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Global Marketingarketing

Sixth Edition

Svend Hollensen

‘All good marketing is local. Global companies know this and are going “glocal”. Svend Hollensen has captured all the latest trends in this new edition of his Global Marketing.’

Philip Kotler, Northwestern University, USA

Global marketinG

iii

Global Marketing

Sixth Edition

Svend Hollensen

PEARSON EDUCATION LIMITED Edinburgh Gate Harlow CM20 2JE United Kingdom Tel: +44 (0)1279 623623 Web: www.pearson.com/uk

First published 1998 by Prentice Hall (print) Second edition published 2001 by Pearson Education Limited (print) Third edition published 2004 (print) Fourth edition published 2007 (print) Fifth edition published 2011 (print) Sixth edition published 2014 (print and electronic)

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brief ContentS

Preface xviii Guided tour xxxii Acknowledgements xxxiv Publisher’s acknowledgements xxxvi Abbreviations xli About the author xlv

Part i THE DECISION WHETHER TO INTERNATIONALIzE 3 1 Global marketing in the firm 5 2 Initiation of internationalization 52 3 Internationalization theories 76 4 Development of the firm’s international competitiveness 100

Part I Case studies 144

Part ii DECIDING WHICH MARKETS TO ENTER 169 5 Global marketing research 173 6 The political and economic environment 208 7 The sociocultural environment 243 8 The international market selection process 270

Part II Case studies 308

Part iii MARKET ENTRY STRATEGIES 325 9 Some approaches to the choice of entry mode 331 10 Export modes 346 11 Intermediate entry modes 368 12 Hierarchical modes 398 13 International sourcing decisions and the role of the subsupplier 419

Part III Case studies 446

Part iV DESIGNING THE GLOBAL MARKETING PROGRAMME 471 14 Product decisions 479 15 Pricing decisions and terms of doing business 534 16 Distribution decisions 570 17 Communication decisions (promotion strategies) 606

Part IV Case studies 650

Part V IMPLEMENTING AND COORDINATING THE GLOBAL MARKETING PROGRAMME 681

18 Cross-cultural sales negotiations 683 19 Organization and control of the global marketing programme 710

Part V Case studies 744

Index 775

This page is intentionally left blank.

ContentS

Preface xviii Guided tour xxxii Acknowledgements xxxiv Publisher’s acknowledgements xxxvi Abbreviations xli About the author xlv

Part I THE DECISION WHETHER TO INTERNATIONALIzE 3

Part I Video case study: Cisco systems 4

1 Global marketing in the firm 5 Learning objectives 5

1.1 Introduction to globalization 6 1.2 The process of developing the global marketing plan 6 1.3 Comparison of the global marketing and management style of SMEs and LSEs 7

Exhibit 1.1 LEGO’s strategic drift 14 Exhibit 1.2 Economies of scale with Nintendo Game Boy 16 Exhibit 1.3 Ford Focus global marketing plan 18

1.4 Should the company internationalize at all? 19 1.5 Development of the ‘global marketing’ concept 20

Exhibit 1.4 Persil Black & Persil Abaya = glocalization (same product, but different packaging and market communication) 23

1.6 Forces for global integration and market responsiveness 24 Exhibit 1.5 McDonald’s is moving towards a higher degree of market

responsiveness 26 1.7 The value chain as a framework for identifying international competitive advantage 27 1.8 Value shop and the ‘service value chain’ 33 1.9 Global experiential marketing 37 1.10 Information business and the virtual value chain 39 1.11 Summary 41

Case studies 1.1 Green Toys, Inc.: a manufacturer of eco-friendly toys is going international 42 1.2 Hunter Boot Ltd: the iconic British brand is moving into exclusive fashion 47 1.3 Video case study: Nivea 49

Questions for discussion 50 References 50

2 Initiation of internationalization 52 Learning objectives 52

2.1 Introduction 53 2.2 Internationalization motives 53

Exhibit 2.1 Jägermeister: the famous herbal liqueur is going global as a result of ‘managerial urge’ in the family-owned company 54

CONTENTSviii

Exhibit 2.2 Global marketing and economies of scale in Japanese firms 57 Exhibit 2.3 Internationalization of Haier – proactive and reactive motives 60

2.3 Triggers of export initiation (change agents) 61 2.4 Internationalization barriers/risks 65

Exhibit 2.4 De-internationalization at British Telecommunications (BT) 67 2.5 Summary 69

Case studies 2.1 LifeStraw: Vestergaard-Frandsen transforms dirty water into clean

drinking water 70 2.2 Elvis Presley Enterprises Inc. (EPE): internationalization of a cult icon 72 2.3 Video case study: TOMS Shoes 73

Questions for discussion 74 References 75

3 Internationalization theories 76 Learning objectives 76

3.1 Introduction 77 3.2 The Uppsala internationalization model 79 3.3 The transaction cost analysis (TCA) model 83 3.4 The network model 86 3.5 Born globals 88

Exhibit 3.1 K-pop – a ‘born global’ phenomenon has worldwide success 88 3.6 Summary 92

Case studies 3.1 zumba: a dance phenomenon is going global 93 3.2 DreamWorks Classics: internationalization of Postman Pat 96 3.3 Video case study: Reebok 97

Questions for discussion 97 References 97

4 Development of the firm’s international competitiveness 100 Learning objectives 100

4.1 Introduction 101 4.2 Analysis of national competitiveness (the Porter diamond) 101 4.3 Competition analysis in an industry 107 4.4 Value chain analysis 111 4.5 The sustainable global value chain 121 4.6 Corporate social responsibility (CSR) 122

Exhibit 4.1 Chiquita – integrating CSR in the resource base 123 4.7 The value net 125

Exhibit 4.2 Value net – cooperation/competition between competitors within each airline alliance. The three alliances are competing against each other 126

4.8 Blue ocean strategy and value innovation 127 Exhibit 4.3 Hotel Formule 1 – value innovation in action 129

4.9 Summary 131 Case studies

4.1 Nintendo Wii: Nintendo’s Wii took first place on the world market – but it didn’t last 132

4.2 Microsoft ‘Surface’ tablet: the software producer is moving into the hardware tablet PC market and challenging Apple 138

4.3 Video case study: Nike 141 Questions for discussion 141 References 142

CONTENTS ix

Part i Case studies

I.1 zara: the Spanish retailer goes to the top of world fashion 144 I.2 Manchester United: still trying to establish a global brand 150 I.3 Adidas: the No. 2 in the global sportswear market is challenging the No. 1, Nike 153 I.4 Cereal Partners Worldwide (CPW): the No. 2 world player is challenging

the No. 1, Kellogg 159

Part ii DECIDING WHICH MARKETS TO ENTER 169

Part ii Video case study: embraer business jets 171

5 Global marketing research 173 Learning objectives 173

5.1 Introduction 174 5.2 The changing role of the international researcher 174 5.3 Linking global marketing research to the decision-making process 175 5.4 Secondary research 177 5.5 Primary research 181

Exhibit 5.1 Market research in India is challenging 190 5.6 Other types of marketing research 193 5.7 Setting up an international marketing information system (MIS) 197 5.8 Marketing research based on Web 2.0 198 5.9 Summary 200

Case studies 5.1 Teepack Spezialmaschinen GmbH: organizing a global survey of

customer satisfaction 200 5.2 LEGO Friends: the world’s third largest toy manufacturer is moving into

the girls’ domain 201 5.3 Video case study: ziba 206

Questions for discussion 206 References 207

6 The political and economic environment 208 Learning objectives 208

6.1 Introduction 209 6.2 The political/legal environment 209

Exhibit 6.1 Huawei Technologies Corporation: the role of home government in the internationalization process 211

6.3 The economic environment 219 6.4 The European economic and monetary union and the euro 226 6.5 BRIC – the new growth markets of the world 228

Exhibit 6.2 ChotuKool – Indian Godrej is creating a disruptive innovation (a low-cost refrigerator) for the BOP market 231

6.6 ‘Bottom of pyramid’ (BOP) as a market opportunity 233 Exhibit 6.3 Vodacom – reaching both BOP customers and BOP entrepreneurs

in Africa 234 Exhibit 6.4 Voltic Cool Pac – distribution of water in Ghana 235

6.7 Summary 236 Case studies

6.1 G-20 and the economic and financial crises: what on earth is globalization about? Massive protests during a meeting in Mexico City, June 2012 238

CONTENTSx

6.2 Sauer-Danfoss: which political/economic factors would affect a manufacturer of hydraulic components? 240

6.3 Video case study: debate on globalization 241 Questions for discussion 241 References 242

7 The sociocultural environment 243

Learning objectives 243 7.1 Introduction 244 7.2 Layers of culture 245

Exhibit 7.1 Electrolux is adapting its vacuum cleaner for the Japanese market 247 7.3 High- and low-context cultures 247 7.4 Elements of culture 249

Exhibit 7.2 In China the Citroën C4 brand name was changed to Citroën c-Quatre 250

Exhibit 7.3 Sensuality and touch culture in Saudi Arabian versus European advertising 252

Exhibit 7.4 Polaroid’s success in Muslim markets 256 7.5 Hofstede’s original work on national cultures (the ‘4 + 1’ dimensions model) 257

Exhibit 7.5 Pocari Sweat – a Japanese soft drink expands sales in Asia 258 7.6 Managing cultural differences 259 7.7 Convergence or divergence of the world’s cultures 260 7.8 The effects of cultural dimensions on ethical decision-making 260

Exhibit 7.6 The quest for beauty opens a huge market for whitening products in Asia 262

7.9 Summary 263 Case studies

7.1 Cirque du Soleil Inc.: the show that revolutionized the circus arts is expanding its global scope 264

7.2 The IKEA catalogue: are there any cultural differences? 266 7.3 Video case study: communicating in the global world 268

Questions for discussion 268 References 269

8 The international market selection process 270

Learning objectives 270 8.1 Introduction 271 8.2 International market selection: SMEs versus LSEs 271 8.3 Building a model for international market selection 272

Exhibit 8.1 Bosch Security Systems: IMS in the Middle East for fire detection systems 285

8.4 Market expansion strategies 289 Exhibit 8.2 Sunquick’s waterfall approach 289 Exhibit 8.3 An example of the ‘trickle-up’ strategy 291 Exhibit 8.4 Bajaj is selecting new international markets ignored by global leaders 295

8.5 The global product/market portfolio 296 8.6 Summary 296

Case studies 8.1 Tata Nano: international market selection with the world’s cheapest car 298 8.2 Philips Lighting: screening markets in the Middle East 303 8.3 Video case study: Hasbro 305

Questions for discussion 306 References 306

CONTENTS xi

Part ii Case studies

II.1 Bajaj Auto: the Indian motorcycle manufacturer internationalizes its business 308 II.2 The Female Health Company (FHC): the female condom is seeking

a foothold in the world market for contraceptive products 311 II.3 Gerolsteiner: a German bottled water manufacturer is trying to increase its

global market share 314 II.4 Porsche: international market selection (IMS) for the exclusive sports car brand 319

Part iii MARKET ENTRY STRATEGIES 325

Part iii Video case study: müller Yogurts 329

9 Some approaches to the choice of entry mode 331 Learning objectives 331

9.1 Introduction 332 9.2 The transaction cost approach 332 9.3 Factors influencing the choice of entry mode 334

Exhibit 9.1 zara is modifying its preferred choice of entry mode, depending on the psychic distance to new markets 338

9.4 Summary 339 Case studies

9.1 Jarlsberg: the king of Norwegian cheeses is deciding on entry modes into new markets 340

9.2 Ansell condoms: is acquisition the right way to gain market shares in the European condom market? 341

9.3 Video case study: understanding entry modes into the Chinese market 345 Questions for discussion 345 References 345

10 Export modes 346 Learning objectives 346

10.1 Introduction 347 10.2 Indirect export modes 349 10.3 Direct export modes 353

Exhibit 10.1 Lofthouse of Fleetwood’s (Fisherman’s Friend) decision criteria when selecting new distributors 356

10.4 Cooperative export modes/export marketing groups 360 10.5 Summary 361

Case studies 10.1 Lysholm Linie Aquavit: international marketing of the Norwegian Aquavit brand 362 10.2 Parle Products: an Indian biscuit manufacturer is seeking agents and

cooperation partners in new export markets 364 10.3 Video case study: Honest Tea 366

Questions for discussion 366 References 367

11 Intermediate entry modes 368 Learning objectives 368

11.1 Introduction 369 11.2 Contract manufacturing 369 11.3 Licensing 371

CONTENTSxii

11.4 Franchising 374 Exhibit 11.1 Build-A-Bear Workshop’s use of the indirect franchising model 375

11.5 Joint ventures/strategic alliances 379 Exhibit 11.2 Safedom: a Chinese condom manufacturer needs a partner with

which to enter the European market 388 11.6 Other intermediate entry modes 389 11.7 Summary 392

Case studies 11.1 Hello Kitty: can the cartoon cat survive the buzz across the world? 392 11.2 Ka-Boo-Ki: licensing in the LEGO brand 395 11.3 Video case study: Marriott 396

Questions for discussion 396 References 397

12 Hierarchical modes 398 Learning objectives 398

12.1 Introduction 399 12.2 Domestic-based sales representatives 400 12.3 Resident sales representatives/foreign sales branch/foreign sales subsidiary 400 12.4 Sales and production subsidiary 402 12.5 Subsidiary growth strategies 403 12.6 Region centres (regional HQ) 404 12.7 Transnational organization 406 12.8 Establishing wholly owned subsidiaries – acquisition or greenfield 407 12.9 Location/relocation of HQ 407 12.10 Foreign divestment: withdrawing from a foreign market 408

Exhibit 12.1 Tesco’s withdrawal from Japan in 2012 after nine years 409 Exhibit 12.2 Wal-Mart’s withdrawal from the German market 411

12.11 Summary 412 Case studies

12.1 Polo Ralph Lauren: Polo moves distribution for South-east Asia in-house 413 12.2 Durex condoms: SSL will sell Durex condoms in the Japanese market

through its own organization 416 12.3 Video case study: Starbucks 417

Questions for discussion 417 References 417

13 International sourcing decisions and the role of the subsupplier 419 Learning objectives 419

13.1 Introduction 420 13.2 Reasons for international sourcing 421 13.3 A typology of subcontracting 423 13.4 Buyer–seller interaction 424 13.5 Development of a relationship 427 13.6 Reverse marketing: from seller to buyer initiative 429 13.7 Internationalization of subcontractors 430

Exhibit 13.1 An example of Japanese network sourcing: the Mazda seat-sourcing case 432

13.8 Project export (turnkey contracts) 433 13.9 Summary 434

Case studies 13.1 ARM: challenging Intel in the world market of computer chips 435 13.2 Bosch Indego: how to build B2B and B2C relationships in a new global

product market – robotic lawnmowers 440

CONTENTS xiii

13.3 Video case study: Eaton Corporation 444 Questions for discussion 444 References 444

Part iii Case studies

III.1 Raleigh bicycles: does the iconic bicycle brand still have a chance on the world market? 446

III.2 IKEA: expanding through franchising to the South American market? 451 III.3 Autoliv airbags: transforming Autoliv into a global company 458 III.4 IMAX Corporation: globalization of the film business 464

Part iV DESIGNING THE GLOBAL MARKETING PROGRAMME 471

Part iV Video case study: tequila avión 478

14 Product decisions 479 Learning objectives 479

14.1 Introduction 480 14.2 The dimensions of the international product offer 480 14.3 Developing international service strategies 480 14.4 The product life cycle 486

Exhibit 14.1 The iOS (Apple)/Android (Google) global contest in the smartphone business 490

14.5 New products for the international market 493 Exhibit 14.2 Product invention – solar-powered portable charging systems

for India 499 14.6 Product positioning 499

Exhibit 14.3 Chinese piano manufacturers are experiencing the ‘country of origin’ (COO) effect 500

Exhibit 14.4 Madame Tussauds – a brand that brings people closer to celebrities on a global basis 501

14.7 Brand equity 502 14.8 Branding decisions 503

Exhibit 14.5 Unilever’s Snuggle fabric softener – an example of local brands in multiple markets 504

Exhibit 14.6 Kellogg under pressure to produce under Aldi’s own label 507 Exhibit 14.7 Shell’s co-branding with Ferrari and LEGO 509 Exhibit 14.8 Roundup – a global brand for multiple markets 510 Exhibit 14.9 Maggi – local brands for multiple markets through acquisitions 511

14.9 Sensory branding 512 Exhibit 14.10 Sensory branding at SIA (Singapore Airlines) 514

14.10 Celebrity branding 515 Exhibit 14.11 Ricola is using celebrity endorsement in the international

marketing of its herbal drops 516 14.11 Implications of the internet for collaboration with customers on

product decisions 519 Exhibit 14.12 Ducati motorcycles – product development through

web communities 520 14.12 ‘Long tail’ strategies 524 14.13 Brand piracy and anti-counterfeiting strategies 525

Exhibit 14.13 The next stage in pirating, faking an entire company – NEC 525

CONTENTSxiv

14.14 Summary 526 Case studies

14.1 Danish Klassic: launch of a cream cheese in Saudi Arabia 526 14.2 zippo Manufacturing Company: has product diversification beyond

the lighter gone too far? 530 14.3 Video case study: Swiss Army 531

Questions for discussion 531 References 532

15 Pricing decisions and terms of doing business 534 Learning objectives 534

15.1 Introduction 535 15.2 International pricing strategies compared with domestic pricing strategies 535 15.3 Factors influencing international pricing decisions 535 15.4 International pricing strategies 539

Exhibit 15.1 A ‘market pricing’ (‘mass point’) strategy in use: the Converse brand is making a comeback under Nike ownership 541

Exhibit 15.2 The Gillette price premium strategy 545 Exhibit 15.3 Kodak is following the reverse ‘buy-in/follow-on’

strategy for its printer and cartridge division 546 15.5 Implications of the internet for pricing across borders 555 15.6 Terms of sale and delivery 557 15.7 Terms of payment 558 15.8 Export financing 562 15.9 Summary 564

Case studies 15.1 Harley-Davidson: does the image justify the price level? 565 15.2 Gillette Co.: is price standardization possible for razor blades? 566 15.3 Video case study: Vaseline pricing strategy 567

Questions for discussion 568 References 569

16 Distribution decisions 570 Learning objectives 570

16.1 Introduction 571 16.2 External determinants of channel decisions 572 16.3 The structure of the channel 574

Exhibit 16.1 Burberry: the iconic British luxury brand targets 25 of the world’s wealthier cities 577

16.4 Managing and controlling distribution channels 578 16.5 Managing logistics 583 16.6 Implications of the internet for distribution decisions 588 16.7 Online retail sales 589 16.8 Smartphone marketing 590 16.9 Channel power in international retailing 592

Exhibit 16.2 The ‘banana split’ model 593 16.10 Grey marketing (parallel importing) 596 16.11 Summary 597

Case studies 16.1 De Beers: forward integration into the diamond industry value chain 598 16.2 Tupperware: the global direct distribution model is still working 601 16.3 Video case study: DHL 604

Questions for discussion 604 References 605

CONTENTS xv

17 Communication decisions (promotion strategies) 606 Learning objectives 606

17.1 Introduction 607 17.2 The communication process 607

Exhibit 17.1 Product placement escalates 610 17.3 Communication tools 610

Exhibit 17.2 Husqvarna’s consumer wheel 611 Exhibit 17.3 Baileys Irish Cream liqueur: sales expansion with market and

product development 618 Exhibit 17.4 Ambush marketing strategy – Dutch brewery vs Anheuser

Busch’s Budweiser during the FIFA World Cup 2010 621 17.4 International advertising strategies in practice 625

Exhibit 17.5 Jarlsberg cheese – cross-border communication 629 17.5 Implications of the internet for communication decisions 630 17.6 Social media marketing 631

Exhibit 17.6 Nike strengthens brand loyalty and brand awareness through social media 634

Exhibit 17.7 Amazon’s online communities 635 Exhibit 17.8 Ford initiates a Facebook campaign to engage potential customers 636

17.7 Developing a viral marketing campaign 636 Exhibit 17.9 Chevrolet Dream Garage – a viral marketing campaign 638

17.8 Crowdsourcing 640 Exhibit 17.10 Threadless T-shirt crowdsourcing business 640

17.9 Summary 641 Case studies

17.1 Helly Hansen: sponsoring fashion clothes in the US market 643 17.2 Morgan Motor Company: can the British retro sports car brand still

be successful after 100 years? 644 17.3 Video case study: BMW Motorcycles 647

Questions for discussion 648 References 648

Part iV Case studies IV.1 Absolut Vodka: defending and attacking for a better position in the

global vodka market 650 IV.2 Guinness: how can the iconic Irish beer brand compensate for declining

sales in the home market? 658 IV.3 Dyson Vacuum Cleaner: shifting from domestic to international marketing

with the famous bagless vacuum cleaner 666 IV.4 Triumph Motorcycles Ltd: rising from the ashes in the international

motorcycle business 674

Part V IMPLEMENTING AND COORDINATING THE GLOBAL MARKETING PROGRAMME 681

Part V Video case study: Stella & Dot 682

18 Cross-cultural sales negotiations 683 Learning objectives 683

18.1 Introduction 684 Exhibit 18.1 Google gives a clock as a gift in China 684

CONTENTSxvi

18.2 Cross-cultural negotiations 685 Exhibit 18.2 Euro Disney becomes Disneyland Resort Paris – Disney learns to

adapt to European cultures 694 18.3 Intercultural preparation 695 18.4 Coping with expatriates 697 18.5 Knowledge management and learning across borders 699 18.6 Transnational bribery in cross-cultural negotiations 702 18.7 Summary 703

Case studies 18.1 zamzam Cola: marketing of a ‘Muslim’ cola from Iran to the European market 704 18.2 TOTO: the Japanese toilet manufacturer seeks export opportunities for its

high-tech brands in the US 706 18.3 Video case study: Dunkin’ Donuts 708

Questions for discussion 708 References 708

19 Organization and control of the global marketing programme 710 Learning objectives 710

19.1 Introduction 711 19.2 Organization of global marketing activities 711 19.3 The global account management organization 716

Exhibit 19.1 Sauer-Danfoss’s GAM 726 Exhibit 19.2 AGRAMKOW – working to model 3 727

19.4 Controlling the global marketing programme 728 19.5 The global marketing budget 734 19.6 The process of developing the global marketing plan 737 19.7 Summary 737

Case studies 19.1 Mars Inc.: merger of the European food, pet care and confectionery divisions 738 19.2 Henkel: should Henkel shift to a more customer-centric organization? 739 19.3 Video case study: McDonald’s 742

Questions for discussion 742 References 743

Part V Case studies

V.1 Sony Music Entertainment: new worldwide organizational structure and the marketing, planning and budgeting of Pink’s new album 744

V.2 Red Bull: the global market leader in energy drinks is considering further market expansion 751

V.3 Tetra Pak: how to create B2B relationships with the food industry on a global level 761

V.4 Polaroid Eyewear: can the iconic brand achieve a comeback in the global sunglasses industry? 767

Index 775

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ON THE WEBSITE

PrefaCe

Globalization is the growing interdependence of national economies – involving primarily customers, producers, suppliers and governments in different markets. Global marketing therefore reflects the trend of firms selling and distributing products and services in many countries around the world. It is associated with governments reducing trade and investment barriers, firms manufacturing in multiple countries and foreign firms increasingly competing in domestic markets.

For many years, the globalization of markets, caused by the convergence of tastes across borders, was thought to result in very large multinational enterprises that could use their advantages in scale economies to introduce world-standardized products successfully.

In his famous 1994 book, The Global Paradox, John Naisbitt has contradicted this myth, especially the last part:1

The mindset that in a huge global economy the multinationals dominate world business couldn’t have been more wrong. The bigger and more open the world economy becomes, the more small and middle sized companies will dominate. In one of the major turn arounds in my lifetime, we have moved from ‘economies of scale’ to ‘disecon omies of scale’; from bigger is better to bigger is inefficient, costly and wastefully bureaucratic, inflexible and, now, disastrous. And the paradox that has occurred is, as we move to the global context: The smaller and speedier players will prevail on a much expanded field.

When the largest corporations (e.g. IBM, ABB) downsize, they are seeking to emulate the entrepreneurial behaviour of successful SMEs (small and medium-sized enterprises) where the implementation phase plays a more important role than in large companies. Since the behaviours of smaller and (divisions of ) larger firms (according to the above quotation) are convergent, the differences in the global marketing behaviour between SMEs and LSEs (large-scale enterprises) are slowly disappearing. What is happening is that the LSEs are downsizing and decentralizing their decision-making process. The result will be a more decision- and action-oriented approach to global marketing. This approach will also characterize this book.

In light of their smaller size, most SMEs lack the capabilities, market power and other resources of traditional multinational LSEs. Compared with the resource-rich LSEs, the complexities of operating under globalization are considerably more difficult for the SME. The success of SMEs under globalization depends in large part on the decision and imple- mentation of the right international marketing strategy.

The primary role of marketing management, in any organization, is to design and execute effective marketing programmes that will pay off. Companies can do this in their home market or they can do it in one or more international markets. Going international is an enormously expensive exercise, in terms of both money and, especially, top management time and commitment. Due to the high cost, going international must generate added value for the company beyond extra sales. In other words, the company needs to gain a competitive advantage by going international. So, unless the company gains by going international, it should probably stay at home.

The task of global marketing management is complex enough when the company operates in one foreign national market. It is much more complex when the company starts opera- tions in several countries. Marketing programmes must, in these situations, adapt to the

1 Naisbitt, J. (1994) The Global Paradox, Nicholas Brearly Publishing, London, p. 17.

PREFACE xix

needs and preferences of customers that have diff erent levels of purchasing power as well as diff erent climates, languages and cultures. Moreover, patterns of com petition and methods of doing business diff er between nations and sometimes also within regions of the same nation. In spite of the many diff erences, however, it is important to hold on to similarities across borders. Some coordination of international activities will be required, but at the same time the company will gain some synergy across borders, in the way that experience and learning acquired in one country can be transferred to another.

Objectives

Th is book’s value chain off ers the reader an analytic decision-oriented framework for the development and implementation of global marketing programmes. Consequently, the reader should be able to analyse, select and evaluate the appropriate conceptual frameworks for approaching the fi ve main management decisions connected with the global marketing process: (1) whether to internationalize; (2) deciding which markets to enter; (3) deciding how to enter the foreign market; (4) designing the global marketing programme; and (5) implementing and coordinating the global marketing programme.

Having studied this book, the reader should be better equipped to understand how the fi rm can achieve global competitiveness through the design and implementation of market- responsive programmes.

Target audience

Th is book is written for people who want to develop eff ective and decision-oriented global marketing programmes. It can be used as a textbook for undergraduate or graduate courses in global/international marketing. A second audience is the large group of people joining ‘global marketing’ or ‘export’ courses on non-university programmes. Finally, this book is of special interest to the manager who wishes to keep abreast of the most recent developments in the global marketing fi eld.

Prerequisites

An introductory course in marketing.

Special features

Th is book has been written from the perspective of the fi rm competing in international markets, irrespective of its country of origin. It has the following key features:

● a focus on SMEs as global marketing players; ● a decision/action-oriented approach; ● a value chain approach (both the traditional product value chain and the service value

chain); ● a value network approach (including diff erent actors vertically and horizontally); ● coverage of global buyer–seller relationships; ● extensive coverage of born globals and global account management (GAM), as an

extension of the traditional key account management (KAM);

Objectives

Target audience

Prerequisites

Special features

PREFACExx

● presents new interesting theories in marketing, for example, service value chain, value innovation, blue ocean strategy, social marketing, corporate social responsibility (CSR), global account management, viral branding and sensory and celebrity branding;

● aims to be a ‘true’ global marketing book, with cases and exhibits from all parts of the world, including Europe, the Middle East, Africa, the Far East, North and South America;

● provides a complete and concentrated overview of the total international marketing planning process;

● many new up-to-date exhibits and cases illustrate the theory by showing practical applications.

Outline

As the book has a clear decision-oriented approach, it is structured according to the fi ve main decisions that marketing people in companies face in connection with the global marketing process. Th e 20 chapters are divided into fi ve parts. Th e schematic outline of the book in Figure 1 shows how the diff erent parts fi t together. Global marketing research is considered to be an integral part of the decision-making process, therefore it is included in the book ( Chapter 5 ), so as to use it as an important input to the decision about which markets to enter (the beginning of Part II ). Examples of the practice of global marketing by actual companies are used throughout the book, in the form of exhibits. Furthermore, each chapter and part ends with cases, which include questions for students.

Outline

figure 1 Structure of the book

What’s new in the sixth edition?

Th e ‘mantra’ of the new edition is ‘glocalization’. Th e international marketers can utilize the synergies of both being ‘local’ and ‘global’ at the same time. Another important aspect of the new edition is the strengthening of the Web 2.0 theme (social media, e-commerce, etc.), which is now incorporated in all the chapters and in many of the cases and exhibits.

What’s new in the sixth edition?

PREFACE xxi

The book’s chapters and cases are totally updated with the latest journal articles and com- pany information. Besides that, the following new issues are introduced in the single chapters:

● Chapter 1 – the concept of providing customer value through the product value chain and the service value chain is now extended by adding ‘customer experiences’ as a value generator. This new section (1.9 Global Experiential Marketing) builds on the new trends in the global ‘experience economy’ and these are further illustrated with cases throughout the book, e.g. on Zumba (case 3.1) and Cirque du Soleil (case 7.1). Deglobalization is looked at.

● Chapter 2 – de-internationalization trends are now better explained and illustrated. New triggers for internationalization are added.

● Chapter 3 – a new revised definition of ‘psychic distance’ is added. Furthermore, the internet-based ‘born global’ and the use of ‘hybrid sales channels’ are discussed. Firms classified as ‘born-again global’ and ‘born regional’ are also further explained, as a supple- ment to the born global concept.

● Chapter 4 – introduces the concepts of ‘stategic groups’ and ‘value net’. The ‘double diamond’ model is also introduced, as a supplement to the diamond model. A special corporate social responsibility (CSR) section based on the ‘shared value’ concept is included.

● Chapter 5 – now introduces international marketing research based on Web 2.0 (social media, e.g. Facebook, Twitter).

● Chapter 6 – special sections about growth in the BRIC (Brazil, Russia, India, China) countries and marketing to bottom of pyramid (BOP) are included and discussed. ‘GDP per capita’ is now also considered as a ‘moderator’ in the Big Mac Index, regarding pos- sible over- or undervaluation of foreign currencies against the US$.

● Chapter 8 – now contains an very comprehensive exhibit about Bosch Fire Detection System’s international market selection (IMS), showing in detail how the chapter’s models and tools regarding IMS should be used in a real-world example.

● Chapter 14 – the service-dominant logic (S-D logic) is included as a supplement to the traditional goods versus services considerations. There is also an explanation of the importance of ‘time-to-market’ (TTM) in developing international competitiveness.

● Chapter 15 – an interesting exhibit about the reverse ‘buy-in–follow-on’ strategy used in the Kodak Printer business is added, as well as some further legal aspects regarding the ‘transfer pricing’ theme.

● Chapter 16 – in connection with disintermediation of middlemen by the internet, special anti-disintermediation measures are discussed. Smartphone marketing aspects in a dis- tribution perspective are also added, and location-based app services – a niche of mobile marketing – are further explained, in particular location-based mobile marketing services and the implications for international marketers.

● Chapter 17 – now contains comprehensive discussions of the following ‘hot’ topics: Web 2.0, social media marketing and the ‘6C’ model. Crowdsourcing is extensively discussed as a measure for gaining access to new R&D resources among external users.

● Chapter 18 – introduces the ‘Time’ perspective in cross-cultural negotiations and the ‘gift-giving’ practices in different cultures.

● Several new exhibits with real updated company examples have been added to various chapters.

● Many completely new and exciting chapter case studies are now available: ● Case 1.1: Green Toys, Inc. – a manufacturer of eco-friendly toys is going international ● Case 1.2: Hunter Boot Ltd – the iconic British brand is moving into exclusive fashion. ● Case 3.1: Zumba – a dance phenomenon is going global ● Case 4.2: Microsoft ‘Surface’ tablet – the software producer is moving into the

hardware tablet PC market and challenging Apple ● Case 5.2: LEGO Friends – the world’s third largest toy manufacturer is moving into

the girls’ domain ● Case 7.1: Cirque du Soleil Inc. – the show that revolutionized the circus arts is expand-

ing its global scope ● Case 13.1: ARM – challenging Intel in the world market of computer chips

PREFACExxii

● Case 13.2 : Bosch Indego – how to build B2B and B2C relationships in a new global product market – robotic lawnmowers

● Case 16.2 : Tupperware – the global direct distribution model is still working ● Case 18.1 : Zam Zam Cola – marketing of a Muslim cola from Iran to the European market.

● As a completely new feature, fi ve new part introduction video case studies have been introduced: ● Part I Video case study: Cisco Systems ● Part II Video case study: Embraer Business Jets ● Part III Video case study: Müller Yogurts ● Part IV Video case study: Tequila Avion ● Part V Video case study: Stella & Dot

● Furthermore completely new part cases have been added: ● Case I.3 : Adidas – the number 2 in the global sportswear market is challenging the

number 1, Nike ● Case II.3 : Gerolsteiner – a German bottled water manufacturer is trying to increase its

global market share ● Case II.4 : Porsche – international market selection (IMS) for the exclusive sports car

brand ● Case V.2 : Red Bull – the global market leader in energy drinks is considering further

market expansion ● Case V.3 : Tetra Pak – how to create B2B relationships with the food industry on a

global level ● Case V.4 : Polaroid Eyewear – can the iconic brand achieve a comeback in the global

sunglasses industry? ● In total, 10 chapter case studies + fi ve video case studies + six part case studies = 21 new

case studies have been added to the book, making a total of: ● 38 chapter case studies (two per chapter) + fi ve part video case studies (one per chapter)

+ 19 chapter video case studies (one per chapter) + 25 part case studies (fi ve per part) + 87 case studies in all.

● Furthermore, 28 completely new exhibits have been added to the book. Th e total number of exhibits is now 67 .

Pedagogical/learning aids

One of the strengths of Global Marketing is its strong pedagogical features:

● Chapter objectives tell readers what they should be able to do aft er completing each chapter. ● Real-world examples and exhibits enliven the text and enable readers to relate to market-

ing models. ● End-of-chapter summaries recap the main concepts. ● Each chapter contains two case studies, which help the student relate the models

presented in the chapter to a specifi c business situation. ● Questions for discussion allow students to probe further into important topics. ● Part cases studies – for each part there are fi ve comprehensive case studies covering

the themes met in the part. To reinforce learning, all case studies are accompanied by questions. Case studies are based on real-life companies. Further information about these companies can be found on the internet. Company cases are derived from many diff erent countries representing all parts of the world. Tables 1 and 2 present the chapter and part case studies.

● Multiple choice questions. ● Part video case studies: Each part is introduced by a video case which highlights a general

decision problem from the part.

Pedagogical/learning aids

PREFACE xxiii

Chapter Case study title, subtitle and related websites

Country/area of company headquarters

Geographical target area

target market

b2b b2C

Chapter 1 Global marketing in the firm

Case study 1.1 Green toys, inc. A manufacturer of eco-friendly toys is going international www.greentoys.com

US US, World ✓ ✓

Case study 1.2 Hunter boot ltd The iconic British brand is moving into exclusive fashion www.hunter-boot.com

UK World ✓

Video case study 1.3 nivea (8.56) www.nivea.com

Germany World ✓

Chapter 2 initiation of internationalization

Case study 2.1 lifeStraw Vestergaard-Frandsen transforms dirty water into clean drinking water www.vestergaard-frandsen.com

Switzerland World (developing countries)

✓ ✓

Case study 2.2 elvis Presley enterprises inc. (ePe) Internationalization of a cult icon www.elvis.com

US World ✓

Video case study 2.3 tomS Shoes www.tomsshoes.com

US World (developing countries)

✓

Chapter 3 internationalization theories

Case study 3.1 Zumba A dance phenomenon is going global www.zumba.com

US World ✓ ✓

Case study 3.2 DreamWorks Classics Internationalization of Postman Pat www.classicmedia.tv

UK World ✓

Video case study 3.3 reebok (9.09) www.reebok.com and www.adidas-group.com

US World ✓ ✓

Chapter 4 Development of the firm’s international competitiveness

Case study 4.1 nintendo Wii Nintendo’s Wii took first place in the world market – but it didn’t last www.nintendo.com

Japan World ✓ ✓

Case study 4.2 microsoft ‘Surface’ tablet The software producer is moving into the hardware tablet PC market and challenging Apple www.microsoft.com/surface

US World ✓ ✓

Video case study 4.3 nike (14.03) www.nike.com

US World ✓

table 1 Chapter case studies: overview (the video case studies can be viewed at www.pearsoned.co.uk/hollensen)

PREFACExxiv

Chapter Case study title, subtitle and related websites

Country/area of company headquarters

Geographical target area

target market

b2b b2C

Chapter 5 Global marketing research

Case study 5.1 teepack Spezialmaschinen GmbH Organizing a global survey of customer satisfaction www.teepack.com

Germany World ✓

Case study 5.2 leGo friends The world’s third largest toy manufacturer is moving into the girl’s domain www.lego.com

Denmark World ✓

Video case study 5.3 Ziba www.ziba.com

US US, World ✓ ✓

Chapter 6 the political and economic environment

Case study 6.1 G-20 and the economic and financial crises: what on earth is globalization about? Massive protests during a meeting in Mexico City, June 2012 www.g20.org www.londonsummit.gov.uk

US World ✓ ✓

Case study 6.2 Sauer-Danfoss Which political/economic factors would affect a manufacturer of hydraulic components? www.sauer-danfoss.com

Denmark, US, Germany

World ✓

Video case study 6.3 Debate on globalization (15.44) No website available

US US ✓ ✓

Chapter 7 the sociocultural environment

Case study 7.1 Cirque du Soleil inc. The show that revolutionized the circus arts is expanding its global scope www.cirquedusoleil.com

Canada World ✓

Case study 7.2 ikea catalogue Are there any cultural differences? www.ikea.com

Sweden, Holland

World ✓

Video case study 7.3 Communicating in the global world No website available

✓ ✓

Chapter 8 the international market selection process

Case study 8.1 tata nano International market selection with the world’s cheapest car

India World (emerging countries)

✓ ✓

Case study 8.2 Philips lighting Screening markets in the Middle East www.philips.com

Holland World ✓

table 1 Continued

PREFACE xxv

Chapter Case study title, subtitle and related websites

Country/area of company headquarters

Geographical target area

target market

b2b b2C

Video case study 8.3 Hasbro (9.42) www.hasbro.com

US World ✓

Chapter 9 Some approaches to the choice of entry mode

Case study 9.1 Jarlsberg The king of Norwegian cheeses is deciding on entry modes into new markets www.jarlsberg.com

Norway World ✓ ✓

Case study 9.2 ansell condoms Is acquisition the right way to gain market shares in the European condom market? www.anselleurope.com www.lifestylesplay.com

Australia, Belgium

Europe, World

✓

Video case study 9.3 Understanding entry modes into the Chinese market (16.33) No website available

World China ✓

Chapter 10 export modes

Case study 10.1 lysholm linie aquavit International marketing of the Norwegian Aquavit brand www.linie-aquavit.com

Norway Germany, the rest of the world

✓ ✓

Case study 10.2 Parle Products An Indian biscuit manufacturer is seeking agents and cooperation partners in new export markets www.parleproducts.com

India World ✓ ✓

Video case study 10.3 Honest tea (8.25) www.honesttea.com

US World, US ✓

Chapter 11 intermediate entry modes

Case study 11.1 Hello kitty Can the cartoon cat survive the buzz across the world? www.sanrio.com

Japan World ✓ ✓

Case study 11.2 ka-boo-ki Licensing in the LEGO brand www.kabooki.com

Denmark World ✓ ✓

Video case study 11.3 marriott (9.36) www.marriott.com

US World ✓ ✓

Chapter 12 Hierarchical modes

Case study 12.1 Polo ralph lauren Polo moves distribution for South-east Asia in-house www.ralphlauren.com

US World, Asia ✓ ✓

table 1 Continued

PREFACExxvi

Chapter Case study title, subtitle and related websites

Country/area of company headquarters

Geographical target area

target market

b2b b2C

Case study 12.2 Durex condoms SSL will sell Durex condoms in the Japanese market through its own organization www.durex.com

UK World ✓ ✓

Video case study 12.3 Starbucks (13.04) www.starbucks.com

US World ✓ ✓

Chapter 13 international sourcing decisions and the role of the subsupplier

Case study 13.1 arm Challenging Intel in the world market of computer chips www.arm.com

UK World ✓

Case study 13.2 bosch indego How to build B2B and B2C relationships in a new global product market – robotic lawnmowers www.bosch.com

Germany World ✓ ✓

Video case study 13.3 eaton Corporation (9.52) www.eaton.com

US World ✓

Chapter 14 Product decisions

Case study 14.1 Danish klassic Launch of a cream cheese in Saudi Arabia www.arla.com (regarding the Puck brand)

Denmark Saudi Arabia Middle East

✓ ✓

Case study 14.2 Zippo manufacturing Company Has product diversification beyond the lighter gone too far? www.zippo.com

US World ✓ ✓

Video case study 14.3 Swiss army (9.07) www.swissarmy.com

Switzerland US, World ✓

Chapter 15 Pricing decisions and terms of doing business

Case study 15.1 Harley-Davidson Does the image justify the price level? www.harley-davidson.com

US US, Europe ✓

Case study 15.2 Gillette Co. Is price standardization possible for razor blades? www.gillette.com

US World ✓ ✓

Video case study 15.3 Vaseline pricing strategy www.vaseline.com

US US, World ✓

Chapter 16 Distribution decisions

Case study 16.1 De beers Forward integration into the diamond industry value chain www.debeers.com

South Africa, UK, Luxembourg

Europe, World

✓ ✓

table 1 Continued

PREFACE xxvii

Chapter Case study title, subtitle and related websites

Country/area of company headquarters

Geographical target area

target market

b2b b2C

Case study 16.2 tupperware The global direct distribution model is still working www.tupperware.com

US World ✓ ✓

Video case study 16.3 DHl www.dhl.com

Germany World ✓

Chapter 17 Communication decisions

Case study 17.1 Helly Hansen Sponsoring fashion clothes in the US market www.hellyhansen.com

Norway US ✓ ✓

Case study 17.2 morgan motor Company Can the British retro sports car brand still be successful after 100 years? www.morgan-motor.co.uk

UK World (Europe and US)

✓ ✓

Video case study 17.3 bmW motorcycles (12.04) www.bmwmotorcycles.com www.bmw.com

Germany US, World ✓ ✓

Chapter 18 Cross-cultural sales negotiations

Case study 18.1 ZamZam Cola Marketing of a ‘Muslim’ cola from Iran to the European market

Iran Europe, Middle East

✓ ✓

Case study 18.2 toto The Japanese toilet manufacturer seeks export opportunities for its high-tech brands in the US www.toto.jp/en/

Video case study 18.3 Dunkin’ Donuts (10.30) www.DunkinDonuts.com www.dunkinbrands.com

Chapter 19 organization and control of the global marketing programme

Case study 19.1 mars inc. Merger of the European food, pet care and confectionery divisions www.mars.com

US World ✓ ✓

Case study 19.2 Henkel Should Henkel shift to a more customer- centric organization? www.henkel.com

Germany World ✓ ✓

Video case study 19.3 mcDonald’s (36.55) www.mcdonalds.com

US World ✓

table 1 Continued

PREFACExxviii

Part Case study title, subtitle and related websites

Country/area of company headquarters

Geographical target area

target market

b2b b2C

Part i the decision whether to internationalize

Part video case study Cisco Systems www.cisco.com

USA World ✓

Case study I.1 Zara The Spanish retailer goes to the top of world fashion www.inditex.com/en

Spain World ✓ ✓

Case study I.2 manchester United Still trying to establish a global brand www.manutd.com

UK World, US ✓ ✓

Case study I.3 adidas The No. 2 in the global sportswear market is challenging the No. 1, Nike www.adidas.com

Germany World ✓ ✓

Case study I.4 Cereal Partners Worldwide (CPW) The No. 2 world player is challenging the No. 1, Kellogg www.cerealpartners.com

Switzerland, US

World ✓

Part ii Deciding which markets to enter

Part video case study embraer business Jets www.embraer.com

Brazil World ✓

Case study II.1 bajaj auto The Indian motorcycle manufacturer internationalizes its business www.bajajauto.com

India Emerging countries

✓ ✓

Case study II.2 the female Health Company (fHC) The female condom is seeking a foothold in the world market for contraceptive products www.femalehealth.com

US World (governmental organizations)

✓ ✓

Case study II.3 Gerolsteiner A German bottled water manufacturer is trying to increase its global market share www.gerolsteiner.com

Tyskland Europe ✓ ✓

Case study II.4 Porsche International market selection (IMS) for the exclusive sports car brand www.porsche.com

US (Denmark)

World ✓ ✓

Part iii market entry strategies

Part video case study müller Yogurts www.muellergroup.com; www.mullerquaker.com

Germany USA ✓ ✓

Case study III.1 raleigh bicycles Does the iconic bicycle brand still have a chance on the world market? www.raleigh.co.uk

UK World ✓ ✓

Case study III.2 ikea Expanding through franchising to the South American market? www.ikea.com

Sweden, Holland

South America (Brazil)

✓

table 2 Part case studies: overview

PREFACE xxix

Part Case study title, subtitle and related websites

Country/area of company headquarters

Geographical target area

target market

b2b b2C

Case study III.3 autoliv airbags Transforming Autoliv into a global company www.autoliv.com

Sweden, US

World ✓

Case study III.4 imaX Corporation Globalization of the film business www.imax.com

Canada World ✓ ✓

Part iV Designing the global marketing programme

Part video case study tequila avion www.tequilaavion.com

USA World ✓

Case study IV.1 absolut Vodka Defending and attacking for a better position in the global vodka market www.absolut.com www.pernod.net

France, Sweden

World, Eastern Europe

✓

Case study IV.2 Guinness How can the iconic Irish beer brand compensate for declining sales in the home market? www.diageo.com www.guinness.com

UK, Ireland World ✓ ✓

Case study IV.3 Dyson Vacuum Cleaner Shifting from domestic to international marketing with the famous bagless vacuum cleaner www.dyson.co.uk www.dysonairblade.co.uk

UK US, the rest of the world

✓ ✓

Case study IV.4 triumph motorcycles ltd Rising from the ashes in the international motorcycle business www.triumph.co.uk

UK World ✓

Part V implementing and coordinating the global marketing programme

Part video case study Stella & Dot www.stelladot.com

USA World ✓ ✓

Case study V.1 Sony music entertainment New worldwide organizational structure and the marketing, planning and budgeting of Pink’s new album www.sonymusic.com

US, Japan World ✓ ✓

Case study V.2 red bull The global market leader in energy drinks is considering further market expansion www.redbull.com

Austria World ✓ ✓

Case study V.3 tetra Pak How to create B2B relationships with the food industry on a global level www.tetrapak.com

Holland World ✓

Case study V.4 Polaroid eyewear Can the iconic brand achieve a comeback in the global sunglasses industry? www.polaroideyewear.com

Switzerland, Italy

World ✓

table 2 Continued

PREFACExxx

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GUiDeD toUr

PART I THE DECISION WHETHER TO INTERNATIONALIZE2

1 Global marketing in the firm

2 Initiation of internationalization

3 Internationalization theories

4 Development of the firm’s international competitiveness

Part I Case studies

I.1 Zara: the Spanish retailer goes to the top of world fashion

I.2 Manchester United: still trying to establish a global brand

I.3 Adidas: the No. 2 in the global sportswear market is challenging the No. 1, Nike

I.4 Cereal Partners Worldwide (CPW): the No. 2 world player is challenging the No. 1, Kellogg

PART I The decision whether to

internationalize

Chs 1–4

PART II Deciding which markets to enter

Chs 5–8

PART III Market entry

strategies

Chs 9–13

PART IV Designing the

global marketing programme

Chs 14–17 PART V Implementing and coordinating the global marketin