LEARNING OBJECTIVES
In this chapter, we will address the following questions:
1. What factors should a company review before deciding to go abroad?
2. How can companies evaluate and select specific foreign markets to enter?
3. What are the differences between marketing in a developing and a developed
market?
4. What are the major ways of entering a foreign market?
5. To what extent must the company adapt its products and marketing program
to each foreign country?
6. How do marketers influence country–of-origin effects?
7. How should the company manage and organize its international activities?
SUMMARY
1. Despite shifting borders, unstable governments, foreign-exchange problems,
2. Upon deciding to go abroad, a company needs to define its international marketing
3. Developing countries offer a unique set of opportunities and risks. The “BRIC”
4. Modes of entry are indirect exporting, direct exporting, licensing, joint ventures, and
5. In deciding how much to adapt their marketing programs at the product level, firms
can pursue a strategy of straight extension, product adaptation, or product invention. At
C H A P T E R
21
TAPPING INTO
GLOBAL MARKETS
6. Country-of-origin perceptions can affect consumers and businesses alike. Managing
those perceptions to the best advantage is a marketing priority.
7. Depending on their level of international involvement, companies manage
OPENING THOUGHT
In today’s multicultural world, students will have been exposed to products marketed
across geographic or national boundaries, so the student’s ability to grasp this concept
should be straightforward. What could present a challenge is the extent of marketing
planning and detail needed by the firm in making their marketing decisions nationally
and internationally.
TEACHING STRATEGY AND CLASS ORGANIZATION
PROJECTS
1. If the project is to be exported to another country, then student’s submissions
2. The instructor is encouraged to challenge the students by assigning students to find
their favorite product’s corporate office. Examples may include Nestle, Nike, Suzuki,
3. Sonic PDA Marketing Plan: Global marketing offers a way for companies to grow by
expanding the customer base beyond the domestic market. However, the complexities
product. Review the recommendations you have made for Sonic’s marketing plan.
Then answer these questions about how Sonic can approach global marketing:
• Should Sonic use licensing, joint ventures, direct investment, or exporting to enter
the Canadian market? To enter other markets?
ASSIGNMENTS
Have the students look at Table 21.1 which lists the 25 leading global firms based in
developing markets and see how many they recognize, and more importantly, how many
products have they and their families recently purchased from these companies. Were
there any surprises among the students that these companies were in fact, international?
In fact, based in emerging countries? Share student comments in class.
Table 21.3 shows some famous “blunders” in international marketing. Students should
research these examples (and find others) and provide insight into why they think such
“blunders” were allowed to occur. This can lead to a classroom discussion into the
complexity facing many firms in international and multi-cultural marketing.
differences in brand characteristics for each country. For example, Pringles, Always, and
Toyota, have made some changes in product features, packaging, channels, pricing, in
different global markets. The assignment is for the students to provide additional
examples of products changed to suit the country’s consumers while at the same time,
maintaining the international brand name.
END–OF–CHAPTER SUPPORT
MARKETING DEBATE—Is the World Coming Closer Together?
Many social commentators maintain that youth and teens are becoming more and more alike
as time goes on. Others, while not disputing that fact, point out that the differences between
cultures at even younger ages by far exceed the similarities.
Con: Cultural differences, in language, environment, physical, economic, and geographical
areas contain key differences that will never be overcome by marketing. Marketers should be
very aware of these differences and excellent marketers will capitalize on these differences in
their marketing messages. These differences especially apply to the second and third world
markets. Countries are communities and people in their particular country will always insist
on their individual identification and nationality. Nationalism is a strong motivator for product
purchase and/or how a product is used. Some products extend national boundaries—this is a
MARKETING DISCUSSION
Think of some of your favorite brands? Do you know where they come from? Where and how
they are made or provided? Do you think it would affect your perceptions of quality or
satisfaction?
Marketing Excellence: NOKIA
1) What have been the keys to Nokia’s global strength?
Suggested Answer: Student answers will vary but good students will note that Nokia started
its success with its strategic decision to divest its product portfolio and focus entirely on
2) What can Nokia do to gain market share in the United States and Europe where its
presence is not as strong?
Suggested Answer: Student answers will vary but good students will note that Nokia needs to
3) In the ever-changing world of mobile technology, what are the greatest threats to
Nokia’s global presence?
Suggested Answer: Student answers will vary but good students will note/cite Michael
Marketing Excellence: L’OREAL
1) Review L’Oreal’s brand portfolio. What role have target marketing, smart
acquisitions, and R&D played in growing those brands?
Suggested Answer: Student answers will vary but good students will note that today, the
company has evolved into the world’s largest beauty and cosmetics company, with
2) Who are L’Oreal’s greatest competitors? Local, global, or both? Why?
Suggested Answer: With sales in 130 countries and 23 global brands, L’Oreal’s greatest
3) What has been the key to successful local product launches such as Maybelline’s
Wondercurl in Japan?
Suggested Answer: Student answers will vary but good students will note that L’Oreal invests
consumers is critical to L’Oreal’s global success.
4) What’s next for L’Oreal on a global level? If you were CEO, how would you
sustain the company’s global leadership.
Suggested Answer: Student answers will vary but Gilles Weil’s comment answers this
DETAILED CHAPTER OUTLINE
With ever faster communication, transportation, and financial flows, the world is rapidly
shrinking. Countries are increasingly multicultural, and products and services developed in
one country are finding enthusiastic acceptance in others. A German businessman may wear
COMPETING ON A GLOBAL BASIS
Although some U.S. businesses may want to eliminate foreign competition through
protective legislation, the better way to compete is to continuously improve products at
home and expand into foreign markets.
A) In a global industry, competitors’ strategic positions in major geographic or
national markets are affected by their overall global positions.
DECIDING WHETHER TO GO ABROAD
Most companies would prefer to remain domestic if their domestic market were large
enough.
Yet several factors are drawing more and more companies into the international arena:
A) Some international markets present higher profit opportunities than the domestic
market.
Before making a decision to go abroad the company must weigh several risks:
A) The company might not understand foreign customer preferences and fail to offer a
competitively attractive product.
Some companies don’t act until events thrust them into the international arena.
The internationalization process typically has four stages:
A) No regular export activities
The first task is to get companies to move from stage 1 to stage 2.
A) This move is helped by studying how firms make their first export decisions (hire
agents) and enter a nearby or similar country.
DECIDING WHICH MARKETS TO ENTER
In deciding to go abroad, the company needs to define its marketing objectives and
How Many Markets to Enter
The company must decide how many countries to enter and how fast to expand.
A) Companies’ entry strategy typically follows one of two possible approaches:
1) A waterfall approach—countries are gradually entered sequentially.
B) Increasingly companies are born global and market to the entire world right from the
outset.
C) When first mover advantage is crucial and a high degree of competitive intensity
prevails, the sprinkler approach is preferred.
Developed Versus Developing Markets
One of the sharpest distinctions in global marketing is between developed and developing
or emerging markets.
The unmet needs of the developing world represent huge potential markets for food,
clothing, shelter, consumer electronics, appliances, and many other goods. Market leaders
rely on developing markets to fuel their growth.
The developed nations and the prosperous parts of developing nations account for less
than 20 percent of the world’s population. Is there a way for marketers to serve the other
80 percent?
A) Successfully entering developing markets requires a special set of skills and plans.
Marketing Insight
Shows spotlight on key developing markets: Brazil, Russia, India, China, Indonesia, and
South Africa.
Evaluating Potential Markets
However much nations and regions integrate their trading policies and standards, each
still has unique features. Its readiness for different products and services and its
attractiveness as a market to foreign firms depend upon certain environments:
1) Economic
2) Political-legal
3) Cultural
DECIDING HOW TO ENTER THE MARKET
Once a company decides to target a particular country, it has to determine the best mode
of entry. Its broad choices are:
1) indirect exporting,
Indirect and Direct Export
A) Companies typically start with export, specifically indirect exporting—that is,
they work through independent intermediaries.
foreign purchases for a commission.
F) The normal way to get involved in an international market is through export.
G) Indirect export has two advantages.
1) It involves less investment.
2) It involves less risk.
I) A company can carry on direct exporting in several ways:
1) Domestic-based export department or division
Internet
A company does not necessarily have to attend international trade shows if it can
effectively use the Internet to attract new customers overseas, support existing customers
Licensing
Licensing is a simple way to engage in international marketing.
A) The licensor licenses a foreign company to use a manufacturing process, trademark,
patent, trade secret, or other item of value for a fee or royalty.
B) The licensor gains entry at little risk.
Joint Ventures
Foreign investors may join with local investors to create a joint venture company in
which they share ownership and control.
A) A joint venture may be necessary or desirable for economic or political reasons.
B) The foreign firm might lack the:
1) Financial resources
2) Physical resources
C) Joint ownership has certain drawbacks:
1) The partners might disagree over investment
2) The partners might disagree over marketing
Direct Investment
The ultimate form of foreign involvement is direct ownership of foreign-based assembly
or manufacturing facilities.
A) The foreign company can buy part or full interest in a local company or build its own
facilities.
B) If the market appears large enough, foreign production facilities offer distinct
advantages:
1) The firm secures cost economies in the form of cheaper labor or raw materials;
foreign–government investment incentives and/or freight savings.
5) The firm assures itself access to the market.
C) The main disadvantage of direct investment is:
DECIDING ON THE MARKETING PROGRAM
International companies must decide how much to adapt their marketing strategy to local
conditions.
A) At one extreme is a standardized marketing program worldwide.
1) Standardization of the product, communications, and distribution channels
promises the lowest costs.
Global Similarities & Differences
The development of the Web, the spread of cable and satellite TV, and the global linking of
telecommunications networks have led to a convergence of lifestyles. Increasingly common
needs and wants have created global markets for more standardized products, particularly
among the young middle class.
Marketing Adaptation
Because of all these differences, most products require at least some adaptation.
A) The best global brands are consistent in theme but reflect significant differences
in consumer behavior, brand development, competitive forces, and the legal or
political environment.
Marketing Memo: The ten commandments of global branding
A) Do not take shortcuts in brand-building;
B) Establish a marketing infrastructure;
C) Embrace integrated marketing communication;
Global Product Strategies
Developing global product strategies requires knowing what types of products or services
are easily standardized and appropriate adaptation strategies.
Product Standardization
Some types of products cross borders without adaptation better than others.
A) While mature products have separate histories or positions in different markets,
consumer knowledge about new products is generally the same everywhere
because perceptions have yet to be formed. Many leading Internet brands—
Google, eBay, Amazon—made quick progress in overseas markets.
Product Adaptation Strategies
Warren Keegan has distinguished five adaptation strategies of product and
communications to a foreign market. The product adaptation strategies are:
A) Straight extension means introducing the product in the foreign market without any
change.
C) Product invention consists of creating something new
1) Backward invention is reintroducing earlier product forms that are well adapted to
a foreign country’s needs.
Brand Element Adaptation
In launching products and services globally, certain brand elements may have to be changed.
Even a brand name may require a choice between phonetic and semantic translations.
Global Communication Strategies
Changing marketing communications for each local market is a process called
communication adaptation.
A) If it adapts both the product and the communication, the company engages in dual
adaptation.
Global Adaptations
A) Companies that adapt their communications wrestle with a number of challenges.
They first must ensure their communications are legally and culturally acceptable.
Global Pricing Strategies
Multinationals face several pricing problems when selling abroad. They must deal with:
A) Price escalation
Price Escalation
When companies sell their goods abroad, they face a price escalation problem.
A) Depending on the added costs of transportation, tariffs, importer margins, and
currency fluctuations, the product might have to sell for two to five times as much in
another country to make the same profit for the manufacturer.
D) In another new global pricing challenge, countries with overcapacity, cheap currencies,
and the need to export aggressively have pushed prices down and devalued their
currencies.
Gray Markets
A) Multinationals are plagued by the gray-market problem.
B) The gray market consists of branded products diverted from normal or authorized
distribution channels in the country of product’s origin or across international borders.
E) Gray markets create a free-rider problem, making legitimate distributors’ investments
in supporting a manufacturer’s product less productive and selective distribution
systems more intensive.
F) They harm distributor relations, tarnish the manufacturer’s brand equity, and
undermine the integrity of the distribution channel.
Counterfeit Products
A) Name a popular brand, and chances are a counterfeit version of it exist
somewhere in the world.
Global Distribution Channels
Too many U.S. manufacturers think their job is done once the product leaves the factory.
They should pay attention to how the product moves within the foreign country. They
should take a whole-channel view of the problem of distributing products to the final
users.
Channel Entry
In the first link, seller’s international marketing headquarters, the export department, or
international division makes decisions on channels and other marketing-mix elements.
A) In the second link, channels between nations, gets the products to the borders of the
foreign nations. The decisions made in this link include:
1) Types of intermediaries (agents, trading companies)
B) The third link, channels within foreign nations, gets the products from their entry point
to the final buyers and users.
Channel Differences
Distribution channels within countries vary considerably.
A) In the first, seller’s international marketing headquarters, the export department or
international division makes decisions about channels and other marketing activities.
E) Another difference lies in the size and character of retail units abroad.
1) Larger-scale retail chains dominate the United States but much foreign retailing is
in the hands of small, independent retailers.
F) Sometimes companies mistakenly adapt infrastructure strategies that were critical
success factors, only to discover that these changes eroded the brand’s competitive
advantage.
COUNTRY-OF-ORIGIN EFFECTS
Country-of-origin perceptions are the mental associations and beliefs triggered by a
country.
A) Government officials want to strengthen their country’s image to help domestic
marketers who export and to attract foreign firms and investors.
Building Country Images
Governments now recognize that the image of their cities and countries affects more than
tourism and has important value in commerce.
A) Attracting foreign business can improve the local economy, provide jobs, and improve
infrastructure.
Consumer Perceptions of Country-of-Origin
Global marketers know that buyers hold distinct attitudes and beliefs about brands or
products from different countries.
A) These country-of-origin perceptions can affect consumer decision-making directly or
indirectly.
B) The perceptions may be included as an attribute in decision-making or influence other
attributes in the process.
E) Marketers must look at country-of–origin perceptions from both a domestic and a
foreign perspective. In the domestic market, these perceptions may stir consumers’
patriotic notions or remind them of their past. As international trade grows, consumers
may view certain brands as symbolically important in their own cultural heritage and
identity.
DECIDING ON THE MARKETING ORGANIZATION
Companies manage their international marketing activities in three ways: through export
departments, international divisions, or a global organization.
Export Department
A) A firm normally gets into international marketing by simply shipping out its goods.
no longer be adequate.
International Division
Sooner or later, companies that engage in several international markets and ventures
create an international division to handle all of this activity.
The international division’s staff consists of functional specialists who provide services
to the various operating units.
A) Operational units can be organized in several ways:
1) Geographic organizations
Global Organization
Several firms have become truly global organizations. Their top corporate management
and staff plans worldwide manufacturing, marketing policies, financial flows, and
logistical systems.
A) The global operating units report directly to the chief executive or executive
committee.
E) What forces favor “global integration?”
a. Capital-intensive production
b. Homogeneous demand
1) Versus “national responsiveness”
a. Local standards and barriers
F) Many firms seek a blend of centralized global control from corporate headquarters
with input from local and regional marketers.