Global marketing strategy case study

Global Marketing eiGhth edition

Warren J. Keegan • Mark C. Green

this is a special edition of an established title widely used by colleges and universities throughout the world. Pearson published this exclusive edition for the benefit of students outside the United States and Canada. If you purchased this book within the United States or Canada you should be aware that it has been imported without the approval of the Publisher or Author.

Pearson Global Edition

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ISBN-13: ISBN-10:

978-1-292-01738-9 1-292-01738-4

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GlobAl edition

For these Global editions, the editorial team at Pearson has collaborated with educators across the world to address a wide range of subjects and requirements, equipping students with the best possible learning tools. this Global edition preserves the cutting-edge approach and pedagogy of the original, but also features alterations, customization, and adaptation from the north American version.

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• Study Plan – Help students build a basic understanding of key concepts. Students start by taking a pretest to gauge initial understanding of key concepts. Upon completion, they receive a personalized path of study based on the areas where they would benefit from additional study and practice.

• Business Today – Bring current events alive in your classroom with videos, discussion questions, and author blogs. Be sure to check back often; this section changes daily.

• Decision-making Simulations – Place your students in the role of a key decision-maker, where they are asked to make a series of decisions. The simulation will change and branch based on the decisions students make, providing a variation of scenario paths. Upon completion of each simulation, students receive a grade, as well as a detailed report of the choices they made during the simulation and the associated consequences of those decisions.

• Dynamic Study Modules – Through adaptive learning, students get personalized guidance where and when they need it most, creating greater engagement, improving knowledge retention, and supporting subject-matter mastery. Ultimately, students’ self-confidence increases and their results improve. Also available on mobile devices.

• Writing Space – Better writers make great learners—who perform better in their courses. Providing a single location to develop and assess concept mastery and critical thinking, the Writing Space offers assisted graded and create-your-own writing assignments, enabling you to exchange personalized feedback with students, quickly and easily.

Writing Space can also check students’ work for improper citation or plagiarism by comparing it against the world’s most accurate text comparison database, available from Turnitin.

http://www.pearsonmylabandmastering.com

Whatever your course goals, we’ve got you covered!

Use MyMarketingLab™ to improve student results!

• Study Plan – Help students build a basic understanding of key concepts. Students start by taking a pretest to gauge initial understanding of key concepts. Upon completion, they receive a personalized path of study based on the areas where they would benefit from additional study and practice.

• Business Today – Bring current events alive in your classroom with videos, discussion questions, and author blogs. Be sure to check back often; this section changes daily.

• Decision-making Simulations – Place your students in the role of a key decision-maker, where they are asked to make a series of decisions. The simulation will change and branch based on the decisions students make, providing a variation of scenario paths. Upon completion of each simulation, students receive a grade, as well as a detailed report of the choices they made during the simulation and the associated consequences of those decisions.

• Dynamic Study Modules – Through adaptive learning, students get personalized guidance where and when they need it most, creating greater engagement, improving knowledge retention, and supporting subject-matter mastery. Ultimately, students’ self-confidence increases and their results improve. Also available on mobile devices.

• Writing Space – Better writers make great learners—who perform better in their courses. Providing a single location to develop and assess concept mastery and critical thinking, the Writing Space offers assisted graded and create-your-own writing assignments, enabling you to exchange personalized feedback with students, quickly and easily.

Writing Space can also check students’ work for improper citation or plagiarism by comparing it against the world’s most accurate text comparison database, available from Turnitin.

http://www.pearsonmylabandmastering.com

Warren J. Keegan Lubin Graduate School of Business

Pace University

New York City and Westchester, New York

Mark C. Green Department of Business Administration

and Economics

Simpson College

Indianola, Iowa

Tippie College of Business

University of Iowa

Iowa City, Iowa

Boston Columbus Indianapolis New York San Francisco Upper Saddle River

Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montréal

Toronto Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

Global MaRKETING Eighth Edition

gLoBAL Edition

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Editor in Chief: Stephanie Wall acquisitions Editor: Mark Gaffney Senior acquisitions Editor, Global Editions: Steven Jackson Project Editor, Global Editions: Suchismita Ukil Program Manager Team lead: ashley Santora Program Manager: Jennifer M. Collins Editorial assistant: Daniel Petrino Director of Marketing: Maggie Moylan Executive Marketing Manager: anne Fahlgren Project Manager Team lead: Judy leale Project Manager: becca Groves Head of learning asset acquisition, Global Editions: laura Dent Media Producer, Global Editions: M. Vikram Kumar

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© Pearson Education limited 2015

The rights of Warren J. Keegan and Mark C. Green to be identified as the authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents act 1988.

Authorized adaptation from the United States edition, entitled Global Marketing, 8th edition, ISBN 978-0-13-354500-5, by Warren J. Keegan and Mark C. Green, published by Pearson Education © 2015.

all rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a license permitting restricted copying in the United Kingdom issued by the Copyright licensing agency ltd, Saffron House, 6–10 Kirby Street, london EC1N 8TS.

all trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners.

ISbN 10: 1-292-01738-4 ISbN 13: 978-1-292-01738-9

british library Cataloguing-in-Publication Data a catalogue record for this book is available from the british library

10 9 8 7 6 5 4 3 2 1 14 13 12 11

Typeset in 10/12 Times by Integra Printed and bound by Courier Kendallville in The United States of america

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To Cynthia, my wife, best friend, and partner in living life creatively.

—WJK

In memoriam: Peter Nathaniel Green 1964–2013

—MCG

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5

Brief Contents

Preface 17 Acknowledgments 21

Part ONE Introduction 24 Chapter 1 Introduction to Global Marketing 24 Case 1-1 The Global Marketplace Is Also Local 24 Case 1-1 The Global Marketplace (continued) 54 Case 1-2 McDonald’s Expands Globally While Adjusting Its Local

Recipe 55 Case 1-3 Apple versus Samsung: The Battle for Smartphone Supremacy

Heats Up 58

Part twO the Global Marketing Environment 60 Chapter 2 The Global Economic Environment 60 Case 2-1 A New Front in the Battle of Ideas 60 Case 2-1 A New Front in the Battle of Ideas (continued) 89 Case 2-2 Argentina Uncorks Malbec; World Ready

for a Glass 90

Chapter 3 The Global Trade Environment 92 Case 3-1 Global Trading Partners Look East and West

for Economic Growth 92 Case 3-1 Will New Trade Partnerships Fuel East-West Growth?

(continued) 121 Case 3-2 Will the Euro Survive? The Euro Zone Fights

for Its Life 122

Chapter 4 Social and Cultural Environments 124 Case 4-1 Will Tourism Ruin Venice? 124 Case 4-1 Is Tourism the Savior or the Scourge of Venice?

(continued) 148 Case 4-2 Soccer and the Fashion World 150

Chapter 5 The Political, Legal, and Regulatory Environments 152

Case 5-1 Mr. President—Free Pussy Riot! 152 Case 5-1 Mr. President—Free Pussy Riot! (continued) 181 Case 5-2 America’s Cuban Conundrum 183 Case 5-3 Gambling Goes Global on the Internet 186

Part thrEE approaching Global Markets 188 Chapter 6 Global Information Systems and Market Research 188 Case 6-1 Nestlé’s Middle East Investment in Market Research 188 Case 6-1 Nestlé’s Middle East Investment in Market Research

(continued) 217 Case 6-2 Research Helps Whirlpool Keep Its Cool at Home, Act Local

in Emerging Markets 218

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6 BRIEF CoNTENTS

Chapter 7 Segmentation, Targeting, and Positioning 220 Case 7-1 Global Companies Target Low-Income Consumers (A) 220 Case 7-1 Global Companies Target Low-Income Consumers (A)

(continued) 250 Case 7-2 Cosmetics Giants Segment the Global Cosmetics Market 252

Chapter 8 Importing, Exporting, and Sourcing 254 Case 8-1 East-Asian Countries: Export-led Growth for Economic

Success 254 Case 8-1 Hong Kong Trade and Investment Hub (continued) 281 Case 8-2 Turkish Cars: The Big Picture 282 Case 8-3 A Day in the Life of an Export Coordinator 283

Chapter 9 Global Market-Entry Strategies: Licensing, Investment, and Strategic Alliances 284

Case 9-1 Mo’men Launches Franchises in UAE 284 Case 9-1 Mo’men Launches Franchises in UAE (continued) 311 Case 9-2 Jaguar’s Passage to India 313

Part fOur the Global Marketing Mix 314 Chapter 10 Brand and Product Decisions in Global Marketing 314 Case 10-1 The Beatles Story, Liverpool 314 Case 10-1 The Beatles Story, Liverpool (continued) 347 Case 10-2 The Smart Car 348

Chapter 11 Pricing Decisions 350 Case 11-1 Global Companies Target Low-Income Consumers (B) 350 Case 11-1 Global Companies Target Low-Income Consumers (B)

(continued) 379 Case 11-2 LVMH and Luxury Goods Marketing 380 Case 11-3 One Laptop Per Child 382

Chapter 12 Global Marketing Channels and Physical Distribution 384 Case 12-1 Carrefour’s Entry in Dubai 384 Case 12-1 How Successful is Carrefour’s Joint Venture in the UAE?

(continued) 415 Case 12-2 Fail! Tesco Strikes Out in the United States 416

Chapter 13 Global Marketing Communications Decisions I: Advertising and Public Relations 418

Case 13-1 The Gulf Oil Spill: BP’s Public Relations Nightmare 418 Case 13-1 The BP Oil Spill (continued) 445 Case 13-2 Samsung: Launching People 446

Chapter 14 Global Marketing Communications Decisions II: Sales Promotion, Personal Selling, and Special Forms of Marketing Communication 448

Case 14-1 Red Bull 448 Case 14-1 Red Bull (continued) 479 Case 14-2 Marketing an Industrial Product in Latin America 480

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BRIEF CoNTENTS 7

Chapter 15 Global Marketing and the Digital Revolution 482 Case 15-1 Africa 3.0 482 Case 15-1 Africa 3.0 (continued) 508 Case 15-2 Global Marketers Discover Social Media 509

Part fIvE Strategy and Leadership in the twenty-first Century 510

Chapter 16 Strategic Elements of Competitive Advantage 510 Case 16-1 Volkswagen Aims for the Top 510 Case 16-1 Volkswagen (continued) 538 Case 16-2 IKEA 541 Case 16-3 LEGO 543

Chapter 17 Leadership, organization, and Corporate Social Responsibility 544

Case 17-1 A Changing of the Guard at Unilever 544 Case 17-1 Unilever (continued) 572

Glossary 575 Author/Name Index 589 Subject/Organization Index 597

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9

Contents

Preface 17 Acknowledgments 21

Part ONE Introduction 24

Chapter 1 Introduction to Global Marketing 24 introduction and overview 25 Principles of Marketing: A Review 27

Competitive Advantage, Globalization, and Global Industries 28

global Marketing: What it is and What it isn’t 31 the importance of global Marketing 38 Management orientations 40

Ethnocentric Orientation 40 Polycentric Orientation 41 Regiocentric Orientation 41 Geocentric Orientation 42

Forces Affecting global integration and global Marketing 44 Multilateral Trade Agreements 44 Converging Market Needs and Wants and the Information Revolution 45 Transportation and Communication Improvements 45 Product Development Costs 45 Quality 46 World Economic Trends 46 Leverage 48

Experience Transfers 48 Scale Economies 48 Resource Utilization 49 Global Strategy 49

Restraining Forces 49 Management Myopia and Organizational Culture 49 National Controls 50 Opposition to Globalization 50

outline of this Book 51

Part twO the Global Marketing Environment 60

Chapter 2 the Global Economic Environment 60 the World Economy—An overview 62 Economic Systems 63

Market Capitalism 64 Centrally Planned Socialism 65 Centrally Planned Capitalism and Market Socialism 65

Stages of Market development 70 Low-Income Countries 70 Lower-Middle-Income Countries 71 Upper-Middle-Income Countries 73 Marketing Opportunities in LDCs and Developing Countries 75 High-Income Countries 77 The Triad 78 Marketing Implications of the Stages of Development 79

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10 CoNTENTS

Balance of Payments 80 trade in Merchandise and Services 82

Overview of International Finance 83 Economic Exposure 85 Managing Exchange Rate Exposure 85

Chapter 3 the Global trade Environment 92 the World trade organization and gAtt 93 Preferential trade Agreements 94

Free Trade Area 95 Customs Union 95 Common Market 95 Economic Union 95

north America 98 Latin America: SiCA, Andean Community, Mercosur, and CARiCoM 100

Central American Integration System 100 Andean Community 101 Common Market of the South (Mercosur) 103 Caribbean Community and Common Market (CARICOM) 105 Current Trade-Related Issues 106

Asia-Pacific: the Association of Southeast Asian nations (ASEAn) 106

Marketing Issues in the Asia-Pacific Region 107

Western, Central, and Eastern Europe 109 The European Union (EU) 110 Marketing Issues in the EU 112

the Middle East 114 Cooperation Council for the Arab States of the Gulf 115 Marketing Issues in the Middle East 116

Africa 116 Economic Community of West African States (ECOWAS) 116 East African Community 117 Southern African Development Community (SADC) 118 Marketing Issues in Africa 118

Chapter 4 Social and Cultural Environments 124 Society, Culture, and global Consumer Culture 125

Attitudes, Beliefs, and Values 127 Religion 127 Aesthetics 128 Dietary Preferences 130 Language and Communication 132 Marketing’s Impact on Culture 135

high- and Low-Context Cultures 136 hofstede’s Cultural typology 137 the Self-Reference Criterion and Perception 141 diffusion theory 142

The Adoption Process 142 Characteristics of Innovations 143 Adopter Categories 143 Diffusion of Innovations in Pacific Rim Countries 144

Marketing implications of Social and Cultural Environments 145

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CoNTENTS 11

Chapter 5 the Political, Legal, and regulatory Environments 152 the Political Environment 153

Nation-States and Sovereignty 154 Political Risk 155 Taxes 157 Seizure of Assets 159

international Law 160 Common Law Versus Civil Law 161 Islamic Law 162

Sidestepping Legal Problems: important Business issues 162 Jurisdiction 162 Intellectual Property: Patents, Trademarks, and Copyrights 163 Antitrust 168 Licensing and Trade Secrets 172 Bribery and Corruption: Legal and Ethical Issues 173

Conflict Resolution, dispute Settlement, and Litigation 175 Alternatives to Litigation for Dispute Settlement 176

the Regulatory Environment 177 Regional Economic Organizations: The EU Example 178

Part thrEE approaching Global Markets 188

Chapter 6 Global Information Systems and Market research 188 information technology and Business intelligence for global Marketing 189 Sources of Market information 194 Formal Market Research 196

Step 1: Information Requirement 196 Step 2: Problem Definition 198 Step 3: Choose Unit of Analysis 198 Step 4: Examine Data Availability 198 Step 5: Assess Value of Research 201 Step 6: Research Design 201

Issues in Data Collection 202 Research Methodologies 204 Scale Development 207 Sampling 208

Step 7: Data Analysis 208 Comparative Analysis and Market Estimation by Analogy 212

Step 8: Interpretation and Presentation 213

headquarters’ Control of Market Research 214 the Marketing information System as a Strategic Asset 214

Chapter 7 Segmentation, targeting, and Positioning 220 global Market Segmentation 221

Contrasting Views of Global Segmentation 223 Demographic Segmentation 223

Segmenting Global Markets by Income and Population 224 Age Segmentation 227 Gender Segmentation 228

Psychographic Segmentation 229 Behavior Segmentation 231 Benefit Segmentation 231 Ethnic Segmentation 234

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12 CoNTENTS

Assessing Market Potential and Choosing target Markets or Segments 235 Current Segment Size and Growth Potential 235 Potential Competition 237 Feasibility and Compatibility 238 A Framework for Selecting Target Markets 239

Product-Market decisions 241 targeting and target Market Strategy options 242

Standardized Global Marketing 242 Concentrated Global Marketing 243 Differentiated Global Marketing 243

Positioning 243 Attribute or Benefit 244 Quality and Price 244 Use or User 244 Competition 245 Global, Foreign, and Local Consumer Culture Positioning 245

Chapter 8 Importing, Exporting, and Sourcing 254 Export Selling and Export Marketing: A Comparison 255 organizational Export Activities 257 national Policies governing Exports and imports 258

Government Programs That Support Exports 259 Governmental Actions to Discourage Imports and Block Market Access 260

tariff Systems 265 Customs Duties 267 Other Duties and Import Charges 267

Key Export Participants 268 organizing for Exporting in the Manufacturer’s Country 269 organizing for Exporting in the Market Country 270 trade Financing and Methods of Payment 270

Documentary Credit 271 Documentary Collections (Sight or Time Drafts) 271 Cash in Advance 273 Sales on Open Account 273

Additional Export and import issues 273 Sourcing 274

Management Vision 275 Factor Costs and Conditions 276 Customer Needs 277 Logistics 277 Country Infrastructure 277 Political Factors 278 Foreign Exchange Rates 278

Chapter 9 Global Market-Entry Strategies: Licensing, Investment, and Strategic alliances 284 Licensing 286

Special Licensing Arrangements 287

investment 289 Joint Ventures 289 Investment via Equity Stake or Full Ownership 293

global Strategic Partnerships 296 The Nature of Global Strategic Partnerships 297 Success Factors 300

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CoNTENTS 13

Alliances with Asian Competitors 300 CFM International, GE, and Snecma: A Success Story 301 Boeing and Japan: A Controversy 301

international Partnerships in developing Countries 302 Cooperative Strategies in Asia 303

Cooperative Strategies in Japan: Keiretsu 303 How Keiretsu Affect American Business: Two Examples 306

Cooperative Strategies in South Korea: Chaebol 307

twenty-First-Century Cooperative Strategies 307 Market Expansion Strategies 308

Part fOur the Global Marketing Mix 314

Chapter 10 Brand and Product Decisions in Global Marketing 314 Basic Product Concepts 315

Product Types 316 Product Warranties 316 Packaging 316 Labeling 317 Aesthetics 318

Basic Branding Concepts 319 Local Products and Brands 320 International Products and Brands 320 Global Products and Brands 321 Global Brand Development 324

A needs-Based Approach to Product Planning 327 “Country of origin” as Brand Element 329 Extend, Adapt, Create: Strategic Alternatives in global Marketing 333

Strategy 1: Product-Communication Extension (Dual Extension) 335 Strategy 2: Product Extension–Communication Adaptation 335 Strategy 3: Product Adaptation–Communication Extension 337 Strategy 4: Product-Communication Adaptation (Dual Adaptation) 338 Strategy 5: Innovation 339 How to Choose a Strategy 340

new Products in global Marketing 340 Identifying New-Product Ideas 340 New-Product Development 342 The International New-Product Department 343 Testing New Products 344

Chapter 11 Pricing Decisions 350 Basic Pricing Concepts 351 global Pricing objectives and Strategies 352

Market Skimming and Financial Objectives 352 Penetration Pricing and Nonfinancial Objectives 353 Companion Products: Captive Pricing, a/k/a “Razors and Blades” Pricing 354 Target Costing 355 Calculating Prices: Cost-Plus Pricing and Export Price Escalation 356

Environmental influences on Pricing decisions 361 Currency Fluctuations 361 Inflationary Environment 364 Government Controls, Subsidies, and Regulations 365

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14 CoNTENTS

Competitive Behavior 366 Using Sourcing as a Strategic Pricing Tool 367

global Pricing: three Policy Alternatives 367 Extension or Ethnocentric Pricing 368 Adaptation or Polycentric Pricing 368 Geocentric Pricing 369

gray Market goods 369 dumping 371 Price Fixing 372 transfer Pricing 373

Tax Regulations and Transfer Prices 374 Sales of Tangible and Intangible Property 374

Countertrade 374 Barter 375 Counterpurchase 376 Offset 376 Compensation Trading 376 Switch Trading 377

Chapter 12 Global Marketing Channels and Physical Distribution 384 distribution Channels: objectives, terminology, and Structure 385

Consumer Products and Services 386 Industrial Products 390

Establishing Channels and Working with Channel intermediaries 391 global Retailing 394

Types of Retail Operations 395 Trends in Global Retailing 399 Global Retailing Market Expansion Strategies 402

Physical distribution, Supply Chains, and Logistics Management 403

Order Processing 408 Warehousing 408 Inventory Management 408 Transportation 409 Logistics Management: A Brief Case Study 412

Chapter 13 Global Marketing Communications Decisions I: advertising and Public relations 418 global Advertising 419

Global Advertising Content: Standardization versus Adaptation 422

Advertising Agencies: organizations and Brands 425 Selecting an Advertising Agency 427

Creating global Advertising 429 Art Direction and Art Directors 430 Copy and Copywriters 432 Cultural Considerations 432

global Media decisions 435 Global Advertising Expenditures and Media Vehicles 435 Media Decisions 436

Public Relations and Publicity 436 The Growing Role of PR in Global Marketing Communications 441 How PR Practices Differ Around the World 442

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CoNTENTS 15

Chapter 14 Global Marketing Communications Decisions II: Sales Promotion, Personal Selling, and Special forms of Marketing Communication 448 Sales Promotion 449

Sampling 452 Couponing 453 Sales Promotion: Issues and Problems 454

Personal Selling 455 The Strategic/Consultative Selling Model 457 Sales Force Nationality 462

Special Forms of Marketing Communications: direct Marketing, Support Media, Event Sponsorship, and Product Placement 464

Direct Mail 465 Catalogs 466 Infomercials, Teleshopping, and Interactive Television 467 Support Media 469 Sponsorship 471 Product Placement: Motion Pictures, Television Shows, and Public Figures 473

Chapter 15 Global Marketing and the Digital revolution 482 the digital Revolution: A Brief history 483 Convergence 488 Value networks and disruptive technologies 489 global E-Commerce 491 Web Site design and implementation 494 new Products and Services 497

Broadband 497 Cloud Computing 498 Smartphones 500 Mobile Advertising and Mobile Commerce 500 Mobile Music 502 Mobile Gaming 504 Internet Phone Service 504 Digital Books and Electronic Reading Devices 505