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CHAPTER 1
INTRODUCTION TO GLOBAL MARKETING
SUMMARY
A. Marketing is an organizational function and a set of processes for creating,
communicating, and delivering value to customers and for managing customer
relationships in ways that benefit the organization and its stakeholders. A company that
engages in global marketing focuses resources on global market opportunities and threats.
Successful global marketers such as Nestlé, Coca-Cola, and Honda use familiar
marketing mix elements – the four Ps – to create global marketing programs.
B. Marketing, R&D, manufacturing, and other activities comprise a firm’s value chain the
value equation (V =B/P) expresses the relationship between values and the marketing
mix.
C. Global companies also maintain strategic focus while pursuing competitive advantage.
The marketing mix, value chain, competitive advantage, and focus are universal in their
applicability, irrespective of whether a company does business only in the home country
or has a presence in many markets around the world. However, in a global industry,
companies that fail to pursue global opportunities risk being pushed aside by stronger
global competitors.
D. A firm’s global marketing strategy (GMS) can enhance its worldwide performance. The
GMS addresses several issues. First is the nature of the marketing program in terms of the
balance between a standardization (extension) approach to the marketing mix and a
localization (adaptation) approach that is responsive to country or regional differences.
Second is the concentration of marketing activities in a few countries or the dispersal of
such activities across many countries. Companies that engage in global marketing can
also engage in coordination of marketing activities. Finally, a firm’s GMS will address
the issue of global market participation.
E. The importance of global marketing today can be seen in the company rankings compiled
by the Wall Street Journal, Fortune, Financial Times, and other publications. Whether
ranked by revenues, market capitalization, or some other measure, most of the world’s
major corporations are active regionally or globally. The size of global markets for
individual industries or product categories helps explain why companies “go global”.
Global markets for some product categories represent hundreds of billions of dollars in
annual sales; other markets are much smaller. Whatever the size of the opportunity,
successful industry competitors find that increasing revenues and profits means seeking
markets outside the home country.
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F. Company management can be classified in terms of its orientation toward the world:
ethnocentric, polycentric, regiocentric, or geocentric. The terms reflect progressive levels
of development or evolution. An ethnocentric orientation characterizes domestic and
international companies; international companies pursue marketing opportunities outside
the home market by extending various elements of the marketing mix. A polycentric
worldview predominates at a multinational company, where the marketing mix is adapted
by country managers operating autonomously. Managers at global and transnational
companies are regiocentric or geocentric in their orientation and pursue both extension
and adaptation strategies in global markets.
G. The dynamic interplay of several driving and restraining forces shapes the importance of
global marketing. Driving forces include market needs and wants, technology,
transportation and communication improvements, product costs, quality, world economic
trends, and recognition of opportunities to develop leverage by operating globally.
Restraining forces include market differences, management myopia, organizational
culture, and national controls such as nontariff barriers (NTBs).
OUTLINE OF THE BOOK
The book is divided into five parts.
Part 1: An overview of global marketing and the basic theory of global marketing.
Part 2: The environments of global marketing.
Part 3: Approaching global markets (global strategy)
Part 4: The marketing mix in global marketing.
Part 5: Corporate strategy, leadership, and the impact of the digital revolution on global
marketing.
LEARNING OBJECTIVES
1 Use the product/market growth matrix to explain the various ways a company can expand
globally
2 Describe how companies in global industries pursue competitive advantage
3 Compare and contrast single-country marketing strategy with global marketing strategy (GMS)
4 Identify the companies at the top of the Global 500 rankings
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5 Explain the stages a company goes through as its management orientation evolves from
domestic and ethnocentric to global and geocentric.
6 Discuss the driving and restraining forces affecting global integration today.
OVERVIEW
The growing importance of global marketing is one aspect of a sweeping transformation that has
profoundly affected the people and industries of many nations during the past 160 years.
Four decades ago, the phrase global marketing did not even exist. Today businesspeople utilize
global marketing to realize their companies’ full commercial potential. However, there is another,
even more critical reason why companies need to take global marketing seriously: survival. A
management team that fails to understand the importance of global marketing risks losing its
domestic business to competitors with lower costs, more experience, and better products.
But what is global marketing? How does it differ from “regular” marketing? Marketing can be
defined as the activity, set of institutions, and processes for creating, communicating, and
delivering value for customers, clients, partners, and society at large.
Marketing activities center on an organization’s efforts to satisfy customer wants and needs with
products and services that offer competitive value and for managing customer relationships in
ways that benefit the organization and its stakeholders. The marketing mix (product, price, place,
and promotion) comprises a contemporary marketer’s primary tools. Marketing is a universal
discipline – as applicable in Argentina as it is in Zimbabwe.
(Learning Objective #1)
This book is about global marketing. An organization that engages in global marketing focuses
its resources and competencies on global market opportunities and threats. A fundamental
difference between regular marketing and global marketing is the scope of activities. A company
that engages in global marketing conducts important business activities outside the home-country
market. The scope issue can be conceptualized in terms of the familiar product/market matrix of
growth strategies (see Table 1-1). Some companies pursue a market development strategy; this
involves seeking new customers by introducing existing products or services to a new market
segment or to a new geographical market.
Global marketing can also take the form of a diversification strategy in which a company creates
new product or service offerings targeting a new segment, a new country, or a new region. Four
of the growth strategies shown in Table 1-1:
(Chapter 1, Page 5)
Four Stages - Starbucks
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Market penetration: Starbucks is building on its loyalty card and rewards program in
the United States with a smartphone app that enables customers to pay for purchases
electronically. The app displays a bar code that the barista can scan.
Market development: Starbucks is entering India via an alliance with the Tata Group.
Phase one calls for sourcing coffee beans in India and marketing them at Starbucks
stores throughout the world. The next phase will likely involve opening Starbucks
outlets in Tata’s upscale Taj hotels in India.
Product development: Starbucks created a brand of instant coffee, Via, to enable its
customers to enjoy coffee at the office and other locations where brewed coffee is not
available. After a successful launch in the United States, Starbucks rolled out Via in
Great Britain, Japan, South Korea, and several other Asian countries.
Diversification: Starbucks has launched several new ventures, including music CDs
and movie production. Next up: Revamping stores so they can serve as wine bars and
attract new customers in the evening.
Companies that engage in global marketing frequently encounter unique or unfamiliar features in
specific countries or regions of the world. In some regions of the world, bribery and corruption
are deeply entrenched. A successful global marketer understands specific concepts and has a
broad and deep understanding of the world’s varied business environments. He or she also must
understand the strategies that, when skillfully implemented in conjunction with universal
marketing fundamentals, increase the likelihood of market success.
ANNOTATED LECTURE/OUTLINE
Principles of Marketing: A Review
Marketing is one of the functional areas of business – distinct from finance and operations.
Marketing is the set of activities and processes that (along with product design, manufacturing,
and transportation) comprises a firm’s value chain.
Decisions at every stage of the process – from idea conceptualization to customer support after
the sale – should be assessed in terms of their ability to create value for customers.
The core of marketing is to surpass the competition in creating perceived value for customers.
The value equation is the guide to this task:
Value = Benefits / Price (money, time, effort, etc.)
The marketing mix is central to this equation because benefits are a combination of the product,
promotion, and distribution components of the mix.
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Value to the customer can be increased in two ways – 1) an improved bundle of benefits or 2) a
lower price (or both):
1) Marketers may improve the product, design new channels of distribution, communicate
better – or a combination of all three.
2) Marketers may seek ways to cut costs or lower the price. Nonmonetary costs may be
lowered by decreasing the time and effort customers must expend to learn about or
acquire a product.
If a company is able to offer a combination of superior product, distribution, and promotion of
the benefits AND offer lower prices than its competition, it should enjoy an extremely
advantageous position. Recall the definition of a market: people or organizations that are both
able and willing to buy. In order to achieve market success, a product or brand must measure up
to a threshold of acceptable quality and be consistent with buyer behavior, expectations, and
preferences
Competitive Advantage, Globalization, and Global Industries
(Learning Objective #2)
When a company succeeds in creating more value for customers than its competitors, that
company is said to enjoy competitive advantage in an industry. Competitive advantage is
measured relative to rivals with whom you compete in the industry – whether that is on a local,
national, or global level.
Global marketing is essential if a company competes in a global industry or one that is
globalizing.
The process of globalization is the transformation of formerly local or national industries into
global ones.
From a marketing point of view, globalization presents companies with tantalizing opportunities
—and challenges—as executives decide whether to offer their products and services everywhere.
As defined by management guru Michael Porter, a global industry is one in which competitive
advantage can be achieved by integrating and leveraging operations on a worldwide scale. Put
another way, an industry is global to the extent that a company’s industry position in one country
is interdependent with its industry position in other countries. Indicators of globalization include
the ratio of cross-border trade to total worldwide production, the ratio of cross-border investment
to total capital investment, and the proportion of industry revenue generated by companies that
compete in all key world regions. One way to determine the degree of globalization in an
industry sector is to calculate the ratio of the annual value of global trade in the sector—
including components shipped to various countries during the production process—to the annual
value of industry sales.
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Achieving competitive advantage in a global industry requires executives and managers to
maintain a well-defined strategic focus. Focus is simply the concentration of attention on a core
business or competence. Companies that understand and engage in global marketing can offer
more overall value to customers than companies that do not have that understanding.
Value, competitive advantage, and the focus required to achieve them are universal in their
relevance, and they should guide marketing efforts in any part of the world. Global marketing
requires attention to these issues on a worldwide basis and utilization of a business intelligence
system capable of monitoring the globe for opportunities and threats. A fundamental premise of
this book can be stated as follows: Companies that understand and engage in global marketing
can offer more overall value to customers than companies that do not have that understanding.
Global Marketing: What It Is and What It Isn’t
The discipline of marketing is universal. It is natural, however, that marketing practices will
vary from country to country, for the simple reason that the countries and peoples of the world
are different. A successful marketing approach in one country may not necessarily succeed in
another. Customer preferences, competitors, channels of distribution, and communication media
may differ. An important managerial task in global marketing is learning to recognize the extent
to which it is possible to extend marketing plans and programs worldwide, as well as the extent
to which adaptation is required.
(Learning Objective #3)
The way a company addresses this task is a reflection of its global marketing strategy (GMS). In
single-country marketing, strategy development addresses two fundamental issues: choosing a
target market and developing a marketing mix. The same two issues are at the heart of a firm’s
GMS, although they are viewed from a somewhat different perspective (see Table 1-3).
A Long, Strange Trip: The Grateful Dead at 50
Tells the story about how the band, the Grateful Dead, in 1965 created a new art form with a
sound that incorporated blues, jazz, rock, jug band, folk, and other cultural influences. In 2015
as the bad approached their 50th anniversary, many industry observers hailed the Dead for
innovations that continue to impact the music scene in the present day. Precursors of
contemporary marketing concepts such as brand equity, freenomics, brand tribes, the sharing
economy, customer relationship management, niche marketing, and word-of-mouth marketing
can be seen in their business practices.
a) Global market participation – is the extent to which a company has operations in major
world markets.
b) Standardization versus adaptation – is the extent to which each marketing mix element
can be standardized (used the same way) or must be adapted (used in different ways) in
different country markets.
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c) Concentration of marketing activities – is the extent to which activities related to the
marketing mix (such as pricing decisions) are performed in one or only a few country
locations.
d) Coordination of marketing activities – is the extent to which marketing activities related
to the mix are planned and executed interdependently around the globe.
e) Integration of competitive moves – the extent to which a firm’s competitive marketing
tactics in different parts of the world are interdependent.
The decision to enter one or more particular markets outside the home country depends on a
company’s resources, its managerial mind-set, and the nature of opportunities and threats.
Global marketing does mean widening business horizons to encompass the world in scanning for
opportunities and threats.
The five emerging markets of Brazil, Russia, India, China, and South Africa represent significant
growth opportunities. They are known as BRICS. Mexico, Indonesia, Nigeria, and Turkey—the
so-called MINTs—also hold great potential.
We can use Burberry as a case study in global marketing strategy. The U.K.-based luxury brand
is available in scores of countries, and Burberry’s current expansion plans emphasize several
geographical areas. Burberry’s marketing mix strategy includes the following:
Product: Boost sales of handbags, belts, and accessories—products whose sales are less cyclical
than clothing.
Price: More expensive than Coach, less expensive than Prada. “Affordable luxury” is central to
the value proposition.
Place: Burberry intends to open more independent stores in the United States as well as
expansion in London and Hong Kong.
Promotion: Encourage advocacy and sharing social media and online channels such as Twitter,
Instagram, and www.artofthetrench.com. Launch Burberry Acoustic to enhance brand relevance
and to provide exposure for emerging music talent via www.burberry.com/acoustic.
The issue of standardization versus adaption has been at the center of a long-standing
controversy among both academicians and business practitioners. Much of the controversy dates
back to the days of Theodore Levitt’s (1983) “homogenized global market.” Levitt envisioned a
global community where standardized, high-quality world products would be marketed in a
standardized manner.
The “homogenized global market” view didn’t work. Even those companies that have become
global successes have not done so through total standardization of the product.
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Global marketing made Coke a worldwide success. However, that success was not based on a
total standardization of marketing mix elements.
Coca-Cola succeeded through the application of global localization. What does the term “global
localization” really mean? Global localization: Think globally, act locally (refer to Table 1-4).
a) For example, Cinnabon’s customers in Central and South America prefer dulce de leche.
Products developed in those regions being introduced in the U.S., where the Hispanic
population is a key segment.
b) Starbucks opened an experimental store in Amsterdam that serves as a testing ground for
new design concepts such as locally sourced and recycled building materials.
c) Kraft’s Tang powder became a $ 1 billion brand as regional managers in Latin American
and the Middle East moved beyond orange (the top-seller) into popular local flavors such
as mango and pineapple. Kraft plans to use these lessons learned on the U.S. market.
Global marketing may include a combination of standard and nonstandard approaches. Global
marketing requires marketers to think and act in a way that is both global and local by
responding to similarities and differences in world markets.
The particular approach to global marketing that a company employs will depend on industry
conditions and its sources of competitive advantage.
For example, McDonald’s global marketing strategy is based on a combination of global and
local marketing mix elements (refer to Table 1-4).
a) For example, Harley-Davidson’s competitive advantage is based in part on “Made in the
USA.” Moving production to a low-wage country would tarnish its image.
b) Toyota’s and Honda’s success in the US has come through its ability to transfer world-
class manufacturing skills to America and advertising that the Camry is “Made in the
USA” by Americans.
c) Uniqlo, a division of Japan’s Fast Retail operates about 850 stores in Japan and 300 stores
in 12 overseas countries. Uniqlo currently has 6 stores in the U.S. but plans call for a
total of 200 stores by 2020.
The Importance of Global Marketing
The largest single market in the world in terms of national income is The United States,
representing roughly 25 percent of the total world market for all products and services.
U.S. companies that wish to achieve maximum growth potential must “go global” because 75
percent of the world market potential is outside of their home country.
Non-US companies have an even greater incentive to “go global;” their potential markets include
the 300 million people in the US.
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