Global Marketin. McGraw-Hill Irwin
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1 Global Marketin Foreign Entry, Local Marketing, & Global Management Fifth Edition Johny K. Johansson Georgetown University McGraw-Hill Irwin Boston Burr Ridge, IL Dubuque, IA Madison, WI New York San Francisco St. Louis Bangkok Bogota Caracas Kuala Lumpur Lisbon London Madrid Mexico City Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto
2 PART ONE FUNDAMENTALS 1 Chapter 1 The Global Marketing Task 3 Going Global 5 The New Global Environment 6 Antiglobalization and Terrorism 6 Anti-Americanism 7 Fair Trade 7 Global Warming and Green Trade 9 The Flat World 10 The Dubai Phenomenon 11 Regionalization 13 Key Concepts 14 Global Marketing 14 Multidomestic Markets 14 Global Markets 16 Global Products 16 Global and Local Brands 17 Leading Markets 17 First-Mover Advantages 18 The Product Life Cycle 19 Why Companies Go Global 20 Market Drivers 21 Competitive Drivers 21 Cost Drivers 22 Technology Drivers 22 Government Drivers 23 Global Localization 23 Developing Knowledge Assets 24 P& G New Products 24 P&G Advertising 25 P&G Distribution 25 Global Marketing Objectives 25 Three Hats 26 The Foreign Entry Role 26 The Local Marketing Role 26 The Global Management Role 27 Summary 27 Chapter 2 Theoretical Foundations 31 Introduction 33 Country-Specific Advantages (CSAs) 33 Comparative and Absolute Advantages 34 The International Product Cycle (1PC) 35 National Competitive Advantages 35 The New Trade Theory 3 7 CSAs and Country-of-Origin Effects 38 Firm-Specific Advantages (FSAs) 40 Knowledge-Based FSAs 41 Marketing-Related FSAs 41 Transferability of FSAs 42 FSAs and Internalization 44 FSAs and Transaction Costs 44 FSAs in the Value Chain 46 FSAs, CSAs, and Regionalization 47 Extending Porter's "Five Forces" Model 48 Rivalry 48 New Entrants 50 Substitutes 50 Buyer Power 50 Supplier Power 51 Rivalry between Global Competitors 51 Competitive Strength 51 Competitive Repertoire 51 Global Rivalry 51 Strategy and the Three Hats 53 Summary 54 Chapter 3 Cultural Foundations 57 Introduction 59 The Meaning of Culture 60 Culture and Buyer Behavior 60 Culture and Materialism 61? Culture and the Core Benefit 63 Cultures across Countries 65 High versus Low Context Cultures 65 "Silent Languages " 66 Hofstede s Cultural Dimensions 66 Gannon's Metaphors 69 Culture and "How to Do Business" 70 Managerial Styles 70 Managing Subordinates 71 Culture and Negotiations 72 Know Whom You Are Dealing With 72 Know What They Hear 73 Know When to Say What 74 Industrial Buyers 75 The Business Marketing Task 75 Cultural Conditioning 75 Organizational Culture 76 Relationship Marketing 77 The Limits to Cultural Sensitivity 78 Nonadaptation 78 xiv
3 xv Culture and the Three Hats 78 Foreign Entry 78 Local Marketing 79 Global Management 80 Summary 81 CASE 1-1: IKEA's Global Strategy: Furnishing the World 85 CASE 1-2: Globalization Headaches at Whirlpool 90 PART TWO FOREIGN ENTRY 97 Chapter 4 Country Attractiveness 99 Introduction 101 Regional and Country Indicators 101 Political Risk Research 102, Environmental Research 104 Physical Environment 105 Sociocultural Environment 106 Economic Environment 106 Trade Blocks and Regulatory Environment 106 Systematic Entry Screening 106 Stage 1 Country Identification 106 Stage 2 Preliminary Screening 107 Stage 3 In-Depth Screening 108 Stage 4 Final Selection 110 Personal Experience 111, Country Data Sources 112 Researching Competitors 116 Strengths and Weaknesses 116 Competitive Signaling 116 Forecasting Country Sales 117 A Basic Equation 117 Stage of the Product Life Cycle 117 Industry Sales 118 The Build- Up Method 118 Forecasting by Analogy 118 An Illustration: TV Penetration 119 Judgmental Forecasts 120 Time Series Extrapolation 121 Regression-Based Forecasts 121 Forecasting Market Share 123 Predicting Competition 123 Identifying Competitors 123 Domestic Competitors 124 Foreign Competitors 124 Summary 125 Chapter 5 Export Expansion 129 Introduction 130 Four Modes of Entry 131 Exporting 131 Licensing 132 Strategic Alliances (SAs) 132 Wholly Owned Manufacturing Subsidiary 132 The Impact of Entry Barriers 133 Entry Barriers Defined 133 The Cost of Barriers 134 The Importer's View 134 Tariff and Nontariff Barriers 135 Government Regulations 136 Distribution Access 136 Natural Barriers 137 Advanced versus Developing Nations 138 Exit Barriers 138 Effect on Entry Mode 138 The Exporting Option 139 Indirect Exporting 140 Direct Exporting 141 The Exporting Tasks 141 Product Shipment 141 Export Pricing 143 Local Distribution 147 Payment 148 Legal Issues 151 After-Sales Support 151 Importers as Trade Partners 152 Summary 153 Chapter 6 Licensing, Strategic Alliances, FDI 157 Introduction 159 Licensing 159 Franchising 161 Original Equipment Manufacturing (OEM) 162 Strategic Alliances 163 p The Rationale for Nonequity SAs 163 Distribution Alliances 164 Manufacturing Alliances 165 R&DAlliances 165 Joint Ventures 166 Manufacturing Subsidiaries 166 Outsourcing 167 Acquisitions 168 Entry Modes and Marketing Control 169 Optimal Entry Strategy 171 The Entry Mode Matrix 171 Optimal Modes 172 Real-World Cases 173 Global Expansion Paths 176 The "CulturalDistance"Effect 176 The International Learning Curve 176 The Internationalization Stages 177 BornGlobals 178 Waterfall versus Sprinkler Strategies 178 Summary 180
4 xvi Contents CASE 2-1: Toys "R" Us Goes to Japan 185 CASE 2-2: Illycaffe (A): Internationalization 189 CASE 2-3: Illycaffe (B): The Starbucks Threat 193 CASE 2-4: AOL: International Expansion 196 PART THREE LOCAL MARKETING 205 Chapter 7 Understanding Local Customers 207 Introduction 209 Buyer Decision Making 210 Problem Recognition 211 Search 212 Evaluation of Alternatives 212 Choice 213 Outcomes 214 Local Buyer Research 215 Problem Definition 215 Qualitative Research 217 Consumer Surveys 217 Trade Surveys 218 Observational Studies 219 Explanatory (Causal) Research 219 Measurement and Scaling 220 Questionnaire Construction 221 Sampling 222 Fieldwork 222 Local Market Segmentation 224 Segmentation Criteria '224 Local Product Positioning 227 The Product Space 22 7 Strategic Implications 228 Overcoming Mispositioning 229 Changing the Product Space 229 Changing Customer Preferences 230 Three Local Market Environments 231 Marketing Environment 231 Marketing Tasks 232 Country Markets 233 Summary 233 Chapter 8 Local Marketing in Mature Markets Introduction 239 Local Marketing in Mature Markets 239 Market Segmentation 239 Product Positioning 239 Marketing Tactics 240 Customer Satisfaction 242 Close-Up: Pan-European Marketing 243 Market Environment 244 Foreign Trade Agreements 245 Competition 246 Market Segmentation Product Positioning 248 Marketing Tactics 250 Close-Up: Marketing in Japan 253 Market Environment 254 Foreign Trade Agreements 254 Competition 254 Market Segmentation 255 Product Positioning 256 Marketing Tactics 256 Close- Ups: Marketing in Australia and New Zealand 258 Market Environment 258 Foreign Trade Agreements 259 Competition 259 Market Segmentation 259 Product Positioning 260 Marketing Tactics 261 Close-Up: Marketing in North America 262 Market Environment 262 Foreign Trade Agreements 264 Competition 264 Market Segmentation 265 Product Positioning 265 Marketing Tactics 265 Summary 267 Chapter 9 Local Marketing in New Growth Markets Introduction 273 Two Kinds of Markets 273 The Role of Trade Blocs 2 74 Market Segmentation 274 Product Positioning 2 74 Marketing Tactics 275 Close- Up: Marketing in Latin America 276 Market Environment 277 P Foreign Trade Agreements 278 Market Segmentation 279 Product Positioning 279 Marketing Tactics 280 Major Country Markets 283 Pan-Regional Marketing 286 Close-Up: Marketing in the New Asian Growth Markets 287 Market Environment 287 Foreign Trade Agreements 288 Market Segmentation 289 Product Positioning 289 Marketing Tactics 290 Major Country Markets 293 Pan-Regional Marketing 294 Close-Up: Marketing in India 295 Market Environment 296 Market Segmentation 298 Product Positioning 299 Marketing Tactics 300 Summary
5 xvii Chapter 10 Local Marketing in Emerging Markets 307 Introduction 309 Local Marketing in Developing Countries 309 Market Segmentation 310 Product Positioning 311 Pricing 311 Distribution 312 Promotion 312 Close-Up: Marketing in Russia and the NDCs 312 Market Environment 313 Political and Legal Risks 315 Market Segmentation 316 Product Positioning 318 Marketing Tactics 318 Close-Up: Marketing in China 323 Market Environment 323 Foreign Entry 325 Hong Kong s Role 327 Market Segmentation 328 Product Positioning 328 Marketing Tactics 329 Continuous Change 332 Vietnam: Another China? 333 Close-Up: Marketing in the Middle East 333 Governing Structures 334 The Islam Factor 334 Market Environment 335 Trade Blocs 335 Market Segmentation' 336 Product Positioning 336 Distribution 337 Promotion 338 Summary 338 CASE 3-1: P&G's Pert Plus: A Pan-European Brand? 343 CASE 3-2: Levi Strauss Japan K.K.: Selling Jeans in Japan 348 CASE 3-3: Colgate-Palmolive: Cleopatra in Quebec? 357 PART FOUR GLOBAL MANAGEMENT 369 Chapter 11 Global Marketing Strategy Introduction 372 The Global Marketer's Mindset Selling Orientation 373 Standardization 374 Coordination 374 Centralization 3 75 The New Global Mindset Global Market Planning 375 The Boston Consulting Group Portfolio Matrix 376 The GE/McKinsey Matrix 377 Ford's Country Matrix 377 Global Resource Allocation 3 78 Global Market Segmentation 381 Macrosegmentation 382 Diversification versus Focus 385 A Case Illustration 386 Targeting Segments 387 Competitive Analysis 387 Profitability Analysis 388 Global Product Positioning 389 Key Positioning Issues 390 Global STP Strategies 391 Global Marketing Planning 393 Summary 398 Chapter 12 Global Products and Services 401 Introduction 403 The Pros and Cons of Standardization 403 The Advantages of Standardization 404 The Drawbacks of Standardization 405 Which Features to Standardize? 406 Localization versus Adaptation 406 Basic Requirements 407 Compatibility Requirements 407 Multisystem Compatibility 407 Pitfalls of Global Standardization 408 Insufficient Market Research 408 Overstandardization 408 Poor Follow-Up 408 Narrow Vision 408 Rigid Implementation 409 P Global Product Lines 409 Developing New Global Products 410 Idea Generation 411 Prelim inary Screen ing 411 Concept Research 412 Sales Forecast 413 Test Marketing 413 Globalizing Successful New Products 414 New Product Success Factors 414 Speed of Diffusion 414 Global Services 416 Characteristics of Services 416 A Product Equivalence 417 Service Globalization Potential 419 Stage of the Life Cycle 419 Infrastructure Barriers 419 Idiosyncratic Home Market 420 Foreign Entry of Services 420 Foreign Trade in Services 420 Service Entry Modes 421 Entry and Exit Barriers 422
6 xviii Contents Controlling Local Service Quality 424 Critical Incidents in Global Services 424 Summary 425 Chapter 13 Global Branding 431 Introduction 432 Brands Defined 434 Global, Regional, and Local Brands 435 Extending the Brand Concept 436 Nation Branding 436 Place Branding 43 7 How Brands Function 438 Risk Avoidance and Trust 438 Longevity and Familiarity 438 Iconic and Experiential 438 Emotional Drivers 439 Cultural Differences 439 Brand Equity 440 Brand Valuation 441 The Advantages of Global Brands 444 The Disadvantages of Global Brands 444 Global versus Local Brands 445 Acquiring a Local Brand? 446 The Brand Portfolio 446 Globalizing a Local Brand 448 Changeover Tactics 449 Defending Local Brands 449 The Advantages of Local Brands 450 Counterfeit Products 452 Extent of Problem 452 Counterfeit Demand 453 Actions against Counterfeits 454 Summary 455 Chapter 14 Global Pricing 459 Introduction 461 A Global Pricing Framework 461 Pricing Basics 463 The Role of Costs 463 Experience Curve Pricing 463 Competition 464 Demand 464 Financial Issues 465 Exchange Rates 465 Hedging 467 Government Intervention 468 Transfer Pricing 468 Definition 468 The Arm 's-length Principle 469 Approaches to Transfer Pricing 470 Conflicting Objectives 470 Countertrade 471 Business Evaluation 473 Systems Pricing 474 Price and Positioning 475 Price-Quality Relationships 475 The PLC Impact 476 Global Coordination 476 Pricing Actions against Gray Trade 478 Global Pricing Policies 481 Polycentric Pricing 481 Geocentric Pricing 481 Ethnocentric Pricing 481 Managerial Trade-Offs 482 Summary 483 Chapter 15 Global Distribution 487 Introduction 488 Distribution as Competitive Advantage 489 Rationalizing Local Channels 490 Changing Distributors 490 Dual Distribution 491 Wholesaling 492 Vertical Integration 492 Types of Wholesalers 493 Retailing 494 Retailing and Lifestyles 495 Creating New Channels 496 Global Retailing 497 Global Logistics 500 Competition and Technology 500 Air Express 501 Ocean Carriers 502 Overland Transportation 503 Warehousing 503 Parallel Distribution 504 Gray Trade 504? Effects of Gray Trade 505 Channel Actions against Gray Trade 506 Multiple Distribution Channels 508 Global Channel Design 509 The FSAs Revisited 509 Availability of Channels 509 Channel Tie-Up 509 Coordination and Control 510 Summary 510 Chapter 16 Global Advertising 515 Promotion as a Global Advantage 516 The Global Advertising Task 518 The International World of Advertising 518 Advertising Volume 518 Media Usage 520 Global Media 521 Strategic Implications 524
7 xix Pros and Cons of Global Advertising 525 Cost Advantages 526 Global Markets 526 Global Products and Brands 526 Globalization Examples 527 The Global Advertiser's Decisions 528 Strategy 529 Budgeting and Organization 531 The Global Advertising Agency 532 Agency Globalization 532 The Agency's Task 532 Message and Creative 535 IdenticalAds 535 Prototype Advertising 536 Pattern Standardization 536 Media Selection 537 The Digitalization of Advertising 539 Close-Up: Goodyear in Latin America Preliminary Orientation (September) Regional Meeting to Define Communications Strategy (October) Advertising Creative Meeting (November) Qualitative Research Stage (November-December) 5. Research Review Meeting (January) Final Creative Review (March) 542 Lessons 543 Summary 543 Chapter 17 Global Promotion, E-Commerce, ' and Personal Selling 547 Introduction 549 Global Sales Promotion 549 In-Store and Trade Promotions 550 Sponsorships 551 Event Marketing Cause Marketing 552 Cross-Marketing 553 Product Placement 554 Publicity 554 "GoodNews..." 554 "... and Bad News " 555 Global Public Relations 555 International Trade Fairs 557 Direct Marketing 558 Global Strategy 558 Electronic Commerce 559 E-tailing Growth 560 Marketing Strengths and Weaknesses 563 Promoting the Site Global Personal Selling 565 Managing a Sales Force 565 Personal Salesmanship 566 The Presentation 567 Be Prepared! 568 Handling Objections 569 Closing Tactics 569 Integrated Marketing Communications 570 Summary 571 Chapter 18 Organizing for Global Marketing 575 Introduction 577 The Context 577 The Task 577 Organizational Structure 578 A Dominant Regional Structure? 583 The Global Network as an Asset 584 Painful History 584 The Win-Win View 584 Globalizing Management 586 Global Marketing Directors 58 7 Global Teams 587 Management Systems 588 Informal Coordination 588 Coordinating Committees 588 Coordinating Staff 589 People and Organizational Culture 589 Local Acceptance 589 Corporate Culture 591 The Expatriate Manager 591 Global Customers 592 Global Account Management 593 Retail Trade Groups 594 Conflict Resolution 594 p The Good Global Marketer 597 Summary 598 CASE 4-1: Banyan Tree Hotels and Resorts: Building an International Brand from an Asian Base 603 CASE 4-2: Texas Instruments: Global Pricing in the Semiconductor Industry 615 CASE 4-3: United Colors of Benetton 621 CASE 4-4: Cathay Pacific Airways: China or the World? 632 CASE 4-5: Hewlett-Packard's Global Account Management 640 Index 647
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