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 international 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?
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 “BRICS”
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.
6. Country-of-origin perceptions can affect consumers and businesses alike. Managing
those perceptions to best advantage is a marketing priority.
C H A P T E R
8
TAPPING INTO
GLOBAL MARKETS
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
of global marketing demand careful planning and implementation. As Jane Melody’s
assistant, you are researching markets outside the United States for Sonic’s first PDA
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?
• If Sonic wants to start marketing a PDA in other countries, which of the five
international product strategies (straight extension, communication adaptation,
product adaptation, dual adaptation, product/forward invention), is most
appropriate and why?
• Identify one international market that seems most promising for Sonic. Why did
you select this international market as most promising?
Summarize your answers in a written marketing plan or enter the answers in the SWOT,
Issue Analysis, Marketing Strategy, and Marketing Research sections of Marketing Plan
Pro.
ASSIGNMENTS
Major marketers are using the power of the Internet to engage in global e-commerce.
Visit a foreign Web site for an American company and evaluate the similarities and
differences between the U.S. Web site and its foreign Web site. What
differences/similarities strike you as significant? Could the differences be readily adapted
to other foreign countries?
Table 8.3 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.
Have the students prepare an international campaign and marketing plan for one
consumer product. Ask them to refer to Global Marketing Pros and Cons (Table 8.1) and
being cognizant of these international companies, decide on how much to adapt their
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.
Take a position: People are becoming more and more similar versus the differences between
people of different cultures far outweigh their advantages.
Pro: The world is becoming homogeneous. At least the “world” of consumers, that is. The
growth of the Internet, the speed of communication, and travel has succeeded in exposing
people to differing lifestyles and preferences that they are finding appealing and desirable.
Consumer preferences for products tend to become similar as the economic conditions of the
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
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: Twitter
1. Discuss Twitter’s global impact since its inception.
Twitter transformed the way we share and get news. It gives a small group of people a
2. Who are Twitter’s biggest competitors? How does Twitter differ from other social
media companies?
3. What marketing challenges does Twitter face as it continues to expand its brand
globally?
Marketing Excellence: L’Oreal
1. Review L’Oreal’s brand portfolio. What role have loal and global 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. What are the keys to successful local product launches like Maybelline’s Wondercurl in
Japan?
3. What’s next for L’Oreal on a global level? Who are its biggest competitors? If you were
CEO, how would you sustain the company’s global leadership?
Suggested Answer: L’Oreal has different competitors in each category, including Procter &
DETAILED CHAPTER OUTLINE
Opening vignette: Some marketers, like Hyundai, are finding international success in an
increasingly smaller, and more multicultural world. There are significant opportunities
and risks associated with internationalizing operations.
I. Competing on a Global Basis
A. Global competition is intensifying in many product categories
i. Competition from developing-market firms is growing
ii. Firms should continuously improve products and expand into foreign
markets
B. Companies must make a series of decisions when deciding whether to go
abroad
i. Domestic markets, if large enough, are easier and safer
ii. Advantages of international markets
2. Larger customer base to achieve economies of scale
4. Counterattack global competitors in home markets
6. Ideas, products and services can be transferred from one
market into another market
iii. Risks associated with going abroad
1. Risk of not understanding foreign preferences; failure to offer a
competitively attractive product
3. Underestimating foreign regulations; incurring unexpected
costs
5. Commercial laws can change, currency can be devalued, a
political revolution could occur
iv. Internationalization process has four stages
1. No regular export activities
3. Establishment of one or more sales subsidiaries
4. Establishment of production facilities abroad
II. Deciding Which Markets to Enter
A. How Many Markets to Enter
i. Waterfall: gradually entering countries in sequence
2. less strain on human and financial resources
ii. Sprinkler: entering many countries simultaneously
2. Main risk is substantial resources and difficulty planning entry
strategies for diverse markets
iii. Born global: technology-intensive firms or online ventures market to
the world from the outset
iv. Country selections may be based on product and geography, income,
population, political climate, competition, and market growth.
B. Evaluating Potential Markets
i. A market’s demographic, economic, sociocultural, natural,
technological, and political-legal environments affect its attractiveness
and readiness for a product
C. Succeeding in Developing Markets
i. Emerging markets, such as Brazil, Russia, India, China, and South
Africa, or BRICS, and Indonesia, are different from developed
markets.
ii. These markets offer many opportunities but also many challenges.
iii. Unmet needs mean huge potential markets for food, clothing, shelter,
consumer electronics, appliances, etc.
iv. Much less purchasing power and many live in conditions ranging from
mild deprivation to severe deficiency
v. Brazil is the biggest economy in Latin America and the sixth largest
in the world.
1. Expected to be economically larger than Germany, Japan, and
the United Kingdom in 2050.
3. Fifth-largest country globally in terms of digital users, with
about 91 million people online, making digital strategies
4. Common themes that resonate well with Brazilians: family life,
5. Large and well-developed agricultural, mining, manufacturing,
and service sectors
6. High transportation costs, strict and costly labor laws, crime
and corruption are problems
vi. Russia is the largest exporter of natural gas, the second-largest
exporter of oil, and the third-largest exporter of steel and primary
aluminum.
2. Heavy user of social media
4. Economic reforms have stagnated; Russia is one of the most
corrupt countries in the world
5. Logistical problems with roads and infrastructure
vii. India lowered trade barriers and liberalized capital markets in the
1990s, bringing booming investment and consumption.
2. Progress in literacy and access to financial services and modern
technology.
3. Mobile phone density is approximately 75 percent of the
5. Areas around Mumbai and Bangalore are richer and more
highly literate, while poorer, less educated states lie in the east
7. Poor infrastructure and public services—education, health, and
water supply—and restrictive labor laws.
9. A complicated retail network has been slow to modernize,
leading to distribution problems.
viii. China has 1.34 billion people that marketers want to reach, which has
resulted in greater competition in pricing, products, and channels since
its entry into WTO
1. Some industries remain fiercely protected or off-limits to
foreigners altogether
2. Subsidized competition, restricted access, conflicting
3. Chinese government encourages partnerships with foreign
4. Selling in China means going beyond the big cities to the
6. China is also ethnically diverse—the banknote features eight
languages, including Arabic, Mongolian, and Tibetan.
do.
8. China is now the world’s top consumer of luxury consumer
9. Western companies benefit from their reputation of quality,
safety, and dependability with Chinese consumers, who have
seen numerous scandals from their domestic companies.
ix. South Africa is a developed market, but has an important role as an
access point to the African region/launch pad for African expansion.
1. Political turmoil in Egypt, Tunisia, and Libya during the “Arab
2. Logistical and infrastructure problems prevail
4. African consumers seek high-quality products and are brand
conscious
5. Agriculture is the largest economic sector, telecommunications,
6. Mobile phones are used not just for talking but also as a
platform to support daily living, playing a crucial role in health
care and banking, for example, where extensive infrastructure
does not exist.
x. Indonesia’s reputation as a country historically struggling with natural
disasters, terrorism, and economic uncertainty is quickly being
replaced by a profile of political stability and economic growth.
2. Third-fastest-growing economy in the region—behind India
and China—largely on the basis of its 240 million consumers.
3. By 2030, forecasts expect the number of middle-class
Indonesians—those making between $2 and $20 per day—to
5. Efficient distribution is critical
D. Marketing Strategies for Developing Markets
i. Economic and cultural differences abound, a marketing infrastructure
may barely exist, and local competition can be a challenge
ii. Typically much easier to tap into the middle class in developing
supply chain and when production methods and distribution strategy
and price premiums are hard to command because of consumer price
sensitivity
vi. Smaller packaging and lower prices are critical when income and
space are limited
E. Developing and Developed Markets
i. Developing markets have yielded some strong multinationals selling in
iii. Firms from developed markets are using lessons gleaned from
developing markets to better compete in their home or existing
markets
iv. Economic integration (trade agreements) has intensified in recent
years, which means companies are more likely to enter entire regions
at the same time.
III. Deciding How to Enter the Market
A. Indirect and Direct Exporting
i. Indirect exporters work through independent intermediaries
1. Domestic-based export merchants buy the manufacturer’s
products and then sell them abroad
3. Cooperative organizations conduct exporting activities for
4. Export-management companies agree to manage a company’s
1. Less investment
2. Less risk
2. Overseas sales branch or subsidiary might handle sales,
3. Traveling export sales representatives travel to find businesses
4. Foreign-based distributors or agents can hold limited or
exclusive rights to represent the company
iv. Successful companies adapt their Web sites to provide country-
specific content and services to their highest-potential international
markets in the local language
B. Licensing is a simple way to engage in international marketing
i. A foreign company gets a license to use a manufacturing process,
trademark, patent, trade secret, or other item of value for a fee or
royalty
depend on the licensor
v. Licensing arrangements include management contracts, contract
manufacturing, and franchising
C. Joint ventures involve foreign investors and local investors
i. May be necessary or desirable for economic or political reasons
D. Direct Investment is direct ownership and has advantages
i. Cost economies through cheaper labor or raw materials, government
incentives, and freight savings
ii. Stronger image in the host country because it creates jobs
iii. Deeper relationship with the government, customers, local suppliers,
and distributors, enabling it to better adapt its products to the local
environment
E. Acquisition of local brands is another way of entering an international market
IV. Deciding on the Marketing Program
A. Standardized Marketing Program (lowest costs)
i. Advantages: economies of scale in production and distribution, lower
marketing costs, power and scope, consistency in brand image, ability
to leverage good ideas quickly and efficiently, uniformity of marketing
practices
B. Adapted marketing program (believes consumer needs vary and tailors
marketing to each target group)
C. Global Similarities and Differences
i. Technology led convergence of lifestyles
ii. Shared needs and wants have created global markets for more
standardized products
iii. Hofstede identifies four cultural dimensions that differentiate countries
2. High versus low power distance
4. Weak versus strong uncertainty avoidance
iv. Consumer behavior differences as well as historical market factors
have led marketers to position brands differently in different markets
v. Marketers adapt if elements add more revenue than cost (features,
D. Global Product Strategies
i. Product Standardization
1. High-end products benefit from standardization because quality
and prestige often can be marketed similarly across countries
2. Culture and wealth factors influence how quickly a new
3. Food and beverage marketers find it more challenging to
standardize
ii. Product Adaptation Strategies
2. Product adaptation alters the product to meet local conditions
or preferences
4. Product invention can be backward or forward
5. Brand element adaptation can include brand names
E. Global Communication Strategies
i. Communication adaptation can be at the product and communication
level (dual adaptation)
F. Global Pricing Strategies
i. Price escalation adds transportation costs, tariffs, importer margins,
wholesaler margins, retailer margins
ii. Three choices for setting prices
2. Set market-based price in each country
3. Set cost-based price in each country
iii. Countries with overcapacity, cheap currencies, and the need to export
aggressively have pushed their prices down and devalued their
or win a market (arms-length price may be forced)
v. Gray markets divert branded products from authorized distribution
channels either in-country or across international borders
1. Create a free-rider problem, making legitimate distributors’
2. Harm distributor relationships, tarnish the manufacturer’s
4. Multinationals try to prevent gray markets by policing
distributors, raising their prices to lower-cost distributors, or
altering product characteristics or service warranties for
different countries
vi. As companies develop global supply chain networks and move
production farther from home, the chance for corruption, fraud, and
quality-control problems rises – as well as a huge market for
counterfeit goods (which can be deadly)
G. Global Distribution Strategies
i. Channel entry decisions include types of intermediaries, type of
V. Country-of-Origin Effects
A. Mental associations and beliefs triggered by a country
B. Governments now recognize that the images of their cities and countries affect
more than tourism and have important value in commerce
i. Foreign business can boost the local economy, provide jobs, and
improve infrastructure