PART 5
FUNCTIONAL AREA EXCELLENCE
CHAPTER 16
MARKETING IN THE GLOBAL FIRM
Instructor’s Manual by Marta Szabo White, Ph.D.
I. LECTURE STARTER/LAUNCHER
■ This chapter discusses how marketing program elements are affected by international
business. It focuses on how companies manage the “balancing act” between adaptation and
standardization when selling products in international markets.
■ A good way to begin this chapter is to discuss a company that most students are familiar with,
such as Dell computer. Visit the Dell website (www.dell.com). Ask students if they think Dell
uses adaptation or standardization in its marketing programs. If they have done some research,
they may say the firm uses both. Ask them to give examples of how the firm uses adaptation
and standardization, and to find examples on the website. Ask students to analyze how the firm
adapted its promotional material to appeal to people in various countries. Ask students to
consider how efficient or how costly it is for Dell to pursue a dual strategy of adaptation and
standardization. Is this an example of a “balancing act?” Is it a good choice for Dell? Or should
Dell choose to either adapt to each market, or to launch a purely global brand?
II. LEARNING OBJECTIVES AND THE OPENING VIGNETTE
LEARNING OBJECTIVES
After studying this chapter, students should be able to:
16.1 Explain global market segmentation.
16.2 Understand standardization and adaptation of international marketing.
16.3 Describe global branding and product development.
16.4 Explain international pricing.
16.5 Understand international marketing communications.
16.6 Describe international distribution.
Key Themes
■ In this chapter, there are six themes:
[1] Global market segmentation
[2] Standardization and adaptation of international marketing
[3] Global branding and product development
[4] International pricing
[5] International marketing communications
[6] International distribution
■ Global marketing strategy requires choices about market segments, targeting, and
positioning.
■ Exhibit 16.1 illustrates an organizing framework for international marketing and previews the
topics of this chapter.
◘ Outer layer- cultural, social, political, legal, and regulatory environment of foreign
markets, which constrain the firm’s ability to price, promote, and distribute a product.
◘ Middle layer- global marketing strategy — decisions:
● (1) how to position itself and its offerings in foreign markets,
● (2) which customer segments to target, and
● (3) the degree of marketing standardization or adaption
◘ Innermost layer– (marketing mix) four major components of an international
marketing program are global branding and product development, international pricing,
international marketing communications, and international distribution.
■ Marketing mix- The first key theme in this chapter is how the marketing mix of product,
pricing, promotion, and place (distribution) are affected by international business.
■ Standardization vs. adaptation– The second key theme is the concept of the “balancing act”
that managers must achieve between adaptation and standardization of the marketing mix when
they sell products in international markets.
◘ Whenever possible, firms prefer to standardize their products to achieve scale
economies and minimize complexity.
■ Global branding and product development– The third theme revolves around the
importance of a global brand. The development of global products facilitates economies of scale
in R&D, production, and marketing; premium pricing; and leverage when dealing with channel
members and competitors.
◘ Innovation and design are increasingly performed by global teams.
■ International pricing– The fourth theme is factors to consider in international pricing.
◘ International price escalation—the problem of end-user prices reaching exorbitant
levels in the export market, caused by multilayered distribution channels, intermediary margins,
tariffs, and other international customer costs.
◘ Transfer pricing is the practice of pricing intermediate or finished products exchanged
among the subsidiaries and affiliates of the same corporate family located in different countries.
◘ Gray market activity, also known as parallel imports, refers to legal importation of
genuine products into a country by intermediaries other than authorized distributors.
■ International marketing communications– The fifth theme highlights the management of
advertising and promotional activities across national borders.
◘ Firms must account for unique legal, cultural, and socioeconomic factors in foreign
markets as well as literacy levels, language, and available media.
◘ Global account management (GAM) practices underscore the servicing of a key
global customer in a consistent and standardized manner.
■ International distribution-
◘ The sixth theme explores how firms engage foreign intermediaries or foreign-based
subsidiaries to reach customers in international markets.
◘ Firms may bypass traditional distribution systems by using direct marketing.
◘ Channel length refers to the number of distributors or other intermediaries it takes to
get the product from the manufacturer to the market.
■ In working with key business customers, firms may undertake global account management
(GAM)—servicing key global customers in a consistent and standardized manner, regardless of
where in the world they operate.
Teaching Tips
■ As indicated in the Lecture Launcher, a good way to teach this chapter is to use many
examples. There are many American products and brands sold in other countries that are
marketed with various degrees of adaptation and standardization.
■ Many students have traveled overseas, and they can usually give examples of how different
or how similar products were in a foreign country.
■ Students can easily research brands such as McDonald’s, KFC, Coca-Cola, Maybelline, Dell,
Apple, Nestle and others to find differences and similarities in product design, promotion,
advertising, and pricing.
■ Students may have more trouble recognizing differences in distribution.
■ Explain to students that there are critical differences in distribution across countries, but that
because distribution is a “back room activity,” it is harder for us to know about it without visiting
the country and talking with agents and distributors.
■ One way to learn about distribution channels without traveling abroad is to read the U.S.
Commercial Service’s Country Commercial Guides.
■ Visit www.globaledge.msu .edu for quick links to these documents. Each Country Commercial
Guide has a section about distribution that serves as a starting point for any vendor wanting to
sell in another country.
■ Further, local experts at the U.S. Commercial Service in the U.S. Consulate Office in each
country will help U.S. vendors who are truly serious about selling internationally find distributors
and customers.
Commentary on the Opening Vignette:
MICHAEL KORS: GLOBALLY MARKETING AFFORDABLE LUXURY
Key message
■ This vignette illustrates the importance of a global marketing strategy in the fashion industry.
■ International tourists account for a large proportion of international sales.
■ Standardized marketing sends a consistent, clear message to global consumers.
■ 1981- Michael Kors established a company to design and sell fashion apparel and
accessories in New York.
■ Gross sales of the firm, Michael Kors (“Kors”), now exceed $3 billion, partly through licensing
agreements with partners such as Fossil (watches) and Estée Lauder (fragrances).
■ 15% of sales come from each of Europe and Asia.
■ Top Asian markets include China and Japan.
■ Women are the main target market.
■ Major competitors include Coach, Donna Karan, and Ralph Lauren.
Uniqueness of the situation described
■ Michael Kors served as a judge on the reality TV program Project Runway– marketing gained
momentum.
■ The U.S. is the largest market for fashion and personal luxury goods, followed by China,
France, Italy, and Japan.
■ Target market– affordable-luxury segment.
■ Power of branding enables premium pricing- perfumes, watches, handbags, and other
accessories earn much higher margins than clothing.
■ Kors brand consumer awareness:
●75% in the U.S.
●50% in Europe
●30% in Japan
■ Emerging markets- affordable luxury appeals to the growing middle class.
■ U.S. buyers spend $60 billion on luxury goods annually
■ Chinese- spend about $50 billion on luxury goods annually
Positioning in China to accommodate variation in spending power and sophistication:
●Major cities- Kors positions the brand as Luxury
●Smaller cities- Kors positions the brand as Fashion
■ Europe- Kors is luring Europeans once loyal only to high-end French and Italian labels.
Quality
■ Kors clothing- meticulous tailoring and luxurious fabrics.
■ Appeals across the demographic spectrum, from teenagers to seniors.
■ Most Kors items are priced between $200 and $300, while luxury brands such as Prada and
Louis Vuitton command much higher prices.
Classroom discussion
Creative talent in marketing distinctive fashion styles
■ Kors conducts marketing via:
●Flagship stores
●Traditional advertising in magazines and newspapers
●Public relations events
●e-commerce sites
●Social media (particularly effective in Asia)
■ Kors is frequently the most-searched-for high-fashion brand on Google.
■ Kors Instagram following—more than 3 million fans (translates into e-commerce sales).
■ Advertising emphasizes the luxurious, jet set lifestyle.
■ Ads feature celebrities on cruises or aircraft.
■ Kors partners with well-known glamourous celebrities such as Angeline Jolie, Jennifer Lopez,
and Uma Thurman.
Versatile distribution strategy
■ Kors products are available in some 3,700 stores across 85 countries, including licensed
locations.
■ Kors has 133 company-owned stores in Europe and about 50 in each of China and Japan.
■ The firm recently launched or expanded stores in London, Milan, Munich, Paris, Seoul,
Shanghai, and Tokyo, all global fashion centers.
■ Management wants to expand distribution to 100 stores in each of China and Japan over the
next few years to capture key Asian markets