Who is able to complete this assignment?

Reference: Keegan, W. J., & Green, M. C. (2020). Global marketing (10th ed.). Retrieved from https://www.vitalsource.com

1-1 Introduction and Overview

1. 1-1 Use the product/market growth matrix to explain the ​various ways a company can expand globally.

As the preceding examples illustrate, the global marketplace finds expression in many ways. Some are quite subtle; others are not. While shopping, you may have noticed more multilanguage labeling on your favorite products and brands. Chances are you were one of the millions of people around the world who tuned in to television coverage of the World Cup Soccer championship in 2018. On the highway, you may have seen a semitrailer truck from FedEx’s Global Supply Chain Services fleet. Or perhaps you are one of the hundreds of millions of Apple iTunes customers who got a free download of U2’s 2014 album Songs of Innocence—whether you wanted it or not! When you pick up a pound of Central American coffee at your favorite café, you will find that some beans are labeled Fair Trade Certified.

The growing importance of global marketing is one aspect of a sweeping transformation that has profoundly affected the people and industries of many nations during the past 160 years. International trade has existed for centuries. Beginning in 200 B.C., for example, the legendary Silk Road was a land route connecting China with Mediterranean Europe. From the mid-1800s to the early 1920s, with Great Britain the dominant economic power in the world, international trade flourished. However, a series of global upheavals, including World War I, the Bolshevik Revolution, and the Great Depression, brought that era to an end. Then, following World War II, a new era began. Unparalleled expansion into global markets by companies that previously served only customers located in their respective home countries is one hallmark of this new global era.

Four decades ago, the phrase global marketing did not exist. Today, businesspeople use global marketing to realize their companies’ full commercial potential. That is why, no matter whether you live in Asia, Europe, North America, or South America, you may be familiar with the brands mentioned in the opening paragraphs of this chapter. However, there is another, even more critical reason why companies need to take global marketing seriously: survival. A management team that fails to understand the importance of global marketing risks losing its domestic business to competitors with lower costs, more experience, and better products.

But what is global marketing? How does it differ from “regular” marketing as it is typically practiced and taught in an introductory course?  Marketing  can be defined as the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. 2  Marketing activities center on an organization’s efforts to satisfy customer wants and needs with products and services that offer competitive value. The  marketing mix  (the four Ps of product, price, place, and promotion) represents the contemporary marketer’s primary tools in achieving this goal. Marketing is a universal discipline, as applicable in Argentina as it is in Zimbabwe.

This book is about global marketing. An organization that engages in  global marketing  focuses its resources and competencies on global market opportunities and threats. A fundamental difference between regular marketing and global marketing is the scope of activities. A company that engages in global marketing conducts important business activities outside the home-country market. The scope issue can be conceptualized in terms of the familiar product/market matrix of growth strategies (see  Table 1-1 ). Some companies pursue a market development strategy, which involves seeking new customers by introducing existing products or services to a new market segment or to a new geographical market. Global marketing can also take the form of a diversification strategy in which a company creates new product or service offerings targeting a new segment, a new country, or a new region.

Table 1-1 Product/Market Growth Matrix

	Product Orientation
	Existing Products	New Products
Market Orientation	Existing markets	Market penetration strategy	Product development strategy
	New markets	Market development strategy	Diversification strategy

Starbucks provides a good case study of a global marketer that can simultaneously execute all four of the growth strategies shown in  Table 1-1 :

· Market penetration: Starbucks is building on its loyalty card and rewards program with a smartphone app that enables customers to pay for purchases electronically. The app displays a bar code that the customer can scan.

· Market development: Starbucks entered Italy in 2018, starting with a 25,000-square-foot flagship Reserve Roastery in Milan. Walking distance from the landmark Duomo, the Roastery will offer pastries by local bakery Princi as well as the aperitivo beverages that are so popular throughout Italy. 3

· Product development: Starbucks created a new instant-coffee brand, Via, to enable its customers to enjoy coffee at the office and other locations where brewed coffee is not available. After a successful launch in the United States, Starbucks rolled out Via in Great Britain, Japan, South Korea, and several other Asian countries. Starbucks also recently introduced its first coffee machine. The Versimo allows Starbucks’ customers to “prepare their favorite beverages at home.”

· Diversification: In 2011, Starbucks dropped the word “Coffee” from its logo. It recently acquired a juice maker, Evolution Fresh; the Bay Bread bakery, and tea retailer Teavana Holdings. Next up: Revamping select stores so they can serve as wine bars and attract new customers in the evening. 4

To get some practice applying the matrix shown in  Table 1-1 , create a product/market growth matrix for another global company. IKEA, LEGO, and Walt Disney are all good candidates for this type of exercise.

Companies that engage in global marketing frequently encounter unique or unfamiliar features in specific countries or regions of the world. In China, for example, product counterfeiting and piracy are rampant. Companies doing business there must take extra care to protect their intellectual property and deal with “knockoffs.” In some regions of the world, bribery and corruption are deeply entrenched. A successful global marketer understands specific concepts and has a broad and deep understanding of the world’s varied business environments.

The global marketer also must understand the strategies that, when skillfully implemented in conjunction with universal marketing fundamentals, increase the likelihood of market success. And, as John Quelch and Katherine Jocz assert, “The best global brands are also the best local brands.” That is, managers at global companies understand the importance of local excellence. 5  This book concentrates on the major dimensions of global marketing. A brief overview of marketing is presented next, although the authors assume that the reader has completed an introductory marketing course or has equivalent experience.

1-2 Principles of Marketing: A Review

1. 1-2 Describe how companies in global industries pursue competitive advantage.

As defined in the previous section, marketing is one of the functional areas of a business, distinct from finance and operations. Marketing can also be thought of as a set of activities and processes that, along with product design, manufacturing, and transportation logistics, compose a firm’s  value chain . Decisions at every stage, from idea conception to support after the sale, should be assessed in terms of their ability to create value for customers.

For any organization operating anywhere in the world, the essence of marketing is to surpass the competition at the task of creating perceived value—that is, to provide a superior value proposition—for customers. The  value equation  is a guide to this task:

Value=Benefits/Price(money,time,effort,etc.)Value=Benefits/Price (money, time, effort, etc.)

The marketing mix is integral to the value equation because benefits are a combination of the product, the promotion, and the distribution. As a general rule, value, as the customer perceives it, can be increased in these ways. Markets can offer customers an improved bundle of benefits or lower prices (or both!). Marketers may strive to improve the product itself, to design new channels of distribution, to create better communications strategies, or a combination of all three.

Marketers may also seek to increase value by finding ways to cut costs and prices. Nonmonetary costs are also a factor, and marketers may be able to decrease the time and effort that customers must expend to learn about or seek out the product. 6  Companies that use price as a competitive weapon may scour the globe to ensure an ample supply of low-wage labor or access to cheap raw materials. Companies can also reduce prices if costs are low because of process efficiencies in manufacturing or because of economies of scale associated with high production volumes.

Recall the definition of a market: people or organizations that are both able and willing to buy. To achieve market success, a product or brand must measure up to a threshold of acceptable quality and be consistent with buyer behavior, expectations, and preferences. If a company is able to offer a combination of superior product, distribution, or promotion benefits and lower prices than the competition does, it should enjoy an extremely advantageous position. Toyota, Nissan, and other Japanese automakers made significant gains in the American market in the 1980s by creating a superior value proposition: They offered cars with higher quality, better mileage, and lower prices than those made by General Motors, Ford, and Chrysler.

Today, the auto industry is shifting its attention to emerging markets such as India and Africa. Renault and its rivals are racing to offer middle-class consumers a new value proposition: high-quality vehicles that sell for the equivalent of $10,000 or less. On the heels of Renault’s success with the Dacia Logan have come the $2,500 Nano from India’s Tata Motors and a $3,000 Datsun from Nissan (see  Case 11-1 ).

Achieving success in global marketing often requires persistence and patience. Following World War II, some of Japan’s initial auto exports were market failures. In the late 1960s, for example, Subaru of America began importing the Subaru 360 automobile and selling it for $1,297. After Consumer Reportsjudged the 360 to be unacceptable, sales ground to a halt. Similarly, the Yugo automobile achieved a modest level of U.S. sales in the 1980s (despite a “don’t buy” rating from a consumer magazine) because its sticker price of $3,999 made it the cheapest new car available. Low quality was the primary reason for the market failure of both the Subaru 360 and the Yugo. 7  The Subaru story does have a happy ending, however, due in no small measure to the company’s decades-long efforts to improve its vehicles. In fact, each year, Consumer Reports puts Subaru near the top of its quality rankings, in the same league with Lexus, Mazda, Toyota, and Audi. 8  History has not been so kind to the Yugo: It ended up on Time magazine’s list of the “50 Worst Cars of All Time.”

Even some of the world’s biggest, most successful companies stumble while pursuing global opportunities. Walmart’s exit from the German market was due, in part, to the fact that German shoppers could find lower prices at “hard discounters” such as Aldi and Lidl. In addition, many German consumers prefer to go to several small shops rather than seek out the convenience of a single, “all-in-one” store located outside a town center. Likewise, U.K.-based Tesco’s attempts to enter the U.S. market with its Fresh & Easy stores failed, in part, because U.S. consumers were unfamiliar with the private-label goods that made up much of the merchandise stock. And, in 2015, American “cheap chic” retailer Target terminated its operations in ​Canada, a victim of missteps in terms of store locations and pricing. The cost for closing 133 stores: more than $5 billion.

Competitive Advantage, Globalization, and Global Industries

When a company succeeds in creating more value for customers than its competitors do, that company is said to enjoy  competitive advantage  in an industry. 9  Competitive advantage is measured relative to rivals in specific industry sectors. For example, your local laundromat is in a local industry; its competitors are local. In a national industry, competitors are national. In a global industry—consumer electronics, apparel, automobiles, steel, pharmaceuticals, furniture, and dozens of other sectors—the competition is, likewise, global (and, in many industries, local as well). Global marketing is essential if a company competes in a global industry or one that is globalizing.

The transformation of formerly local or national industries into global ones is part of a broader economic process of globalization, which Jagdish Bhagwati defines as follows:

Economic globalization constitutes integration of national economies into the international economy through trade, direct foreign investment (by corporations and multinationals), short-term capital flows, international flows of workers and humanity generally, and flows of technology. 10

From a marketing point of view, globalization presents companies with tantalizing opportunities—and challenges—as executives decide whether to offer their products and services everywhere. At the same time, globalization presents companies with unprecedented opportunities to reconfigure themselves. As John Micklethwait and Adrian Wooldridge put it, the same global bazaar that allows consumers to buy the best that the world can offer also enables producers to find the best partners. 11

For example, globalization is presenting significant marketing opportunities for professional sports organizations such as the National Basketball Association, the National Football League, and Major League Soccer (see  Exhibit 1-2 ). As Major League Soccer commissioner Don Garber noted, “In the global culture the universal language is soccer. That’s the sweet spot. If it weren’t for the shrinking world caused by globalization, we wouldn’t have the opportunity we have today.” 12

Exhibit 1-2

The National Football League (NFL) promotes American football globally. The NFL is focusing on a handful of key markets, including Canada, China, Germany, Japan, ​Mexico, and the United Kingdom. Every fall, banners are draped over London’s Regent Street to create awareness of the International Series games played before sellout crowds at Wembley Stadium and Twickenham.

Source: Alena Kravchenko/Shutterstock.

“We believe a company can only think in one set of terms. If you are premium, you have to focus on it.” 13

Helmut Panke, former chairman, Bayerische Motoren Werke (BMW) AG

Is there more to a global industry than simply “global competition”? Definitely. As defined by management guru Michael Porter, a  global industry  is one in which competitive advantage can be achieved by integrating and leveraging operations on a worldwide scale. Put another way, an industry is global to the extent that a company’s industry position in one country is interdependent with its industry position in other countries. Indicators of globalization include the ratio of cross-border trade to total worldwide production, the ratio of cross-border investment to total capital investment, and the proportion of industry revenue generated by companies that compete in all key world regions. 14  One way to determine the degree of globalization in an industry sector is to calculate the ratio of the annual value of global trade in the sector—including the value of components shipped to various countries during the production process—to the annual value of industry sales. In terms of these metrics, the consumer electronics, apparel, automobile, and steel industries are highly globalized. 15

Achieving competitive advantage in a global industry requires executives and managers to maintain a well-defined strategic focus.  Focus  is simply the concentration of attention on a core business or competence. The importance of focus for a global company is evident in the following comment by Helmut Maucher, former chairman of Nestlé SA:

Nestlé is focused: We are food and beverages. We are not running bicycle shops. Even in food we are not in all fields. There are certain areas we do not touch. For the time being we have no biscuits [cookies] in Europe and the United States for competitive reasons, and no margarine. We have no soft drinks because I have said we either buy Coca-Cola or we leave it alone. This is focus. 16

Sometimes, however, company management may choose to initiate a change in focus as part of an overall strategy shift. Even Coca-Cola has been forced to sharpen its focus on its core beverage brands. Following sluggish sales for that company in 2000 and 2001, former chairman and chief executive Douglas Daft formed a new alliance with Nestlé that jointly developed and marketed coffees and teas. Daft also set about the task of transforming Coca-Cola’s Minute Maid unit into a global division that markets a variety of juice brands worldwide. As Daft explained:

We’re a network of brands and businesses. You don’t just want to be a total beverage company. Each brand has a different return on investment, is sold differently, drunk for different reasons, and has different managing structures. If you mix them all together, you lose the focus. 17

Examples abound of corporate executives addressing the issue of focus, often in response to changes in the global business environment. In recent years, Bertelsmann, Colgate, Danone, ​Electrolux, Fiat, Ford, Fortune Brands, General Motors, Harley-Davidson, Henkel, LEGO, McDonald’s, Royal Philips, Toshiba, Vivendi, and many other companies have stepped up their efforts to sharpen their strategic focus on core businesses and brands.

Specific actions can take a number of different forms; in addition to alliances, these can include mergers, acquisitions, divestitures, and folding some businesses into other company ​divisions (see  Table 1-2 ). At Royal Philips, CEO Frans van Houten has shed the electronics and engineering units; instead of marketing TV sets and VCRs, today’s Philips is focused on three sectors: health care, lighting, and consumer lifestyle (see  Exhibit 1-3 ). Major changes in the ​organizational structure such as these must also be accompanied by changes in corporate culture. 18

Exhibit 1-3

The Dragon Bridge in Da Nang is a major tourist attraction. The LED lighting is provided by Philips.

Source: Huu Dai Trinh/Alamy Stock Photo.

Table 1-2 Strategic Focus

Company/Headquarters	Divestiture/Buyer
General Electric (United States)	Appliance division, sold to Haier (China) for $5.4 billion (2016); NBC Universal, sold to Comcast for $30 billion (2009).
Vivendi (France)	Activision Blizzard videogame unit, management buyout for $8.2 billion (2013).
Unilever (United Kingdom/Netherlands)	American pasta sauce business, sold to Mizkan Group (Japan) for $2.15 billion (2014).
IBM (United States)	Microelectronics division, sold to Global Foundries for $1.5 billion (2014).

Value, competitive advantage, and the focus required to achieve them are universal in their relevance, and they should guide marketing efforts in any part of the world. Global marketing requires attention to these issues on a worldwide basis and utilization of a business intelligence system capable of monitoring the globe for opportunities and threats. A fundamental premise of this book can be stated as follows: Companies that understand and engage in global marketing can offer more overall value to customers than companies that do not have such understanding. Many business managers and pundits share this conviction. In the mid-1990s, for example, C. Samuel Craig and Susan P. Douglas noted:

Globalization is no longer an abstraction but a stark reality. . . . Choosing not to participate in global markets is no longer an option. All firms, regardless of their size, have to craft strategies in the broader context of world markets to anticipate, respond, and adapt to the changing configuration of these markets. 19

Companies in a range of industries are “going global.” For example, three Italian furniture companies have joined together to increase sales outside of Italy and ward off increased competition from Asia. Luxury goods purveyors such as LVMH and Prada Group provided the model for the new business entity, which unites Poltrona Frau, Cassina, and Cappellini. 20  Hong Kong’s Tai Ping Carpets International is also globalizing. Top managers have been dispersed to different parts of the world; while the finance and technology functions are still in Hong Kong, the marketing chief is based in New York City and the head of operations is in Singapore. As company director John Ying noted, “We’re trying to create a minimultinational.” 21

Many gains can be ascribed to globalization. Hundreds of millions of people have been lifted from poverty and have joined the middle class. In countries where globalization has raised wages, living standards have improved. Even so, popular sentiment has been shifting, and a note of ​caution is in order. A mounting body of evidence indicates that the gains from globalization have not been evenly distributed. A disproportionate amount of wealth has flowed to the “have lots” and “have yachts,” with not enough going to the “have nots.” U.S. President Donald Trump’s “America First” agenda is just one example of the way some nations are retreating into protectionism and isolation. Some industry observers have noted that we are entering a new era of “globalization in reverse.”

1-3 Global Marketing: What it is and What it isn’t

1. 1-3 Compare and contrast a single-country marketing ​strategy with a global marketing strategy (GMS).

The discipline of marketing is universal. It is natural, however, that marketing practices will vary from country to country for the simple reason that the countries and peoples of the world are different. These differences mean that a marketing approach that has proved successful in one country will not necessarily succeed in another country. Customer preferences, competitors, channels of distribution, and communication media may differ. An important managerial task in global marketing is learning to recognize the extent to which it is possible to extend marketing plans and programs worldwide, as well as the extent to which adaptation is required.

The way a company addresses this task is a manifestation of its  global marketing strategy (GMS) . In single-country marketing, strategy development addresses two fundamental issues: choosing a target market and developing a marketing mix. The same two issues are at the heart of a firm’s GMS, although they are viewed from a somewhat different perspective (see  Table 1-3 ). Global market participation is the extent to which a company has operations in major world markets. Standardization versus adaptation is the extent to which each marketing mix element is standardized (i.e., executed the same way) or adapted (i.e., executed in different ways) in various country markets. For example, Nike recently adopted the slogan “Here I am” for its pan-European clothing advertising targeting women. The decision to drop the famous “Just do it” tagline in the region was based on research indicating that college-age women in Europe are not as competitive about sports as men are. 22

Table 1-3 Comparison of Single-Country Marketing Strategy and Global Marketing Strategy

Single-Country Marketing Strategy	Global Marketing Strategy
Target market strategy	Global market participation
Marketing mix development	Marketing mix development
Product	Product adaptation or standardization
Price	Price adaptation or standardization
Promotion	Promotion adaptation or standardization
Place	Place adaptation or standardization
	Concentration of marketing activities
	Coordination of marketing activities
	Integration of competitive moves

GMS has three additional dimensions that pertain to marketing management. First, ​concentration of marketing activities is the extent to which activities related to the marketing mix (e.g., promotional campaigns or pricing decisions) are performed in one or a few country locations. Second, coordination of marketing activities refers to the extent to which marketing activities related to the marketing mix are planned and executed interdependently around the globe. Third, integration of competitive moves is the extent to which a firm’s competitive ​marketing tactics in different parts of the world are interdependent. The GMS should enhance the firm’s performance on a worldwide basis. 23

The decision to enter one or more particular markets outside the home country depends on a company’s resources, its managerial mind-set, and the nature of opportunities and threats. Today, most observers agree that Brazil, Russia, India, China, and South Africa—five emerging markets known collectively as BRICS—represent significant growth opportunities. Mexico, Indonesia, Nigeria, and Turkey—the so-called MINTs—also hold great potential. Throughout this text, ​marketing issues in these countries are highlighted in “Emerging Markets Briefing Book” boxes.

The Cultural Context

“1-2-3-4!” 40 Years of Punk Rock, 1976–2016

Rock music has often served as a cultural manifestation of youth movements. In 1960’s “swinging London,” for example, the Beatles, the Rolling Stones, and other British Invasion bands set new trends in sound and style. On the other side of the Atlantic Ocean, American rock groups such as the Grateful Dead and the Jefferson Airplane gave voice to the era’s political and social turmoil during the “Summer of Love.”

In 1976, a new sound emerged. Punk rock was both a ​musical and a cultural movement. On the musical side, it ​represented a visceral reaction to, and repudiation of, the prevailing musical styles and tastes of the time. Giant stadium concerts by English progressive rock bands such as Genesis, Pink Floyd, and Yes had become overblown spectacles. Southern California soft-rock, a genre popularized by the Eagles, Linda Ronstadt, and singer-songwriter Jackson Browne, was equally distasteful to the punks.

Punk also offered an outlet for the voices of disenfranchised young people and an opportunity to rebel against the establishment. In the United Kingdom in the mid-1970s, the country’s economic stagnation meant there were few job opportunities for young people—as well as their elders. The government’s decision to conserve coal supplies resulted in power shortages and mandatory three-day working weeks. During the same time period, New York City was in social and economic decline. In the summer of 1976, a serial killer known as the Son of Sam was terrorizing the area. Across America, the energy crisis meant rising prices for gasoline and shortages.

It was in this musical and economic context that young people in both the United States and the United Kingdom discovered that it was relatively easy to learn to play two or three guitar chords. Even ​better, punk’s “DIY” ethos meant that musicianship was often beside the point. Who needs technique? Who cares what the notes are?

In the United States, punk scenes sprang up on both coasts. Forest Hills, New York, was the breeding ground for the Ramones. Seymour Stein, the Sire Records chief who signed the band to his label, says simply, “New York City needed an infusion.” At the legendary CBGB (“Country Bluegrass Blues”) music club in New York’s East Village, the Ramones shared the stage with the Talking Heads, Blondie, and other new bands that were part of the local art-rock scene.

Key to the Ramones’ sound was concise pop songwriting; many songs ranged in length from a mere two minutes (or less) to under three minutes. The look was important, too; the band members ​carefully cultivated an outcast image by wearing black leather biker jackets and ripped jeans. None of the four was actually named Ramone. Even so, the band was often referred to as “Da Brudders.”

On the U.S. West Coast, a punk scene took shape when bands such as X and Black Flag were formed in Los Angeles. As John Doe, bassist and vocalist for X, recalls, “Rock and roll needed to be hit upside the head!” Despite being dismissed by the mainstream rock world, punk flourished in L.A. as a minority movement in clubs such as the Mask.

In the United Kingdom, the Sex Pistols burst onto the scene in 1976. The Clash, X-Ray Spex and a host of others followed and quickly gained fame and notoriety (see  Exhibit 1-4 ). In July 1976, the Ramones played a landmark show at the Roundhouse in London that some observers credit with sparking the U.K. punk movement. In November 1976, the Sex Pistols released their debut single, “Anarchy in the UK,” on the EMI label.

Exhibit 1-4

Among punk’s positive social effects was the empowerment of women. For example, Exene Cervenka fronted L.A. punk band X, and Poly Styrene (shown here) was the singer for London’s X-Ray Spex.

Source: Pictorial Press Ltd/Alamy Stock Photo.

The following month, the Sex Pistols caused a national furor by swearing on-camera during a live interview with Thames Television presenter Bill Grundy. When Grundy asked what the band had done with its £40,000 advance from EMI, guitarist Steve Jones replied, “We f**kin’ spent it, didn’t we?” The following day, the headline in The Daily Mirror trumpeted, “The Filth and the Fury!” Grundy was fired. (The entire spectacle can viewed on YouTube.)

Vivian Goldman, a former features editor who covered punk for Sounds, a weekly British music paper, notes that punk’s relevance and impact continue today. “In Indonesia, Russia, South Africa, and elsewhere, people use punk to rage against the system,” she said recently. “Punk’s rebel consciousness represents a flag for a new way of thinking.”

Sources: Peter Aspden, “Infamy in the UK,” Financial Times (June 11–12, 2016), p. 14; Anna Russell, “Punk Takes London by Storm, Again,” The Wall Street Journal (March 25, 2016), p. D6; “Musical Milestones: Celebrating 40 Years of the Ramones,” Conference Presentation, SXSW Music, Film, and Interactive, March 17, 2016; “No Future: 1976 and the Birth of Punk in the UK,” Conference Presentation, SXSW Music, Film, and Interactive, March 16, 2016; Mikal Gilmore, “The Curse of the Ramones: How a Band of Misfits Launched Punk Rock,” Rolling Stone (April 21, 2016), pp. 42–48+; Tom DeSavia and John Doe, Under the Big Black Sun: A Personal History of L.A. Punk (Boston, MA: Da Capo Press, 2016); Tim Jackson, Virgin King: Inside Richard Branson’s Business Empire (London, UK: Harper Collins Publishers, 1995), Chapter 3, “Broken Bottles.”

We can use Burberry as a case study in global marketing strategy. This U.K.-based luxury brand is available in scores of countries, and Burberry’s recent expansion plans emphasize ​several geographical areas (see  Exhibit 1-5 ). First are the BRICS nations, where growing numbers of middle-class consumers are developing a taste for luxury brands. Second is the United States, which is dotted with shopping malls whose managers are anxious to entice crowd-pulling luxury goods retailers by sharing fit-out costs and offering attractive, rent-free periods. Under former CEO Angela Ahrendts, Burberry’s marketing mix strategy included the following elements:

Exhibit 1-5

Thomas Burberry is credited with inventing gabardine fabric in the 1850s, paving the way for creation of the trench coat. England’s Burberry Group celebrated its 160th anniversary in 2016. The Burberry trademark is registered in more than 90 countries.

Source: Oli Scarff/Getty Images.

· Product: Intensify focus on accessories. Boost sales of handbags, belts, and accessories—products whose sales are less cyclical than sales of clothing. Burberry Bespoke allows ​customers to design their own coats.

· Price: “Affordable luxury” is central to the value proposition: more expensive than Coach, less expensive than Prada.

· Place: Burberry is opening more independent stores in key U.S. cities, including flagship stores in Los Angeles, San Francisco, and New York; it is also expanding in London and Hong Kong. Such locations generate more than half the company’s revenue and profit. 24

· Promotion: Encourage advocacy and sharing via social media and online channels such as Twitter, Instagram, and www.artofthetrench.com. Launch Burberry Acoustic to enhance brand relevance and to provide exposure for emerging music talent via www.burberry.com/acoustic.

As you can see in  Table 1-3 , the next part of the GMS involves the concentration and coordination of marketing activities. At Burberry, haphazard growth had led to a federation of individual operations. Company units in some parts of the world didn’t talk to each other. In some cases, they competed against each other, and sometimes designed their own products for their own markets and wouldn’t share ideas with other parts of the business. During her tenure as CEO, Angela Ahrendts was very clear in articulating her core strategic vision: Leverage the Franchise. In other words: “One company, one brand.” 25

When Christopher Bailey became CEO in 2014, he set about refining and updating Ahrendts’ strategies with an approach he called “Inspire with the Brand.” Bailey used data analytics to leverage consumer insights gleaned from Burberry’s strong digital presence and its worldwide network of brick-and-mortar stores to project a consistent brand voice. 26  Collaborations with musicians also became integral to Bailey’s strategy; he even designed the sequined gown global superstar Adele wore on her 2016 world tour! Bailey also embraced multichannel marketing, adding more mobile marketing to the existing mix of retail and wholesale channels.

An Italian businessman, Marco Gobetti, took over as Burberry’s CEO in 2017. He faces a number of new challenges to the company’s global marketing strategy, including the declining popularity of department store shopping in the United States and slowing sales of luxury goods in China. 27

The issue of standardization versus adaptation in global marketing has been at the center of a long-standing controversy among both academicians and business practitioners. Much of the controversy dates back to Professor Theodore Levitt’s 1983 article “The Globalization of Markets” in the Harvard Business Review. Levitt argued that marketers were confronted with a “homogeneous global village.” He advised organizations to develop standardized, high-quality world products and market them around the globe by using standardized advertising, pricing, and distribution. Some well-publicized failures by Parker Pen and other companies that had tried to follow Levitt’s advice brought his proposals into question. The business press frequently quoted industry observers who disputed Levitt’s views. As Carl Spielvogel, chairman and CEO of the Backer Spielvogel Bates Worldwide advertising agency, told The Wall Street Journal in the late 1980s, “Theodore Levitt’s comment about the world becoming homogenized is bunk. There are about two products that lend themselves to global marketing—and one of them is Coca-Cola.” 28

Global marketing is the key to Coke’s worldwide success—but that success was not based on a total standardization of marketing mix elements. For example, Coca-Cola achieved success in Japan by spending a great deal of time and money to become an insider; the company built a complete local infrastructure with its sales force and vending machine operations. Coke’s success in Japan is a function of its ability to achieve global localization, by being as much of an insider as a local company, yet still reaping the benefits that result from world-scale operations. Although the Coca-Cola Company has experienced a recent sales decline in Japan, that country remains a key market that accounts for about 20 percent of total worldwide operating revenues. 29

What does the phrase global localization really mean? In a nutshell, it means that a successful global marketer must have the ability to “think globally and act locally.” Kenichi Ohmae summed up this paradox as follows:

The essence of being a global company is to maintain a kind of tension within the organization without being undone by it. Some companies say the new world requires homogeneous products—”one size fits all”—everywhere. Others say the world requires endless customization—special products for every region. The best global companies understand it’s neither and it’s both. They keep the two perspectives in mind simultaneously. 30

“The more things ​globalize, the more people want to affiliate with ​everything that is local. This has led to unbelievable fragmentation.” 31

Peter Ter Kulve, Chief Transformation Officer, Unilever

As we will see many times in this book, global marketing may include a combination of standard (e.g., the actual product itself) and nonstandard (e.g., distribution or packaging) approaches. A global product may be the same product everywhere and yet different. Global marketing requires marketers to think and act in a way that is both global and local by responding to similarities and differences in world markets.

But it is important to bear in mind that “global localization” is a two-way street, and that there is more to the story than “think globally, act locally.” Many companies are learning that it is equally important to think locally and act globally. In practice, this means that companies are discovering the value of leveraging innovations that occur far from headquarters and transporting them back home. For example, McDonald’s restaurants in France don’t look like McDonald’s restaurants elsewhere. Décor colors are muted, and the golden arches are displayed more subtly. After seeing the sales increases posted in France, some American franchisees began undertaking similar renovations. As Burger Business newsletter editor Scott Hume has noted, “Most of the interesting ideas of McDonald’s are coming from outside the U.S. McDonald’s is becoming a European chain with stores in the U.S.” 32  (see  Case 1-2 ).

“One of the top-level ​lessons is that we have done much more local ​market customization in India than we did in China.” 33

Jeff Bezos, CEO, Amazon

These reverse flows of innovation are not occurring just between developed regions such as Western Europe and North America. The growing economic power of China, India, and other emerging markets means that many innovations originate there (see  Table 1-4 ). For example, Nestlé, Procter & Gamble, Unilever, and other consumer products companies are learning that low-cost products with less packaging developed for low-income consumers also appeal to cost-conscious consumers in, say, Spain and Greece (see  Exhibit 1-6 ). 34

Exhibit 1-6

For Nestlé, innovation is the key to its expanded presence in emerging markets such as Thailand, Sri Lanka, and Mali. Recently, Nestlé introduced mobile coffee carts from which vendors sell single servings of Nescafé brand coffee. Some of these innovations are being transferred to high-income countries in Europe and elsewhere.

Source: adrian arbib/Alamy.

Table 1-4 Think Locally/Act Globally

Company/Headquarters Country	Product
Cinnabon/USA	Cinnabon customers in Central and South America prefer dulce de leche. Products developed for those regions are being introduced in the United States, where the Hispanic population is a key segment. 35
Starbucks/USA	Starbucks opened an experimental store in Amsterdam that serves as a testing ground for new design concepts such as locally sourced and recycled building materials. The best concepts will be extended to other parts of Europe. Fast Company magazine included Liz Muller, Director of Creative Design at Starbucks, in its “Most Creative People 2013” ranking.
Kraft Foods/USA	Tang drink powder became a $1 billion brand as regional managers in Latin America and the Middle East moved beyond orange (the top-seller) into popular local flavors such as mango and pineapple. Kraft plans to reboot Tang in the U.S. market using lessons learned abroad. 36

The Coca-Cola Company supports its Coke, Fanta, and Powerade brands with marketing mix elements that are both global and local. Dozens of other companies also have successfully pursued global marketing by creating strong global brands, in various ways. In consumer electronics, Apple is synonymous with hardware and software integration, ease of use, cutting-edge innovation, and high-tech design. In appliances, Germany’s reputation for engineering and manufacturing excellence is a source of competitive advantage for Bosch (see  Exhibit 1-7 ). Italy’s Benetton utilizes a sophisticated distribution system to quickly deliver the latest fashions to its worldwide network of stores. The backbone of Caterpillar’s global success is a network of dealers who support the company’s promise of “24-hour parts and service” anywhere in the world. As these examples indicate, there are many different paths to success in global markets. In this book, we do not propose that global marketing is a knee-jerk attempt to impose a totally standardized approach on marketing around the world. Instead, a central issue in global marketing is how to tailor the global marketing concept to fit particular products, businesses, and markets. 37

Exhibit 1-7

MILAN - ITALY - APRIL 2012: Salone internazionale del mobile 2012, furniture fair, Bosch.

Source: A. Astes/Alamy Stock Photo.

As shown in  Table 1-5 , McDonald’s global marketing strategy is based on a combination of global and local marketing mix elements. For example, a vital element in McDonald’s business model is a restaurant system that can be set up virtually anywhere in the world. McDonald’s offers core menu items—hamburgers, french fries, and soft drinks—in most countries, and the company also customizes menu offerings in accordance with local eating customs. The average price of a Big Mac in the United States is $5.28. By contrast, in China, Big Macs sell for the equivalent of $3.17. In absolute terms, Chinese Big Macs are cheaper than American ones. But is it a fair comparison? Real estate costs vary from country to country, as do per capita incomes.

Table 1-5 Examples of Effective Global Marketing: McDonald’s

Marketing Mix Element	Standardized	Localized
Product	Big Mac	McAloo Tikka potato burger, Chicken Maharaja Mac (India); Rye McFeast (Finland); Adagio (Italy)
Promotion	Brand name	Slang nicknames—for example, Mickey D’s (United States, Canada), Macky D’s (United Kingdom, Ireland), Macca’s (Australia), Mäkkäri (Finland), MakDo (Philippines), McDo (France)
	Advertising slogan “i’m lovin’ it”	“Venez comme vous êtes” (“Come as you are”) television ad campaign in France. Various executions show individuals expressing different aspects of their respective personalities. One features a young man dining with his father. The ad’s creative strategy centers on sexual freedom and rebellion: The father does not realize that his son is gay.
Place	Freestanding restaurants in high-traffic public areas	McDonald’s Switzerland operates themed dining cars on the Swiss national rail system; McDonald’s is served on the Stena Line ferry from Helsinki to Oslo; home delivery (India)
Price	Average price of Big Mac is $5.28 (United States)	$5.91 (Norway); $3.17 (China)

 The approach to global marketing that a company adopts will depend on industry conditions, shifting economic realities, and its source or sources of competitive advantage. For example:

· Harley-Davidson’s motorcycles are perceived around the world as the all-American bike. Should Harley-Davidson start manufacturing motorcycles in a low-wage country such as Thailand?

· The success of Honda and Toyota in world markets was initially based on exporting cars from factories in Japan. Today, both companies operate manufacturing and assembly facilities in the Americas, Asia, and Europe. From these sites, the automakers both supply customers in the local market and export their products to the rest of the world. For example, each year Honda exports tens of thousands of Accords and Civics from U.S. plants to Japan and dozens of other countries. Will European consumers continue to buy Honda vehicles exported from America? Will American consumers continue to snap up American-built Toyotas?

· Uniqlo, a division of Japan’s Fast Retailing, operates approximately 850 stores in Japan and 300 stores in 12 overseas countries. The company sources 90 percent of its clothing from China. Uniqlo currently has 46 stores in the United States; its plans call for a total of 200 U.S. stores by 2020. Can the company achieve its goal of reaching $50 billion in sales by 2020, thereby becoming the world’s number 1 apparel retailer?

The answer to these questions is: It all depends. Although Harley-Davidson’s competitive advantage is based, in part, on its “Made in the USA” positioning, the company has shifted some production outside the United States. India’s 100 percent tariff on imported motorcycles prompted Harley-Davidson to launch production in the state of Haryana in 2011. To further capitalize on market opportunities in Asia, and to avoid import tariffs that can go as high as 60 percent, the company recently opened a manufacturing facility in Thailand. 38

Toyota’s success in the United States was originally attributable to its ability to transfer world-class manufacturing skills—“the Toyota Way”—to its U.S. plants while using advertising to inform prospective customers that American workers build the Avalon, Camry, and Tundra models, with many components purchased from American suppliers. The U.S. market generates approximately two-thirds of Toyota’s profits. However, in its drive to become the world’s top automaker, Toyota’s insular corporate culture and focus on cost cutting compromised overall product quality. Under the leadership of Akio Toyoda, the company has rebounded. It sold 10.2 million cars in 2016 and posted record profits; an innovative production system, dubbed Toyota New Global Architecture, is designed to ensure that Toyota can respond quickly to market changes in any part of the world. 39

As noted, about one-fourth of Uniqlo’s 1,200 stores are located outside Japan; key ​country markets include the United States, China, Russia, Singapore, and South Korea. Shoppers have responded favorably to Uniqlo’s colorful designs and the high service standards for which Japanese retailers are famous. According to A. T. Kearney’s 2016 Global Retail Development Index, China is the number 1–ranked emerging market opportunity for retail. In China, Uniqlo’s management team selectively targets cities with high population densities such as Beijing and Shanghai (see  Exhibit 1-8 ). 40

Exhibit 1-8

Japan’s Fast Retailing competes with global companies such as Inditex (Spain), H&M (Sweden), and Gap (U.S.). Fast Retailing founder Tadashi Yanai intends to create the world’s biggest apparel retail operation by 2020.

Source: August_0802/ Shutterstock.

1-4 The Importance of Global Marketing

1. 1-4 Identify the companies at the top of the Global 500 rankings.

The largest single market in the world in terms of national income is the United States, ​representing roughly 25 percent of the total world market for all products and services. U.S. companies that wish to achieve their maximum growth potential must “go global,” however, because 75 ​percent of world market potential is outside their home country. Management at Coca-Cola clearly understands this; about 75 percent of the company’s operating income and two-thirds of its operating revenue are generated outside North America.

Non-U.S. companies have an even greater motivation to seek market opportunities beyond their own borders; their opportunities include the 325 million people in the United States. For example, even though the dollar value of the home market for Japanese companies is the third largest in the world (after the United States and China), the market outside Japan is 90 percent of the world potential. For European countries, the picture is even more dramatic. Even though Germany is the largest single-country market in Europe, 94 percent of the world market potential for German companies is outside Germany.

Many companies have recognized the importance of conducting business activities outside their home country. Industries that were essentially national in scope only a few years ago are dominated today by a handful of global companies. In most industries, the companies that will survive and prosper in the twenty-first century will be global enterprises. Some companies that fail to formulate adequate responses to the challenges and opportunities of globalization will be absorbed by more dynamic, visionary enterprises. Others will undergo wrenching transformations and, if their efforts succeed, will emerge from the process greatly transformed. Some companies will simply disappear.

Each year, Fortune magazine compiles a ranking of the 500 largest service and manufacturing companies by revenues. 41  Walmart stands atop the 2016 Global 500 rankings, with revenues of $486 billion; it currently generates only about one-third of its revenues outside the United States. However, global expansion is key to Walmart’s growth strategy. In all, 5 companies in the top 10 compete in the oil or energy sectors. Toyota and Volkswagen, the only global automakers in the top 10, are locked in a fierce competitive struggle as the German company rebounds from a scandal involving its diesel engines.

Examining the size of individual product markets, measured in terms of annual sales, provides another perspective on global marketing’s importance. Many of the companies identified in the Fortunerankings are key players in the global marketplace.