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In Memoriam: Warren J. Keegan 1936–2014

—MCG

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Mark C. Green Simpson College

Warren J. Keegan Late, Pace University

GLOBAL MARKETING

TENTH EDITION

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ISBN 10: 0-13-489975-X ISBN 13: 978-0-13-489975-6

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Library of Congress Cataloging-in-Publication Data

Library of Congress Cataloging-in-Publication Data Names: Keegan, Warren J., author. | Green, Mark C., author. Title: Global marketing / 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. Description: Tenth edition. | Hoboken : Pearson Education, [2020] Identifiers: LCCN 2018045759| ISBN 9780134899756 | ISBN 013489975X Subjects: LCSH: Export marketing. Classification: LCC HF1416 .K443 2020 | DDC 658.8/4--dc23 LC record available at https://lccn.loc.gov/2018045759

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v

Brief Contents

Preface xvi Acknowledgments xx

PART ONE INTRODUCTION 2

Chapter 1 Introduction to Global Marketing 2

PART TWO THE GLOBAL MARKETING ENVIRONMENT 40

Chapter 2 The Global Economic Environment 40 Chapter 3 The Global Trade Environment 72 Chapter 4 Social and Cultural Environments 106 Chapter 5 The Political, Legal, and Regulatory Environments 138

PART THREE APPROACHING GLOBAL MARKETS 174

Chapter 6 Global Information Systems and Market Research 174 Chapter 7 Segmentation, Targeting, and Positioning 212 Chapter 8 Importing, Exporting, and Sourcing 246 Chapter 9 Global Market-Entry Strategies: Licensing, Investment, and

Strategic Alliances 276

PART FOUR THE GLOBAL MARKETING MIX 306

Chapter 10 Brand and Product Decisions in Global Marketing 306 Chapter 11 Pricing Decisions 340 Chapter 12 Global Marketing Channels and Physical Distribution 376 Chapter 13 Global Marketing Communications Decisions I 412 Chapter 14 Global Marketing Communications Decisions II 444 Chapter 15 Global Marketing and the Digital Revolution 478

PART FIVE STRATEGY AND LEADERSHIP IN THE TWENTY-FIRST CENTURY 510

Chapter 16 Strategic Elements of Competitive Advantage 510 Chapter 17 Leadership, Organization, and Corporate Social

Responsibility 542

Glossary 573 Author/Name Index 587 Subject/Organization Index 597

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vii

Preface xvi Acknowledgments xx

PART ONE INTRODUCTION 2

Chapter 1 Introduction to Global Marketing 2 Case 1-1 The Global Marketplace Is Also Local 2

1-1 Introduction and Overview 3 1-2 Principles of Marketing: A Review 5

Competitive Advantage, Globalization, and Global Industries 6

1-3 Global Marketing: What it is and What it isn’t 9 1-4 The Importance of Global Marketing 16 1-5 Management Orientations 17

Ethnocentric Orientation 17 Polycentric Orientation 18 Regiocentric Orientation 18 Geocentric Orientation 18

1-6 Forces Affecting Global Integration and Global Marketing 21 Driving Forces 21

MULTILATERAL TRADE AGREEMENTS 21 CONVERGING MARKET NEEDS AND WANTS AND THE INFORMATION REVOLUTION 21 TRANSPORTATION AND COMMUNICATION IMPROVEMENTS 22 PRODUCT DEVELOPMENT COSTS 22 QUALITY 23 WORLD ECONOMIC TRENDS 23 LEVERAGE 24

Experience Transfers 24 Scale Economies 24

RESOURCE UTILIZATION 25 GLOBAL STRATEGY 25 INNOVATION AND ENTREPRENEURSHIP 25

Restraining Forces 26 MANAGEMENT MYOPIA AND ORGANIZATIONAL CULTURE 26 NATIONAL CONTROLS 26 OPPOSITION TO GLOBALIZATION 26

1-7 Outline of This Book 27 Summary 28 Discussion Questions 29

Case 1-1 The Global Marketplace (continued) 30 Case 1-2 McDonald’s Expands Globally While Adjusting Its Local Recipe 31 Case 1-3 Apple versus Samsung: The Battle for Smartphone

Supremacy Heats Up 35

PART TWO THE GLOBAL MARKETING ENVIRONMENT 40

Chapter 2 The Global Economic Environment 40 Case 2-1 India’s Economy at the Crossroads: Can Prime Minister Narendra Modi Deliver

Acche Din? 40 2-1 The World Economy—Overview of Major Changes 41 2-2 Economic Systems 43

Contents

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Market Capitalism 44 Centrally Planned Socialism 44 Centrally Planned Capitalism and Market Socialism 45

2-3 Stages of Market Development 48 Low-Income Countries 49 Lower-Middle-Income Countries 50 Upper-Middle-Income Countries 51 Marketing Opportunities in LDCs and Developing Countries 54 High-Income Countries 57 Marketing Implications of the Stages of Development 58

2-4 Balance of Payments 59 2-5 Trade in Merchandise and Services 61

Overview of International Finance 62 Economic Exposure 64 Managing Exchange Rate Exposure 64

Summary 65 Discussion Questions 66

Case 2-1 India’s Economy at the Crossroads: Can Prime Minister Narendra Modi Deliver Acche Din? (continued) 67

Case 2-2 A Day in the Life of a Contracts Analyst at Cargill 69

Chapter 3 The Global Trade Environment 72 Case 3-1 Breaking Up Is Hard to Do: Britons Contemplate “Brexit” 72

3-1 The World Trade Organization and Gatt 73 3-2 Preferential Trade Agreements 74

Free Trade Area 75 Customs Union 76 Common Market 76 Economic Union 76

3-3 North America 77 3-4 Latin America: Sica, Andean Community, Mercosur, and Caricom 80

Central American Integration System 80 Andean Community 82 Common Market of the South (Mercosur) 84 Caribbean Community and Common Market (CARICOM) 85

3-5 Asia-Pacific: The Association of Southeast Asian Nations 87 Marketing Issues in the Asia-Pacific Region 88

3-6 Western, Central, and Eastern Europe 89 The European Union 89 Marketing Issues in the EU 93 Central and Eastern Europe 94

3-7 The Middle East 94 Cooperation Council for the Arab States of the Gulf 95 Marketing Issues in the Middle East 96

3-8 Africa 97 Economic Community of West African States 97 East African Community 97 Southern African Development Community 98 Marketing Issues in Africa 98

Summary 99 Discussion Questions 99

Case 3-1 Breaking Up Is Hard to Do: Britons Contemplate “Brexit” (continued) 101 Case 3-2 Can Global Trade Talks Survive in an Era of Populism and Protectionism? 103

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Chapter 4 Social and Cultural Environments 106 Case 4-1 Strange Brew: Coffee Culture Around the World 106

4-1 Society, Culture, and Global Consumer Culture 107 Attitudes, Beliefs, and Values 108 Religion 109 Aesthetics 110 Dietary Preferences 111 Language and Communication 112 Marketing’s Impact on Culture 117

4-2 High- and Low-Context Cultures 118 4-3 Hofstede’s Cultural Typology 119 4-4 The Self-Reference Criterion and Perception 121 4-5 Diffusion Theory 124

The Adoption Process 124 Characteristics of Innovations 124 Adopter Categories 125 Diffusion of Innovations in Pacific Rim Countries 126

4-6 Marketing Implications of Social and Cultural Environments 126 Summary 128 Discussion Questions 129

Case 4-1 Coffee Culture Around the World (continued) 129 Case 4-2 Is Tourism the Savior or the Scourge of Venice? 133

Chapter 5 The Political, Legal, and Regulatory Environments 138 Case 5-1 Travis Kalanick and Uber 138

5-1 The Political Environment 139 Nation-States and Sovereignty 140 Political Risk 142 Taxes 143 Seizure of Assets 145

5-2 International Law 145 Common Law versus Civil Law 147 Islamic Law 148

5-3 Sidestepping Legal Problems: Important Business Issues 148 Jurisdiction 149 Intellectual Property: Patents, Trademarks, and Copyrights 149 Antitrust 155 Licensing and Trade Secrets 159 Bribery and Corruption: Legal and Ethical Issues 160

5-4 Conflict Resolution, Dispute Settlement, and Litigation 162 Alternatives to Litigation for Dispute Settlement 163

5-5 The Regulatory Environment 164 Regional Economic Organizations: The EU Example 165

Summary 167 Discussion Questions 167

Case 5-1 Travis Kalanick and Uber (continued) 168 Case 5-2 Putin’s Russia versus the West: Cold War 2.0? 170

PART THREE APPROACHING GLOBAL MARKETS 174

Chapter 6 Global Information Systems and Market Research 174 Case 6-1 Big Data: “Number One with a Bullet” in the Music Industry 174

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6-1 Information Technology, Management Information Systems, and Big Data for Global Marketing 176 6-2 Sources of Market Information 181 6-3 Formal Market Research 183

Step 1: Information Requirements 183 Step 2: Problem Definition 184 Step 3: Choosing the Unit of Analysis 185 Step 4: Examining Data Availability 185 Step 5: Assessing the Value of Research 187 Step 6: Research Design 187

ISSUES IN DATA COLLECTION 188 RESEARCH METHODOLOGIES 189 SCALE DEVELOPMENT 194 SAMPLING 194

Step 7: Data Analysis 194 COMPARATIVE ANALYSIS AND MARKET ESTIMATION BY ANALOGY 198

Step 8: Interpretation and Presentation 199

6-4 Headquarters’ Control of Market Research 200 6-5 The Marketing Information System as a Strategic Asset 201 Summary 202 Discussion Questions 202

Case 6-1 Big Data Transforms the Music Business and Artist Careers (continued) 203 Case 6-2 A Day in the Life of a Business Systems and Analytics Manager 207

Chapter 7 Segmentation, Targeting, and Positioning 212 Case 7-1 Segmenting the Chinese Luxury Goods Market 212

7-1 Global Market Segmentation 213 Contrasting Views of Global Segmentation 214 Demographic Segmentation 215

SEGMENTING GLOBAL MARKETS BY INCOME AND POPULATION 216 AGE SEGMENTATION 220 GENDER SEGMENTATION 221

Psychographic Segmentation 221 Behavior Segmentation 224 Benefit Segmentation 224 Ethnic Segmentation 225

7-2 Assessing Market Potential and Choosing Target Markets or Segments 226

Current Segment Size and Growth Potential 226 Potential Competition 228 Feasibility and Compatibility 229 A Framework for Selecting Target Markets 230

7-3 Product–Market Decisions 231 7-4 Targeting and Target Market Strategy Options 233

Standardized Global Marketing 233 Concentrated Global Marketing 234 Differentiated Global Marketing 235

7-5 Positioning 236 Attribute or Benefit 236 Quality and Price 236 Use or User 237 Competition 237 Global, Foreign, and Local Consumer Culture Positioning 237

Summary 240 Discussion Questions 240

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Case 7-1 Segmenting the Chinese Luxury Goods Market (continued) 241 Case 7-2 Cosmetics Giants Segment the Global Health and Beauty Market 243

Chapter 8 Importing, Exporting, and Sourcing 246 Case 8-1 The Game’s Afoot: Exports Revive Britain’s Shoe Industry 246

8-1 Export Selling and Export Marketing: A Comparison 247 8-2 Organizational Export Activities 249 8-3 National Policies Governing Exports and Imports 250

Government Programs That Support Exports 250 Governmental Actions to Discourage Imports and Block Market Access 252

8-4 Tariff Systems 257 Customs Duties 259 Other Duties and Import Charges 259

8-5 Key Export Participants 260 8-6 Organizing for Exporting in the Manufacturer’s Country 261 8-7 Organizing for Exporting in the Market Country 262 8-8 Trade Financing and Methods of Payment 262

Letters of Credit 263 Documentary Collections (Sight or Time Drafts) 264 Navigating the Real World: A Brief Case Study 264 Navigating the Real World: Another Brief Case Study 265 Additional Export and Import Issues 265

8-9 Sourcing 266 Management Vision 267 Factor Costs and Conditions 268 Customer Needs 269 Logistics 269 Country Infrastructure 269 Political Factors 270 Foreign Exchange Rates 270

Summary 270 Discussion Questions 271

Case 8-1 Great Britain’s Shoe Export Boom (continued) 271 Case 8-2 A Day in the Life of an Export Coordinator 273

Chapter 9 Global Market-Entry Strategies: Licensing, Investment, and Strategic Alliances 276

Case 9-1 AB InBev and SABMiller: A Match Made in (Beer) Heaven? 276 9-1 Licensing 278

Special Licensing Arrangements 280

9-2 Investment 281 Joint Ventures 283 Investment via Equity Stake or Full Ownership 284

9-3 Global Strategic Partnerships 288 The Nature of Global Strategic Partnerships 288 Success Factors 291 Alliances with Asian Competitors 291 CFM International, GE, and Snecma: A Success Story 292 Boeing and Japan: A Controversy 292

9-4 International Partnerships in Developing Countries 293 9-5 Cooperative Strategies in Asia 294

Cooperative Strategies in Japan: Keiretsu 294 HOW KEIRETSU AFFECT AMERICAN BUSINESS: TWO EXAMPLES 295

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Cooperative Strategies in South Korea: Chaebol 296

9-6 Twenty-First-Century Cooperative Strategies 297 9-7 Market Expansion Strategies 298 Summary 298 Discussion Questions 299

Case 9-1 AB InBev and SABMiller: A Match Made in (Beer) Heaven? (continued) 300 Case 9-2 Jaguar’s Passage to India 302

PART FOUR THE GLOBAL MARKETING MIX 306

Chapter 10 Brand and Product Decisions in Global Marketing 306 Case 10-1 Alphabet 306

10-1 Basic Product Concepts 307 Product Types 308 Product Warranties 308 Packaging 308 Labeling 309 Aesthetics 310

10-2 Basic Branding Concepts 310 Local Products and Brands 311 International Products and Brands 312 Global Products and Brands 312 Global Brand Development 315

10-3 A Needs-Based Approach To Product Planning 319 10-4 “Country of Origin” as a Brand Element 322 10-5 Extend, Adapt, Create: Strategic Alternatives in Global Marketing 324

Strategy 1: Product-Communication Extension (Dual Extension) 325 Strategy 2: Product Extension–Communication Adaptation 326 Strategy 3: Product Adaptation–Communication Extension 327 Strategy 4: Product-Communication Adaptation (Dual Adaptation) 328 Strategy 5: Innovation 329 How to Choose a Strategy 329

10-6 New Products in Global Marketing 330 Identifying New-Product Ideas 330 New-Product Development 331 The International New-Product Department 333 Testing New Products 333

Summary 334 Discussion Questions 335

Case 10-1 Google (continued) 335

Chapter 11 Pricing Decisions 340 Case 11-1 Global Automakers Target Low-Income Consumers 340

11-1 Basic Pricing Concepts 341 11-2 Global Pricing Objectives and Strategies 342

Market Skimming and Financial Objectives 342 Penetration Pricing and Nonfinancial Objectives 344 Companion Products: Captive (“Razors and Blades”) Pricing 344 Target Costing 345 Calculating Prices: Cost-Plus Pricing and Export Price Escalation 346

11-3 Incoterms 347 11-4 Environmental Influences on Pricing Decisions 351

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Currency Fluctuations 351 Inflationary Environment 354 Government Controls, Subsidies, and Regulations 355 Competitive Behavior 356 Using Sourcing as a Strategic Pricing Tool 357

11-5 Global Pricing: Three Policy Alternatives 357 Extension or Ethnocentric Pricing 357 Adaptation or Polycentric Pricing 358 Geocentric Pricing 358

11-6 Gray Market Goods 359 11-7 Dumping 360 11-8 Price Fixing 361 11-9 Transfer Pricing 362

Tax Regulations and Transfer Prices 362 Sales of Tangible and Intangible Property 363

11-10 Countertrade 364 Barter 364 Counterpurchase 365 Offset 365 Compensation Trading 365 Switch Trading 366

Summary 366 Discussion Questions 367

Case 11-1 Global Automakers Target Low-Income Consumers (continued) 367 Case 11-2 Global Consumer-Products Companies Target Low-Income Consumers 369 Case 11-3 LVMH and Luxury Goods Marketing 371

Chapter 12 Global Marketing Channels and Physical Distribution 376 Case 12-1 Welcome to the World of Fast Fashion 376

12-1 Distribution Channels: Objectives, Terminology, and Structure 377

Consumer Products and Services 378 Industrial Products 382

12-2 Establishing Channels and Working With Channel Intermediaries 383

12-3 Global Retailing 386 Types of Retail Operations 387 Trends in Global Retailing 391 Global Retailing Market Expansion Strategies 394

12-4 Physical Distribution, Supply Chains, and Logistics Management 397

Order Processing 399 Warehousing 400 Inventory Management 400 Transportation 400 Logistics Management: A Brief Case Study 403

Summary 403 Discussion Questions 404

Case 12-1 Welcome to the World of Fast Fashion (continued) 405 Case 12-2 Can Walmart Crack the Retail Code in India? 408

Chapter 13 Global Marketing Communications Decisions I 412 Case 13-1 Volkswagen’s “Dieselgate” Nightmare 412

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13-1 Global Advertising 413 Global Advertising Content: Standardization versus Adaptation 415

13-2 Advertising Agencies: Organizations and Brands 419 Selecting an Advertising Agency in the Era of Digital Disruption 420

13-3 Creating Global Advertising 424 Art Direction and Art Directors 425 Copy and Copywriters 426 Additional Cultural Considerations 426

13-4 Global Media Decisions 429 Global Advertising Expenditures and Media Vehicles 430 Media Decisions 430

13-5 Public Relations and Publicity 431 The Growing Role of PR in Global Marketing Communications 435 How PR Practices Differ Around the World 436

Summary 437 Discussion Questions 437

Case 13-1 Volkswagen’s “Dieselgate” Nightmare (continued) 438 Case 13-2 Coca-Cola: Using Advertising and Public Relations to Respond to a Changing

World 440

Chapter 14 Global Marketing Communications Decisions II 444 Case 14-1 Milan Expo 2015 444

14-1 Sales Promotion 446 Sampling 448 Couponing 449 Sales Promotion: Issues and Problems 450

14-2 Personal Selling 451 The Strategic/Consultative Selling Model 453

14-3 Sales Force Nationality 457 14-4 Special Forms of Marketing Communications: Direct Marketing 460

Direct Mail 461 Catalogs 461 Infomercials, Teleshopping, and Interactive Television 463

14-5 Special Forms of Marketing Communications: Support Media, Sponsorship, and Product Placement 464

Support Media 464 Sponsorship 466 Product Placement: Motion Pictures, Television Shows, and Public Figures 468

Summary 470 Discussion Questions 471

Case 14-1 Milan Expo 2015 (continued) 472 Case 14-2 Red Bull 474

Chapter 15 Global Marketing and the Digital Revolution 478 Case 15-1 How Do You Like Your Reality? Virtual? Augmented? Mixed? 478

15-1 The Digital Revolution: A Brief History 479 15-2 Convergence 483 15-3 Value Networks and Disruptive Technologies 484 15-4 Global E-Commerce 487 15-5 Web Site Design and Implementation 490 15-6 New Products and Services 492

Broadband 492 Cloud Computing 494

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Smartphones 494 Mobile Advertising and Mobile Commerce 494 Autonomous Mobility 497 Mobile Music 498 Mobile Gaming 498 Online Gaming and e-Sports 499 Mobile Payments 499 Streaming Video 500 Internet Phone Service 500 Digital Books and Electronic Reading Devices 500 Wearables 501

Summary 502 Discussion Questions 503

Case 15-1 How Do You Like Your Reality: Virtual? Augmented? Mixed? (continued) 504 Case 15-2 Africa 3.0 506

PART FIVE STRATEGY AND LEADERSHIP IN THE TWENTY-FIRST CENTURY 510

Chapter 16 Strategic Elements of Competitive Advantage 510 Case 16-1 IKEA 510

16-1 Industry Analysis: Forces Influencing Competition 511 Threat of New Entrants 512 Threat of Substitute Products 513 Bargaining Power of Buyers 513 Bargaining Power of Suppliers 514 Rivalry among Competitors 514

16-2 Competitive Advantage 515 Generic Strategies for Creating Competitive Advantage 515

BROAD MARKET STRATEGIES: COST LEADERSHIP AND DIFFERENTIATION 515 NARROW TARGET STRATEGIES: COST FOCUS AND FOCUSED DIFFERENTIATION 517

Creating Competitive Advantage via Strategic Intent 519 LAYERS OF ADVANTAGE 519 LOOSE BRICKS 520 CHANGING THE RULES 520 COLLABORATING 521

16-3 Global Competition and National Competitive Advantage 521 Factor Conditions 522

HUMAN RESOURCES 522 PHYSICAL RESOURCES 522 KNOWLEDGE RESOURCES 522 CAPITAL RESOURCES 523 INFRASTRUCTURE RESOURCES 523

Demand Conditions 523 COMPOSITION OF HOME DEMAND 525 SIZE AND PATTERN OF GROWTH OF HOME DEMAND 525 RAPID HOME-MARKET GROWTH 525 MEANS BY WHICH A NATION’S PRODUCTS AND SERVICES ARE PUSHED OR PULLED INTO FOREIGN COUNTRIES 525

Related and Supporting Industries 525 Firm Strategy, Structure, and Rivalry 526 Chance 526 Government 527

16-4 Current Issues in Competitive Advantage 527 Hypercompetitive Industries 527

COST AND QUALITY 529

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TIMING AND KNOW-HOW 529 ENTRY BARRIERS 531

The Flagship Firm: The Business Network with Five Partners 532 Blue Ocean Strategy 533 Additional Research on Competitive Advantage 534

Summary 535 Discussion Questions 535

Case 16-1 IKEA (continued) 536 Case 16-2 “Everything Is Awesome, Everything Is Cool” at LEGO 538

Chapter 17 Leadership, Organization, and Corporate Social Responsibility 542

Case 17-1 A Changing of the Guard at Unilever 542 17-1 Leadership 543

Top Management Nationality 544 Leadership and Core Competence 546

17-2 Organizing For Global Marketing 547 Patterns of International Organizational Development 550

INTERNATIONAL DIVISION STRUCTURE 550 REGIONAL MANAGEMENT CENTERS 552 GEOGRAPHIC AND PRODUCT DIVISION STRUCTURES 554 THE MATRIX DESIGN 555

17-3 Lean Production: Organizing The Japanese Way 558 Assembler Value Chains 558 Downstream Value Chains 559

17-4 Ethics, Corporate Social Responsibility, and Social Responsiveness in the Globalization Era 560

Summary 566 Discussion Questions 567

Case 17-1 Unilever (continued) 567

Glossary 573 Author/Name Index 587 Subject/Organization Index 597

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We are proud that this Tenth Edition of Global Marketing marks more than two decades of pub- lication success. In this new edition, as in prior editions, we take an environmental and strategic approach to global marketing by outlining the major dimensions of the global business environ- ment. We also provide a set of conceptual and analytical tools that prepare students to success- fully apply the 4Ps when pursuing careers in global marketing or related areas.

Guided by our experience using the text in undergraduate and graduate classrooms and in corporate training seminars, we have revised, updated, and expanded Global Marketing. One of our challenges in developing a new edition of Global Marketing is the rate of change in the global business environment. Yesterday’s impossibility becomes today’s reality; new companies explode onto the scene; company leadership changes abruptly. In short, any book can be quickly outdated by events. Even so, we set out to create a compelling narrative that captures the unfold- ing drama that is in inherent in marketing in the globalization era.