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Chapter 07 - Understanding and Reaching Global Consumers and Markets
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a. Is a global market-entry strategy in which a foreign and a local firm invest
together.
• Advantages of a joint venture:
a. One firm may not have the necessary financial, physical, or managerial
resources to enter a foreign market alone.
• Disadvantages of a joint venture:
a. The two companies may disagree about policies or courses of action.
D. Direct Investment
• Direct investment:
a. Is a global market-entry strategy that entails a domestic firm actually investing
in and owning a foreign subsidiary or division.
b. Is the biggest commitment a firm can make when entering the global market.
• For many firms, it often follows one of the other three market-entry strategies.
• Advantages of direct investment:
a. Cost savings.
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LEARNING REVIEW
7-8. What mode of entry could a company follow if it has no previous experience in
global marketing?
7-9. How does licensing differ from a joint venture?
V. CRAFTING A WORLDWIDE MARKETING PROGRAM [LO 7-5]
• A global marketer must plan, implement, and evaluate marketing programs
worldwide.
A. Product and Promotion Strategies
• [Figure 7-5] Global firms:
a. Have five strategies for matching products and promotion efforts to global
markets, which are…
• A product may be sold globally in one of three ways:
1. Product extension.
a. Involves selling virtually the same product in other countries.
b. Works best when the target markets share the same desires, needs, and
uses for the product.
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2. Product adaptation. Involves changing a product to make it more appropriate
for a country’s climate or consumer preferences.
3. Product invention. Companies can invent totally new products designed to
satisfy common needs across countries.
• To promote its products globally, companies can:
[Video 7-4: Nescafé China Video]
c. Use a dual adaptation strategy, modifying both their products and
promotional message.
B. Distribution Strategy
• A country’s economic infrastructure determines:
a. The availability and quality of retailers and wholesalers.
b. The transportation, communication, and warehousing facilities.
• [Figure 7-6] The starting point is the seller, who is responsible for the successful
distribution to the ultimate consumer.
C. Pricing Strategy
• Individual countries, even those with free trade agreements, may impose
considerable competitive, political, and legal constraints on a global company’s
pricing strategy.
• Economic factors, such as the costs of production, selling, and tariffs, plus
transportation and storage costs, also affect global pricing decisions.
• Pricing too low or too high can have dire consequences:
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a. Dumping occurs when a firm sells a product in a foreign country below its
domestic price or below its actual cost. This is because:
• A company wants to build its market by pricing at a competitive level.
• The products being sold may be surplus or cannot be sold domestically
and, therefore, are already a burden to the company.
b. A gray market is a situation where products are sold through unauthorized
channels of distribution.
• Also known as parallel importing.
• Occurs when companies price their products very high in some countries
but competitively in others.
• Occurs when individuals:
• Parallel importing is legal in the U.S. but illegal in the EU.
LEARNING REVIEW
7-10. Products may be sold globally in three ways. What are they?
7-11. What is dumping?
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APPLYING MARKETING KNOWLEDGE
1. Explain what is meant by this statement: “Quotas are a hidden tax on consumers,
whereas tariffs are a more obvious one.”
2. How successful would a television commercial in Japan be if it featured a husband
surprising his wife in her dressing area on Valentine’s Day with a small box of
chocolates containing four candies? Explain.
3. As a novice in global marketing, which alternative global market-entry strategy
would you be likely start with? Why? What other alternatives do you have for a
global market entry?
Answers: The best alternative for a novice firm is indirect exporting—selling its
domestically produced goods in a foreign country through an intermediary, such as a
4. Coca-Cola is sold worldwide. In some countries, Coca-Cola owns the bottling
facilities; in others, it has signed contracts with licensees or relies on joint ventures.
When selecting a licensee in each country, what factors should Coca-Cola consider?
Answer: Among the risks of licensing are the licensor’s losing control of its products and
the licensor’s creating its own competition by the licensee’s somehow modifying the
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BUILDING YOUR MARKETING PLAN
Does your marketing plan involve reaching global customers outside the United
States? If the answer is no, read no further and do not include a global element in your
plan. If the answer is yes, try to identify the following:
1. What features of your product are especially important to potential customers?
2. In which countries do these potential customers live?
3. What special marketing issues are involved in trying to reach them?
Answers to these questions will help in developing more detailed marketing mix
strategies described in later chapters.
Special issues for students to consider if marketing a product to another country include:
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TEACHING NOTE FOR VIDEO CASE VC-7
Mary Kay, Inc.: Building a Brand in India
Synopsis
This case describes the market entry into India by Mary Kay, Inc. At the time of the
case, Mary Kay, Inc. was one of the largest direct sellers of skin care and color cosmetics in the
world. The company’s brands are sold in more than 35 markets on five continents.
This video case provides students with an opportunity to explore different aspects of its
global operations in the context of the entry into India. Specifically, students are asked to: (1)
define what type of global company it is; (2) describe the global market-entry strategy used by
the company to enter India; and (3) decrease whether or not Mary Kay is a global brand.
Teaching Suggestions
This case addresses global marketing organizations, global market-entry strategies, and
global branding. As such, the case provides a basis for review and possible synthesis of these
topics. Instructors might emphasize this benefit when discussing the case.
1. A useful opening question to students is: “Are any of you familiar with Mary Kay, Inc.
and its products?”
2. Assuming some students say “yes”, then these students might be asked: “Does Mary Kay
do business in India like it does in the United States?”
This question then leads to the questions posed in the case.
Answers to Questions
1. Is Mary Kay an international firm, a multinational firm, or a transnational firm
based on its marketing strategy?
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2. What global market-entry strategy did Mary Kay use when it entered India?
3. Is Mary Kay a global brand? Why or why not?
Epilogue
Mary Kay has enjoyed success in India. Since 2009, the company posted year-on-year
growth of 45 percent in India. According to K. K. Chua, President of Asia-Pacific, for Mary Kay
in 2012:
“We continue to attract aspirational consumers who seek value for money. As incomes
are fast growing in India, we hope to enlarge our consumer base. We will continue to
expand all our category portfolios with unique products for our Indian consumers.”
On February 18, 2013, Mary Kay, Inc. announced that it would discontinue its operations
in India. In December 2012, the government of India proposed a ban on multi-level marketing in
India. When Mary Kay, Inc. announced its decision to depart India, the company president said:
“We have seen the regulatory environment in India for both direct selling and cosmetics
companies dramatically change and change again at an alarming and inconsistent rate,
while the country’s infrastructure continues to create insurmountable obstacles.
Despite significant investments of time and money, our operation in India has not
performed as we had hoped and expected. So, we have made the decision to reallocate
the Company’s resources to other international markets.”
Other global direct selling companies such as Amway have also experienced difficulties due to
the regulatory issues. The World Federation of Direct Selling Associations (WFDSA) is now
trying to hold meetings with the many stakeholders to address the concerns.
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Mary Kay recently celebrated its 50th anniversary. According to David Holl, President
and CEO for Mary Kay, “Our 50th anniversary has been a record-setting year.” In the past year,
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TEACHING NOTE FOR APPENDIX D CASE D-7
Callaway Golf: The Global Challenge
Synopsis
Callaway Golf has been a pioneer and leading manufacturer of quality golf clubs,
particularly its Big Bertha line of oversized metal woods. The international popularity of golf
makes Callaway an interesting case for exploring the merits of a global marketing strategy.
Background
To supplement the case material, additional information is provided here on the history of
Callaway’s product development.
The golf industry, and Callaway in particular, has been fueled by technological
innovation in product design and development. Many golfers looking for an edge or a means to
improve their game have embraced Callaway’s new products.
Focusing on the use of high tech designs and aerospace materials, the Big Bertha Driver,
named after a WWI German Cannon, quickly became popular with golfers of all abilities. The
Big Bertha provided a larger sweet spot than other drivers at that time allowing for an increased
effective hitting area. Sales at Callaway Golf more than doubled from 1990 to 1991 ($22 million
to $55 million). With the addition of an equally popular and cleverly marketed line of fairway
woods, word spread among golfers and sales exploded. These clubs were given cute and clever
names like “ The Deuce,” “Heaven Wood,” and “Divine Nine,” which also became
tremendously popular with the average golfer. By 1994, Callaway sales hit the $449 million
mark.
The success of the Big Bertha driver and the Big Bertha line of irons and fairway woods
led Callaway to its next “Great” success story, “The Great Big Bertha” oversized driver. The
Great Big Bertha Driver proved to be an exceptional advancement in golf club engineering, and
for many golfers, it provided even greater driver distance and was more forgiving than its older
but smaller Big Bertha sister. Callaway really hit it big with the Great Big Bertha, as it became
one of the single most popular drivers of all time. Company sales hit $800 million by 1998.
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With the introduction of its Biggest Big Bertha Driver in 1997, Callaway’s run of
successful product launches slowed. The new and biggest of the Big Bertha sisters was so big
and for many golfers at that time, so cumbersome or awkward, that it did not catch on in
popularity like the previous two Big Bertha products. The Biggest Big Bertha may have been a
product just a few years ahead of its time. Callaway product loyalists did not switch in droves.
Happy or content with their current drivers, many refused to pay the $600 premium product price
Callaway charges for its new release drivers. Callaway products that followed the Biggest Big
Bertha to the market—“Steelhead,” “Hawkeye,” ERC, C4, and other drivers—also struggled to
some degree in the marketplace.
Some golf pundits predict that the rate of technological innovation and product
development in the golf equipment industry may render many golf courses obsolete. As clubs
are capable of hitting longer distances, a par four hole could become a long par three.
In May 2001, Ely Callaway passed away due to complications from pancreatic cancer.
It was a devastating blow to a company that was defined as much by its maverick founder as its
Big Bertha driver and other innovative products. It remains to be seen how the company will
weather the loss of its founder.
Teaching Suggestions
Introduce the case to students by asking them about whether they play golf. Some may
be able to give some insight into the different club manufacturers and product differences.
