to adjust costs. Finally, the presence or absence of competitors directly affects a company’s flexibility with prices. In the absence of competitive constraints, a company can charge whatever the market will bear.

3.

What is dumping? Is it an important trade issue or a red herring?

Dumping is the practice of selling goods in foreign markets at prices that are lower than the cost of production or lower than the home-country price. During the GATT negotiations, government representatives from some countries expressed concern that enforcement of U.S. antidumping policies always favored the U.S. For its part, the U.S. negotiators were concerned about the relative absence of due process in overseas dumping cases.

4.

What is a transfer price? What is the difference, if any, between a transfer price and a “regular” price? What are three methods for determining transfer prices?

A transfer price is the price one unit of a company charges to another company unit for goods and services. Transfer prices can be determined on the basis of costs, on the basis of the market, or by negotiation between the company’s various units.

Companies under the jurisdiction of U.S. tax laws must comply with Section 482, the portion of the Internal Revenue Code that deals with controlled intracorporate transfers.

5.

What are three alternative approaches to global pricing? Which one would you recommend to a company that has global market aspirations?

An ethnocentric pricing policy calls for the price of a particular product to be the same in every part of the world. When management uses this approach it foregoes opportunities to set prices higher in certain country markets and also risks loss of market share in countries where a lower price is required. A polycentric approach relies on adaptation of country managers who attempt to be as responsive as possible to local market conditions. One problem with the polycentric approach is that it

creates conditions in which gray marketing can flourish. A geocentric approach to pricing balances the desire for long-term returns on investment with shorter-term considerations, such as market share. The geocentric approach is most appropriate for a company with a global strategy and global aspirations.

6.

If you were responsible for marketing CAT scanners worldwide and your sourcing country (location of manufacture) was experiencing a strong and appreciating currency against almost all other currencies, what options are available for adjusting prices to take into account the strong currency situation?

The real issue here is not just options for adjusting prices, but options that will allow the marketer to maintain competitive advantage. One option is to shift manufacture to one or more weak-currency countries. If that is not feasible, another medicalproducts company could become license under license. Another is to keep manufacturing in the strong currency country, focusing on cost -cutting efficiencies and/or product innovation and improvements that will differentiate the scanners. A lower cost, “no frills” model can be developed for some markets.

Chapter 12: Global Marketing Channels Learning Objectives •

Discuss the development of global marketing channels and current distribution trends

•

Identify the factors that affect channel strategy decisions

•

Describe the characteristics of distribution channels

•

Describe the features of global retail channels

•

Explain the causes and effects of global channel innovations

•

Discuss physical distribution issues and logistics Chapter Overview

The characteristics of customers, products, middlemen, and environment all impact channel design and strategy. Consumer channels may be direct, via mail, door-to-door, the Internet, or direct factory/manufacturer outlets; or they may involve one or more levels of resellers. A combination of the manufacturer’s sales force, agents/brokers, and wholesalers may also be used. Channels for industrial products are less varied, with the manufacturer’s sales force, wholesalers, and dealers or agents being utilized. In developed countries, retail channels are characterized by the substitution of capital for labor. The opposite is true in less developed countries with abundant labor. Such countries disguise their unemployment in inefficient retail and wholesale channels suited to the needs of consumers; such channels may have gross margins that are 50 percent lower than those in self-service stores in developed countries. Transportation and physical distribution issues are critically important in global marketing because of the geographical distances involved in sourcing products and serving customers in different parts of the world.

Lecture Outline I.

Global Marketing Channels – History and Trends (p. 324)

II.

Channel Strategy (p. 326) a. Customer Characteristics b. Product Characteristics c. Middleman Characteristics i.

Selection and Care of Distributors and Agents

ii.

Agent/Distributor Performance

iii.

Termination

d. Environmental Characteristics III.

Distribution Channels: Terminology and Structure (p. 335) a. Consumer Products i. Door-to-Door Selling ii. Manufacturer-Owned Store iii. Franchise Operations iv. Combination Structures b. Industrial Products c. Global Retailing

IV.

Global Channel Innovation (p. 341)

V.

Channel Strategy for New Market Entry (p. 342)

VI.

Physical Distribution and Logistics (p. 343) a. Order Processing b. Warehousing and Inventory Management c. Transportation

VII.

Case Example: Japan (p. 346) a. Devising a Japanese Distribution Strategy (p. 347)

VIII.

Summary (p. 348) Tables and Figures

Table 12-1

Apple Store Locations (p. 328)

Figure 12-1

Criteria for Evaluating Distributors (p. 333)

Figure 12-2

Marketing Channel Alternatives – Consumer Products (p. 336)

Table 12-2

Top 10 Global Franchises 2012 (p. 337)

Table 12-3

Non-US Franchise Companies 2012 (p. 338)

Figure 12-3

Marketing Channel Alternatives – Industrial Products (p. 339) Sidebars

Sidebar 13-1

Hypermarkets (p. 325)

Sidebar 13-2

The Apple Stores – Something New Under the Sun (p. 327)

Sidebar 13-3

A Case of Wine: Distribution Channels (p. 329)

Sidebar 13-4

Channels in Less Developed Countries (p. 340)

Suggested Answers to Discussion Questions 1.

In what ways can channel intermediaries create utility for buyers?

The sidebar titled “A Case of Wine” contains several examples of the types of utility identified in the chapter. Place utility is created by intermediaries who move the wine from the place of production to the ultimate consumer. Form utility, including proper condition, is important in the wine trade because wine is perishable. Quality-minded distributors and importers use refrigerated containers (“reefers”) to ensure the wine is not damaged by heat. Similarly, some retail wine outlets go to extra lengths to ensure that the wine is not exposed to excessive heat while on display. Wine retailers provide information utility by providing advice, holding comparative tastings, and exhibiting tasting notes and evaluations from well-known wine publications.

2.

What factors influence the channel structures and strategies available to global marketers?

Factors include customer characteristics, product characteristics, middleman characteristics, and environmental characteristics. In Latin America, low per-capita incomes and limited access to traditional sources of credit are two customer characteristics that contributed to the emergence of the low-volume pulperia. In Japan, relationship-oriented car buyers expect car salespersons to visit them at home.

As described in the chapter, the distribution of wine is partly determined by the product characteristics of bulk and heat sensitivity. Although many wineries also engage in direct sales, either via delivery service or by selling to visitors, exporting wine necessitates use of intermediaries who, as described, create utility as they move the wine. Middleman characteristics are particularly important in Japan, where both the multilayered wholesale and retail systems are extremely fragmented.

Relationships with channel intermediaries tend to be long term. Termination can be difficult and expensive; also, the tendency of intermediaries to “cherry pick” the best lines means newcomers to the market may have problems finding a distributor. An example of environmental characteristics can by seen in the success of direct selling

by Avon in China, Russia, and Latin America where the retail infrastructure is underdeveloped.

3.

What is cherry picking? What approaches can be used to deal with this problem?

Cherry picking occurs when a channel member prefers to carry product lines with proven demand from well-known manufacturers. Intermediaries tend to favor product lines that do not require “push.” If a channel intermediary is not interested in a company’s product, the company may have to bypass that particular intermediary by setting up its own distribution organization. Alternatively, the company can offer to subsidize the effort of the distributors own sales force. If the company succeeds in establishing a presence in the market, it may ultimately succeed in attracting the attention of the erstwhile cherry picker.

4.

Compare and contrast the typical channel structures for consumer products and industrial products.

Consumer channels tend to exhibit more variety and be longer (have more intermediaries) compared with industrial channels. This is due in part to the fact that there are typically more customers for retail products than for industrial goods, and consumers purchase smaller quantities on a more frequent basis. Also, the increased complexity and cost of industrial products, as well as the information needs of customers, combine to keep industrial channels relatively short and direct. Direct, short channels are especially appropriate if a product requires a great deal of service support after the sale.

5.

Briefly discuss the global issues associated with physical distribution and transportation logistics. Cite one example of a company that is making efficiency improvements in its physical distribution.

One issue is finding the most cost-effective mode for moving goods between farflung global production, distribution, and retail units. Companies have a variety of transportation options available: trucks provide flexibility and excellent coverage; water is a low-cost, but slow mode for bulky products; air, by contrast, is fastest but also the most expensive. Many companies will use intermodal (a.k.a. multimodal) transportation in which a container moves via various two or more modes. Both inbound and outbound logistics must be managed to achieve optimum levels of services and speed. 3m and Laura Ashley are two companies that have improved their distribution efforts. 3m established a distribution center in the Netherlands and invested million in a truck fleet to provide daily service on the Continent. Laura Ashley has subcontracted with FedEx’s Business Logistics Service to provide air service between Asian factories and the company’s Asian retail stores. Previously,

output from Asian factories was shipped to the company’s distribution center in Wales and then sent back to Asia to stock the retail stores.

6.

What special distribution challenges exist in Japan? What is the best way for a non-Japanese company to deal with these challenges?

In Japan, exclusive distribution arrangements can keep some competitors out of the market. Generally, in Japan and other Asia countries, a sense of respect, trust and strong social relationships are required to obtain channel support. Non-Japanese companies should follow the example of Toys ‘R’ Us by choosing a local partner, cultivating the necessary relationships, and using diplomacy and home-government contacts when necessary to level the playing field.

Chapter 13: Global Integrated Marketing Communications Learning Objectives •

What is global integrated marketing communications? How does it differ from global advertising?

•

Explain the advantages and disadvantages of advertising standardization and localization

•

Discuss the global marketing methods and tools for encouraging customer engagement

•

Identify factors to consider when choosing an advertising agency for a global marketing campaign

•

Discuss the significance of art, copy and culture to global advertisers Chapter Overview

Integrated marketing communications (IMC) refers to all forms of communication used by organizations to inform, remind, explain, persuade, and influence the attitudes and buying behavior of customers and other persons. Marketing communications includes advertising, public relations, sales promotion, and personal selling. Although marketers may identify opportunities for global standardized advertising campaigns, local adaptation or distinct local campaigns may also be required. When creating advertising, care must be taken to ensure that the art direction and copy are appropriate for the intended audiences in target countries. Advertising intensity and media use varies from country to country. Service offerings will continue to grow on proprietary platforms offered via low-cost cloud computing as well as mobile devices. Communication strategies will include web-based branded content promotions and marketing campaigns

and messaging that will be virally spread through socially networked friends responding to ever more targeted campaigns.

Lecture Outline I.

Global Integrated Marketing Communications (p. 352)

II.

The Extension Versus Adaptation Debate (p. 355)

III.

Selecting an Advertising Agency (p. 415)

IV.

Customer Engagement (p. 358) a. Encouraging Social Engagement b. Online Reputation Management

V.

Social Media Content and Targeting (p. 363)

VI.

Using Data to Drive Business Value (p. 369)

VII.

Advertising Strategy (p. 371) a. Advertising Appeals b. Art c. Copy d. Cultural Considerations

VIII.

Summary (p. 377) Tables and Figures

Table 13-1

Top Global Marketers by Measured Media (p. 354)

Table 13-2

Top 10 Contributors to Global Adspend Growth (p. 355)

Figure 13-1

Cross-Channel Performance Data Comparison (p. 365)

Figure 13-2

Influence of Channels on Brand & Consumer Response (p. 366)

Figure 13-3

Five Sets of Data/Tools (p. 370)

Table 13-3

Top 10 Leading Consolidated Agency Networks (p. 372) Sidebars

Sidebar 13-1

Global Campaigns for Global Products (p. 356)

Sidebar 13-2

Nike’s Global Customers (p. 363)

Suggested Answers to Discussion Questions 1.

In what ways can global brands and global advertising campaigns benefit a company?

The potential benefits from global brands include economies of scale in both advertising and production and improved access to distribution channels. As consumer tastes and preferences continue to converge, consumer products companies in particular will have opportunities to build global brands and use global campaigns.

Also, as people from around the globe travel more freely, they will be confused if they see a particular product with an unfamiliar name or package.

2.

How does the standardized-versus-localized debate apply to advertising? Identify and discuss the problems with assessing advertising effectiveness in foreign markets.

In general, advertising can be used to inform or persuade. If a global market exists for a product, or if a global product is developed from the ground up, opportunities to standardize some, if not all elements, should be explored. “Pattern” advertising represents a middle point on the standardized/localized continuum. In pattern advertising, a standardized basic message is used with modifications tailored to individual markets. At Coca-Cola, for example, a TV ad could include a wide shot of hundreds of children singing together, plus a close-up of a youngster from the local country market. Other localizations can include translating words and lyrics or making adjustments to copy or art direction. For example, when Benetton refrains from running a particular execution of its “United Colors of Benetton” print campaign in a particular country, it is using pattern advertising.

3.

When creating advertising for world markets, what issues must art directors and copywriters take into account?

Art direction concerns an ad’s visual presentation. Long-running campaigns can link various visual executions to a given theme; print ads for Absolut vodka and Benetton are two examples. Visual must be appropriate for every market; the Benetton case shows that care should be used when creating ads with shocking or controversial images. Copywriters create the written text that will appear in words in a print ad or be spoken in a broadcast as. When preparing global ads, copywriters must take care that the message is properly encoded. Back translation should be employed to ensure that copy is correctly rendered in target languages. Copywriters must also work with art directors to make sure that the tone of a particular ad is appropriate; in some countries, for example, logical, rational appeals are best; in other countries, ads that appeal to sentiment or emotion are likely to be better received.

4.

How do the media options available to advertisers vary in different parts of the world? What can advertisers do to cope with media limitations in certain countries?

Media availability varies widely in world markets. Even when a particular media vehicle is available, government regulations can limit, or even prohibit, some or all types of advertising. This is especially true where government owns the broadcasting companies. Broadcast advertising is frequently restricted by government edict. Even if broadcast media are available, information about listener or viewer audiences may be hard to obtain compared with industrialized countries where such information forms the basis for advertising rates. One favorable trend in broadcasting is the

privatization of industry in some parts of the world, which should create a more favorable climate for advertising. Another trend is the rapid diffusion of small satellite dishes around the world – including countries such as China where broadcasting has been limited. The growth of global satellite broadcasting also mean improved prospects for both television advertising in general and for development of pan-regional or global ads.

5. It was once said that advertising is American’s greatest export. Discuss.

The United States has done a remarkable job of exporting the American brands.

Companies realize that some market segments can be defined on the basis of global demography – youth culture, for example – rather than ethnic or national culture.

Nike’s, for example, can be targeted to a worldwide segment of 18- to 25-year-old males. Media vehicles such as MTV Europe enable people virtually anywhere to see how the rest of the world lives.

6. Describe the relationship between integrated marketing communications and the other elements of the marketing mix.

Integrated marketing communications (IMC) refers to all forms of communication used by organizations to inform, remind, explain, persuade, and influence the attitudes and buying behavior of customers and other persons. The primary purpose of marketing communications is to inform consumers and customers about the benefits and values that a product or service offers. IMC provides the consumer with information concerning the other elements of the mix.

7. Can it be argued that social networking and social media are hybrid elements of the promotion mix because they exhibit characteristics of more traditional

integrated marketing communications such as word-of-mouth? What degree of control and influence can the marketing manager have over the frequency or content of information being shared? Discuss.

The future of marketing is about relevance and engagement. The bottom line is that the web, particularly the social web, is about value exchange. In conversations about brands, product categories, or services, the web makes transparent those offerings of value backed by emerging universal principles of quality, durability, and environmental sustability. Traditional marketing has been very good at differentiating products and building brands. It continues to be marketing’s role to identify and segment customers, differentiate and position products, and build value propositions by encouraging demand and interaction with customers. A firm’s assets are not only intellectual property (IP), but also its relationship assets (RA) including, most importantly, customers. The challenge is recognizing that relationships are assets. As engagement channels proliferate, it is important to understand which channels customers choose to use and for what reasons. This is the heart of what social media and social networking is all about.

Chapter 14: Global Organization and Leadership: Managing the Global Marketing Effort Learning Objectives •

Identify the characteristics of great companies

•

Discuss global organizational design issues

•

Differentiate between the types of organizational structures

•

Describe the factors that affect organizational structure

•

Describe the stages of organizational development

•

Discuss global marketing control practices Chapter Overview

To respond to the opportunities and threats in the global marketing environment, a firm must have a global vision and strategy. Leaders must have the vision, in addition to the technical resources, to build global competencies. In organizing the global marketing effort, a structure that enables the company to respond to relevant differences in international market environments and enables the company to extend valuable corporate knowledge is the goal. A balance between autonomy and integration must be established.

Within this organization, firms must establish core competencies to be competitive. For global marketing control practices to be effective, differences from purely domestic control must be recognized and implemented in planning and control practices.

Lecture Outline I.

Great Companies Think Differently (p. 380)

II.

Organization (p. 382) a. International Division Structure b. Regional Management Centers

c. Geographic Structure d. Global Product Division Structure e. The Integrated Structure f. Relationship Among Structure, Foreign Product Diversification, and Size g. Organizational Structure and National Origin h. The Myth of the Ideal Organization Structure III.

Impact of Emerging Markets on Global Structure (p. 396)

IV.

Global Marketing Audit (p. 396) a. The Global Marketing Audit Defined i. Setting Objectives and Scope of the Audit 1. Gathering Data 2. Analyzing the Data 3. Preparing and Presenting the Report ii. Problems, Pitfall, and Potential of the Global Marketing Audit 1. Report Presentation b. Planning and Budgeting c. Evaluating Performance d. Influences on Marketing Plans and Budgets i. Market Potential ii. Competition iii. Impact of Substitute Products iv. Process v. Share of Market vi. Informal Control Methods

V.

Summary (p. 403) Tables and Figures

Figure 14-1

Function Corporate Structure, Domestic Corporate Staff Orientation, Preinternational Division (p. 384)

Figure 14-2

Divisional Corporate Structure, Oriented Product Division Staff, Preinternational Division (p. 385)

Figure 14-3

Functional Corporate Structure, Domestic Corporate Staff

Orientation, International Division (p. 386) Figure 14-4

Divisional Corporate Structure, Domestically Oriented Corporate Staff, domestically Oriented Product Division, International Division (p. 387)

Figure 14-5

Functional Corporate Structure, Domestic Corporate Staff Orientation, International Division, Area Divisions (p. 388)

Figure 14-6

Divisional Corporate Structure, Domestically Oriented Corporate Staff, International Division, Area Subdivision (p. 389)

Figure 14-7

Single Product Division or Business Company (p. 390)

Figure 14-8

Multi Divisional or Multi Product Division Corporate Structure with World Corporate Staff Orientation (p. 391)

Figure 14-9

The Integrated Structure (p. 392)

Figure 14-10

The Relationship Among Structure, Foreign Product Diversification, and Size Abroad (p. 393)

Figure 14-11

Relationship of Strategic Control and Planning (p. 400) Suggested Answers to Discussion Questions

1. What is the difference between a great and an ordinary company?

Perhaps the most fundamental difference is that great companies think differently.

The ordinary company has a limited view of its purpose and mission: the most ordinary and lowest form of ordinary is the company that sees itself as nothing more than a money-making machine. Great companies believe that they have a much broader purpose than just making money. They see themselves as key social institutions like the family, government, religion, or not-for-profit organizations, including NGOs, operating globally. Like each of these institutions, great companies know that they create value for the world not only in the products and services they provide to their customers, but also in the contributions they make to individuals and communities all over the world through the opportunities they create for creative

expression of human potential. Great companies make the world a better place and enrich the lives of their customers, communities, and society. Great global companies do this globally.

2. Cite examples of companies that you consider to be great and ordinary companies. Explain why the companies that you selected are great or ordinary.

The answer to this question is totally dependent upon what the individual students view as either great or ordinary companies. The challenge here is to question them to make certain they understand the differences between great and ordinary and that they can substantiate their answers.

3. What is the major complaint of managers in subsidiary companies about the control practices of headquarters?

The primary complaint from managers in subsidiary companies about the control practices of headquarters is that headquarters does not allow them the independence or autonomy to make the quick necessary decisions they believe are imperative to effective competitive operation. Subsidiary management believe they are in the better position to know what is going on at the local level and what actions need to be accomplished. In organizing the global marketing effort, a structure that enables the company to respond to relevant differences in international market environments and enables the company to extend valuable corporate knowledge is the goal. A balance between autonomy and integration must be established.

4. What is a global marketing audit?

A global marketing audit can be defined as a comprehensive, systematic and periodic examination of a company’s or business unit’s marketing environment, objectives,

strategies, programs, policies and activities, which is conducted with the objective of identifying existing and potential problems and opportunities and recommending a plan of action to improve a company’s marketing performance.

5. What kind of planning problems develop in the headquarters of a global company?

If plans are developed at headquarters, there may be difficulty in implementing them at the local level as subsidiary managers may suffer from the “Not Invented Here” syndrome. In addition, headquarters may lack geographic knowledge of all the relevant markets, product knowledge and know how for local conditions, functional competence in such fields as marketing and specific knowledge of the local customer and its needs.

6. What are the problems in planning at the country or subsidiary level in a global company?

With a geographic structure where planning is at the country or subsidiary level, relevant market information may not be shared with subsidiaries, there may be costly duplication of effort and a coherent global advertising effort does not result.

7. How would you advise a company manufacturing a line of construction equipment to organize on a global scale?

There are many ways to organize a global company. In the case of construction equipment, an industrial product, it would be advisable to organize around a product structure as opposed to a geographic structure. The product (construction equipment) is fairly standardized around the globe so it would benefit from centralization and the economic and management benefits this structure offers.

Chapter 16: Global Corporate Social Responsibility and Environmental Sustainability Learning Objectives •

Discuss the historical foundations of corporate social responsibility

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Explain the shared value concept

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Describe the six elements that characterize great companies

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Discuss how environmental sustainability affects organizational strategy and success

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Describe the stakeholders of global corporations Chapter Overview

The big new idea in marketing is shared value. The concept of shared value recognizes that the stakeholders of a business are not limited to the owners (shareholders), management, and customers but also include employees at all levels who contribute toward the business’ success, suppliers, and society, both local and global. If a company’s product is toxic at the end of its service life and the company has adopted the concept of shared value, it will do whatever it can to ensure that no harm is caused to people or the environment by the disposal of the product.

Lecture Outline I.

Historical Context (p. 406)

II.

Shared Value: The Big New Idea in Marketing (p. 408) a. Great Companies Think Differently i. Common Purpose ii. Long-Term View iii. Emotional Engagement iv. Partnering with the Public v. Innovation

vi. Self-Organization III.

Environmental Sustainability (p. 412)

IV.

Can CSR Be Measured? (p. 414) a. Sustainability and Innovation

V.

Stakeholders (p. 415) a. Management b. Shareholders c. Employees d. Customers e. Suppliers f. Society

VI.

Summary (p. 419) Tables and Figures

Figure 15-1

The Value Equation: Old versus New (p. 408) Sidebar

Sidebar 15-1

Top Ten Global Air Polluting Countries 2011 (p. 406) Suggested Answers to Discussion Questions

1. What is the global marketer’s responsibility and relationship to corporate social and sustainability initiatives? Can global marketing as both a field of study and discipline be a leading voice for corporate social responsibility? If so how, if not, why not.

The goal of marketing is to create value. This goal raises a question: value for whom?

Under the old concept of marketing, the goal of marketing was to create value for the marketer by getting a customer to exchange her money for the marketer’s product.

The new concept of marketing shifted the goal to creating value for customers and stockholders. Today, the strategic concept of marketing shifts the goal to creating value for stakeholders. And who are the stakeholders? Of course they include

customers and stockholders. However, our knowledge of the global social, cultural, and physical environment has expanded, and with this greater understanding, it is clear that the focus of marketing must go beyond addressing customers and stockholders to recognize that marketing activity can have both positive and negative impact for a much wider constituency including employees, society, and the physical environment. The social and economic impacts of marketing include a company’s impact on health and well-being, and on the physical and social and economic environment of the firm. For the global company, this is the global economic and social environment. This is how the global company becomes a leading voice for corporate social responsibility.

2. Who are the truly “Great Companies” that come to mind for you using the criteria highlighted in this chapter? Are there other grounds for being a “Great Company”?

The Great Companies that are named by the students will be individual student choices. However, it is important to ensure that they have justifiable rationales for their decisions.

3. Describe sustainability initiatives that have influenced supply chain relationships, channel or purchasing decisions, media and messaging campaigns, R&D, tech investments, or other functions. If you don’t know of any, why?

The text mentions several that can be used to answer this question. Taking the LongTerm View: Ford Motor Company is thought of as a social institution. As such, it worked with employees and suppliers to make short-term financial sacrifices required to achieve the corporate purpose and endure over time. Innovation: Apple is a

company driven to innovate. From an environmental sustainability viewpoint, Apple’s disruptive business model of downloading music from the Internet for an iPod or MP3 player eliminated the need for polymer-based CDs and effectively “dematerialized” an important aspect of the music industry. Many other examples exist in this chapter.

4. What systems might need to be put in place that are not be in place now which would incorporate or facilitate sustainability and corporate responsibility standards in decision making? How might these systems or others help align shared value initiatives across the organization especially from the global marketing perspective?

The answers to this question will tend to be wide-ranging and incomplete. It is important to press the students to justify their answers and to dig deeper for greater understanding.

Chapter 16: The Future of Global Marketing Learning Objectives •

What are the major trends shaping the future of global marketing

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Explain how globalization and global marketing is influenced by the growth of information technology

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How will growth of the global income and population influence global marketing strategy

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What is the trade cycle

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What is shared value

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Explain the significance of sustainability and shared value to global marketing

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Explain the relevance of an expanded set of ‘C’s to the global marketing effort

Chapter Overview The future of global marketing will reflect seven major changes that will shape and create new directions, opportunities, and threats. All world regions will continue to grow, and world wealth will become more evenly distributed. Marketing is at the threshold of a new and exciting era: e-business, e-commerce, and e-marketing. The trade cycle has not eliminated manufacturing as a source of employment and income in the high-income countries. Global markets will continue to grow in importance as global marketers continue their quest to identify and serve global segments. There are two big new developments in marketing. The first is the concept of shared value: recognizing that companies do more than create value for customers and stockholders. The other big new development is sustainability: the challenge of sustainability will be a major driver of innovation and value creation and, if it is fully embraced, will ensure that future

generations of consumers and marketers will enjoy fuller and richer lives.

Lecture Outline I.

Eight Major Trends (p. 424) a. Globalization and Information Technology b. The End of Distance c. Technical Convergence and Connecting to the Customer d. World Economic Growth and the Rise of the Rest e. Population Changes f. Trade Cycle Model Clarified g. The New Paradigm: Shared Value

II.

The Cs of Marketing: Three Times Four = Twelve (p. 434) a. Sustainability

III.

Careers in Global Marketing (p. 436)

IV.

Summary (p. 436) Tables and Figures

Figure 16-1

Projected Acceleration of World Population Aging (p. 431)

Figure 16-2

World Population 1800-2100 (p. 432)

Suggested Answers to Discussion Questions 1.

Do you believe that economic democracy (free markets) will inevitably lead to political democracy? Why? Why not?

As the poor countries grow richer, they assume that their values are responsible for their success, and they do not listen to lectures from their less successful former world leaders. Indeed, they start giving lectures. Wealth creates the foundation for political and military power and the basis for an assumption of moral superiority. The attitude of politicians and businesspeople from rich countries and from countries that

are successfully developing is that if we are rich or fast growing, we must be doing something right.

2.

Why did free markets and marketing win in the competition with communism?

The age old “contest” between capitalism and communism is over. The clear success of the capitalist market-driven system over the communist centrally controlled model has led to the collapse of communism as a model for the organization of economic activity and as an ideologue. Markets are in control of the allocation of resources all over the world with the exception of the two autocratic national anachronisms, Cuba and North Korea. But, the actual case was the accelerating growth of non-communist markets. The high-income country growth leadership has shifted. Low and lower middle-income country growth leadership has been concentrated in South East and South Asia. The driving forces of this growth are technology, deregulation, global integration, and the triumph of marketing. China, although still communist, is experimenting with marketing, which has resulted in one of the world’s fastest growing economies.

3.

Is the trade cycle relevant to companies today? Why? Why not?

The old trade-cycle model, which implied to a generation of managers that as a product matures, the location of production must shift to low-wage countries, has been clarified. Just the level of wages does not dictate the location of production.

Wages are simply one element of the cost equation. For any product where labor is less than say 15% to 20% of total costs, the location of production of mature products may be anywhere in the world. Factors such as transportation costs, availability of skilled labor, market responsiveness, and market access and high levels of innovation

in product design and manufacturability may all indicate that the best location for production is a high income, high wage country.

4. How have technological convergence, the Internet, and customer expectations changed the task of the global marketer? Are marketing tools and concepts discussed throughout this text relevant to the digital marketplace? If so, how? If not, why not?

“The new electronic interdependence re-creates the world in the image of a global village.” This observation, from the quotation at the beginning of this chapter, describes today’s hyperconnected world. The most important change today in marketing is the interaction of globalization and information technology. Workers and companies everywhere must constantly improve their productivity and performance because today, as never before in human history, all markets are exposed to global competition. For marketers, this explosion of connectivity presents unprecedented opportunities to identify customer needs and wants and to communicate and connect with customers. Marketing is the art and science of creating value: information is the key to the task of creating value. Information is the raw material that enables marketers to identify customer needs and wants, create products that will meet these needs and wants, and communicate value propositions with existing and potential customers.

5. The acceleration of population growth and aging of the world population will have an impact on marketing practices. How will these trends impact product and pricing decisions, integrated marketing communications, or other areas?

Current projections show a continued increase of population (but a steady decline in

the population growth rate) with the population expected to reach between 7.5 and 10.5 billion in the year 2050. The population within the developed economies of the world is continuing to gray. Certainly, it will impact medical markets. Older populations are living more active, healthier lives and will be a major market for goods and services across a broad spectrum of consumer products. Hand in hand with aging populations, the birthrate in the high-income countries is collapsing. In Japan and many European countries, the number of births has dropped to below population equilibrium level. The combination of low birthrates and wealth will drive a continuation of the global economic migration of people from poor, undeveloped countries to the rich, developed countries.

6. Are sustainability initiatives applicable to marketing? If so, how? If not, why not?

What would the practice of marketing look like from a perspective where shared value is a top priority?

Yes, sustainability initiatives are most applicable to marketing. Sustainability is a response to the new era of man and is closely linked to shared value, the value equation, and the strategic concept of marketing. The Brundtland Commission definition “sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs” addresses the impact of production, consumption, and disposal/byproducts on future generations. Consumption of products that are manufactured with renewable, safely recyclable resources that do not impact the earth’s environment is sustainable because the resources consumed by production and consumption are replaced in a virtuous sustainable production/consumption/zero-impact cycle. Shared value is a big

new idea for many global marketers, and a very old and accepted idea for others. The capitalist system in many countries is failing to meet the needs of society. In other countries, it is alive and well. This is good news: the companies and countries that understand and practice the application of this concept have proven that it works in today’s global economy. Everyone wins when shared value is a top corporate priority.

7. Discuss with your classroom peers where they have been residing and working.

What have been their experiences with living, working, or studying in a country where they had to learn the language, the culture, and applicable industry standards? What did they find rewarding about these experiences? How have these experiences shaped their understanding of global marketing and global marketing practices?

The exercise is totally student dependent and answers and discussion will vary accordingly.

8. Hermawan Kartajaya has outlined the Twelve Cs of New Wave Marketing in the appendix to this chapter. In your view, which are the most important Cs on his list? Why are the Cs you selected especially important?

The Twelve Cs of New Wave Marketing are: 1. Communitization; 2. Confirmation; 3. Clarification; 4. Codification; 5. Co-Creation; 6. Currency; 7. Communal Activities; 8. Conversation; 9. Commercialization; 10. Character; 11. Care; 12.

Collaboration. Student choice will be individualized.