Marketing management Chapter 21 pptx

IN THIS CHAPTER, WE WILL
ADDRESS THE FOLLOWING
QUESTIONS:
1.
What factors should a company
review before deciding to go
2.
How can companies evaluate
and select specific foreign
markets to enter?
3. What are the major ways of
entering a foreign market?
4.
To what extent must the
company adapt its products and
marketing program to each
foreign country?
5. How should the company
manage and organize its
international activities?
CHAPTER 21 TAPPING INTO
GLOBAL MARKETS
•••••••••••i
With faster communication, transportation, and financial flows, the
world is rapidly shrinking. Products developed in one country—-
Gucci purses, Mont Blanc pens, McDonald's hamburgers, Japanese
sushi,
Chanel suits, German BMWs—are finding enthusiastic accep-
tance in others. A German businessman may wear an Armani suit to
meet an English friend at a Japanese restaurant, who later returns
home to drink Russian vodka and watch an American soap on TV.

Consider the international success of Red
Bull.
iillion-dollar brand in less than 15 years, Red Bull has gained 70
>ercent of the worldwide energy drink market by skillfully con-
necting with global youth. Founded in Austria by Dietrich
Matescnitz, Red Bull was introduced into its first foreign market, Hungary, in
1992, and is now sold in over 100 countries. Red Bull consists of amino acid
taurine, B-comp/ex vitamins, caffeine, and carbohydrates. The drink was sold
I
originally in only one size—the silver 250 ml (8.3 oz.) can—and received little
traditional advertising support beyond animated television commercials with
the tagline "Red Bull Gives You Wiiings." Red Bull built buzz about the prod-
uct through its "seeding program": the company microtargets "in" shops,
clubs, bars, and stores, gradually moves from bars and clubs to convenience
stores and restaurants, and finally enters supermarkets. It targets "opinion
leaders" by making Red Bull available at sports competitions, in limos before
Red Bull X-Fighters event, 2004.
668 PART 8 CREATING SUCCESSFUL LONG-TERM GROWTH •
III Competing on a Global Basis
Two hundred giant corporations, most of them larger than many national economies, have
sales that in total exceed a quarter of the world's economic activity. On that basis, Philip
Morris is larger than New Zealand and operates in 170 countries. International trade in 2003
accounted for over one-quarter of
U.S.
GDP, up from 11 percent in 1970.
2
Many companies have conducted international marketing for decades—Nestle, Shell,
Bayer, and Toshiba are familiar to consumers around the world. But global competition is
intensifying. Domestic companies that never thought about foreign competitors suddenly
find them in their backyards. Newspapers report on the gains of Japanese, German, Swedish,

and Korean car imports in the U.S. market, and the loss of textile and shoe markets to
imports from developing countries in Latin America, Eastern Europe, and Asia. Many com-
panies that are thought to be American firms are really foreign firms. Dannon, Red Roof Inn,
Wild Turkey, Interscope, and L'Oreal, for example, are all French-owned.
3
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 global industry is an industry in which the
strategic positions of competitors in major geographic or national markets are funda-
mentally affected by their overall global positions.
4
A global firm is a firm that operates
in more than one country and captures R&D, production, logistical, marketing, and
financial advantages in its costs and reputation that are not available to purely domestic
competitors.
Global firms plan, operate, and coordinate their activities on a worldwide basis. Ford's
"world truck" has a European-made cab and a North American-built chassis, is assembled
in Brazil, and is imported into the United States for sale. Otis Elevator gets its door systems
from France, small geared parts from Spain, electronics from Germany, and special motor
drives from Japan; it uses the United States for systems integration. One of the most suc-
cessful global companies is
ABB,
formed by a merger between the Swedish company
ASEA
and the Swiss company Brown Boveri.
5
ABB
ABB's products include power transformers, electrical installations, instrumentation, auto components, air-
conditioning equipment, and railroad equipment. The company has annual revenues of $32 billion and 200,000
employees. Its motto: "ABB is a global company local everywhere." English is its official language (all ABB man-

award shows, and at exclusive after-parties. Red Bull also built its cool image
through sponsorship of extreme sports like its X-Fighters events, and unique grass-
roots efforts. In cities throughout the world, for example, the company sponsors
an annual Flugtag where contestants build flying machines that they launch off
ramps into
water,
true to the brand's slogan!
1
Although the opportunities for companies to enter and compete in foreign
markets are significant, the risks can also be high. Companies selling in global
industries, however, really have no choice but to internationalize their opera-
tions.
In this chapter, we review the major decisions in expanding into global
markets.
> TAPPING INTO GLOBAL MARKETS CHAPTER 21 669
agers must be conversant in English), and all financial results must be reported in
dollars.
ABB
aims to reconcile
three contradictions: to be global and local; to be big and small; and to be radically decentralized with central-
ized reporting and control. It has fewer than 200 staff at company headquarters in Switzerland, compared to the
3,000 people who populate the Siemens headquarters. The company's many product lines are organized into 8
business segments, 65 business areas, 1,300 companies, and 5,000 profit centers, with the average employee
belonging to a profit center of around 50 employees. Managers are regularly rotated among countries and
mixed-nationality teams are encouraged. Depending on the type of business, some units are treated as super-
local businesses with lots of autonomy, while others are governed with major central control and are considered
global businesses.
6
A company need not be large, however, to sell globally. Small and medium-sized firms
can practice global nichemanship. The Poilane Bakery sells 15,000 loaves of old-style bread

each day in Paris—2.5 percent of all bread sold in that city—via company-owned delivery
trucks. But each day, Poilane-branded bread is also shipped via FedEx to loyal customers in
roughly 20 countries around the world.
7
For a company of any size to go global, it must make a series of decisions (see Figure
21.1).
We'll examine each of these decisions here.
::: Deciding Whether to Go Abroad
Most companies would prefer to remain domestic if their domestic market were large
enough. Managers would not need to learn other languages and laws, deal with volatile cur-
rencies, face political and legal uncertainties, or redesign their products to suit different cus-
tomer needs and expectations. Business would be easier and safer. Yet several factors are
drawing more and more companies into the international arena:
a The company discovers that some foreign markets present higher profit opportunities
than the domestic market.
H
The company needs a larger customer base to achieve economies of scale.
a The company wants to reduce its dependence on any one market.
n Global firms offering better products or lower prices can attack the company's domestic
market. The company might want to counterattack these competitors in their home markets.
B
The company's customers are going abroad and require international servicing.
Before making a decision to go abroad, the company must weigh several risks:
n The company might not understand foreign customer preferences and fail to offer a com-
petitively attractive product.
a The company might not understand the foreign country's business culture or know how
to deal effectively with foreign nationals.
a The company might underestimate foreign regulations and incur unexpected costs.
& The company might realize that it lacks managers with international experience.
E

The foreign country might change its commercial laws, devalue its currency, or undergo
a political revolution and expropriate foreign property.
Because of the conflicting advantages and risks, companies often do not act until some
event thrusts them into the international arena. Someone—a domestic exporter, an interna-
tional importer, a foreign government—solicits the company to sell abroad, or the company
is saddled with overcapacity and must find additional markets for its goods.
Most countries lament that too few of their companies participate in international trade.
This keeps the country from earning foreign exchange to pay for needed imports. It also
raises the specter of domestic companies eventually being hurt or taken over by foreign
multinationals. These countries are trying to encourage their domestic companies to grow
domestically and expand globally. Many countries sponsor aggressive export-promotion
programs to get their companies to export. These programs require a deep understanding of
how companies become internationalized.
Deciding whether
to go abroad
Deciding which
markets to
enter
Deciding on
the marketing
organization
FIG.
21.1
Major Decisions in International
Marketing
670 PART 8 CREATING SUCCESSFUL LONG-TERM GROWTH <
The company logo being carved into a loaf of Poilane
bread,
which is
shipped daily via FedEx to loyal customers in countries around the world.

The internationalization process has four stages:
8
1.
No regular export activities.
2.
Export via independent representatives (agents).
3.
Establishment of one or more sales subsidiaries.
4.
Establishment of production facilities abroad.
The first task is to get companies to move from stage 1 to stage 2.
This move is helped by studying how firms make their first export
decisions.
9
Most firms work with an independent agent and enter a
nearby or similar country. A company then engages further agents to
enter additional countries. Later, it establishes an export depart-
ment to manage its agent relationships. Still later, the company
replaces its agents with its own sales subsidiaries in its larger export
markets. This increases the company's investment and risk, but also
its earning potential.
To manage these subsidiaries, the company replaces the export
department with an international department. If certain markets
continue to be large and stable, or if the host country insists on local
production, the company takes the next step of locating production
facilities in those markets. This means a still larger commitment and
still larger potential earnings. By this time, the company is operating
as a multinational and is engaged in optimizing its global sourcing,
financing, manufacturing, and marketing. According to some
researchers, top management begins to pay more attention to global

opportunities when they find that over 15 percent of revenues comes
from foreign markets.
10
Deciding Which Markets to Enter
In deciding to go abroad, the company needs to define its marketing objectives and policies.
What proportion of foreign to total sales will it seek? Most companies start small when they
venture abroad. Some plan to stay small; others have bigger plans. Ayal and Zif have argued
that a company should enter fewer countries when:
a Market entry and market control costs are high.
£3
Product and communication adaptation costs are high.
H
Population and income size and growth are high in the initial countries chosen.
n Dominant foreign firms can establish high barriers to entry.
11
How Many Markets to Enter
The company must decide how many countries to enter and how fast to expand. Consider
Amway's experience:
AM WAY
Amway Corp., one of the world's largest direct-selling companies, markets its products and services through
independent business owners worldwide. Amway expanded into Australia in 1971. In the 1980s, it moved
into 10 more countries. By 2004, Amway had evolved into a multinational juggernaut with a sales force of
more than 3.6 million independent distributors hauling in S4.5 billion in sales. Established in 1998, Amway
India quickly grew to 200,000 active Amway distributors by 2004. Amway currently sells products in 80
countries and territories worldwide. The corporate goal is to have overseas markets account for 80 percent
of its sales. This is not unrealistic or overly ambitious considering that Amway already gains 70 percent of its
a sales from markets outside North America.
12
> TAPPING INTO GLOBAL MARKETS CHAPTER
21 671

A
company's entry strategy typically follows
one of
two possible approaches:
a
waterfall
approach,
in
which countries
are
gradually entered sequentially;
or a
sprinkler approach,
in
which many countries
are
entered simultaneously within
a
limited period
of
time.
Increasingly, especially with technology-intensive firms, they are born global
and
market
to
the entire world right from
the
outset.
13
Generally speaking, companies such

as
Matsushita, BMW,
and
General Electric,
or
even
newer companies such
as
Dell, Benetton, and The Body Shop, follow the waterfall approach.
Expansion
can be
carefully planned
and is
less likely
to
strain human
and
financial
resources. When first-mover advantage
is
crucial
and a
high degree
of
competitive intensity
prevails,
the
sprinkler approach
is
preferred,

as
when Microsoft introduces
a new
form
of
Windows software.
The
main risk
is the
substantial resources involved
and the
difficulty
of
planning entry strategies
in so
many potentially diverse markets.
The company must also decide
on the
types
of
countries
to
consider. Attractiveness
is
influenced
by the
product, geography, income
and
population, political climate,
and

other
factors. Kenichi Ohmae recommends that companies concentrate
on
selling
in the
"triad
markets"—the United States, Western Europe,
and the Far
East—because these markets
account
for a
large percentage
of
all
international trade.
14
Developed versus Developing Markets
Although Ohmae's position makes short-run sense,
it can
spell disaster
for the
world econ-
omy
in the
long run. The unmet needs
of
the emerging
or
developing world represent huge
potential markets

for
food, clothing, shelter, consumer electronics, appliances,
and
other
goods. Many market leaders
are
rushing into Eastern Europe, China,
and
India. Colgate
now draws more personal
and
household products business from Latin America than
North America.
15
The developed nations
and the
prosperous parts
of
developing nations account
for
less
than 15 percent
of
the world's population.
Is
there
a
way
for
marketers

to
serve
the
other
85
percent, which
has
much less purchasing power? Successfully entering developing markets
requires
a
special
set of
skills
and
plans. Consider how the following companies
are
pioneer-
ing ways
to
serve these invisible consumers:
16
s Grameen-Phone markets cell phones
to
35,000 villages
in
Bangladesh
by
hiring village
women
as

agents who lease phone time
to
other villagers,
one
call
at a
time.
n Colgate-Palmolive rolls into Indian villages with video vans that show
the
benefits
of
toothbrushing;
it
expects
to
earn over half
of
its Indian revenue from rural areas by
2003.
H
An
Indian-Australian
car
manufacturer created
an
affordable rural transport vehicle
to
compete with bullock carts rather than cars.
The
vehicle functions well

at low
speeds
and
carries
up to two
tons.
n Fiat developed
a
"third-world car,"
the
Palio, that
far
outsells
the
Ford Fiesta
in
Brazil
and
that will
be
launched
in
other developing nations.
a Corporacion GEO builds low-income housing
in
Mexico.
The
two-bedroom homes
are
modular

and can be
expanded.
The
company
is now
moving into Chile
and
southern U.S.
communities.
s
A
Latin American building-supply retailer offers bags
of
cement
in
smaller sizes
to
cus-
tomers building their own homes.
These marketers
are
able
to
capitalize
on the
potential
of
developing markets
by
changing

their conventional marketing practices
to
sell their products
and
services more effectively.
17
It
cannot
be
business
as
usual when selling
in
developing markets. Economic
and
cultural
dif-
ferences abound;
a
marketing infrastructure
may
barely exist;
and
local competition
can be
surprisingly
stiff. In
China,
PC
maker Legend

and
mobile-phone provider
TCL
have thrived
despite strong foreign competition. Besides their close grasp
on
Chinese tastes, they also have
their vast distribution networks, especially
in
rural areas.
18
Smaller packaging
and
lower sales prices
are
often critical
in
markets where incomes
are
limited. Unilever's 4-cent sachets
of
detergent
and
shampoo have been
a big hit in
rural
India, where 70 percent
of
the country's population still
lives.

When Coke moved to
a
smaller,
200
ml
bottle
in
India, selling
for
10
to
12 cents
in
small shops, bus-stop stalls,
and
roadside
672 PART 8 CREATING SUCCESSFUL LONG-TERM GROWTH
eateries, sales jumped.
19
A
Western image can also be helpful, as Coke discovered in China.
Part of
its
success against local cola brand Jianlibao was due to its symbolic values of moder-
nity and affluence.
20
Recognizing that its cost structure made it difficult to compete effectively in developing
markets, Procter
&
Gamble devised cheaper, clever ways to make the right kinds of prod-

ucts to suit consumer demand. It now uses contract manufacturers in certain markets and
gained eight share points in Russia for Always feminine protection pads by responding to
consumer wishes for a thicker pad.
21
Due to a boom in consumer spending, Russia has
been the fastest-growing market for many major multinationals, including Nestle, L'Oreal,
and IKEA.
22
The challenge is to think creatively about how marketing can fulfill the dreams of most of
the world's population for a better standard of
living.
Many companies are betting that they
can do that.
i— GENERAL MOTORS
After launching Buick in China in 1999, GM poured more than $2 billion into the region over the next five
years,
expanding the lineup to 14 models, ranging from the $8,000 Chevrolet Spark mini-car to high-end
Cadillacs. Although competition in the third-largest car market is fierce, GM was able to secure 11 percent
market share in 2004 and reap sizable profits. But initial gains in the Chinese market do not necessarily spell
long-term success. After investing to establish the markets, foreign pioneers in television sets and motorcy-
cles saw domestic Chinese firms emerge as rivals. In 1995, virtually all mobile phones in China were made
by global giants Nokia, Motorola, and Ericsson. Within 10 years, their market share had dropped to 60 per-
cent. To secure and build on its gains, General Motors pledged to invest another S3 billion in the region to
• boost capacity and build its reputation.
23
A Russian ad for Nestle s
Nescafe.
As
consumer spending has risen in Russia,
the market for products of major

multinationals like Nestle has boomed.
TAPPING INTO GLOBAL MARKETS CHAPTER 21 673
Regional Free Trade Zones
Regional economic integration—trading agreements between blocs of countries—has inten-
sified in recent years. This development means that companies are more likely to enter
entire regions at the same time. Certain countries bave formed free trade zones or economic
communities—groups of nations organized to work toward common goals in the regulation
of international trade. One such community is the European Union (EU).
3
EAN UNION Formed in 1957, the European Union set out to create a single
European market by reducing barriers to the free flow of products, services, finances, and
labor among member countries, and by developing trade policies with nonmember nations.
Today, the European Union is one of the world's largest single markets. The 15 member
countries making up the EU increased by 10 in May 2004 with the addition of Cyprus, the
Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia.
The EU now contains more than 454 million consumers and accounts for
23
percent of the
world's exports. It has a common currency, the euro monetary system.
European unification offers tremendous trade opportunities for non-European firms.
However, it also poses threats. European companies will grow bigger and more competi-
tive.
Witness the competition in the aircraft industry between Europe's Airbus consortium
and Boeing in the United States. Perhaps an even bigger concern, however, is that lower
barriers inside Europe will only create thicker outside walls. Some observers envision a
"fortress Europe" that heaps favors on firms from EU countries but hinders outsiders by
imposing obstacles such as stiffer import quotas, local content requirements, and other
nontariff (nontax) barriers.
Also,
companies that plan to create "pan-European" marketing campaigns directed to a

unified Europe should proceed with caution. Even as the EU standardizes its general trade
regulations and currency, creating an economic community will not create a homogeneous
market. Companies marketing in Europe face 14 different languages, 2,000 years of histori-
cal and cultural differences, and a daunting mass of local rules.
NAFTA Closer to home, in North America, the United States and Canada phased out trade
barriers in 1989. In January 1994, the North American Free Trade Agreement (NAFTA) estab-
lished a free trade zone among the United States, Mexico, and Canada. The agreement cre-
ated a single market of
360
million people who produce and consume $6.7 trillion worth of
goods and services annually. As it is implemented over a 15-year period, NAFTA will elimi-
nate all trade barriers and investment restrictions among the three countries. Prior to
NAFTA, tariffs on American products entering Mexico averaged 13 percent, whereas U.S.
tariffs on Mexican goods averaged 6 percent.
)SUL Other free trade areas are forming in Latin America. For example, MERCOSUL
now links Brazil, Argentina, Paraguay, and Uruguay. Chile and Mexico have formed a suc-
cessful free trade zone. It is likely that NAFTA will eventually merge with this and other
arrangements to form an all-Americas free trade zone.
It is the European nations that have tapped Latin America's enormous potential. As
Washington's efforts to extend NAFTA to Latin America have stalled, European countries
have moved in with a vengeance. When Latin American countries instituted market reforms
and privatized public utilities, European companies rushed in to grab up lucrative contracts
for rebuilding Latin America's infrastructure. Spain's Telefonica de Espana spent $5 billion
buying phone companies in Brazil, Chile, Peru, and Argentina. In Brazil, seven of the ten
largest private companies are European owned, compared to two controlled by Americans.
Among the notable European companies operating in Latin America are automotive giants
Volkswagen and Fiat, the French supermarket chain Carrefours, and the Anglo-Dutch per-
sonal-care products group Gessy-Lever.
APEC Twenty-one Pacific Rim countries, including the NAFTA member states, Japan, and
China, are working to create a pan-Pacific free trade area under the auspices of the Asian

Pacific Economic Cooperation forum
(APEC).
There are also active attempts at regional eco-
nomic integration in the Caribbean, Southeast Asia, and parts of Africa.
Evaluating Potential Markets
Yet, however much nations and regions integrate their trading policies and standards, each
nation still has unique features that must be understood.
A
nation's readiness for different
674 PART 8 CREATING SUCCESSFUL LONG-TERM GROWTH
FIG.
21.2 I
Five Modes of Entry into Foreign
Markets
products and services and its attractiveness as a market to foreign firms depend on its eco-
nomic, political-legal, and cultural environments.
Suppose a company has assembled a list of potential markets to enter. How does it choose
among them? Many companies prefer to sell to neighboring countries because they under-
stand these countries better and can control their costs more effectively. It is not surprising
that the two largest
U.S.
export markets are Canada and Mexico, or that Swedish companies
first sold to their Scandinavian neighbors. As growing numbers of
U.S.
companies expand
abroad, many are deciding the best place to start is next door.
At other times, psychic proximity determines choices. Many U.S. firms prefer to sell in
Canada, England, and Australia—rather than in larger markets such as Germany and France—
because they feel more comfortable with the language, laws, and culture. Companies should
be careful, however, in choosing markets according to cultural distance. Besides the fact that

potentially better markets may be overlooked, it also may result in a superficial analysis of
some very real differences among the countries. It may also lead to predictable marketing
actions that would be a disadvantage from a competitive standpoint.
24
Regardless of how chosen, it often makes sense to operate in fewer countries with a
deeper commitment and penetration in each. In general, a company prefers to enter coun-
tries (1) that rank high on market attractiveness, (2) that are low in market risk, and (3) in
which it possesses a competitive advantage. Here is how Bechtel Corporation, the construc-
tion giant, goes about evaluating overseas markets.
BECHTEL CORPORATION
Bechtel provides premier technical, management, and directly related services to develop, manage, engineer,
build,
and operate installations for customers in nearly 60 countries worldwide. Before Bechtel ventures into new
markets, the company starts with a detailed strategic market analysis. It looks at its markets and tries to deter-
mine where it should be in four or five years' time. A management team does a cost-benefit analysis that fac-
tors in the position of competitors, infrastructure, regulatory and trade barriers, and the tax situation (both cor-
porate and individual). Ideally, the new market should be a country with an untapped need for its products or
services; a quality, skilled labor pool capable of manufacturing the product; and a welcoming environment (gov-
ernmental and physical).
Are there countries that meet Bechtel's requirements? Although Singapore has an edu-
cated, English-speaking labor force, basks in political stability, and encourages foreign
investment, it has a small population. Although many countries in central Europe possess
an eager, hungry-to-learn labor pool, their infrastructures create difficulties. The team eval-
uating a new market must determine whether the company could earn enough on its invest-
ment to cover the risk factors or other negatives.
25
• • •
• • •
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 indirect
exporting,
direct
exporting,
licensing,
joint
ventures,
and
direct investment. These five market-entry strategies are shown in Figure 21.2. Each suc-
ceeding strategy involves more commitment, risk, control, and profit potential.
Indirect and Direct Export
The normal way to get involved in an international market is through export. Occasional
exportingis a passive level of involvement in which the company exports from time to time,
either on its own initiative or in response to unsolicited orders from abroad. Active exporting
takes place when the company makes a commitment to expand into a particular market. In
either case, the company produces its goods in the home country and might or might not
adapt them to the international market.
Companies typically start with indirect exporting—that is, they work through indepen-
dent intermediaries. Domestic-based export merchantsbuy the manufacturer's products and
then sell them abroad. Domestic-based export agents seek and negotiate foreign purchases
and are paid a commission. Included in this group are trading companies.
Cooperative
orga-
nizations carry on exporting activities on behalf of several producers and are partly under
their administrative control. They are often used by producers of primary products such as
• TAPPING INTO GLOBAL MARKETS CHAPTER 21 675
fruits or
nuts.
Export-management companies agree to manage a company's export activities
for a fee.

Indirect export has two advantages. First, it involves less investment: The firm does not
have to develop an export department, an overseas sales force, or a set of international con-
tacts.
Second, it involves less risk: Because international-marketing intermediaries bring
know-how and services to the relationship, the seller will normally make fewer mistakes.
Companies eventually may decide to handle their own exports.
26
The investment and risk
are somewhat greater, but so is the potential return.
A
company can carry on direct export-
ing in several ways:
• Domestic-based export department or division. Might evolve into a self-contained
export department operating as a profit center.
u
Overseas
sales branch or subsidiary. The sales branch handles sales and distribution and
might handle warehousing and promotion as well. It often serves as a display and customer
service center.
o Traveling export sales representatives. Home-based sales representatives are sent abroad
to find business.
• Foreign-based distributors or agents. These distributors and agents might be given
exclusive rights to represent the company in that country, or only limited rights.
Whether companies decide to export indirectly or directly, many companies use export-
ing as a way to "test the waters" before building a plant and manufacturing a product over-
seas.
University Games of Burlingame, California, maker of education games that encourage
social interaction and imagination, has blossomed into a $50 million-per-year international
company through careful entry into overseas ventures.
UNIVERSITY GAMES

Bob Moog, president and founder of University Games, says his company's international sales strategy relies
heavily on third-party distributors and has a fair degree of flexibility. "We identify the international markets we
want to penetrate," says Moog, "and then form a business venture with a local distributor that will give us a
large degree of control. In Australia, we expect to run a print of 5,000 board games. These we will manufacture
in the United States. If we reach a run of 25,000 games, however, we would then establish a sub-contracting
venture with a local manufacturer in Australia or New Zealand to print the games." The company now sells in
a 28 countries.
27
Using a Global Web Strategy
One of the best ways to initiate or extend export activities used to be to exhibit at an overseas
trade
show.
With the
Web,
it is not even necessary to attend trade shows to show one's wares:
Electronic communication via the Internet is extending the reach of companies large and
small to worldwide markets.
Major marketers doing global e-commerce range from automakers (GM) to direct-mail
companies (L.L. Bean and Lands' End) to running-shoe giants (Nike and Reebok) to
Amazon.com. Marketers like these are using the
Web
to reach new customers outside their
home countries, to support existing customers who live abroad, to source from interna-
tional suppliers, and to build global brand awareness.
These companies adapt their
Web
sites to provide country-specific content and services
to their best potential international markets, ideally in the local language. The number of
Internet users is rising quickly as access costs decline, local-language content increases, and
infrastructure improves. Upscale retailer and cataloger The Sharper Image now gets more

than 25 percent of its online business from overseas customers.
28
The Internet has become an effective means of everything from gaining free exporting
information and guidelines to conducting market research and offering customers several
time zones away a secure process for ordering and paying for products. "Going abroad" on
the Internet does pose special challenges. The global marketer may run up against govern-
mental or cultural restrictions. In Germany, a vendor cannot accept payment via credit card
until two weeks after an order has been sent. German law also prevents companies from
using certain marketing techniques like unconditional lifetime guarantees. On a wider scale,
the issue of who pays sales taxes and duties on global e-commerce is murkier still.
676 PART 8 • CREATING SUCCESSFUL LONG-TERM GROWTH
Finding free information about trade and exporting has never been easier. Here are some
places to start a search:
www.ita.doc.gov U.S. Department of Commerce's International
Trade
Administration
www.exim.gov Export-Import Bank of the United States
www.sba.gov U.S. Small Business Administration
www.bxa.doc.gov Bureau of Industry and Security, a branch of the Commerce Department
Also,
many states' export-promotion offices have online resources and allow businesses to
link to their sites.
Licensing
Licensing
is
a simple way to become involved in international
marketing.
The licensor issues
a license to a foreign company to use a manufacturing process, trademark, patent, trade
secret, or other item of value for a fee or royalty. The licensor gains entry at little risk; the

licensee gains production expertise or a well-known product or brand name.
Licensing has potential disadvantages. The licensor has less control over the licensee
than it does over its own production and sales facilities. Furthermore, if the licensee is very
successful, the firm has given up profits; and if and when the contract ends, the company
might find that it has created a competitor. To avoid this, the licensor usually supplies some
proprietary ingredients or components needed in the product (as Coca-Cola does). But the
best strategy is for the licensor to lead in innovation so that the licensee will continue to
depend on the licensor.
There are several variations on a licensing arrangement. Companies such as Hyatt and
Marriott sell management contracts to owners of foreign hotels to manage these businesses
for a fee. The management firm may even be given the option to purchase some share in the
managed company within a stated period.
In contract manufacturing, the firm hires local manufacturers to produce the product.
When Sears opened department stores in Mexico and Spain, it found qualified local manu-
facturers to produce many of its products. Contract manufacturing gives the company less
control over the manufacturing process and the loss of potential profits on manufacturing.
However, it offers a chance to start faster, with less risk and with the opportunity to form a
partnership or buy out the local manufacturer later.
Finally, a company can enter a foreign market through franchising, which is a more com-
plete form of licensing. The franchiser offers a complete brand concept and operating sys-
tem. In return, the franchisee invests in and pays certain fees to the franchiser. McDonald's,
KFC,
and Avis have entered scores of countries by franchising their retail concepts and mak-
ing sure their marketing is culturally relevant.
r- KFC CORPORATION
KFC is the world's largest fast-food chicken chain, owning or franchising 12,800 outlets in about 90 countries—
60 percent of them outside the United States. KFC had a number of obstacles to overcome when it entered the
Japanese market. The Japanese saw fast food as artificial, made by mechanical means, and unhealthy.
To
build

trust in the KFC brand, advertising showed scenes depicting Colonel Sanders' beginnings in Kentucky that
con-
veyed southern hospitality, old American tradition, and authentic home cooking. The campaign was hugely suc-
cessful,
and in less than eight years KFC expanded its presence from 400 locations to more than
1,000.
KFC is
China's largest, oldest, and most popular quick-service restaurant chain, also with over 1,000 locations. KFC is
the most popular international brand throughout China, ranking higher than all others, according to a consumer
survey conducted by
A.C.
Nielsen. China operations offer such fare as an "Old Beijing Twister"—a wrap mod-
• eled after the way Peking duck is served, but with fried chicken inside.
29
Joint Ventures
Foreign investors may join with local investors to create a joint venture company in which
they share ownership and control. For instance:
30
B
Coca-Cola and Nestle joined forces to develop the international market for "ready-to-
drink" tea and coffee, which currently they sell in significant amounts in Japan.
TAPPING INTO GLOBAL MARKETS CHAPTER 21 677
• Procter
&
Gamble formed a joint venture with its Italian archrival Fater to cover babies'
bottoms in the United Kingdom and Italy.
• Whirlpool took a 53 percent stake in the Dutch electronics group Philips's white-goods
business to leapfrog into the European market.
A
joint venture may be necessary or desirable for economic or political reasons. The for-

eign firm might lack the financial, physical, or managerial resources to undertake the ven-
ture alone; or the foreign government might require joint ownership as a condition for entry.
Even corporate giants need joint ventures to crack the toughest markets. When it wanted to
enter China's ice cream market, Unilever joined forces with Sumstar, a state-owned Chinese
investment company. The venture's general manager says Sumstar's help with the formida-
ble Chinese bureaucracy
was
crucial in getting a high-tech ice cream plant up and running
in just 12 months.
31
Joint ownership has certain drawbacks. The partners might disagree over investment,
marketing, or other policies. One partner might want to reinvest earnings for growth, and
the other partner might want to declare more dividends. Joint ownership can also prevent a
multinational company from carrying out specific manufacturing and marketing policies on
a worldwide basis.
Direct Investment
The ultimate form of foreign involvement is direct ownership of foreign-based assembly or
manufacturing facilities. The foreign company can buy part or full interest in a local com-
pany or build its own facilities. General Motors has invested billions of dollars in auto man-
ufacturers around the world, such as Shangai GM, Fiat Auto Holdings, Isuzu, Daewoo,
Suzuki, Saab, Fuji Heavy Industries, Jinbei GM Automotive Co., and AvtoVAZ.
32
If the market appears large enough, foreign production facilities offer distinct advantages.
First, the firm secures cost economies in the form of cheaper labor or raw materials, foreign-
government investment incentives, and freight savings. Second, the firm strengthens its image
in the host country because it creates
jobs.
Third, the firm develops a deeper relationship with
government, customers, local suppliers, and distributors, enabling it to adapt its products
better to the local environment. Fourth, the firm retains full control over its investment and

therefore can develop manufacturing and marketing policies that serve its long-term interna-
tional objectives. Fifth, the firm assures itself access to the market in case the host country
starts insisting that locally purchased goods have domestic content.
The main disadvantage of direct investment is that the firm exposes a large investment to
risks such as blocked or devalued currencies, worsening markets, or expropriation. The firm
will find it expensive to reduce or close down its operations, because the host country might
require substantial severance pay to the employees.
Ill Deciding on the Marketing Program
International companies must decide how much to adapt their marketing strategy to local
conditions.
33
At one extreme are companies that use a globally standardized marketing mix
worldwide. Standardization of the product, communication, and distribution channels
promises the lowest costs. Table 21.1 summarizes some of the pros and cons of standardiz-
ing the marketing program. At the other extreme is an adapted marketing mix, where the
producer adjusts the marketing program to each target market. For a discussion of the main
issues, see "Marketing Insight: Global Standardization or Adaptation?"
Between the two extremes, many possibilities
exist.
Most brands are adapted to some extent
to reflect significant differences in consumer behavior, brand development, competitive
forces, and the legal or political environment. Satisfying different consumer needs and wants
can require different marketing
programs.
Cultural differences can often be pronounced across
countries. Hofstede identifies four cultural dimensions that can differentiate countries:
34
1.
Individualism vs. collectivism. In collectivist societies, such as Japan, the self-worth of
an individual is rooted more in the social system than in individual achievement.

2.
High
vs.
low power distance. HigJi power distance cultures tend to be less egalitarian.
3.
Masculine
vs.
feminine. How much the culture is dominated by assertive males versus
nurturing females.
4.
Weak
vs.
strong uncertainty avoidance. How risk tolerant or aversive people are.
678 PART 8 CREATING SUCCESSFUL LONG-TERM GROWTH
| TABLE 21.1
Global Marketing Pros and Cons
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
Disadvantages
Differences in consumer needs, wants, and usage patterns for products
Differences in consumer response to marketing-mix elements
Differences in brand and product development and the competitive environment
Differences in the legal environment
Differences in marketing institutions
Differences in administrative procedures

Even global brands, such as Pringles, Always, and Toyota, will undergo some changes in
product features, packaging, channels, pricing, or communications in different global mar-
kets.
(See "Marketing
Memo:
The
Ten
Commandments of Global Branding.") Marketers must
make sure that their marketing is relevant to consumers in every market.
WALT DISNEY CO.
When Walt Disney launched the Euro Disney theme park outside Paris in 1992, it was harshly criticized as being
an example of American cultural imperialism. A number of local French customs and values, such as serving
wine with meals, were ignored. As one Euro Disney executive noted, "When we first launched, there was the
belief that it was enough to be Disney. Now we realize our guests need to be welcomed on the basis of their own
culture and travel habits." Renamed Disneyland Paris, the theme park eventually became Europe's biggest
tourist attraction—even more popular than the Eiffel Tower—by making a number of changes and adding more
local touches.
35
Disneyland Paris, Europe's biggest tourist attraction.
Product
Some types of products travel better across bor-
ders than others—food and beverage marketers
have to contend with widely varying tastes.
36
"Marketing Insight: Establishing Global Service
Brands" describes some of the special concerns
for marketing services globally. Warren Keegan
has distinguished five adaptation strategies of
product and communications to a foreign mar-
ket (see Figure 21.3).

37
Straight extension means introducing the
product in the foreign market without any
change. Straight extension has been success-
ful with cameras, consumer electronics, and
many machine tools. In other cases, it has
been a disaster. General Foods introduced its
standard powdered Jell-0 in the British market
only to find that British consumers prefer the
solid wafer or cake form. Campbell Soup
Company lost an estimated $30 million in
introducing its condensed soups in England;
> TAPPING INTO GLOBAL MARKETS CHAPTER 21 679
GLOBAL STANDARDIZATION OR ADAPTATION?
The marketing concept holds that consumer needs vary and that
marketing programs will be more effective when they are tailored to
each target group. This also applies to foreign
markets.
Yet in 1983,
in a groundbreaking article in the
Harvard Business
Review,
Harvard
Professor Theodore Levitt challenged this view and supplied the
intel-
lectual rationale for global standardization: "The world is becoming a
common marketplace in which people—no matter where they live—
desire the same products and lifestyles."
The development of the
Web,

the rapid spread of cable and satel-
lite TV
around the
world,
and the global linking of telecommunications
networks have led to a convergence of lifestyles.
The
convergence of
needs and wants has created global markets for standardized
prod-
ucts,
particularly among the young middle class.
Levitt favors global corporations that try to sell the same product
the same way to all consumers. They focus on similarities across
world markets and "sensibly force suitably standardized products and
services on the entire globe." These global marketers achieve
economies through standardization of production, distribution, mar-
keting,
and management. They translate their efficiency into greater
value for consumers by offering high-quality and more reliable
prod-
ucts at lower prices.
Coca-Cola, McDonald's, Marlboro,
Nike,
the NBA, and Gillette are
among the companies that have successfully marketed global
prod-
ucts.
Consider Gillette: Some 1.2 billion people use at least one
Gillette product daily, according to the company's estimates. Gillette

enjoys huge economies of scale by selling a few types of razor blades
in every single market.
Many companies have tried to launch their version of a world
product.
Yet,
most products require some
adaptation.
Toyota's Corolla
will exhibit some differences in styling. McDonald's offers a ham and
cheese "Croque McDo" in France, a variation of the French favorite
croque monsieur. Coca-Cola is sweeter or less carbonated in certain
countries. Rather than assuming that its domestic product can be
introduced "as is" in another country, the company should review the
following elements and determine which would add more revenue
than cost:
• Product features
• Brand name
• Labeling
• Packaging
• Colors
• Advertising execution
• Materials
• Prices
• Sales promotion
a Advertising themes
• Advertising media
Consumer behavior can dramatically differ across markets. Take
annual beverage consumption. One of the highest per capita
con-
sumers of carbonated soft drinks is the United States, with 203.9

liters per capita consumption; Italy is among the lowest. But Italy is
one of the highest per capita drinkers of bottled water with 164.4
liters,
whereas the United Kingdom is only 20
liters.
When
it comes to
beer, Ireland and the Czech Republic lead the pack, with over 150
liters per
capita,
with France among the lowest at 35.9 liters.
Besides demand-side differences, other types of supply-side
dif-
ferences can also prevail. Levitt's critics pointed out that flexible
manufacturing techniques made it easier to produce many different
product versions, tailored to particular countries. One study showed
that companies made one or more marketing-mix adaptations in 80
percent of their foreign products and that the average number of
adapted elements was four. So perhaps Levitt's globalization dictum
should be rephrased. Global marketing, yes; global standardization,
not necessarily.
Sources: Theodore
Levitt, "The Globalization of Markets,"
Harvard Business Review
(May-June 1983): 92-102; Bernard Wysocki Jr., "The Global
Mall:
In
Developing Nations, Many Youths Splurge, Mainly on U.S. Goods,"
Wall Street
Journal,

June 26,1997,
p.
A1;
"What Makes a Company Great?"
Fortune,
October 26,1998, pp. 218-226; David M. Szymanski, Sundar
G.
Bharadwaj, and
P.
Rajan
Varadarajan,
"Standardization
versus Adaptation
of International
Marketing Strategy: An Empirical Investigation,"
Journal
of
Marketing
(October 1993): 1-17; "Burgers and Fries a la Francaise,"
The
Economist,
April 17,
2004,
pp.
60-61;
Johny K. Johansson, "Global Marketing: Research on Foreign Entry, Local Marketing, Global Management," in
Handbook
of Marketing,
edited by Bart Weitz and Robin Wensley (London: Sage Publications, 2002), pp. 457-483.
consumers saw expensive small-sized cans and did not realize that water needed to

be added. Straight extension is tempting because it involves no additional R&D
expense, manufacturing retooling, or promotional modification; but it can be costly in
the long run.
Product adaptation involves altering the product to meet local conditions or prefer-
ences.
There are several levels of adaptation.
B
A
company can produce a regional version of its product, such as a Western European
version. Finnish cellular phone superstar Nokia customized its 6100 series phone for
every major market. Developers built in rudimentary voice recognition for Asia, where
keyboards are a problem, and raised the ring volume so the phone could be heard on
crowded Asian streets.
MARKETING INSIGHT
680 PART 8 > CREATING SUCCESSFUL LONG-TERM GROWTH «
FIG.
21.3 |
Five International Product and
Communication Strategies
Do Not Change
Communications
1 Adapt
<S Communications
Product
Do Not Change Adapt Develop New
Product Product Product
a
A
company can produce a country version of its product. In Japan, Mister Donut's
cof-

fee cup is smaller and lighter to fit the hand of the average Japanese consumer; even the
doughnuts are a little smaller. Kraft blends different coffees for the British (who drink
their coffee with milk), the French (who drink their coffee black), and Latin Americans
(who want a chicory taste).
E
A
company can produce a city
version
of
its
product—for instance, a beer to meet Munich
tastes or
Tokyo
tastes.
H
A company can produce different retailer versions of its product, such as one coffee
brew for the Migros chain store and another for the Cooperative chain store, both in
Switzerland.
MARKETING MEMO
THE TEN COMMANDMENTS OF GLOBAL BRANDING
For many companies, global branding has been both a blessing and
a curse. A global branding program can lower marketing costs,
real-
ize greater economies of scale in production, and provide a long-term
source of growth. If not designed and implemented properly, it may
ignore important differences in consumer behavior and/or the com-
petitive environment in the individual countries. These suggestions
can help a company retain many of the advantages of global brand-
ing while minimizing the potential disadvantages:
1.

Understand
similarities and differences in the global
brand-
ing
landscape.
International markets can vary in terms of brand
development, consumer behavior, competitive activity, legal
restrictions, and so on.
2.
Do not take shortcuts in brand-building. Building a brand in
new markets should be done from the "bottom-up," both strate-
gically (building awareness before brand image) and tactically
(creating sources of brand equity in new markets).
3. Establish a marketing infrastructure. A company must either
build marketing infrastructure "from scratch" or adapt to existing
infrastructure in other countries.
4.
Embrace
integrated marketing communications. A company
must often use many forms of communication in overseas mar-
kets,
not just advertising.
5. Establish brand partnerships. Most global brands have
marketing partners in their international markets that help
companies achieve advantages in distribution, profitability,
and added value.
6. Balance standardization and customization. Some elements
of a marketing program can be standardized (packaging, brand
name); others typically require greater customization (distribu-
tion channels).

7. Balance global and local control. Companies must balance
global and local control within the organization and distribute
decision making between global and local managers.
8. Establish operable guidelines. Brand definition and guidelines
must be established, communicated, and properly enforced so
that marketers everywhere know what they are expected to do
and not
do.
The goal is to set rules for how the brand should be
positioned and marketed.
9. Implement a global brand equity measurement system. A
global brand equity system is a set of research procedures
designed to provide timely, accurate, and actionable information
for marketers so they can make the best possible short-run tac-
tical decisions and long-run strategic decisions.
10.
Leverage brand elements. Proper design and implementa-
tion of brand elements (brand name and trademarked brand
identifiers) can be an invaluable source of brand equity
worldwide.
Source:
Adapted from Kevin Lane Keller and Sanjay Sood, "The Ten Commandments of Global Branding,"
Asian Journal
of
Marketing
8,
no. 2 (2001):
97-108.
> TAPPING INTO GLOBAL MARKETS CHAPTER 21 681
ESTABLISHING GLOBAL SERVICE BRANDS

limit the number of U.S. television programs and films shown in their
countries. Many U.S. states bar foreign bank branches. At the same
time,
the United States is pressuring South Korea to open its markets
to U.S.
banks.
The World Trade Organization, consisting of 147 coun-
tries,
and the General Agreement on Tariffs and Trade (GATT),
con-
sisting of 110 countries, continue to press for more free trade in
international services and other areas.
Retailers who sell books, videos, and CD-ROMs, and entertain-
ment companies have also had to contend with a culture of censor-
ship in countries such as China and Singapore. In Singapore, for
example, book retailers must submit potentially "hot" materials to the
Committee on Undesirable Publications.
Sources:
Charles P. Wallace, "Charge!"
Fortune,
September 28,1998, pp. 189-196; <www.wto.org>; Ben Dolven, "Find the Niche," Far
Eastern
Economic
Review,
March 26,1998, pp. 58-59.
Product invention consists of creating something new. It can take two forms. Backward
invention is reintroducing earlier product forms that are well adapted to a foreign country's
needs.
The National Cash Register Company reintroduced its crank-operated cash register
at half the price of a modern cash register and sold substantial numbers in Latin America

and Africa.
Forward invention is creating a new product to meet a need in another country. There is
an enormous need in less developed countries for low-cost, high-protein foods. Companies
such as Quaker Oats, Swift, and Monsanto are researching these countries' nutrition needs,
formulating new foods, and developing advertising campaigns to gain product trial and
acceptance. Toyota produces vehicles specifically designed, with the help of local employ-
ees,
to suit the tastes of these markets.
38
Product invention is a costly strategy, but the payoffs can be great, particularly if a com-
pany can parlay a product innovation into other countries. In globalization's latest twist,
American companies are not only inventing new products for overseas markets, but also lift-
ing products and ideas from their international operations and bringing them home.
r- HAAGEN-DAZS
Haagen-Dazs had developed a flavor for sale solely in Argentina, called "dulce de leche." Translated as "sweet
of milk," it was named for the caramelized milk that is one of the most popular flavors in Argentina. Just one
year later, the company rolled out dulce de leche in supermarkets from Boston to Los Angeles to
Paris.
The co-
opted flavor soon did
S1
million a month in the United States, becoming one of the top 10 flavors. It was partic-
• ularly popular in Miami, where it sold twice as fast as any other flavor.
39
In launching products and services globally, certain brand elements may have to be
changed. When Clairol introduced the "Mist Stick," a curling iron, into Germany, it found
that mistis slang for manure. Few Germans wanted to purchase a "manure stick." Brand slo-
gans or ad taglines sometimes have to be changed too:'
10
When Coors put its brand slogan "Turn it loose" into Spanish, it was read by some as

"suf-
fer from diarrhea."
•
A
laundry soap ad claiming to wash "really dirty parts" was translated in French-speaking
Quebec to read "a soap for washing private parts."
B
Perdue's slogan—"It takes a tough man to make a tender chicken"—was rendered into
Spanish as "It takes a sexually excited man to make a chick affectionate."
MARKETING INSIGHT
The world market for services is growing at double the rate of world
merchandise trade. Large firms in accounting, advertising, banking,
communications, construction, insurance, law, management consult-
ing,
and retailing are pursuing global expansion. Pricewaterhouse,
American Express, Citigroup, Club Med, Hilton, and Thomas Cook are
known worldwide. U.S. credit card companies have streamed across
the Atlantic to convince Europeans of the joys of charge cards. In
Britain,
industry heavyweights Citibank and American Express have
wrested a lot of business from big British banks like Barclay's.
Many countries, however, have erected entry barriers or regula-
tions.
Brazil requires all accountants to possess a professional degree
from a Brazilian university. Many Western European countries want to
682 PART 8 CREATING SUCCESSFUL LONG-TERM GROWTH '
a Hallmark cards failed when they were introduced in France. The French dislike syrupy sentiment and prefer
writing their own cards.
a Philips began to earn a profit in Japan only after it had reduced the size of its coffeemakers to fit into
smaller Japanese kitchens and its shavers to fit smaller Japanese hands.

a Coca-Cola had to withdraw its two-liter bottle in Spain after discovering that few Spaniards owned refriger-
ators with large enough compartments to accommodate it.
m General Foods' Tang initially failed in France because it was positioned as a substitute for orange juice at
breakfast. The French drink little orange juice and almost none at breakfast.
• Kellogg's Pop-Tarts failed in Britain because the percentage of British homes with toasters was significantly
lower than in the United States, and the product was too sweet for British tastes.
• Procter & Gamble's Crest toothpaste initially failed in
Mexico when
it
used
the U.S.
campaign.
Mexicans did not
care as much for the decay-prevention benefit, nor did scientifically oriented advertising appeal to them.
• General Foods squandered millions trying to introduce packaged cake mixes to Japanese consumers. The
company failed to note that only 3 percent of Japanese homes were equipped with ovens.
a S. C. Johnson's wax floor polish initially failed in
Japan.
The wax made the floors too slippery, and Johnson
had overlooked the fact that Japanese do not wear shoes in their homes.
£3 Electrolux's British ad line for its vacuum cleaners—"Nothing sucks like an Electrolux"—
would certainly not lure customers in the United States!
Table 21.2 lists some other famous blunders in this arena.
Communications
Companies can run the same marketing communications programs as used in the home
market or change them for each local market, a process called communication adapta-
tion. If it adapts both the product and the communications, the company engages in dual
adaptation.
Consider the message. The company can use one message everywhere, varying only
the language, name, and colors.

41
Exxon used "Put a tiger in your tank" with minor vari-
ations and gained international recognition. Colors can be changed to avoid taboos in
some countries. Purple is associated with death in Burma and some Latin American
nations; white is a mourning color in India; and green is associated with disease in
Malaysia.
42
The second possibility is to use the same theme globally but adapt the copy to each local
market. For example, a Camay soap commercial showed a beautiful woman bathing. In
Venezuela, a man was seen in the bathroom; in Italy and France, only a man's hand was
seen; and in Japan, the man waited outside. The positioning stays the same, but the creative
execution reflects local sensibilities, as with Unilever.
r- UNILEVER
Global marketing powerhouse Unilever decided to base the positioning of its detergent brands around the
world on the consumer insight that parents universally saw dirty clothes and stains as a favorable sign of
their children's experiences. The pitch in Europe for Omo detergent was a sentimental 60-second spot
themed "Dirt is Good" that exhorted viewers to love their dirt. In North America, a different pitch was used.
The ad slogan for Wisk detergent was "Go Ahead. Get Dirty," and communications featured a sponsorship
• with baseball legend Cal Ripken.
43
The third approach consists of developing a global pool of
ads,
from which each country
selects the most appropriate one. Coca-Cola and Goodyear have used this approach. Finally,
| TABLE 21.2 |
Blunders in International Marketing
TAPPING INTO GLOBAL MARKETS CHAPTER 21 683
A Lands' End ad
for
Germany. Because

Germany has
a
number
of
laws
preventing
or
limiting the use
of
sales
promotion tools, Land's End cannot
advertise
its
money-back guarantee,
though
it
can accept merchandise
returns,
some companies allow their country managers to create country-specific ads—within guide-
lines,
of course. Kraft uses different ads for Cheez Whiz in different countries, given that
household penetration is 95 percent in Puerto Rico, where the cheese is put on everything,
and 65 percent in Canada, where it is spread on morning breakfast toast. In the United
States, it is considered a junk food.
The use of media also requires international adaptation because media availability varies
from country to country. Norway, Belgium, and France (and now the United States) do not
allow cigarettes and alcohol (except for beer in the United States) to be advertised on TV.
Austria and Italy regulate
TV
advertising to children. Saudi Arabia does not want advertisers

to use women in ads. India taxes advertising. Magazines vary in availability and effective-
ness;
they play a major role in Italy and a minor one in Austria.
Marketers must also adapt sales promotion techniques to different markets. Several
European countries have laws preventing or limiting sales promotion tools such as dis-
counts, rebates, coupons, games of chance, and premiums. In Germany, Lands' End
could not advertise its money-back guarantee, although it does accept returned mer-
chandise. American Express could not award points based on charges to its card for
redeeming merchandise. A German store could not advertise that it would contribute a
small sum to the fight against AIDS for each transaction; a German law limits discounts
to 3 percent of list price. However, these restrictions are under attack and are beginning
to crumble.
Personal selling tactics may have to change too. The direct, no-nonsense approach
favored
by
Americans (characterized by more of a "let's get down to business" and "what's in
it for me" stance) may not work as well in Europe, Asia, and other places where a more indi-
rect, subtle approach can be more effective.
44
With younger, more worldly employees, how-
ever, such cultural differences may be less pronounced.
684 PART 8 CREATING SUCCESSFUL LONG-TERM GROWTH
Price
Multinationals face several pricing problems when selling abroad. They must deal with price
escalation, transfer prices, dumping charges, and gray markets.
When companies sell their goods abroad, they face a price escalation problem.
A
Gucci
handbag may sell for $120 in Italy and $240 in the United States. Why? Gucci has to add the
cost of transportation, tariffs, importer margin, wholesaler margin, and retailer margin to its

factory price. Depending on these added costs, as well as the currency-fluctuation risk, the
product might have to sell for two to
five
times as much in another country to make the same
profit for the manufacturer. Because the cost escalation varies from country to country, the
question is how to set the prices in different countries. Companies have three choices:
1.
Set a uniform price everywhere - Coca-Cola might want to charge 75 cents for Coke
everywhere in the world, but then Coca-Cola would earn quite different profit rates in
different countries. Also, this strategy would result in the price being too high in poor
countries and not high enough in rich countries.
2.
Set a market-based price in each country - Here Coca-Cola would charge what each
country could afford, but this strategy ignores differences in the actual cost from coun-
try to country. Also, it could lead to a situation in which intermediaries in low-price
countries reship their Coca-Cola to high-price countries.
3.
Set a cost-based price in each country-Here Coca-Cola would use a standard markup of
its costs everywhere, but this strategy might price Coca-Cola out of the market in coun-
tries where its costs are high.
Another problem arises when a company sets a transfer price (the price it charges
another unit in the company) for goods that it ships to its foreign subsidiaries. If the com-
pany charges too high a price to a subsidiary, it may end up paying higher tariff duties,
although it may pay lower income taxes in the foreign country. If the company charges too
low a price to its subsidiary, it can be charged with dumping. Dumping occurs when a com-
pany charges either less than its costs or less than it charges in its home market, in order to
enter or win a market. In 2000, Stelco, a Canadian steelmaker, successfully fought dumping
of steel products by steelmakers in Brazil, Finland, India, Indonesia, Thailand, and Ukraine.
A
Canadian tribunal found that cut-price steel imports from these countries caused "mate-

rial injury to Canadian producers, including Stelco."
45
When the U.S. Customs Bureau finds evidence of dumping, it can levy a dumping tariff
on the guilty company. Various governments are watching for abuses and often force com-
panies to charge the arm's-length price—that is, the price charged by other competitors for
the same or a similar product.
Many multinationals are plagued by the gray market problem. The gray market consists
of
branded products diverted from normal or authorized distributions channels in the country
of product origin or across international borders. Dealers in the low-price country find ways
to sell some of their products in higher-price countries, thus earning more. Industry research
suggests that gray market activity accounts for over $40 billion in revenue each year. In 2004,
3Com successfully sued several companies in Canada (for a total of $10 million) who pro-
vided written and oral misrepresentations to get deep discounts on 3Com networking equip-
ment. The equipment, worth millions of dollars, was to be sold to a
U.S.
education software
company and sent to China and Australia, but instead ended up back in the United States.
46
Very often a company finds some enterprising distributors buying more than they can
sell in their own country and reshipping the goods to another country to take advantage of
price differences. Multinationals try to prevent gray markets by policing the distributors, by
raising their prices to lower-cost distributors, or by altering the product characteristics or
service warranties for different countries. In the European Union, the gray market may dis-
appear altogether with the transition to a single currency unit. Once consumers recognize
price differentiation by country, companies will be forced to harmonize prices throughout
the countries that have adopted the single currency. Companies and marketers that offer the
most innovative, specialized, or necessary products or services will be least affected by price
transparency.
47

The Internet will also reduce price differentiation between countries. When companies
sell their wares over the Internet, price will become transparent: Customers can easily find
out how much products sell for in different countries. Take an online training course, for
instance. Whereas the price of a classroom-delivered day of training can vary significantly
from the United States to France to Thailand, the price of an online-delivered day of training
would have to be similar.
48
TAPPING INTO GLOBAL MARKETS - CHAPTER 21 685
Another global pricing challenge that has arisen in recent years is that countries with
overcapacity, cheap currencies, and the need to export aggressively have pushed prices
down and devalued their currencies. For multinational firms this poses challenges: Sluggish
demand and reluctance to pay higher prices make selling in these emerging markets diffi-
cult. Instead of lowering prices, and taking a loss, some multinationals have found more
lucrative and creative means of coping.
49
GENERAL ELECTRIC COMPANY
Rather than striving for larger market share, GE's power systems unit focused on winning a larger percentage of
each customer's expenditures. The unit asked its top 100 customers what services were most critical to them
and how GE could provide or improve them. The answers prompted the company to cut its response time for
replacing old or damaged parts from 12 weeks to 6. It began advising customers on the nuances of doing
busi-
ness in the diverse environments of Europe and Asia and providing the maintenance staff for occasional equip-
ment upgrades. By adding value and helping customers reduce their costs and become more efficient,
GE
was
able to avoid a move to commodity pricing and was actually able to generate bigger margins. These margins led
to record revenues of S15 billion in 2000, a 50 percent rise from the previous year.
50
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 final users. Figure 21.4
shows the three major links between seller and ultimate buyer. In the first link,
seller's
inter-
national marketing headquarters, the export department or international division makes
decisions on channels and other marketing-mix elements. The second link, channels between
nations,
gets the products to the borders of the foreign nation. The decisions made in this link
include the types of intermediaries (agents, trading companies) that will be used, the type of
transportation (air, sea), and the financing and risk arrangements. The third link, channels
within
foreign
nations, gets the products from their entry point to final buyers and users.
Distribution channels within countries vary considerably.
To
sell soap in japan, Procter
&
Gamble has to work through one of the most complicated distribution systems in the world.
It must sell to a general wholesaler, who sells to a product wholesaler, who sells to a product-
specialty wholesaler, who sells to a regional wholesaler, who sells to a local wholesaler, who
finally sells to retailers. All these distribution levels can mean that the consumer's price ends
up double or triple the importer's price. If P&G takes the soap to tropical Africa, the com-
pany might sell to an import wholesaler, who sells to several
jobbers,
who sell to petty traders
(mostly women) working in local markets.
Another difference lies in the size and character of retail units abroad. Large-scale retail

chains dominate the U.S. scene, but much foreign retailing is in the hands of small, inde-
pendent retailers. In India, millions of retailers operate tiny shops or sell in open markets.
Their markups are high, but the real price is brought down through haggling. Incomes are
low, and people must shop daily for small amounts; they are limited to whatever quantity
can be carried home on foot or on a bicycle. Most homes lack storage space and refrigera-
tion. Packaging costs are kept low in order to keep prices low. In India, cigarettes are often
bought singly. Breaking bulk remains an important function of intermediaries and helps
perpetuate the long channels of distribution, which are a major obstacle to the expansion of
large-scale retailing in developing countries.
When multinationals first enter a country, they prefer to work with local distributors
who have good local knowledge, but friction often arises later.
51
The multinational com-
plains that the local distributor does not invest in business growth, does not follow com-
pany policy, does not share enough information. The local distributor complains of
insuf-
ficient corporate support, impossible goals, and confusing policies. The multinational
must choose the right distributors, invest in them, and set up performance goals to which
they can agree.
52
Some companies choose to invest in infrastructure to ensure that they benefit from the
right channels. Peruvian cola company Kola Real has been able to survive despite compet-
ing with Coca-Cola and Pepsi-Cola in Mexico by setting up its own distribution network of
600 leased lorries, 24 distribution centers, and 800 salespeople.
53
Many retailers are trying to make inroads into global markets. France's Carrefour,
Germany's Metro, and United Kingdom's Tesco have all established global positions.
FIG.
21.4
Whole-Channel Concept for International

Marketing
686 PART 8 CREATING SUCCESSFUL LONG-TERM GROWTH
Germany's Aldi follows a simple formula globally. It stocks only about 700 products, com-
pared with more than 20,000 at a traditional grocer such as Royal Ahold's Albert Heijin,
almost all on their own exclusive label. Because it sells so few products, Aldi can exert strong
control over quality and price and can simplify shipping and handling, leading to large mar-
gins.
Retail experts expect Aldi to have 1,000 stores in the United States by 2010, with as
much as
2
percent of the
U.S.
grocery market. American retail giant Wal-Mart is also expand-
ing overseas, although sometimes with mixed results.
54
WAL-MART
Wal-Mart has more than 1,000 stores in Mexico,
Canada,
Germany,
Argentina, China, Britain, South Korea, Brazil,
and Puerto Rico. By 2003, Wal-Mart was receiving 20 percent of its revenue from overseas, up from 12 percent
in 2000. The company has learned along the way. German operations have encountered a number of obstacles.
When Wal-Mart opened its stores in Latin America, sales were disappointing. Wal-Mart designed its Latin
American stores like those in the United States: narrow aisles crowded with merchandise, huge parking lots,
many products with red, white, and blue banners, and so on. However, Latin American shoppers expect wider
aisles since they come with larger families; many do not have a car and need door-to-door bus transportation,
and the red, white, and blue banners seem like Yankee imperialism.
55
::: Country-of-Origin Effects
In an increasingly connected, highly competitive global marketplace, government officials

and marketers are concerned with how attitudes and beliefs about their country affect con-
sumer and business decision making. Country-of-origin perceptions are the mental associa-
tions and beliefs triggered by a country. Government officials want to strengthen their coun-
try's image to help domestic marketers who export and to attract foreign firms and investors.
Marketers want to use country-of-origin perceptions in the most advantageous way possible
to sell their products and services.
Building Country Images
Governments now recognize that the images of their cities and countries affect more than
tourism and have important value in commerce. Attracting foreign business can improve the
local economy provide jobs, and improve infrastructure. City officials in Kobe, Japan, were
able to entice multinationals Procter
&
Gamble, Nestle, and Eli Lilly to locate their Japanese
headquarters in the city through traditional marketing techniques, with careful targeting and
positioning.
56
Across the globe, after seeing its name being used to help sell everything from
pizza to perfume to blinds, the city of Venice made it a priority to capitalize on its image. City
officials developed a trademark that could be licensed to product marketers.
57
Hong
Kong
offi-
cials also developed a symbol—a stylized dragon—to represent their city's core brand values.
58
Countries all over the world are being marketed like any other brand. In some cases, neg-
ative perceptions must be overcome. Research by the British Council in 2000 revealed that
young opinion leaders in 28 countries saw Britons as weak on creativity and innovation,
class-ridden, racist, and cold. Emphasizing the country's traditional values and heritage, as
has typically been done, might only exacerbate the situation. One commentator's recom-

mendation was to concentrate on the 1,700 foreign media correspondents in London who
play a critical role in conveying the British image to their respective countries.
59
Attitudes toward country of origin can change over time. Before World War II, Japan had
a poor quality
image.
The success of Sony and
its
Trinitron
TV
sets and Japanese automakers
Honda and Toyota helped to change people's opinions. Relying partly on the global success
of Nokia, Finland launched a campaign to enhance its image as a center of high-tech inno-
vation.
60
"Marketing Insight: The Ups and Downs of Brand America" describes some of the
issues that arose due to the anti-American sentiment after the commencement of the Iraq
war in
2003.
Consumer Perceptions of Country of Origin
Global marketers know that buyers hold distinct attitudes and beliefs about brands or prod-
ucts from different countries.
61
These country-of-origin perceptions can affect consumer
decision making directly and indirectly. The perceptions may be included as an attribute in
- TAPPING INTO GLOBAL MARKETS CHAPTER 21 687
Hong Kong's trademark,
a
stylized dragon with the tagline "Asia's world city."
decision making or influence other attributes in the process ("if it is French, it must be styl-

ish").
The mere fact that a brand is perceived as being successful on a global stage may lend
credibility and respect.
r>2
Several studies have found the following:
63
B
People are often ethnocentric and favorably predisposed to their own country's products,
unless they come from a less developed country
a The more favorable a country's image, the more prominently the "Made in . . ." label
should be displayed.
B
The impact of country of origin varies with the type of product. Consumers want to know
where a car was made but not the lubricating oil.
B
Certain countries enjoy a reputation for certain goods: Japan for automobiles and con-
sumer electronics; the United States for high-tech innovations, soft drinks, toys, cigarettes,
and jeans; France for wine, perfume, and luxury goods.
H
Sometimes country-of-origin perception can encompass an entire country's products. In
one study, Chinese consumers in Hong Kong perceived American products as prestigious,
Japanese products as innovative, and Chinese products as cheap.
The favorability of country-of-origin perceptions must be considered both from a domes-
tic and foreign perspective. In the domestic market, country-of-origin 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. Patriotic appeals have been the basis of marketing strategies all over the world.
Patriotic appeals, however, can lack uniqueness and even be overused. For example, during
the Reagan administration in the 1980s, a number of different
U.S.

brands in a diverse range
of product categories (e.g., cars, beer, clothing, etc.) used pro-American themes in their
advertising, perhaps diluting the efforts of all as a result.
A
company has several options when its products are competitively priced but their place
of origin turns consumers off. The company can consider co-production with a foreign
company that has a better name: South Korea could make a fine leather jacket that it sends
to Italy for finishing; or the company can adopt a strategy to achieve world-class quality in
the local industry, as is the case with Belgian chocolates, Polish ham, and Colombian coffee.
Companies can target niches to establish a footing in new markets. China's leading
maker of refrigerators, washing machines, and air conditioners, Haier, is building
a beachhead in the United States with American college students who loyally buy its
688 PART 8 CREATING SUCCESSFUL LONG-TERM GROWTH
THE UPS AND DOWNS OF BRAND AMERICA
One concern for global marketers is how political issues about their
domestic country can spill over to influence consumers' perceptions
of their products and services in overseas markets. As the United
States found itself at odds with other countries in recent years over
various issues, including the war in
Iraq,
marketers wondered how it
might influence the effectiveness of their marketing programs.
Initially, the answer appeared to be
little.
As
one protester against
the U.S. policy on North Korea observed, "Calling for political inde-
pendence is one thing, and liking American brands is another. I like
IBM,
Dell,

Microsoft, Starbucks, and Coke." Many consumers seemed
willing to separate politics and products. American technology was
widely admired and young people all over the world continued to
embrace American youth culture. Perhaps the most compelling
example of the power of American brands overseas is the fact that
McDonald's most successful market in Europe has been France, a
country often dismissive of American politics and culture.
Part of the explanation for this mental compartmentalization may be
the way these
global American
brands
had
been built
and
marketed over
the years. Many of them successfully tapped into universal consumer
values and needs—such as Nike with athletic performance, Levi's with
rugged individualism, and Coca-Cola with youthful optimism. Further,
these firms hire thousands of employees and make sure their products
and marketing activities are consistent with local sensibilities.
Many of these same brands also had gone to great lengths
through the years to weave themselves into the cultural fabric of their
foreign markets. One story told by a Coca-Cola executive is about a
young child visiting America from Japan who commented to her par-
ents on seeing a Coca-Cola vending machine—"Look, they have
Coca-Cola too!" As far as she was concerned, Coca-Cola was a
Japanese brand.
In some cases, consumers actually don't know where brands
come
from,

either because the brand has become so intertwined with
multiple countries or the country of origin is just not that well known.
In surveys, consumers routinely guess that Heineken is German and
that Nokia is Japanese (Dutch and Finnish, respectively). Few
con-
sumers know that Haagen-Dazs and Estee Lauder originated in the
United States.
Concerned about
a
potentially tarnished American image, Charlotte
Beers, former chief executive of the Ogilvy & Mather ad agency, was
sworn in as President Bush's Under Secretary for Public Diplomacy and
Public Affairs on October
2,2001,
and
charged with helping to improve
the national reputation in the Middle East, where public perceptions
were especially negative. Despite these efforts, as time wore on after
the commencement of the Iraq war, some U.S. brands such as
McDonald's, Coca-Cola, Microsoft, and
Yahoo!
did appear to sustain
some tarnishing of their images.
Sources:
Janet
Guyon,
"Brand America,"
Fortune,
October 27,2003, pp. 179-182; Richard
Tompkins,

"As Hostility
Towards
America
Grows,
Will the World
Lose Its Appetite for Coca-Cola, McDonald's and Nike,"
Financial Times,
March 27,2003, p. 13; Gerry Kermouch and Diane Brady, "Brands in an Age of
Anti-Americanism,
BusinessWeek,
August 4,2003, pp. 69-78; Parija Bhatnagar, "U.S. Brands Losing Luster,"
CNN/Money,
May 21,2004; "Burgers and
Fries a la Francaise,"
The
Economist,
April 17,2004, pp.
60-61.
mini-fridges, which are sold at Wal-Mart and elsewhere.
64
Haier's long-term plans are to
introduce innovative products in other areas, such as flat-screen TV sets and wine-
cooling cabinets.
As progress is made, companies can start to build local roots to increase relevance, as
exemplified by Toyota.
TOYOTA
Toyota has made sales in North America a top
priority.
As
one executive bluntly

stated,
"We must Americanize."
As proof of their conviction, consider the following. Toyota has become the number-three player in the U.S. car
market. In 2001, it sold more vehicles in the United States than in Japan, and over two-thirds of these sales
were manufactured locally. An estimated two-thirds of its corporate operating profit comes from the United
States. Toyota's U.S. factories and dealerships employ 123,000 Americans—more than Coca-Cola, Microsoft,
and Oracle combined.
65
Toyota is not alone in emphasizing the American market. BMW sold more cars in the United
States in 2003 than it did in Germany.
66
Ill Deciding on the Marketing Organization
Companies manage their international marketing activities in three ways: through export
departments, international divisions, or a global organization.
MARKETING INSIGHT
TAPPING INTO GLOBAL MARKETS CHAPTER 21 689
Export Department
A
firm normally gets into international marketing by simply shipping out its goods. If its
international sales expand, the company organizes an export department consisting of a
sales manager and a few assistants. As sales increase, the export department is expanded to
include various marketing services so that the company can go after business more aggres-
sively. If the firm moves into joint ventures or direct investment, the export department will
no longer be adequate to manage international operations.
International Division
Many companies become involved in several international markets and ventures. Sooner or
later they will create international divisions to handle all their international activity. The
international division is headed by a division president, who sets goals and budgets and is
responsible for the company's international growth.
The international division's corporate staff consists of functional specialists who provide

services to various operating units. Operating units can be organized in several ways. First,
they can be geographical organizations. Reporting to the international-division president
might be regional vice presidents for North America, Latin America, Europe, Africa, the
Middle East, and the Far East. Reporting to the regional vice presidents are country man-
agers who are responsible for a sales force, sales branches, distributors, and licensees in the
respective countries. The operating units may be world product
groups,
each with an inter-
national vice president responsible for worldwide sales of each product group. The vice
presidents may draw on corporate-staff area specialists for expertise on different geo-
graphical areas. Finally, operating units may be international subsidiaries, each headed by
a president. The various subsidiary presidents report to the president of the international
division.
Many multinationals shift between types of organization.
|- IBM
Part of IBM's massive reorganization strategy has been to put 235,000 employees into 14 customer-focused
groups such as oil and gas, entertainment, and financial services. This way a big customer will be able to cut
one deal with a central sales office to have IBM computers installed worldwide. Under the old system, a corpo-
rate customer with operations in 20 countries had to contract with 20 little Big Blues, each with its own pricing
2 structure and service standards.
67
Global Organization
Several firms have become truly global organizations. Their top corporate management and
staff plan worldwide manufacturing facilities, marketing policies, financial flows, and logis-
tical systems. The global operating units report directly to the chief executive or executive
committee, not to the head of an international division. Executives are trained in worldwide
operations. Management is recruited from many countries; components and supplies are
purchased where they can be obtained at the least cost; and investments are made where
the anticipated returns are greatest.
These companies face several organizational complexities. For example, when pricing a

company's mainframe computers to a large banking system in Germany, how much influ-
ence should the headquarters product manager have? And the company's market manager
for the banking sector? And the company's German country manager?
Bartlett and Ghoshal have proposed circumstances under which different approaches work
best. In Managing
Across
Borders,
they describe forces that favor "global integration" (capital-
intensive production, homogeneous demand) versus "national responsiveness" (local stan-
dards and barriers, strong
local
preferences). They distinguish three organizational strategies:
68
1.
A global strategy treats the world as a single market - This strategy is warranted when
the forces for global integration are strong and the forces for national responsiveness are
weak. This is true of the consumer electronics market, for example, where most buyers
will accept a fairly standardized pocket radio, CD player, or
TV.
Matsushita has per-
formed better than GE and Philips in the consumer-electronics market because
Matsushita operates in a more globally coordinated and standardized way.
690 PART 8 CREATING SUCCESSFUL LONG-TERM GROWTH
2.
A multinational strategy treats the world as a portfolio of national opportunities -
This strategy is warranted when the forces favoring national responsiveness are strong
and the forces favoring global integration are weak. This is the situation in the branded
packaged-goods business (food products, cleaning products). Bartlett and Ghoshal cite
Unilever as a better performer than Kao and P&G because Unilever grants more
decision-making autonomy to its local branches.

3.
A "glocal" strategy standardizes certain
core
elements and localizes other elements - This
strategy makes sense for an industry (such as telecommunications) where each nation
requires some adaptation of its equipment, but the providing company can also standard-
ize some of the core components. Bartlett and Ghoshal cite Ericsson as balancing these
considerations better than NEC (too globally oriented) and ITT (too locally oriented).
Many firms seek a blend of centralized global control from corporate headquarters with
input from local and regional marketers. Finding that balance can be tricky. Coca-Cola's
"think local, act local" philosophy, which decentralized much of the power and responsibil-
ity to design marketing programs and activities, fell apart when many local managers lacked
the necessary skills or discipline. Decidedly un-Coke-like ads appeared—such as skinny-
dippers streaking down a beach in Italy—and sales stalled. The pendulum swung back, and
Coke executives in Atlanta began to play a stronger strategic role again.
69
SUMMARY
Despite the many challenges in the international arena
(shifting borders, unstable governments, foreign-exchange
problems, corruption, and technological pirating), compa-
nies selling in global industries need to internationalize
their operations. Companies cannot simply stay domestic
and expect to maintain their markets.
In deciding to go abroad, a company needs to define its
international marketing objectives and policies. The com-
pany must determine whether to market in a few countries
or many countries. It must decide which countries to con-
sider. In general, the candidate countries should be rated
on three criteria: market attractiveness, risk, and competi-
tive advantage. Developing countries offer a unique set of

opportunities and risks.
Once a company decides on a particular country, it must
determine the best mode of entry.
Its
broad choices are indi-
rect exporting, direct exporting, licensing, joint ventures,
and direct investment. Each succeeding strategy involves
more commitment, risk, control, and profit potential.
In deciding on the marketing program, a company must
decide how much to adapt its marketing program—prod-
uct, communications, distribution, and price—to local
conditions. At the product level, firms can pursue a strat-
egy of straight extension, product adaptation, or product
invention. At the communication level, firms may choose
communication adaptation or dual adaptation. At the
price level, firms may encounter price escalation and gray
markets. At the distribution level, firms need to take a
whole-channel view of the challenge of distributing prod-
ucts to the final users. In creating all elements of the mar-
keting program, firms must be aware of the cultural, social,
political, technological, environmental, and legal limita-
tions they face in other countries.
5.
Country-of-origin perceptions can affect consumers and
businesses alike. Managing those perceptions in the most
advantageous way possible is an important marketing
priority.
6. Depending on the level of international involvement, com-
panies manage their international marketing activity in
three ways: through export departments, international

divisions, or a global organization.
APPLICATIONS
:::
Marketing Debate Is The World Coming Closer Together?
Many social commentators maintain that youth and teens are
becoming more and more alike across countries as time goes
on. Others, while not disputing that fact, point out that the
dif-
ferences 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 similarities.