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Global Marketing

Tenth Edition

Chapter 1

Introduction to Global Marketing

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Learning Objectives

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

1.2 Describe how companies in global industries pursue competitive advantage.

1.3 Compare and contrast a single-country marketing strategy with a global marketing strategy (G M S).

1.4 Identify the companies at the top of the Global 500 rankings.

1.5 Explain the stages a company goes through as its management orientation evolves from domestic and ethnocentric to global and geocentric.

1.6 Discuss the driving and restraining forces affecting global integration today.

Overview

International trade flourished from mid-1800s until 1920s. Great Britain dominated the world economy but that ended

the Great Depression and the Bolshevik

Revolution.

The post

era brought unparalleled expansion by

companies going outside their home markets.

Four decades ago the phrase global marketing did not exist.

Today companies go global to survive as competitors will enter the home market with lower costs, more experience and better products.

Marketing & Global Marketing Defined

Marketing: “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”

Marketing Mix: The 4 Ps

Global Marketing: The scope of activities outside the home market

What is Global Marketing?

Global versus “Regular” Marketing

Scope of activities are outside the home-country market

Table 1-1 Product/Market Growth Matrix

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

The matrix shows that Market Penetration is defined as getting the existing customers to buy more of existing products. Starbucks is building on its loyalty card and rewards program in the United States with a smartphone app that enables customers to pay for purchases electronically.

Market Development is defined as taking existing products into new markets. Starbucks’s expansion into Italy in 2018 with a 25,000 sq. ft. Reserve Roastery in Milan. It will offer pastries from a local bakery and aperitivo beverages popular in Italy.

Product development is developing new products and placing them in existing markets. Starbucks created a brand of instant coffee, 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 US, Starbucks rolled out Via in Great Britain, Japan, South Korea and several other Asian countries.

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

Challenges for Marketers

Marketers encounter unique or unfamiliar features in countries or regions

counterfeiting and piracy in China

Bribery and corruption

Managers at global companies understand the importance of local excellence.

“The best global brands are also the best local brands.”

John Quelch & Katherine Jocz

Customer Perceived Value

The Value Chain is composed of marketing, product design, manufacturing, and transportation logistics.

The essence of marketing is to provide a superior value proposition to surpass the competition.

Create value for customers by improving benefits or reducing price

Improve the product

Find new distribution channels

Create better communications

Cut monetary and non-monetary costs and prices

Companies that use price as a competitive weapon may use global sourcing to access cheap raw materials or low-wage labor. Companies can seek to improve process efficiencies or gain economies of scale with high production volumes.

Marketers may be able to reduce non-monetary costs by decreasing the time and effort customers expend to learn about or seek out the product.

A market is defined as people and organizations that are both able and willing to buy. A successful product or brand must be of acceptable quality and 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 price than competitors, it should enjoy a competitive advantage. Japanese auto makers made significant gains in the American market in the 1980s by creating a superior value proposition. They offered cars with higher quality and lower prices than those made by American car companies. . 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 come the $2,500 Nano from India’s Tata Motors and a $3,000 Datsun from Nissan.

Markets & Value Proposition

Market

People or organizations that are both able and willing to buy

Value Proposition

Perceived value to the customer

The firm’s promise to the customer

Japanese auto makers gained U.S. market share in the 1980s by creating a superior value proposition: Cars with higher quality, better mileage, and lower prices that those of U.S. makers.

Today’s new value proposition: high quality vehicles for less than $10K or less for Indian and African markets.

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.

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 Reports judged 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. 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. 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.”

Competitive Advantage

When a company succeeds in creating more value for customers than its competitors do it creates Competitive Advantage.

Measured relative to industry rivals

“Created when a firm has value-creating strategy not simultaneously being implemented by any current or potential competitors.” ~ Jay Barney

Competitive advantage is measured relative to rivals in a 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.

Globalization

“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.”

~Jagdish Bhagwati~

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.

Global Industries

An industry is global to the extent that a company’s industry position in one country is interdependent with its industry position in another country

Indicators of globalization:

Ratio of cross-border investment to total capital investment

Proportion of industry revenue generated by all companies that compete in key world regions

Ratio of cross-border trade to worldwide production

80% of Coca-Cola’s case sales come from outside the US. Brazil, Mexico, China and Japan account for 31% of case sales (Annual Report, 2011)

Globalization of Pro Sports

Major league sports like the N B A, N F L, and M L S are finding new fans abroad.

Soccer is a global sport.

The National Football League is focusing on Canada, China, Germany, Japan, Mexico, and the U K.

Exhibit 1-2 The National Football League (N F L) promotes American football globally. The N F L 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.

Competitive Advantage, Globalization & Global Industries

Focus

Concentration and attention on core business and competence

“Nestle 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…We have no soft drinks because I have said we will either buy Coca-Cola or we leave it alone. This is focus.”

~Helmut Maucher, former chairman of Nestlé S A~

When a company succeeds in creating more value for customers than its competitors, that company is said to enjoy competitive advantage. CA is measured relative to rivals in an industry. A local laundromat is in a local industry and competes locally. A national company competes within its country’s borders. Global industries compete globally—consumer electronics, apparel, automobiles, steel, pharmaceuticals, furniture, etc.

In recent years, Bertelsmann, Colgate, Danone, Electrolux, Fiat, Ford, Fortune Brands, General Motors, Harley-Davidson, Henkel, LEGO, McDonald’s, Royal Philips Electronics, Toshiba, and many other companies have stepped up efforts to sharpen their strategic focus on core businesses and brands.

Value, Competitive Advantage, & Focus

Value, Competitive Advantage, and Focus are universal in their relevance and guide marketing in any part of the world.

Companies that understand and engage in global marketing can offer more value to customers that those who do not.

“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.

C. Samuel Craig and Susan P. Douglas

C. Samuel Craig and Susan P. Douglas, “Responding to the Challenges of Global Markets: Change, Complexity, Competition, and Conscience,” Columbia Journal of World Business 31, no. 4 (Winter 1996), pp. 6–18

Table 1-2 Strategic Focus

Company/Headquarters	Divestiture/Buyer
General Electric (United States)	Appliance division, sold to Haier (China) for $5.4 billion (2016); N B C 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).
I B M (United States)	Microelectronics division, sold to Global Foundries for $1.5 billion (2014).

Pros and Cons of Globalization

Hundreds of million of people have been lifted from poverty and joined the middle class

Where globalization has raised wages, living standards have improved

Not all gains from globalization have been evenly distributed

U.S. President Trump’s “America First” agenda is one example of nations retreating into protectionism and isolation

“Globalization in reverse”

Standardization versus Adaptation

Globalization (Standardization)

Developing standardized products marketed worldwide with a standardized marketing mix

Essence of mass marketing

Global localization (Adaptation)

Mixing standardization and customization in a way that minimizes costs while maximizing satisfaction

Essence of segmentation

Think globally, act locally

Global marketing may include a combination of standard (e.g., the actual product itself) and nonstandard (e.g., distribution or packaging) approaches.

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.

Global Marketing: What It Is & What It Isn’t

Single-Country Marketing Strategy	Global Marketing Strategy
Target Market Strategy Marketing Mix Product Price Promotion Place	Global Market Participation Marketing Mix Development 4 P’ s: Adapt or Standardize? Concentration of Marketing Activities Coordination of Marketing Activities Integration of Competitive Moves

Since countries and people are different, marketing practices that work in one country will not necessarily work in another. Customer preferences, competitors, channels of distribution, and communication may differ. Global marketers must realize the extent to which plans and programs may be extended or need adaptation. The way a company addresses this task is a reflection of its global marketing strategy (GMS). Standardization versus adaptation is the extent to which each marketing mix element can be executed in the same or different ways in various country markets.

Concentration of marketing activities is the extent to which marketing mix activities are performed in one or a few country locations.

Coordination of marketing activities refers to the extent to which marketing mix activities are planned and executed interdependently around the globe.

Integration of competitive moves is the extent to which a firm’s competitive marketing tactics are interdependent in different parts of the world.

Additional Dimensions

Concentration of Marketing Activities

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

Coordination of Marketing Activities

the extent to which marketing activities related to the marketing mix are planned and executed interdependently around the globe

Integration of Competitive Moves

the extent to which a firm’s competitive marketing tactics in different parts of the world are interdependent

Markets with Great Potential

B R I C S are long recognized as offering significant growth opportunities

Brazil

Russia

India

China

South Africa

M I N Ts are a new group with great potential

Mexico

Indonesia

Nigeria

Turkey

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.

40 Years of Punk Rock, 1976-2016

1976 Punk rock emerged to challenge prevailing music styles set by Genesis, Pink Floyd, the Eagles, Linda Ronstadt, et al.

Punk offered a voice for disenfranchised youth to rebel.

Easy to play with only 2-3 chords.

The Ramones, Blondie, Talking Heads, X, Black Flag in the U.S.

U.K. had the Sex Pistols, Clash,X-Ray Spex.

“Rock and Roll needed to be hit upside the head”

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.

Decades before the term “brand tribes” entered the marketing vocabulary, the Dead attracted a self-identified community known as Deadheads. For these loyal fans, being a Deadhead was badge of identity. Deadheads typically attended multiple concerts, moving from city to city in sync with the band. Part of the Dead’s legacy was creating customer value with marathon live concerts that lasted three hours or more—a template for contemporary jam bands such as Phish.

A direct-to-fan ticketing approach brought the Grateful Dead closer to their fans. Thanks to its direct approach, the band accumulated an extensive database that kept it in close communication with fans—via mail and telephone—and facilitated merchandise marketing. The Dead’s social network innovation happened in the pre‒Internet/social media era. However, the direct-to-fan model has been adopted in the present day by artists working in the EDM scene and other genres that operate somewhat out of the industry mainstream.

Sonic perfectionists, the Dead toured with a custom-built sound system that produced a “wall of sound” renowned for its clarity and volume. While music piracy is an industry hot-button issue in the twenty-first century, the Dead actually encouraged their fans to record their live concerts. The fans then traded the tapes amongst themselves, creating a sense of connection and community. As John Perry Barlow, a lyricist and member of the Dead’s extended family, noted succinctly, “We invented file sharing!” Allowing fans to tape their concerts and take the experience home with them created brand equity, and the Dead redefined the relationship between artists and their fans.

Burberry’s G M S

Expand in B R I C S, U S

Marketing Mix

Product: emphasize handbags, belts, accessories

Price: Affordable luxury

Place: Independent stores in major cities like Hong Kong, Los Angeles, San Francisco, N Y C

Promoti