Individual Help

International Marketing

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International Marketing

fifteenth edition

Philip R. Cateora FELLOW, ACADEMY OF INTERNATIONAL BUSINESS UNIVERSITY OF COLORADO

Mary C. Gilly UNIVERSITY OF CALIFORNIA, IRVINE

John L. Graham UNIVERSITY OF CALIFORNIA, IRVINE

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INTERNATIONAL MARKETING

Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020. Copyright © 2011, 2009, 2007, 2005, 2002, 1999, 1996, 1993, 1990, 1987, 1985, 1983, 1979, 1975, 1971 by The McGraw-Hill Companies, Inc. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

Some ancillaries, including electronic and print components, may not be available to customers outside the United States.

This book is printed on acid-free paper.

1 2 3 4 5 6 7 8 9 0 DOW⁄DOW 1 0 9 8 7 6 5 4 3 2 1 0

ISBN 978-0-07-352994-3 MHID 0-07-352994-X

www.mhhe.com

Vice president and editor-in-chief: Brent Gordon Editorial director: Paul Ducham Publisher: Doug Hughes Executive editor: John Weimeister Director of development: Ann Torbert Development editor: Sara Knox Hunter Editorial assistant: Heather Darr Vice president and director of marketing: Robin J. Zwettler Marketing manager: Katie Mergen Marketing specialist: Meredith Desmond Vice president of editing, design, and production: Sesha Bolisetty

Senior project manager: Bruce Gin Buyer II: Debra R. Sylvester Interior designer: JoAnne Schopler Senior photo research coordinator: Jeremy Cheshareck Photo researcher: David Tietz, Editorial Image, LLC Senior media project manager: Greg Bates Media project manager: Cathy L. Tepper Cover design: JoAnne Schopler Interior design: JoAnne Schopler Typeface: 10/12 Times New Roman Compositor: MPS Limited, a Macmillan Company Printer: R. R. Donnelley

Library of Congress Cataloging-in-Publication Data Cateora, Philip R. International marketing ⁄ Philip R. Cateora, Mary C. Gilly, John L. Graham. — 15th ed. p. cm. Includes index. ISBN-13: 978-0-07-352994-3 (alk. paper) ISBN-10: 0-07-352994-X (alk. paper) 1. Export marketing. 2. International business enterprises. I. Gilly, Mary C. II. Graham, John L. III. Title. HF1416.C375 2011 658.8’4—dc22

2010020200

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To Nancy

To the people who led me down this career path:

Richard Burr, Trinity University

Tom Barry, Southern Methodist University

Betsy Gelb, University of Houston

To Geert Hofstede

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vi

Philip R. Cateora Professor Emeritus, The University of Colorado at Boulder. Received his Ph.D. from the

ABOUT THE AUTHORS

University of Texas at Austin where he was elected to Beta Gamma Sigma. In his academic career at the University of Colorado he has served as Division Head of Marketing, Coordi- nator of International Business Programs, Associate Dean, and Interim Dean. His teaching has spanned a range of courses in marketing and international business, from fundamentals through the doctoral level. He received the University of Colorado Teaching Excellence Award and the Western Marketing Educator’s Association’s Educator of the Year Award. Professor Cateora has conducted faculty workshops on internationalizing principles of marketing courses for the AACSB and participated in designing and offering similar faculty workshops under a grant by the Department of Education. In conjunction with these efforts, he co-authored Marketing: An International Perspective, a supplement to accompany principles of marketing texts. Professor Cateora has served as consultant to small export companies as well as multinational companies, served on the Rocky Mountain Export Council, and taught in management development programs. He is a Fellow of the Academy of International Business.

Mary C. Gilly Professor of Marketing at the Paul Merage School of Business, University of California, Irvine. She received her B.A. from Trinity University in San Antonio, Texas; her M.B.A. from Southern Methodist University in Dallas, Texas; and her Ph.D. from the University of Hous- ton. Dr. Gilly has been at UCI since 1982 and has served as Vice Dean, Associate Dean, Director of the Ph.D. Program and Faculty Chair in the school of business, as well as the Associate Dean of Graduate Studies for the campus. She has been on the faculties of Texas A&M University and Southern Methodist University and has been a visiting professor at the Madrid Business School and Georgetown University. Professor Gilly has been a member of the American Marketing Association since 1975 and has served that organization in a number of capacities, including Marketing Education Council, President, Co-Chair of the 1991 AMA Summer Educators’ Conference, and member and chair of the AMA–Irwin Distinguished Marketing Educator Award Committee. She currently serves as Academic Director for the As- sociation for Consumer Research. Professor Gilly has published her research on international, cross-cultural, and consumer behavior topics in Journal of Marketing , Journal of Consumer Research , Journal of Retailing , California Management Review , and other venues.

John L. Graham Professor of International Business and Marketing at the Paul Merage School of Business, University of California, Irvine. He has been Associate Dean and Director, UCI Center for Citizen Peacebuilding; Visiting Scholar, Georgetown University School of Business; Visit- ing Professor at Madrid Business School in Spain; and Associate Professor, University of Southern California. Before beginning his doctoral studies at UC Berkeley, he worked for a division of Caterpillar Tractor Co. and served as an offi cer in the U.S. Navy Underwater Demolition Teams. Professor Graham is the author (with William Hernandez Requejo) of Global Negotiation: The New Rules , Palgrave-Macmillan, 2008; (with N. Mark Lam) of China Now, Doing Business in the World’s Most Dynamic Market, McGraw-Hill, 2007; (with Yoshihiro Sano and James Hodgson, former U.S. Ambassador to Japan) of Doing Business with the New Japan, Rowman & Littlefi eld, 4th edition, 2008; and editor (with Taylor Meloan) of Global and International Marketing, Irwin, 2nd edition, 1997. He has published articles in publications such as Harvard Business Review , Journal of Market- ing , Journal of International Business Studies , Strategic Management Review , Journal of Consumer Research , Journal of International Marketing , and Marketing Science. Excerpts of his work have been read into the Congressional Record , and his research on business negotiation styles in 20 cultures was the subject of an article in the January 1988 issue of Smithsonian. His 1994 paper in Management Science received a citation of excellence from the Lauder Institute at the Wharton School of Business. He was selected for the 2009 International Trade Educator of the Year Award, given by the North American Small Business International Trade Educators’ Association.

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Preface vii PREFACE

At the start of the last millennium, the Chinese were the pre- eminent international traders. Although a truly global trading system would not evolve until some 500 years later, Chinese silk had been available in Europe since Roman times. At the start of the last century the British military, mer- chants, and manufacturers dominated the seas and interna- tional commerce. Literally, the sun did not set on the British Empire. At the start of the last decade, the United States had surged past a faltering Japan to retake the lead in global commerce. The American domination of information tech- nology has since been followed by the political upheaval of 9/11 and the economic shocks of 2001 and 2008. China started that decade as the largest military threat to the United States, and at the decade’s end, it has become a lead- ing, often diffi cult trading partner. What surprises do the new decade, century, and millen- nium hold in store for all of us? Toward the end of the last decade, natural disasters and wars hampered commerce and human progress. The battle to balance economic growth and stewardship of the environment continues. The globalization of markets has certainly accelerated through almost univer- sal acceptance of the democratic free enterprise model and new communication technologies, including cell phones and the Internet. Which will prove the better, Chinese grad- ualism or the Russian big-bang approach to economic and political reform? Will the information technology boom of the previous decade be followed by a demographics bust when American baby boomers begin to try to retire after 2012? Or will NAFTA and the young folks in Mexico pro- vide a much needed demographic balance? Ten years out the debate about global warming should be settled—more data and better science will yield the answers. Will the economic tsunami of 2008–2009 evolve into something even worse? What unforeseen advances or disasters will the biological sciences bring us? Will we conquer AIDS⁄HIV in Africa? Will weapons and warfare become obsolete? International marketing will play a key role in providing positive answers to all these questions. We know that trade causes peace and prosperity by promoting creativity, mutual understanding, and interdependence. Markets are burgeon- ing in emerging economies in eastern Europe, the Com- monwealth of Independent States, China, Indonesia, Korea, India, Mexico, Chile, Brazil, and Argentina—in short, glob- ally. These emerging economies hold the promise of huge markets in the future. In the more mature markets of the in- dustrialized world, opportunity and challenge also abound as consumers’ tastes become more sophisticated and complex and as the hoped for rebound in purchasing power provides consumers with new means of satisfying new demands. With the recent downturn in the industrialized countries and the continued growth in emerging markets has come a new competitive landscape, one vastly different from that

earlier period when United States multinationals dominated world markets. From the late 1940s through the 1960s, multi- national corporations (MNCs) from the United States had lit- tle competition; today, companies from almost all the world’s nations vie for global markets. Fareed Zakaria reported:

“During the last two years, 124 countries grew their econ- omies at over 4 percent a year. That includes more than 30 countries in Africa. Over the last two decades, lands out- side the industrialized West have been growing at rates that were once unthinkable. While there have been booms and busts, the overall trend has been unambiguously upward. Antoine van Agtmael, the fund manager who coined the term ‘emerging markets,’ has identifi ed the 25 companies most likely to be the world’s next great multinationals. His list includes four companies each from Brazil, Mexico, South Korea, and Taiwan; three from India, two from China, and one each from Argentina, Chile, Malaysia, and South Africa. This is something much broader than the much- ballyhooed rise of China or even Asia. It is the rise of the rest—the rest of the world.” 1

The economic, political, and social changes that have occurred over the last decade have dramatically altered the landscape of global business. Consider the present and future impact of the following:

• The ever-present threat of global terrorism as repre- sented by the September 11, 2001, attacks

• Major armed confl icts in sub-Saharan Africa and the Middle East

• The potential global recession emanating from the United States

• The emerging markets in eastern Europe, Asia, and Latin America, where more than 75 percent of the growth in world trade over the next 20 years is ex- pected to occur

• The reunifi cation of Hong Kong, Macau, and China, which fi nally puts all of Asia under the control of Asians for the fi rst time in over a century

• The European Monetary Union and the successful switch from local-country currencies to one monetary unit for Europe, the euro

• The rapid move away from traditional distribution structures in Japan, Europe, and many emerging markets

• The growth of middle-income households the world over

• The continued strengthening and creation of regional market groups such as the European Union (EU),

1Fareed Zakaria, “The Rise of the Rest,” Newsweek, May 3, 2008.

vii

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viii Preface

the North American Free Trade Area (NAFTA), the Central American Free Trade Area (CAFTA), ASEAN Free Trade Area (AFTA), the Southern Cone Free Trade Area (Mercosur), and the Asia-Pacifi c Eco- nomic Cooperation (APEC)

• The successful completion of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) and the creation of the World Trade Organization (WTO), the latter now including China and Taiwan

• The restructuring, reorganizing, and refocusing of companies in telecommunications, entertainment, and biotechnology, as well as in traditional smokestack industries around the world

• The continuing integration of the Internet and cell phones into all aspects of companies’ operations and consumers’ lives

These are not simply news reports. These changes af- fect the practice of business worldwide, and they mean that companies will have to constantly examine the way they do business and remain fl exible enough to react rapidly to changing global trends to be competitive. As global economic growth occurs, understanding marketing in all cultures is increasingly important. Inter- national Marketing addresses global issues and describes concepts relevant to all international marketers, regardless of the extent of their international involvement. Not all fi rms engaged in overseas marketing have a global perspec- tive, nor do they need to. Some companies’ foreign market- ing is limited to one country; others market in a number of countries, treating each as a separate market; and still oth- ers, the global enterprises, look for market segments with common needs and wants across political and economic boundaries. All, however, are affected by competitive activ- ity in the global marketplace. It is with this future that the fi fteenth edition of International Marketing is concerned. Emphasis is on the strategic implications of competi- tion in different country markets. An environmental⁄cultural approach to international marketing permits a truly global orientation. The reader’s horizons are not limited to any spe- cifi c nation or to the particular ways of doing business in a single nation. Instead, the book provides an approach and framework for identifying and analyzing the important cul- tural and environmental uniqueness of any nation or global region. Thus, when surveying the tasks of marketing in a foreign milieu, the reader will not overlook the impact of crucial cultural issues. The text is designed to stimulate curiosity about man- agement practices of companies, large and small, seeking market opportunities outside the home country and to raise the reader’s consciousness about the importance of view- ing international marketing management strategies from a global perspective.

Although this revised edition is infused throughout with a global orientation, export marketing and the operations of smaller companies are also included. Issues specifi c to ex- porting are discussed where strategies applicable to export- ing arise, and examples of marketing practices of smaller companies are examined.

New and Expanded Topics in This Edition The new and expanded topics in this fi fteenth edition refl ect issues in competition, changing marketing structures, ethics and social responsibility, negotiations, and the development of the manager for the 21st century. Competition is raising the global standards for quality, in- creasing the demand for advanced technology and innova- tion, and increasing the value of customer satisfaction. The global market is swiftly changing from a seller’s market to a buyer’s market. This is a period of profound social, eco- nomic, and political change. To remain competitive glob- ally, companies must be aware of all aspects of the emerging global economic order. Additionally, the evolution of global communications and its known and unknown impacts on how international business is conducted cannot be minimized. In the third millennium, people in the “global village” will grow closer than ever before and will hear and see each other as a matter of course. An executive in Germany can routinely connect via VoIP (Voice over Internet Protocol) to hear and see his or her counterpart in an Australian company or anywhere else in the world. In many respects (time zone differences is a prominent exception), geographic distance is becoming irrelevant. Telecommunications, the Internet, and satellites are helping companies optimize their planning, production, and procurement processes. Information—and, in its wake, the fl ow of goods—is moving around the globe at lightning speed. Increasingly powerful networks spanning the globe enable the delivery of services that reach far beyond na- tional and continental boundaries, fueling and fostering international trade. The connections of global communica- tions bring people all around the world together in new and better forms of dialogue and understanding. This dynamic nature of the international marketplace is re- fl ected in the number of substantially improved and expanded topics in this fi fteenth edition, including the following:

• A deeper look at the causes of cultural differences

• The Internet and cell phones and their expanding role in international marketing

• Negotiations with customers, partners, and regulators

• Evolving global middle-income households

• Bottom-of-the-pyramid markets

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Preface ix

• World Trade Organization

• Free trade agreements

• Multicultural research

• Qualitative and quantitative research

• Country-of-origin effects and global brands

• Industrial trade shows

• A growing emphasis on both consumer and industrial services

• Trends in channel structures in Europe, Japan, and developing countries

• Ethics and socially responsible decisions

• Green marketing

• Changing profi les of global managers

Structure of the Text The text is divided into six parts. The fi rst two chapters, Part 1, introduce the reader to the environmental⁄cultural approach to inter- national marketing and to three international marketing management concepts: domestic market expansion, multi- domestic marketing, and global marketing. As companies restructure for the global competitive rigors of the 21st century, so too must tomorrow’s managers. The successful manager must be globally aware and have a frame of ref- erence that goes beyond a country, or even a region, and encompasses the world. What global awareness means and how it is acquired is discussed early in the text; it is at the foundation of global marketing. Chapter 2 focuses on the dynamic environment of interna- tional trade and the competitive challenges and opportunities confronting today’s international marketer. The importance of the creation of the World Trade Organization, the succes- sor to GATT, is fully explored. The growing importance of cell phones and the Internet in conducting international busi- ness is considered, creating a foundation on which specifi c applications in subsequent chapters are presented. The fi ve chapters in Part 2 deal with the cultural environ- ment of global marketing. A global orientation requires the recognition of cultural differences and the critical decision of whether it is necessary to accommodate them. Geography and history (Chapter 3) are included as im- portant dimensions in understanding cultural and market differences among countries. Not to be overlooked is con- cern for the deterioration of the global ecological environ- ment and the multinational company’s critical responsibility to protect it. Chapter 4 presents a broad review of culture and its im- pact on human behavior as it relates to international mar- keting. Specifi c attention is paid to Geert Hofstede’s study of cultural values and behavior. The elements of culture re- viewed in Chapter 4 set the stage for the in-depth analyses

in Chapters 5, 6, and 7 of business customs and the political and legal environments. Ethics and social responsibility are presented in the context of the dilemma that often confronts the international manager, that is, balancing corporate prof- its against the social and ethical consequences of his or her decisions. We have reorganized Part 3 of the book into four chap- ters on assessing global market opportunities. As markets expand, segments grow within markets; as market seg- ments across country markets evolve, marketers are forced to understand market behavior within and across different cultural contexts. Multicultural research, qualitative and quantitative research, and the Internet as a tool in the re- search task are explored in Chapter 8. Separate chapters on economic development and the Americas (Chapter 9); Europe, Africa, and the Middle East (Chapter 10); and the Asia Pacifi c Region (Chapter 11) refl ect the evolving marketing organizations of many multinational companies in response to the costs of travel and communica- tions across time zones, as well as the steady creation and growth of regional market groups in all three regions. The discussions in all three chapters include details about both established and emerging markets present in each region. The strategic implications of the dissolution of the Soviet Union and the emergence of new independent republics, the shift from socialist-based to market-based economies in Eastern Europe, and the return of South Africa and Vietnam to international commerce are examined. Attention is also given to the efforts of the governments of China and India and many Latin American countries to reduce or eliminate barriers to trade, open their countries to foreign investment, and privatize state-owned enterprises. These political, social, and economic changes that are sweeping the world are creating new markets and opportu- nities, making some markets more accessible while creating the potential for greater protectionism in others. In Part 4, Developing Global Marketing Strategies, plan- ning and organizing for global marketing is the subject of Chapter 12. The discussion of collaborative relationships, including strategic alliances, recognizes the importance of relational collaborations among fi rms, suppliers, and cus- tomers in the success of the global marketer. Many mul- tinational companies realize that to fully capitalize on opportunities offered by global markets, they must have strengths that often exceed their capabilities. Collaborative relationships can provide technology, innovations, produc- tivity, capital, and market access that strengthen a compa- ny’s competitive position. Chapters 13 and 14 focus on product and services man- agement, refl ecting the differences in strategies between consumer and industrial offerings and the growing impor- tance in world markets for both consumer and business ser- vices. Additionally, the discussion on the development of

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x Preface

global offerings stresses the importance of approaching the adaptation issue from the viewpoint of building a standard- ized product⁄service platform that can be adapted to refl ect cultural differences. The competitive importance in today’s global market of quality, innovation, and technology as the keys to marketing success is explored. Chapter 15 takes the reader through the distribution process, from home country to the consumer in the target country market. The structural impediments to market entry imposed by a country’s distribution system are examined in the framework of a detailed presentation of the Japanese distribution system. Additionally, the rapid changes in chan- nel structure that are occurring in Japan, as well as in other countries, and the emergence of the World Wide Web as a distribution channel are presented. We also have redistrib- uted key material from a previous chapter on exporting lo- gistics to this and other related sections of the book. Chapter 16 covers advertising and addresses the pro- motional element of the international marketing mix. In- cluded in the discussion of global market segmentation are recognition of the rapid growth of market segments across country markets and the importance of market segmenta- tion as a strategic competitive tool in creating an effective promotional message. Chapter 17 discusses personal selling and sales management and the critical nature of training, evaluating, and controlling sales representatives. Price escalation and ways it can be lessened, counter- trade practices, and price strategies to employ when the dollar is strong or weak relative to foreign currencies are concepts presented in Chapter 18. In Part 5, Chapter 19 is a thorough presentation of ne- gotiating with customers, partners, and regulators. The dis- cussion stresses the varying negotiation styles found among cultures and the importance of recognizing these differ- ences at the negotiation table.

Pedagogical Features of the Text The text portion of the book provides thorough coverage of its subject, with a subject emphasis on the planning and strategic problems confronting companies that market across cultural boundaries. The use of the Internet as a tool of international market- ing is stressed throughout the text. On all occasions in which data used in the text originated from an Internet source, the Web address is given. Problems that require the student to access the Internet are included with end-of-chapter ques- tions. Internet-related problems are designed to familiarize the student with the power of the Internet in his or her re- search, to illustrate data available on the Internet, and to challenge the reader to solve problems using the Internet. Many of the examples, illustrations, and exhibits found in the text can be explored in more detail by accessing the Web addresses that are included.

Current, pithy, sometimes humorous, and always rel- evant examples are used to stimulate interest and increase understanding of the ideas, concepts, and strategies pre- sented in emphasizing the importance of understanding cultural uniqueness and relevant business practices and strategies. Each chapter is introduced with a Global Perspective, a real-life example of company experiences that illustrates salient issues discussed in the chapter. Companies featured in the Global Perspectives range from exporters to global enterprises. The boxed Crossing Borders, an innovation of the fi rst edition of International Marketing , have always been pop- ular with students. They refl ect contemporary issues in in- ternational marketing and can be used to illustrate real-life situations and as the basis for class discussion. They are se- lected to be unique, humorous, and of general interest to the reader. The book is presented in full color, allowing maps to de- pict of geographical, cultural, and political boundaries and features more easily. Color also allows us to better commu- nicate the intricacies of international symbols and meanings in marketing communications. New photographs of cur- rent and relevant international marketing events are found throughout the text—all in color. The Country Notebook—A Guide for Developing a Marketing Plan, found in Part 6, Supplementary Material, is a detailed outline that provides both a format for a complete cultural and economic analysis of a country and guidelines for developing a marketing plan. In addition to The Country Notebook, the fi fteenth edi- tion comprises a selection of short and long cases located online at www.mhhe.com⁄cateora15e. The short cases focus on a single problem, serving as the basis for discussion of a specifi c concept or issue. The longer, more integrated cases are broader in scope and focus on more than one marketing management problem; new cases focus on services, mar- keting, and marketing strategy. The cases can be analyzed using the information provided. They also lend themselves to more in-depth analysis, requiring the student to engage in additional research and data collection.

Supplements We have taken great care to offer new features and improvements to every part of the teach- ing aid package. Following is a list of specifi c features:

• Instructor’s Manual and Test Bank. The Instructor’s Manual, prepared by the authors, con- tains lecture notes or teaching suggestions for each chapter. A section called Changes to This Edition is included to help instructors adapt their teaching notes to the fi fteenth edition. A case correlation grid at the beginning of the case note offers alternative uses for the cases.

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Preface xi

The Test Bank is also available on the Online Learning Center for ease of use. The Test Bank contains more than 2,000 questions, including true⁄false, critical thinking, and essay formats. Computerized testing software with an on- line testing feature is also available.

• Videos. The video program has been revised for the fi fteenth edition and contains footage of companies, topics videos, and unique training materials for inter- national negotiations. Teaching notes and questions relevant to each chapter in the text are available in the Instructor’s Manual and at the Web site.

• PowerPoint slides. This edition has PowerPoint slides for both the instructor and students. The PowerPoint presentation that accompanies International Market- ing , fi fteenth edition, contains exhibits from the text and other sources.

• Web site: www.mhhe.com⁄cateora15e. Included on the site are instructor resources such as downloadable fi les for the complete Instructor’s Manual, Power- Point slides, test bank, and links to current events and additional resources for the classroom. Instructors can also link to PageOut to create their own course Web site. For students, our site provides links to Web sites, Cases, an interactive version of the Country Notebook, online quizzing, and chapter PowerPoint Slides.

Acknowledgments The success of a text depends on the contributions of many people, especially those who take the time to share their thoughtful criticisms and suggestions to improve the text. We would especially like to thank the following review- ers who gave us valuable insights into this revision:

Gregory J. Benzmiller College of Management School for Professional Studies, Regis University

Larry Carter Idaho State University

Anindya Chatterjee Slippery Rock University of Pennsylvania

Dr. Dharma deSilva CIBA, Barton School of Business, Wichita State University

David E. Foster Montana State University

Debbie Gaspard Southeast Community College

Jamey Halleck Marshall University

Maxwell K. Hsu University of Wisconsin-Whitewater

James W. Marco Wake Technical Community College

James M. Maskulka Lehigh University

Zahir A. Quraeshi Western Michigan University

William Renforth Angelo State University

Camille Schuster California State University San Marcos

Nancy Thannert Robert Morris University

Bronis Verhage Georgia State University

Srdan Zdravkovic Bryant University

We appreciate the help of all the many students and pro- fessors who have shared their opinions of past editions, and we welcome their comments and suggestions on this and future editions of International Marketing . A very special thanks to Paul Ducham, John Weimeister, Sara Hunter, Heather Darr, Katie Mergen, Bruce Gin, and JoAnne Schopler from McGraw-Hill/Irwin, whose enthusi- asm, creativity, constructive criticisms, and commitment to excellence have made this edition possible.

Philip R. Cateora Mary C. Gilly

John L. Graham

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WALKTHROUGH A quick look at the new edition

Albania Austria Belgium Bosnia and Herzegovina Czech Republic Croatia Denmark Serbia-Montenegro Hungary Macedonia The Netherlands Switzerland Slovakia Slovenia

ALB. AUS. BELG. BOS.–HER. CZECH REP. CR. DEN. SERB-MONT. HUN. MAC. NETH. SWITZ. SLOV. SLOVE.

1 The World

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M e d i t e r r a n e a n S e a

I N D I A N O C E A N

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Bay of

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Laptev Sea

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WESTERN SAHARA (Morocco)

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BURKINA FASO

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DEMOCRATIC REPUBLIC

OF CONGO

CENTRAL AFRICAN REPUBLIC

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ERITREA

EGYPT LIBYA

SUDAN

ETHIOPIA

KENYA

UGANDA

CHAD

MAURITANIA

ALGERIA

TUNISIA

SPAIN

IRELAND

PORTUGAL

AZORES (Portugal)

SVALBARD (Norway)

FRANZ JOSEF LAND (Russia)

CANARY IS. (Spain)

POLAND

UNITED KINGDOM

FRANCE ITALY

GREECE

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ROMANIA SERB.-MONT.

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BELARUS

ESTONIA

GEORGIA

ARMENIA

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NIGER MALI

NIGERIA

GABON

CABINDA (Angola)

ANGOLA

TANZANIA

NAMIBIA

BOTSWANA

SOUTH AFRICA

LESOTHO

MALAWI

MADAGASCAR

ZAMBIA

SWAZILAND

SEYCHELLES

MAURITIUS

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COMOROS

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BANGLADESH

BHUTAN NEPAL

M O N G O L I A

I N D I A

C H I N

TAJIKISTAN

KYRGYZSTAN

UZBEKISTAN

K A Z A K H S T A N

I R A N

TURKEY

IRAQ SYRIA

SAUDI ARABIA

YEM EN

LEBANON ISRAEL

JORDAN

O M

A N

BAHRAIN

R U S S I A

SRI LANKA

UNITED ARAB EMIRATES

QATAR

KUWAIT

OMAN

TURKMENISTAN

AF GH

AN IS

TA N

PA KIS

TA N

C A N A D A

UNITED STATES

ALASKA (United States)

M E

X I C

O

BAHAMAS

CUBA

HAITI

DOMINICAN REPUBLIC

JAMAICA

BELIZE HONDURAS

GUATEMALA EL SALVADOR

NICARAGUA

COSTA RICA

PANAMA

PUERTO RICO (U.S.)

GUADELOUPE DOMINICA

ST. LUCIA

TRINIDAD & TOBAGO

COLOMBIA

VENEZUELA GUYANA SURINAME

FRENCH GUIANA (France)

ECUADOR

P E

R U

B R A Z I L

BOLIVIA

PARAGUAY

URUGUAY

ARGENTINA

C H

I L

E

GREENLAND (Denmark)

ICELAND

FALKLAND ISLANDS

(U.K.)

Mexico City

Sao Paulo

Buenos Aires

Rio de Janeiro

Bogota

Lima

Belo Horizonte

Caracas

Porto Alegre

New York

Los Angeles

Chicago Philadelphia

San Francisco

Miami

Detroit

Dallas

Washington

Boston

Houston

Toronto

Montreal

Reykjavik

Monterrey

Madrid

Lisbon Athens

London

Paris

Rome

Dublin

Oslo

Berlin Warsaw

Moscow

Istanbul

Kiev

Helsinki

Stockholm

Maputo

Luanda

Kinshasa

Abuja

Nairobi

Mogadishu Libreville

Nouakchott

Bamako Dakar

Bissau

Niamey

Tripoli

Casablanca

N'Djamena

Joannesburg

Windhoek

Gaborone

Harare

Lilongwe

Lusaka

Kampala

Addis Ababa

Astana

Khartoum

TunisAlgiers

Cairo Alexandria

Conakry

Monrovia

Antananarivo

Dar es Salaam

Cape Town

Baghdad

Tehran

Tashkent

Kolkata Dhaka

Yangon

Bangkok

Kuala Lu

Delhi

Lahore

Mumbai

Hyderabad

Bangalore

Karachi

Ankara

Colombo

Chennai

HAWAII (United States)

International Marketing by Cateora, Gilly, and Graham has always been a pioneer in the field of international marketing. The authors continue to set the standard in this edition with new and expanded topics that reflect the swift changes of an expanding competitive global market, as well as increased coverage of technology’s impact on the international market arena.

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P A C I F I C O C E A N

South China Sea

Philippine Sea

Coral Sea

Tasman Sea

Sea Of Okhotsk

Sea of

Japan

East China Sea

Bering Sea

East Siberian Sea

P.M. 12 P.M. 1 P.M. 2 P.M. 3 P.M.

PALAU

FEDERATED STATES OF MICRONESIA

SINGAPORE

TIMOR-LESTE

Macao (Portugal)

SOLOMON IS.

VANUATU

PAPUA NEW

GUINEA

I N D O N E S I A

M A L A Y S I A

BRUNEI

PHILIPPINESCAMBODIA

LAO S

HAILAND

TAIWAN

NORTH KOREA

SOUTH KOREA

JAPAN

A

A U S T R A L I A

NEW ZEALAND

VIETN A

M

Seoul

Taipei

Manila

Melbourne

Sydney

Port Moresby

Wellington

Beijing

Shenyang

Tianjin

Shanghai

Guangzhou

k

mpur

Chongqing

Ho Chi Minh City

Hong Kong Hanoi

Tokyo

Osaka

Jakarta Surabaya

4-Color Design New color maps and exhibits allow for improved pedagogy and a clearer presentation of international symbols and cultural meanings in marketing and advertising. In addition, photos that depend on full color for maximum impact easily bring many global examples to life. This visually stimulating combination works together to make the text material reader-friendly and accessible for both instructors and students.

444 Part 4 Developing Global Marketing Strategies

Global Marketing on the Web at Marriott The Internet today is the most global of any media invented so far, having leapfrogged television and radio—which may yet become global some day but are far from doing so. It is the only medium that approaches true global reach.

The power of the Internet results from its many unique attributes. It is unique in its ability to:

• Encompass text, audio and video in one platform.

• Operate in a dialogue versus monologue mode.

• Operate simultaneously as mass media and personalized media.

• Build global “communities,” unconfined by national borders.

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Chapter 15 International Marketing Channels 445

These attributes make it the most powerful medium on earth, unparalleled in its ability to communicate, espe- cially to a global world. It is an international marketer’s dream.

However, leveraging these characteristics in an effective manner requires dealing with various substantive issues. These issues include:

• Major differences in Internet adoption rates across the globe ranging from greater than 70 percent adoption in North America to less than 2 percent for the continent of Africa. This difference greatly influences the role of the Web as part of the marketing mix in international markets. Even for advanced EU economies, the variability of adoption is great, ranging from 88 percent in the Netherlands to 49 percent in Belgium. The average for the entire continent of Africa is around 1 percent (see www.internetworldstats.com).

• Unique issues caused by technology including broadband versus narrow-band, which drive what products and services can be marketed and how. In the narrow-band world, highly graphic and video-based Web sites are not viable. An example is the elaborate photo tours of hotels on www.Marriott.com, which download quickly on broadband connections but take inordinately long on narrow band. Therefore, a site designed for one market can be ineffective in another.

Renaissance is a Marriott-owned hotel brand. It uses various media to lead customers to its all-important Web sites, including print, television, Internet, and outdoor. Three 2-page print ads are directed toward U.K., Middle Eastern, and Chinese customers, and each of them lists the Web site addresses—the fi rst two citing www.renaissancehotels. co.uk, and the last noting www. renaissancehotels.com.cn. Even though the same Web site ultimately serves customers in both the United Kingdom and the Middle East, the ad presentation is adapted to the more conservative dress appropriate in the latter region. Finally, you can see how the campaign is also used on the streets of Shanghai. Ask your classmates what “Be fashionable” translates into on the latter two ads.

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The Scope and Challenge of International Marketing

1

CHAPTER LEARNING OBJECTIVES

What you should learn from Chapter 1 :

LO1 The benefi ts of international markets

LO2 The changing face of U.S. business

LO3 The scope of the international marketing task

LO4 The importance of the self-reference criterion (SRC) in international marketing

LO5 The increasing importance of global awareness

LO6 The progression of becoming a global marketer

CHAPTER OUTLINE

Global Perspective: Global Commerce Causes Peace

The Internationalization of U.S. Business

International Marketing Defi ned

The International Marketing Task

Marketing Decision Factors Aspects of the Domestic Environment Aspects of the Foreign Environment

Environmental Adaptation Needed

The Self-Reference Criterion and Ethnocentrism: Major Obstacles

Developing a Global Awareness

Stages of International Marketing Involvement

No Direct Foreign Marketing Infrequent Foreign Marketing Regular Foreign Marketing International Marketing Global Marketing

The Orientation of International Marketing

Chapter

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PA RT O N E

Global Perspective GLOBAL COMMERCE CAUSES PEACE

Global commerce thrives during peacetime. The economic boom in North America during the late 1990s was in large part due to the end of the Cold War and the opening of the formerly communist countries to the world trading system. However, we should also understand the important role that trade and international marketing play in producing peace. Boeing Company, America’s largest exporter, is perhaps the most prominent example. Although many would argue that Boeing’s military sales (aircraft and missiles) do not exactly promote peace, over most of the company’s history, that business has constituted only about 20 percent of the company’s commercial activity. Up until 2002, of Boeing’s some $60 billion in annual revenues, about 65 percent came from sales of commercial jets around the world and another 15 percent from space and communications technologies. Unfortunately, these historical numbers are being skewed by U.S. military spending and the damage done to tourism by terrorism. 1 Even so, the company still counts custom- ers in more than 90 countries, and its 158,000 employees work in 70 countries. The new 787 Dreamliner includes parts from around the world, including Australia, France, India, Italy, Japan, Russia, and Sweden. 2 Its more than 12,000 commercial jets in service worldwide carry about one billion travelers per year. Its NASA Services division is the lead contractor in the construction and operation of the 16-country International Space Station, fi rst manned by an American and two Russians in the fall of 2000. The Space and Intelligence Systems Division also produces and launches communications satellites affecting people in every country. All the activity associated with the development, pro- duction, and marketing of commercial aircraft and space vehicles requires millions of people from around the world to work together. Moreover, no company does more 3 to enable people from all countries to meet face-to-face for

both recreation and commerce. All this interaction yields not just the mutual gain associated with business relation- ships but also personal relationships and mutual under- standing. The latter are the foundation of global peace and prosperity. Another class of companies that promotes global dia- logue and therefore peace is the mobile phone industry. During 2007 the number of mobile phone subscribers ex- ceeded 3.0 billion, and this number is expected to grow beyond 4.5 billion by 2012. Nokia (Finland), the market leader, is well ahead of the American manufacturers Mo- torola and Apple, Samsung (S. Korea), LG (S. Korea), and Sony Ericsson (Japan/Sweden). Individuals and small companies also make a difference—perhaps a subtler one than large multina- tional companies, but one just as important in the aggre- gate. Our favorite example is Daniel Lubetzky’s company, PeaceWorks. Mr. Lubetzky used a fellowship at Stanford Law School to study how to foster joint ventures between Arabs and Israelis. Then, following his own advice, he cre- ated a company that combined basil pesto from Israel with other raw materials and glass jars supplied by an Arab part- ner to produce the fi rst product in a line he called Moshe & Ali’s Gourmet Foods. The company now sells four differ- ent product lines in 5,000 stores in the United States and has its headquarters on Park Avenue in New York, as well as business operations in Israel, Egypt, Indonesia, Turkey, and Sri Lanka. Again, beyond the measurable commer- cial benefi ts of cooperation between the involved Arabs, Israelis, and others is the longer-lasting and more funda- mental appreciation for one another’s circumstances and character. International marketing is hard work. Making sales calls is no vacation, even in Paris, especially when you’ve been there 10 times before. But international marketing is impor- tant work. It can enrich you, your family, your company, and

1 Circa 2011, approximately half of Boeing’s business is defense related ( http://www.boeing.com ). 2 W.J. Hennigan, “Dreamliner is Causing Nightmares for Boeing,” Los Angeles Times , October, 15, 2009, pp. B1–2. 3 The European commercial aircraft manufacturer Airbus is beginning to catch up, employing 57,000 people around the world ( http://www.airbus. com , 2008).

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The Political Environment:

A CRITICAL CONCERN

CHAPTER LEARNING OBJECTIVES

What you should learn from Chapter 6:

LO1 What the sovereignty of nations means and how it can affect the stability of government policies

LO2 How different governmental types, political parties, nationalism, targeted fear/animosity, and trade disputes can affect the environment for marketing in foreign countries

LO3 The political risks of global business and the factors that affect stability

LO4 The importance of the political system to international marketing and its effect on foreign investments

LO5 The impact of political and social activists, violence, and terrorism on international business

LO6 How to assess and reduce the effect of political vulnerabililty

LO7 How and why governments encourage foreign investment

CHAPTER OUTLINE

Global Perspective: World Trade Goes Bananas

The Sovereignty of Nations

Stability of Government Policies

Forms of Government Political Parties Nationalism Targeted Fear and/or Animosity Trade Disputes

Political Risks of Global Business

Confi scation, Expropriation, and Domestication Economic Risks Political Sanctions Political and Social Activists and Nongovernmental

Organizations Violence, Terrorism, and War Cyberterrorism and Cybercrime

Assessing Political Vulnerability

Politically Sensitive Products and Issues Forecasting Political Risk

Lessening Political Vulnerability

Joint Ventures Expanding the Investment Base Licensing Planned Domestication Political Bargaining Political Payoffs

Government Encouragement

6Chapter

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Global Perspective WORLD TRADE GOES BANANAS

PA RT T W O

Rather than bruising Chiquita Bananas, the wrath of poli- tics instead hammered Prosciutto di Parma ham from Italy, handbags from France, and bath oils and soaps from Germany. These and a host of other imported products from Europe were all slapped with a 100 percent import tariff as retaliation by the U.S. government against European Union banana-import rules that favored Caribbean bananas over Latin American bananas. Keep in mind that no bananas are exported from the United States, yet the United States has been engaged in a trade war over the past seven years that has cost numerous small businesses on both sides of the Atlantic millions of dollars. But how can this be, you ask? Politics, that’s how! One small business, Reha Enterprises, for example, sells bath oil, soaps, and other supplies imported from Germany. The tariff on its most popular product, an herbal foam bath, was raised from 5 percent to 100 percent. The customs bill for six months spiraled to $37,783 from just $1,851—a 1,941 percent tax increase. For a small business whose gross sales are less than $1 million annually, it was crip- pling. When Reha heard of the impending “banana war,” he called everyone—his congressperson, his senator, the United States Trade Representative (USTR). When he de- scribed his plight to the USTR, an offi cial there expressed amazement. “They were surprised I was still importing,” because they thought the tariff would cut off the industry entirely. That was their intention, which of course would have meant killing Reha Enterprises as well. In effect, he was told it was his fault that he got caught up in the trade war. He should have attended the hearings in Washington, just like Gillette and Mattel, and maybe his products would have been dropped from the targeted list, just as theirs were. Scores of European products, from clothing to stoves to glass Christmas ornaments, dolls, and ballpoint pens, that were originally targeted for the retaliatory tariffs escaped the tariff. Aggressive lob- bying by large corporations, trade groups, and members of Congress got most of the threatened imported prod- ucts off the list. The USTR had published a list of the targeted imports in the Federal Register, inviting affected companies to testify. Unfortunately, the Federal Register was not on Reha’s reading list. In that case, he was told, he should have hired a lobby- ist in Washington to keep him briefed. Good advice—but it doesn’t make much sense to a company that grosses less

than $1 million a year. Other advice received from an offi - cial of the USTR included the off-the-record suggestion that he might want to change the customs number on the invoice so it would appear that he was importing goods not subject to the tariff, a decision that could, if he were caught, result in a hefty fi ne or jail. Smaller businesses in Europe faced similar problems as their export business dried up because of the tariffs. How did this banana war start? The European Union imposed a quota and tariffs that favored imports from former colonies in the Caribbean and Africa, distributed by European fi rms, over Latin American bananas distributed by U.S. fi rms. Chiquita Brands International and Dole Food Company, contending that the EU’s “illegal trade barriers” were costing $520 million annually in lost sales to Europe, asked the U.S. government for help. The government agreed that unfair trade barriers were damaging their business, and 100 percent tariffs on selected European imports were lev- ied. Coincidentally, Chiquita Brands’ annual political cam- paign contributions increased from barely over $40,000 in 1991 to $1.3 million in 1998. A settlement was fi nally reached that involved high tar- iffs on Latin America bananas and quotas (with no tariffs) on bananas from Europe’s former colonies. But the bruising over bananas continued, and not in a straightforward way! In 2007 the issue shifted to banana bending. That is, bananas from Latin America tend to be long and straight, while those from the non-tariff countries are short and bent. Because the latter are not preferred by the shippers or retailers (the bend- ier ones don’t stack as neatly and economically), the ba- nanas from the former colonies were still not preferred. And new regulations were adopted by the European Commission that mandated that bananas must be free from “abnormal curvature of the fi ngers.” So the bendy banana producers threatened to renege on the whole agreement. Circa 2007 everyone involved found this prospect very unappealing. The tale does have a happy ending though. In 2009, after marathon meetings among all parties in Geneva, the 16-year banana split was fi nally healed: The EU cut import tariffs on bananas grown in Latin America by U.S. fi rms.

Sources: “U.S. Sets Import Tariffs in Latest Salvo in Ongoing Battle over Banana Trade,” Minneapolis Star Tribune, March 4, 1999; Timothy Dove, “Hit by a $200,000 Bill from the Blue,” Time, February 7, 2000, p. 54; Jeremy Smith, “EU Heading for Trade Crunch over Bananas,” Reuters , November 14, 2007.

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Chapter Openers A Chapter Outline provides students an at-a-glance overview of chapter topics, while Chapter Learning Objectives summarize the chapter’s goals and focus. Each chapter is introduced with a Global Perspective, a real-life example of company experiences that illustrates signifi cant issues discussed in the chapter. Companies featured in the Global Perspective vignettes range from exporters to global enterprises.

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When analyzing a product for a second market, the extent of adaptation required de- pends on cultural differences in product use and perception between the market the product was originally developed for and the new market. The greater these cultural differences between the two markets, the greater the extent of adaptation that may be necessary.

When instant cake mixes were introduced in Japan, the consumers’ response was less than enthusiastic. Not only do Japanese reserve cakes for special occasions, but they pre- fer the cakes to be beautifully wrapped and purchased in pastry shops. The acceptance of instant cakes was further complicated by another cultural difference: many Japanese homes do not have ovens. An interesting sidebar to this example is the company’s attempt to correct for that problem by developing a cake mix that could be cooked in a rice cooker, which all Japanese homes have. The problem with that idea was that in a Japanese kitchen,

CROSSING BORDERS 13.3

Seeds of Fashion: Eastern vs. Western Counter-Culture Movements and A Look at the Gothic Lolitas of Harajuku, Japan

Where do new ideas come from? Since its origin, the Gothic Lolita subculture of Harajuku has continued to fascinate people around the world. This group is just one example of the counterculture fashion movements that have emerged from the Harajuku district of Japan, each group identifi ed by a specifi c look that conveys a visual message. Gothic Lolita fashion infuses Victorian- era clothing with elements of Goth and Japanese anime to create a unique form of dress. Adherents take notes from the Gothic & Lolita Bible (a quarterly magazine with an estimated circulation of 100,000) and rely on their dis- tinctive appearance to proclaim their subcultural identity. As in other counterculture movements, youth’s fantasies of liberation, rebellion, and revolution have become em- bedded in the cultural mode of a changing nation. By examining the fashion of the Harajuku, we can gain a more in-depth understanding of group affi liation and construction of self in counterculture movements. Defi nitive of a counterculture, the Gothic Lolita’s in- group behavior and fashion evokes opposition and dis- plays a symbolic rebellion against mainstream Japanese culture. These attitudes are refl ected in norm-breaking and attention-grabbing styles. In the past, youth subcultures generally have emerged from Western society and diffused globally. But the Harajuku subculture began in the East and is moving West, marking a shift in the cultural current. The Harajuku subculture is also an example of the dif- ference between Eastern and Western counterculture movements. Whereas maturity in Western cultures is associated with authority and individuality, in Confucian Japan, maturity is the ability to cooperate with a group, accept compromises, and fulfi ll obligations to society. Therefore, rebellion in Japanese youth culture means rebellion against adulthood as well. Rather than engag- ing in sexually provocative or aggressive behaviors to emphasize their maturity and independence, as occurs among Western rebels, Japanese Gothic Lolitas display

themselves in a childlike and vulnerable manner to emphasize their immaturity and inability to meet the social responsibilities and obligations of adulthood. Likely because of this refusal to cooperate with social expectations, mainstream Japan views the subculture as selfi sh, especially considering its indulgent consumption be- haviors. Unlike contempo- rary Western youth cultures, such as punk and grunge, the Gothic Lolita subculture does not condemn mate- rialism or other aspects of modern consumer culture. Instead, one outfi t (as seen in accompanying photo) can cost as much as $300–$1000! Because personal consumption is regarded as both antisocial and immoral in Japanese society, the subculture opposes normative social values by indulging in conspicuous consumption. Most participants (aged 13–30 years) are students or have jobs that require them to wear a uniform everyday. On Sundays, they feel they have reached the time they can truly be themselves. Their lifestyle is frowned upon, making it is very common to see teenagers carrying bags with their “harajuku outfi t” on the train and changing at the park so their parents never see their outfi ts. Other wear the cloth- ing as their normal daily dress, but the vast majority save it for Sundays, when they congregate at Jingu Bridge and Yoyogi Park to show off their fashions, hang out, and meet others like them. Some go just to have their pictures taken by the subculture’ magazine photographers, who search for shots of new trends, or by tourists.

Source: Kristen San Jose, working paper, Paul Merage School of Business, University of California, Irvine, 2010.

Japanese women in an ad for Angelic Pretty fashions appearing in the Gothic & Lolita Bible .

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Crossing Borders Boxes These invaluable boxes offer anecdotal company examples. These entertaining examples are designed to encourage critical thinking and guide students through topics ranging from ethical to cultural to global issues facing marketers today.

NEW Cases New cases accompany the fi fteenth edition, enlivening the material in the book and class discussions while broadening a student’s critical thinking skills. These cases bring forth many of the topics discussed in the chapters and demonstrate how these concepts are dealt with in the real world.

O U T L I N E O F C A S E S

3-1 International Marketing Research at the Mayo Clinic

3-2 Swifter, Higher, Stronger, Dearer

3-3 Marketing to the Bottom of the Pyramid

3-4 Continued Growth for Zara and Inditex

3-5 A Sea Launch Recovery?

PA RT S I X

cases 3 ASSESSING GLOBAL MARKET OPPORTUNITIES

cat2994X_case3_047-066.indd 47 16/08/10 10:24 PM

is already booking payloads for launch in the future. Next year is sold out, according to company offi cials. Sea Launch Home Port is a decommissioned U.S. Navy facil- ity on the tip of a manmade peninsula at the Port of Long Beach. The Sea Launch buildings are all left over from the Navy except for the Payload Processing Facility, which the company built in the late 1990s. The company’s pier is home to two one-of-a-kind vessels—the Sea Launch Commander and the Odyssey launch platform. The Sea Launch Commander carries about 240 people, ranging from rocket technicians and corporate leaders to chefs and helicopter pilots. The Commander houses a state-of-the-art launch control center divided between two sections designed for Ukrai- nian and Russian engineers and American engineers and manag- ers. The cavernous rocket assembly and checkout hall is located on the command ship’s lower deck and stretches nearly the entire length of the vessel. The facility is capable of supporting two simultaneous launch campaigns using staging and integration compartments and a fueling cell. Giant cranes inside the high bays lift rocket stages, which sits on Russian-gauge rails on the fl oor integration room fl oor. The rocket’s ground support equipment inside the Sea Launch Commander is virtually identical to hardware used for Zenit launches at the Baikonur Cosmodrome in Kazakhstan, according to Sea Launch offi cials. The Sea Launch Commander was specially constructed for Sea Launch at a Scotland shipyard by the maritime unit of Kvaerner, then a leading Norwegian industrial company. Measuring 656 feet long and 105 feet wide, the command ship was outfi tted with more than 600 tons of rocket support equipment in Russia before sailing to Long Beach in 1998. The massive ship’s crew quarters are home to Sea Launch’s international employees during their stay in the United States.

CIRCA 2008 Sea Launch engineers say the three-week round-trip journey across the Pacifi c Ocean is the most rewarding part of their jobs. The cruise is the culmination of nearly two months of work pre- paring the rocket, payload, and launch teams for the mission. Prior to operations at Home Port, about 18 months goes into the planning, fl ight design, and logistics. “It’s really nice to know most of the reviews are over and we’re fi nally ready to launch,” said Bill Rujevcan, mission director for the company’s next fl ight. More than 300 people take the trip to the company’s equatorial launch site about 1,400 miles south of Hawaii. The crew includes workers from several nations, including: Ukraine, Russia, Norway, the Philippines, and the United States. Ukraine-based Yuzhnoye and Yuzhmash build the Zenit 3SL rocket’s fi rst and second stages, while Energia of Russia manufactures the Block DM-SL upper stage for the rocket. Norwegian ship offi cers manage marine oper- ations, and Filipino deckhands work on both the Sea Launch Com- mander and the Odyssey launch platform. U.S. employees from the Boeing Co. fi ll management roles and provide the fl ight de- sign, payload fairing, and satellite adapter. Astrotech, a contractor, oversees processing of customer payloads inside a clean room at the company’s Payload Processing Facility at Home Port in Long Beach, California. After 27 missions in nine years of business, Sea Launch is thriving in the do-or-die commercial launch industry. The com- pany’s Zenit 3SL rocket has suffered three setbacks in that time. Two were total failures. The rocket’s success rate places it among the top tier of heavy-lift launchers on the commercial market, and the company’s launch backlog seems to confi rm that. Sea Launch

A Sea Launch Recovery?CASE 35

The Sea Launch Commander and the

Odyssey platform are seen here docked at

Home Port.

Credit: Chris Miller/Spaceflight Now

cat2994X_case3_047-066.indd 62 16/08/10 10:24 PM

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A Wealth of Supplements PA RT O N E

Global Perspective TRADE BARRIERS—AN INTERNATIONAL MARKETER’S MINEFIELD

We all know the story about U.S. trade disputes with Japan. Japan has so many trade barriers and high tariffs that U.S. manufacturers are unable to sell in Japan as much as Japa- nese companies sell in the United States. The Japanese claim that “unique” Japanese snow requires skis made in Japan, and U.S. baseballs are not good enough for Japanese baseball. Even when Japan opened its rice market, popu- lar California rice had to be mixed and sold with inferior grades of Japanese rice. And, at this writing, the Japanese government continues to exclude American beef from the Japanese diet based on disputes about mad cow disease. 1 However, the Japanese are not alone; every country seems to take advantage of the open U.S. market while put- ting barriers in the way of U.S. exports. The French, for example, protect their fi lm and broadcast industry from for- eign competition by limiting the number of American shows that can appear on television, the percentage of American songs broadcast on radio, and the proportion of U.S. movies that can be shown in French theaters. Most recently, France launched its own “French” version of CNN with strong gov- ernment fi nancial support. Not only do these barriers and high tariffs limit how much U.S. companies can sell, they also raise prices for imported products much higher than they sell for in the United States. Another trade protection tactic even involved Britain’s Supreme Court of Judicature, which has fi nally answered a question that has long puzzled late-night dorm-room snack- ers: What, exactly, is a Pringle? With citations ranging from Baroness Hale of Richmond to Oliver Wendell Holmes, Lord Justice Robin Jacob concluded that legally it is a po- tato chip. The decision is bad news for Procter & Gamble U.K., which now owes $160 million in value-added taxes to the state. It is thus good news for Her Majesty’s Revenue

and Customs—and for fans of no-nonsense legal opinions. It is also a reminder, as conservatives in the United States attack Justice Sonia Sotomayor for not being a “strict con- structionist,” of the pointlessness of such labels. In Britain, most foods are exempt from the value-added tax (VAT), but potato chips (known there as crisps) and “similar products made from the potato, or from potato fl our” are taxable. Procter & Gamble, in what could be considered a strict constructionist plea, argued that Pringles are about 40 per- cent potato fl our but also contain corn, rice and wheat and therefore should not be considered potato chips or “similar products.” Rather, they are “savory snacks.” The VAT and Duties Tribunal disagreed, ruling that Prin- gles, marketed in the United States as “potato chips,” are taxable. “There are other ingredients,” the Tribunal agreed, but a Pringle is “made from potato fl our in the sense that one cannot say that it is not made from potato fl our, and the proportion of potato fl our is signifi cant being over 40 percent.” Barriers to trade, whatever form they take, both tariff and nontariff, are one of the major issues confronting interna- tional marketers. Nations continue to use trade barriers for a variety of reasons: some rational, some not so rational. For- tunately, tariffs generally have been reduced to record lows, and substantial progress has been made on eliminating non- tariff barriers. And work continues around the world to fur- ther reduce these pesky hurdles to peace and prosperity.

Sources: Adapted from Todd G. Buchholz , “Free Trade Keeps Prices Down,” Consumers’ Research Magazine , October 1995, p. 22; Tomas Kellner , “What Gaul!” Forbes , April 28, 2003, p. 52; Jonathan Lynn , “WTO Negotiators to Tackle Obstacles to Farm Deal,” Reuters News , January 3, 2008; Adam Cohen , “The Lord Justice Hath Ruled: Pringles Are Potato Chips,” The New York Times , June 1, 2009.

1 See James Day Hodgson, Yoshihiro Sano, and John L. Graham, Doing Business in the New Japan, Succeeding in America’s Richest Foreign Market (Boulder, CO: Rowman & Littlefi eld, 2008) for the complete story.

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Global Perspectives At the beginning of each chapter, Global Perspectives give examples of current company experiences in global marketing. Illustrating chapter concepts, these profi les help students to combine the theory they read about with real-life application.

Online Learning Center Numerous resources available for both instructors and students are online at www.mhhe.com/ cateora15e. Instructor resources include downloadable versions of the Instructor’s Manual, PowerPoint presentation, and Instructor Notes to accompany the videos. Student study tools include Chapter Quizzes, PowerPoint International Resource Links, Cases, and the Country Notebook Online with an interactive component so students can complete this popular marketing plan project online.

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McGraw-Hill Connect Marketing is an online assignment and as- sessment solution that connects students with the tools and re- sources they’ll need to achieve success.

McGraw-Hill Connect Marketing helps prepare students for their future by enabling faster learning, more effi cient studying, and higher retention of knowledge.

Connect Marketing offers a number of powerful tools and features to make managing as- signments easier, so faculty can spend more time teaching. With Connect Marketing , stu- dents can engage with their coursework anytime and anywhere, making the learning process more accessible and effi cient. Connect Marketing offers you the features described below.

Simple assignment management With Connect Marketing, creating assign- ments is easier than ever, so you can spend more time teaching and less time managing. The assignment management function enables you to:

• Create and deliver assignments easily with selectable end-of-chapter questions and test bank items.

• Streamline lesson planning, student progress reporting, and assignment grading to make classroom management more effi cient than ever.

• Go paperless with the eBook and online submission and grading of student assignments.

Smart grading When it comes to studying, time is precious. Connect Marketing helps students learn more effi ciently by providing feedback and practice material when they need it, where they need it. When it comes to teaching, your time also is precious. The grading function enables you to:

• Have assignments scored automatically, giving students immediate feedback on their work and side-by-side comparisons with correct answers.

• Access and review each response; manually change grades or leave comments for students to review.

• Reinforce classroom concepts with practice tests and instant quizzes.

Instructor library The Connect Marketing Instructor Library is your repository for additional resources to improve student engagement in and out of class. You can select and use any asset that enhances your lecture. The Connect Marketing Instructor Library includes:

• eBook

• PowerPoint slides

• Video clips

• Test Bank fi les

• Quizzes

Student study center The Connect Marketing Student Study Center is the place for students to access additional resources. The Student Study Center:

• Offers students quick access to lectures, practice materials, eBooks, and more.

• Provides instant practice material and study questions, easily accessible on the go.

• Gives students access to the Personalized Learning Plan described below.

Student progress tracking Connect Marketing keeps instructors informed about how each student, section, and class is performing, allowing for more productive use of lecture and offi ce hours. The progress-tracking function enables you to:

• View scored work immediately and track individual or group performance with as- signment and grade reports.

Less Managing. More Teaching.

Greater Learning.

McGraw-Hill Connect Marketing features

marketing

McGraw-Hill Connect Marketing

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• Access an instant view of student or class performance relative to learning objectives.

• Collect data and generate reports required by many accreditation organizations, such as AACSB.

McGraw-Hill Connect Plus Marketing McGraw-Hill reinvents the text- book learning experience for the modern student with Connect Plus Marketing. A seamless integration of an eBook and Connect Marketing, Connect Plus Marketing provides all of the Connect Marketing features plus the following:

• An integrated eBook, allowing for anytime, anywhere access to the textbook.

• Dynamic links between the problems or questions you assign to your students and the location in the eBook where that problem or question is covered.

• A powerful search function to pinpoint and connect key concepts in a snap.

In short, Connect Marketing offers you and your students powerful tools and features that optimize your time and energies, enabling you to focus on course content, teaching, and student learning. Connect Marketing also offers a wealth of content resources for both instructors and students. This state-of-the-art, thoroughly tested system supports you in preparing students for the world that awaits. For more information about Connect, go to www.mcgrawhillconnect.com, or contact your local McGraw-Hill sales representative.

Tegrity Campus: Lectures 24/ 7 Tegrity Campus is a service that makes class time available 24/7 by automatically capturing every lecture in a searchable format for students to review when they study and complete assignments. With a simple one-click start-and-stop process, you capture all computer screens and corresponding audio. Students can replay any part of any class with easy-to-use browser-based viewing on a PC or Mac. Educators know that the more students can see, hear, and experience class resources, the better they learn. In fact, studies prove it. With Tegrity Campus, students quickly recall key mo- ments by using Tegrity Campus’s unique search feature. This search helps students effi ciently fi nd what they need, when they need it, across an entire semester of class recordings. Help turn all your students’ study time into learning moments immediately supported by your lecture. To learn more about Tegrity watch a 2-minute Flash demo at http://tegritycampus .mhhe.com.

Assurance of Learning Ready Many educational institutions today are focused on the notion of assurance of learning , an important element of some accreditation standards. International Marketing is designed specifi cally to support your assurance of learning initiatives with a simple, yet powerful solution. Each test bank question for International Marketing maps to a specifi c chapter learning outcome⁄objective listed in the text. You can use our test bank software, EZ Test and EZ Test Online, or in Connect Marketing to easily query for learning outcomes⁄objectives that directly relate to the learning objectives for your course. You can then use the reporting features of EZ Test to aggregate student results in similar fashion, making the collection and presentation of assurance of learning data simple and easy.

AACSB Statement The McGraw-Hill Companies is a proud corporate member of AACSB International. Understanding the importance and value of AACSB accreditation, International Market- ing, 15e recognizes the curricula guidelines detailed in the AACSB standards for business accreditation by connecting selected questions in the test bank to the six general knowledge and skill guidelines in the AACSB standards. The statements contained in International Marketing, 15e are provided only as a guide for the users of this textbook. The AACSB leaves content coverage and assessment within

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the purview of individual schools, the mission of the school, and the faculty. While Inter- national Marketing, 15e and the teaching package make no claim of any specifi c AACSB qualifi cation or evaluation, we have within International Marketing, 15e labeled selected questions according to the six general knowledge and skills areas.

McGraw-Hill Customer Care Contact Information At McGraw-Hill, we understand that getting the most from new technology can be challenging. That’s why our services don’t stop after you purchase our products. You can e-mail our Product Specialists 24 hours a day to get product-training online. Or you can search our knowledge bank of Frequently Asked Questions on our support Web site. For Customer Support, call 800-331-5094 , e-mail [email protected] , or visit www.mhhe.com⁄support . One of our Techni- cal Support Analysts will be able to assist you in a timely fashion.

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BRIEF CONTENTS

Part One An Overview

1 The Scope and Challenge of International Marketing 2

2 The Dynamic Environment of International Trade 26

Part Two The Cultural Environment of Global Markets

3 History and Geography: The Foundations of Culture 52

4 Cultural Dynamics in Assessing Global Markets 94

5 Culture, Management Style, and Business Systems 124

6 The Political Environment: A Critical Concern 158

7 The International Legal Environment: Playing by the Rules 184

Part Three Assessing Global Market Opportunities

8 Developing a Global Vision through Marketing Research 218

9 Economic Development and the Americas 248

10 Europe, Africa, and the Middle East 274

11 The Asia Pacific Region 302

Part Four Developing Global Marketing Strategies

12 Global Marketing Management: Planning and Organization 330

13 Products and Services for Consumers 358

14 Products and Services for Businesses 392

15 International Marketing Channels 418

16 Integrated Marketing Communications and International Advertising 452

17 Personal Selling and Sales Management 494

18 Pricing for International Markets 520

Part Five Implementing Global Marketing Strategies

19 Negotiating with International Customers, Partners, and Regulators 550

Part Six Supplementary Material

THE COUNTRY NOTEBOOK—A Guide for Developing a Marketing Plan 579

CASES

Cases can be found online at www.mhhe.com/cateora15e

1 An Overview 1-1 Starbucks—Going Global Fast 1-2 Nestlé: The Infant Formula Controversy 1-3 Coke and Pepsi Learn to Compete in India 1-4 Marketing Microwave Ovens to a New Market

Segment

2 The Cultural Environment of Global Marketing 2-1 The Not-So-Wonderful World of EuroDisney—Things Are Better Now at Disneyland Resort Paris 2-2 Cultural Norms, Fair & Lovely, and Advertising 2-3 Starnes-Brenner Machine Tool Company: To Bribe or Not to Bribe? 2-4 Ethics and Airbus 2-5 Coping with Corruption in Trading with China 2-6 When International Buyers and Sellers Disagree 2-7 McDonald’s and Obesity 2-8 Ultrasound Machines, India, China, and a Skewed Sex

Ratio

3 Assessing Global Market Opportunities 3-1 International Marketing Research at the Mayo Clinic 3-2 Swifter, Higher, Stronger, Dearer 3-3 Marketing to the Bottom of the Pyramid 3-4 Continued Growth for Zara and Inditex 3-5 A Sea Launch Recovery?

4 Developing Global Marketing Strategies 4-1 Tambrands—Overcoming Cultural Resistance 4-2 Iberia Airlines Builds a BATNA 4-3 Sales Negotiations Abroad for MRI Systems 4-4 National Offi ce Machines—Motivating Japanese Salespeople: Straight Salary or Commission? 4-5 AIDS, Condoms, and Carnival 4-6 Making Socially Responsible and Ethical Marketing Decisions: Selling Tobacco to Third World Countries

Glossary 589

Photo Credits 598

Name Index 600

Subject Index 609

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1 The Scope and Challenge of International Marketing 2

Global Perspective: Global Commerce Causes Peace 3

The Internationalization of U.S. Business 7

International Marketing Defi ned 10

The International Marketing Task 11

Marketing Decision Factors 12

Aspects of the Domestic Environment 12

Aspects of the Foreign Environment 13

Environmental Adaptation Needed 15

The Self-Reference Criterion and Ethnocentrism: Major Obstacles 16

Developing a Global Awareness 18

Stages of International Marketing Involvement 19

No Direct Foreign Marketing 20

Infrequent Foreign Marketing 20

Regular Foreign Marketing 20

International Marketing 21

Global Marketing 21

The Orientation of International Marketing 23

2 The Dynamic Environment of International Trade 26

Global Perspective: Trade Barriers—An International Marketer’s Minefi eld 27

The Twentieth to the Twenty-First Century 28

World Trade and U.S. Multinationals 30

Beyond the First Decade of the Twenty-First Century 32

Balance of Payments 33

Protectionism 35

Protection Logic and Illogic 35

Trade Barriers 36

Easing Trade Restrictions 42

The Omnibus Trade and Competitiveness Act 42

General Agreement on Tariffs and Trade 43

World Trade Organization 45

Skirting the Spirit of GATT and WTO 46

The International Monetary Fund and World Bank Group 47

Protests against Global Institutions 48

PART ONE

AN OVERVIEW

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PART TWO

THE CULTURAL ENVIRONMENT OF GLOBAL MARKETS 3 History and Geography: The

Foundations of Culture 52

Global Perspective: Birth of a Nation—Panama in 67 Hours 53

Historical Perspective in Global Business 54

History and Contemporary Behavior 54

History Is Subjective 57

Manifest Destiny and the Monroe Doctrine 59

Geography and Global Markets 63

Climate and Topography 63

Geography, Nature, and Economic Growth 66

Social Responsibility and Environmental Management 67

Resources 71

Dynamics of Global Population Trends 74

Controlling Population Growth 75

Rural/Urban Migration 75

Population Decline and Aging 76

Worker Shortage and Immigration 78

World Trade Routes 79

Communication Links 80

4 Cultural Dynamics in Assessing Global Markets 94

Global Perspective: Equities and eBay—Culture Gets in the Way 95

Culture’s Pervasive Impact 96

Defi nitions and Origins of Culture 102

Geography 103

History 104

The Political Economy 104

Technology 105

Social Institutions 105

Elements of Culture 109

Cultural Values 109

Rituals 113

Symbols 114

Beliefs 116

Thought Processes 117

Cultural Sensitivity and Tolerance 118

Cultural Change 118

Cultural Borrowing 119

Similarities: An Illusion 120

Resistance to Change 121

Planned and Unplanned Cultural Change 122

5 Culture, Management Style, and Business Systems 124

Global Perspective: Do Blondes Have More Fun in Japan? 125

Required Adaptation 126

Degree of Adaptation 127

Imperatives, Electives, and Exclusives 127

The Impact of American Culture on Management Style 129

Management Styles around the

World 131

Authority and Decision Making 132

Management Objectives and Aspirations 133

Communication Styles 135

Formality and Tempo 138

P-Time versus M-Time 139

Negotiations Emphasis 140

Marketing Orientation 141

Gender Bias in International Business 141

Business Ethics 144

Corruption Defi ned 144

The Western Focus on Bribery 146

Bribery: Variations on a Theme 149

Ethical and Socially Responsible Decisions 150

Culture’s Infl uence on Strategic Thinking 152

Synthesis: Relationship-Oriented vs. Information-Oriented Cultures 153

6 The Political Environment: A Critical Concern 158

Global Perspective: World Trade Goes Bananas 159

The Sovereignty of Nations 160

Stability of Government Policies 162

Forms of Government 163

Political Parties 165

Nationalism 165

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Targeted Fear and/or Animosity 167

Trade Disputes 167

Political Risks of Global Business 167

Confi scation, Expropriation, and Domestication 168

Economic Risks 168

Political Sanctions 170

Political and Social Activists and Nongovernmental Organizations 171

Violence, Terrorism, and War 175

Cyberterrorism and Cybercrime 177

Assessing Political Vulnerability 177

Politically Sensitive Products and Issues 178

Forecasting Political Risk 178

Lessening Political Vulnerability 180

Joint Ventures 180

Expanding the Investment Base 181

Licensing 181

Planned Domestication 181

Political Bargaining 181

Political Payoffs 181

Government Encouragement 182

7 The International Legal Environment: Playing by the Rules 184

Global Perspective: The Pajama Caper 185

Bases for Legal Systems 186

Common vs. Code Law 187

Islamic Law 188

Marxist–Socialist Tenets 189

Jurisdiction in International Legal Disputes 190

International Dispute Resolution 191

Conciliation 191

Arbitration 191

Litigation 194

Protection of Intellectual Property Rights: A Special Problem 194

Counterfeiting and Piracy 194

Inadequate Protection 196

Prior Use versus Registration 197

International Conventions 197

Other Managerial Approaches to Protecting Intellectual Property 199

Cyberlaw: Unresolved Issues 201

Domain Names and Cybersquatters 201

Taxes 202

Jurisdiction of Disputes and Validity of Contracts 203

Commercial Law within Countries 203

Marketing Laws 204

Green Marketing Legislation 207

Foreign Countries’ Antitrust Laws 208

U.S. Laws Apply in Host Countries 208

Foreign Corrupt Practices Act 209

U.S. Antitrust Laws that Apply in Foreign Markets 210

Antiboycott Law 211

Extraterritoriality of U.S. Laws 211

Export Restrictions 212

National Security Laws 213

Determining Export Requirements 214

ELAIN, STELA, ERIC, and SNAP 216

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PART THREE

ASSESSING GLOBAL MARKET OPPORTUNITIES

8 Developing a Global Vision through Marketing Research 218

Global Perspective: Japan— Test Market for the World 219

Breadth and Scope of International Marketing Research 221

The Research Process 222

Defi ning the Problem and Establishing Research Objectives 222

Problems of Availability and Use of Secondary Data 223

Availability of Data 223

Reliability of Data 224

Comparability of Data 225

Validating Secondary Data 225

Gathering Primary Data: Quantitative and Qualitative Research 226

Problems of Gathering Primary Data 228

Ability to Communicate Opinions 228

Willingness to Respond 228

Sampling in Field Surveys 230

Language and Comprehension 230

Multicultural Research: A Special Problem 234

Research on the Internet: A Growing Opportunity 234

Estimating Market Demand 236

Expert Opinion 236

Analogy 237

Problems in Analyzing and Interpreting Research Information 239

Responsibility for Conducting Marketing Research 240

Communicating with Decision Makers 241

Appendix: Sources of Secondary Data 244

9 Economic Development and the Americas 248

Global Perspective: Desynchronosis? Something George Clooney Caught Up in the Air? 249

Marketing and Economic Development 250

Stages of Economic Development 251

Economic Growth Factors 253

Information Technology, the Internet, and Economic Development 255

Objectives of Developing Countries 255

Infrastructure and Development 256

Marketing’s Contributions 257

Marketing in a Developing Country 257

Level of Market Development 257

Demand in Developing Countries 259

Big Emerging Markets (BEMs) 262

The Americas 263

North American Free Trade Agreement (NAFTA) 263

United States–Central American Free Trade Agreement– Dominican Republic Free Trade Agreement (DR-CAFTA) 267

Southern Cone Free Trade Area (Mercosur) 269

Latin American Progress 269

Latin American Economic Cooperation 270

NAFTA to FTAA or SAFTA? 271

Strategic Implications for Marketing 271

10 Europe, Africa, and the Middle East 274

Global Perspective: Might Free Trade Bring Peace to the Middle East? 275

La Raison d’Etre 277

Economic Factors 277

Political Factors 278

Geographic and Temporal Proximity 278

Cultural Factors 278

Patterns of Multinational Cooperation 279

Global Markets and Multinational Market Groups 280

Europe 280

European Integration 280

European Union 284

Eastern Europe and the Baltic States 288

The Commonwealth of Independent States 289

Africa 291

Middle East 294

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Implications of Market Integration 296

Strategic Implications 296

Market Metrics 297

Marketing Mix Implications 299

11 The Asia Pacific Region 302

Global Perspective: Walmart, Tide, and Three-Snake Wine 303

Dynamic Growth in the Asia Pacifi c Region 304

The Greater China 304

Japan 308

India 311

The Four “Asian Tigers” 313

Vietnam 313

Bottom-of-the-Pyramid Markets (BOPMs) 314

Market Metrics 316

Asia Pacifi c Trade Associations 318

Association of Southeast Asian Nations (ASEAN) and ASEAN+3 318

Asia-Pacifi c Economic Cooperation (APEC) 320

A Focus on Diversity Within China 320

Northeast China: Longtime Industrial Heartland 322

Beijing–Tianjin 324

Shanghai and the Yangtze River Delta 325

Pearl River Delta 325

The Other Billion 326

Differences in Business Negotiation Styles Within The Greater China 327

Marketing Opportunities in The Greater China 328

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PART FOUR

DEVELOPING GLOBAL MARKETING STRATEGIES

12 Global Marketing Management: Planning and Organization 330

Global Perspective: The British Sell Another Treasure 331

Global Marketing Management 332

The Nestlé Way: Evolution Not Revolution 335

Benefi ts of Global Marketing 336

Planning for Global Markets 338

Company Objectives and Resources 339

International Commitment 339

The Planning Process 340

Alternative Market-Entry Strategies 344

Exporting 345

Contractual Agreements 346

Strategic International Alliances 349

Direct Foreign Investment 353

Organizing for Global Competition 355

Locus of Decision 356

Centralized versus Decentralized Organizations 356

13 Products and Services for Consumers 358

Global Perspective: China—Disney Rolls the Dice Again 359

Quality 360

Quality Defi ned 361

Maintaining Quality 362

Physical or Mandatory Requirements and Adaptation 363

Green Marketing and Product Development 364

Products and Culture 366

Innovative Products and Adaptation 368

Diffusion of Innovations 369

Production of Innovations 372

Analyzing Product Components for Adaptation 373

Core Component 373

Packaging Component 374

Support Services Component 376

Marketing Consumer Services Globally 377

Services Opportunities in Global Markets 378

Barriers to Entering Global Markets for Consumer Services 380

Brands in International Markets 382

Global Brands 385

National Brands 387

Country-of-Origin Effect and Global Brands 387

Private Brands 390

14 Products and Services for Businesses 392

Global Perspective: Intel, the Boom, and the Inescapable Bust 393

Demand in Global Business-to- Business Markets 395

The Volatility of Industrial Demand 396

Stages of Economic Development 399

Technology and Market Demand 399

Quality and Global Standards 401

Quality Is Defined by the Buyer 402

ISO 9000 Certifi cation: An International Standard of Quality 404

Business Services 406

After-Sale Services 406

Other Business Services 408

Trade Shows: A Crucial Part of Business-to-Business Marketing 409

Relationship Marketing in Business-to-Business Contexts 412

15 International Marketing Channels 418

Global Perspective: Central Perk in Beijing 419

Channel-of-Distribution Structures 421

Import-Oriented Distribution Structure 421

Japanese Distribution Structure 422

Trends: From Traditional to Modern Channel Structures 424

Distribution Patterns 427

Retail Patterns 428

Alternative Middleman Choices 430

Home-Country Middlemen 431

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Foreign-Country Middlemen 434

Government-Affi liated Middlemen 434

Factors Affecting Choice of Channels 435

Cost 435

Capital Requirements 436

Control 436

Coverage 436

Character 436

Continuity 437

Channel Management 438

Locating Middlemen 438

Selecting Middlemen 438

Motivating Middlemen 439

Terminating Middlemen 439

Controlling Middlemen 441

The Internet 441

Logistics 449

16 Integrated Marketing Communications and International Advertising 452

Global Perspective: Barbie Versus Mulan 453

Sales Promotions in International Markets 454

International Public Relations 455

International Advertising 457

Advertising Strategy and Goals 462

Product Attribute and Benefi t Segmentation 463

Regional Segmentation 463

The Message: Creative Challenges 467

Global Advertising and the Communications Process 467

Legal Constraints 471

Linguistic Limitations 473

Cultural Diversity 475

Media Limitations 476

Production and Cost Limitations 477

Media Planning and Analysis 477

Tactical Considerations 477

Campaign Execution and Advertising Agencies 489

International Control of Advertising: Broader Issues 491

17 Personal Selling and Sales Management 494

Global Perspective: International Assignments Are Glamorous, Right? 495

Designing the Sales Force 496

Recruiting Marketing and Sales Personnel 498

Expatriates 498

Virtual Expatriates 499

Local Nationals 500

Third-Country Nationals 501

Host-Country Restrictions 502

Selecting Sales and Marketing Personnel 502

Training for International Marketing 505

Motivating Sales Personnel 506

Designing Compensation Systems 508

For Expatriates 508

For a Global Sales Force 508

Evaluating and Controlling Sales Representatives 511

Preparing U.S. Personnel for Foreign Assignments 512

Overcoming Reluctance to Accept a Foreign Assignment 512

Reducing the Rate of Early Returns 513

Successful Expatriate Repatriation 514

Developing Cultural Awareness 515

The Changing Profi le of the Global Manager 516

Foreign-Language Skills 518

18 Pricing for International Markets 520

Global Perspective: The Price War 521

Pricing Policy 522

Pricing Objectives 522

Parallel Imports 523

Approaches to International Pricing 526

Full-Cost versus Variable-Cost Pricing 526

Skimming versus Penetration Pricing 526

Price Escalation 528

Costs of Exporting 529

Taxes, Tariffs, and Administrative Costs 529

Infl ation 529

Defl ation 530

Exchange Rate Fluctuations 530

Varying Currency Values 531

Middleman and Transportation Costs 532

Sample Effects of Price Escalation 532

Approaches to Reducing Price Escalation 533

Lowering Cost of Goods 534

Lowering Tariffs 534

Lowering Distribution Costs 536

Using Foreign Trade Zones to Lessen Price Escalation 536

Dumping 537

Leasing in International Markets 538

Countertrade as a Pricing Tool 539

Problems of Countertrading 540

The Internet and Countertrading 540

Price Quotations 541

Administered Pricing 542

Cartels 542

Government-Infl uenced Pricing 544

Getting Paid: Foreign Commercial Payments 544

Letters of Credit 545

Bills of Exchange 546

Cash in Advance 547

Open Accounts 547

Forfaiting 547

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19 Negotiating with International Customers, Partners, and Regulators 550

Global Perspective: A Japanese Aisatsu 551

The Dangers of Stereotypes 553

The Pervasive Impact of Culture on Negotiation Behavior 554

Differences in Language and Nonverbal Behaviors 555

Differences in Values 561

Differences in Thinking and Decision-Making Processes 563

Implications for Managers and Negotiators 564

Negotiation Teams 564

Negotiation Preliminaries 566

At the Negotiation Table 569

After Negotiations 574

Creative International Negotiations 575

Conclusions 576

PART FIVE

IMPLEMENTING GLOBAL MARKETING STRATEGIES

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PART SIX

SUPPLEMENTARY MATERIAL

THE COUNTRY NOTEBOOK—A Guide for Developing a Marketing Plan 579

CASES

Cases can be found online at www.mhhe.com/cateora15e

1 An Overview

1-1 Starbucks—Going Global Fast

1-2 Nestlé: The Infant Formula Controversy

1-3 Coke and Pepsi Learn to Compete in India

1-4 Marketing Microwave Ovens to a New Market Segment

2 The Cultural Environment of Global Marketing

2-1 The Not-So-Wonderful World of EuroDisney—Things Are Better Now at Disneyland Resort Paris

2-2 Cultural Norms, Fair & Lovely, and Advertising

2-3 Starnes-Brenner Machine Tool Company: To Bribe or Not to Bribe?

2-4 Ethics and Airbus

2-5 Coping with Corruption in Trading with China

2-6 When International Buyers and Sellers Disagree

2-7 McDonald’s and Obesity

2-8 Ultrasound Machines, India, China, and a Skewed Sex Ratio

3 Assessing Global Market Opportunities

3-1 International Marketing Research at the Mayo Clinic

3-2 Swifter, Higher, Stronger, Dearer

3-3 Marketing to the Bottom of the Pyramid

3-4 Continued Growth for Zara and Inditex

3-5 A Sea Launch Recovery?

4 Developing Global Marketing Strategies

4-1 Tambrands—Overcoming Cultural Resistance

4-2 Iberia Airlines Builds a BATNA

4-3 Sales Negotiations Abroad for MRI Systems

4-4 National Offi ce Machines— Motivating Japanese Salespeople: Straight Salary or Commission?

4-5 AIDS, Condoms, and Carnival

4-6 Making Socially Responsible and Ethical Marketing Decisions: Selling Tobacco to Third World Countries

Glossary 589

Photo Credits 598

Name Index 600

Subject Index 609

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PA RT O N E

An Overview

1 The Scope and Challenge of International Marketing 2

1.1 What Do French Farmers, Chinese Fishermen, and Russian Hackers Have in Common? 7

1.2 Blanca Nieves, La Cenicienta, y Bimbo (Snow White, Cinderella, and Bimbo) 9

1.3 Mobile Phones, Economic Development, and Shrinking the Digital Divide 14

1.4 Orange County, CA, Travels East and West 22

2 The Dynamic Environment of International Trade 26

2.1 Trade Barriers, Hypocrisy, and the United States 36

2.2 Underwear, Outerwear, Sony Playstations, and Pointed Ears—What Do They Have in Common? 37

2.3 Crossing Borders with Monkeys in His Pants 39

PA RT T W O

The Cultural Environment of Global Markets

3 History and Geography: The Foundations of Culture 52

3.1 Microsoft Adapts Encarta to “Local History” 62

3.2 Innovation and the Water Shortage, from Fog to Kid Power 64

3.3 Where Have All the Women Gone? 78 3.4 History, Geography, and Population Collide

in America: Returning to Multigenerational Family Living 79

4 Cultural Dynamics in Assessing Global Markets 94

4.1 Human Universals: The Myth of Diversity? 102 4.2 It’s Not the Gift That Counts, but How You

Present It 112 4.3 Thumbs that Rule 119

5 Culture, Management Style, and Business Systems 124

5.1 Don’t Beat Your Mother-in-Law! 133 5.2 The American Tourist and the Mexican

Fisherman 135 5.3 Cultures Change, Albeit Slowly 142

6 The Political Environment: A Critical Concern 158

6.1 Coke’s Back, and It Still Has the Secret 166 6.2 Trade Does Not Work as a Stick, Only as a

Carrot 171 6.3 When States Fail: Dodging the Bullet in

Former Yugoslavia 179

7 The International Legal Environment: Playing by the Rules 184

7.1 Č eské Budě jovice, Privatization, Trademarks, and Taste Tests—What Do They Have in Common with Anheuser-Busch? Budweiser, That’s What! 192

7.2 The Kind of Correspondence an International Marketer Doesn’t Want to See 210

7.3 The Consequences of Mixing Politics and Security 214

PA RT T H R E E

Assessing Global Market Opportunities

8 Developing a Global Vision through Marketing Research 218

8.1 Headache? Take Two Aspirin and Lie Down 224

8.2 French Is Special 231 8.3 Forecasting the Global Healthcare

Market 239

9 Economic Development and the Americas 248

9.1 Marketing in the Third World: Teaching, Pricing, and Community Usage 259

LIST OF CROSSING BORDERS BOXES

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9.2 Taco Bell Tries Again 264 9.3 In Quebec, They Prefer Pepsi 266

10 Europe, Africa, and the Middle East 274

10.1 Lost in Translation 285 10.2 The Death of the Drachma 287 10.3 Refusing to Pass along the Gas 290 10.4 The U.S. to Dubai to Iran, Illegally 295

11 The Asia Pacific Region 302

11.1 Infrastructure: India 312 11.2 The Benefits of Information Technology in

Village Life 314 11.3 Comments on Dealing with Dialects in

China 323 11.4 Culture Changes, Celebrations Spread from

the South 326

PA RT F O U R

Developing Global Marketing Strategies

12 Global Marketing Management: Planning and Organization 330

12.1 Swedish Takeout 337 12.2 Apple Shops for Partners around the

World 338 12.3 The Men Who Would Be Pizza Kings 348

13 Products and Services for Consumers 358

13.1 The Quality of Food Is a Matter of Taste 362 13.2 In Germany, Video Games Showing

Frontal Nudity Are OK, but Blood Is Verboten 365

13.3 Seeds of Fashion: Eastern vs. Western Counter-Culture Movements and A Look at the Gothic Lolitas of Harajuku, Japan 367

13.4 Selling Coffee in Tea-Drinking Japan 371 13.5 D’oh! Or Just Dough in Dubai? 375 13.6 So, Your Computer Isn’t Working? 377 13.7 Just to Go to School 380

14 Products and Services for Businesses 392

14.1 Trade Statistics Don’t Tell the Whole Story 395

14.2 The Military–Consumer Complex? Sony Sells to the Military 400

14.3 Yes, Opinions Do Differ about the Metric System 403

14.4 No More Aching Feet, but What About the 15-Ton Russian Tank? 411

15 International Marketing Channels 418

15.1 Big-Box Cookie-Cutter Stores Don’t Always Work 424

15.2 It Depends on What “Not Satisfied” Means 429

15.3 Managing the Humps in the Camel Market 440

15.4 One of the Many Dark Sides of the Internet: Growing Organ-Supply Shortfall Creates Windfall for Online Brokers 443

16 Integrated Marketing Communications and International Advertising 452

16.1 PR in the PRC 457 16.2 Joe Canuck Bashes America 472 16.3 Objections to Indian Ad Not Taken

Lightly 476 16.4 Advertising Themes that Work in Japan,

Including a Polite Duck 480

17 Personal Selling and Sales Management 494

17.1 Sales Force Management and Global Customers 497

17.2 Avon Calling—or Not? 502 17.3 How Important Are Those Meetings? 507 17.4 A Look into the Future: Tomorrow’s

International Leaders? An Education for the 21st Century 517

18 Pricing for International Markets 520

18.1 Inside the iPhone Gray Market 523 18.2 Don’t Squeeze the Charmin, Mr. Whipple—Or

Change the Color 527 18.3 What Does It Mean To Be Human? 5.2 Percent,

That’s What 535 18.4 Psychological Pricing in China, the

Lucky 8 541

PA RT F I V E

Implementing Global Marketing Strategies

19 Negotiating with International Customers, Partners, and Regulators 550

19.1 Poker Faces and Botox Injections 559 19.2 The Digital Impact on International

Negotiations 569 19.3 Fishing for Business in Brazil 572

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