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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 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.

When Principles of Global Marketing first appeared in 1996, we invited readers to “look ahead” to such developments as the ending of America’s trade embargo with Vietnam, Europe’s new single market, Daimler AG’s Smart car, Volkswagen’s global ambitions, and Whirlpool’s expansion into emerging markets. This newly revised edition also surveys important current developments in the international arena, including Britain’s tortuous path towards Brexit, China’s ascendance on the world stage, evolving trade relations in the Trump era, achievements by entrepreneurs such as Elon Musk, plus much more.

We are passionate about the subject of global marketing; if our readers detect a note of enthusiasm in our writing, then we have been successful. Our goal for all ten editions has been the same: to write a book that is authoritative in content yet relaxed and assured in style and tone. One instructor using the Ninth Edition wrote us to say, “I love the text, and really like the way it engages students. That is invaluable.” We believe that you will find latest edition of Global Marketing to be the most engaging, up-to-date, relevant, useful text of its kind.

We recommend pairing the Tenth Edition with Pearson’s MyLab Marketing. MyLab Mar- keting is a teaching and learning platform that empowers you to reach every student. By combin- ing content from Global Marketing with digital tools and a flexible platform, MyLab Marketing personalizes the learning experience and will help your students learn and retain key course concepts while developing skills that future employers are seeking in their candidates.

Preface

ChAPTER 1 • INTRODUCTION TO GlObAl MARkETING 35

Exhibit 1-14 Apple cofounder Steve Jobs wore many hats during his illustri- ous career, including inventor, entrepreneur, CEO, and visionary technolo- gist. He was also a master showman, a storyteller, and marketing genius. His appearances at product launches are the stuff of legend, and under his guidance Apple’s must-have products—including the iPod, the iPhone, and the iPad—were, simply put, the epitome of “cool.” Source: Paul Sakuma/AP Images.

CASE 1-3

Apple versus Samsung: The Battle for Smartphone Supremacy Heats Up

When Steve Jobs died in October 2011, the world lost one of the towering figures of the modern business era (see Exhibit 1-14). Apple, the company Jobs cofounded, was a pioneer in the consumer electronics world; its key product introductions included the Apple II (1977), the Macintosh (1984), the iPod and iTunes (2001), the Apple Store (2001), the iPhone (2007), and the iPad (2009). At the time of Jobs’s death, Apple was the most valuable tech company in the world. By September 2012, Apple stock had soared to record levels, with its price briefly rising above $700 per share. In addition, Apple had amassed more than $100 billion in cash, most of it held abroad as foreign earnings. Meanwhile, once-dominant tech industry giants such as Nokia, Sony, Dell, and BlackBerry were struggling.

Despite strong 2012 sales for the iPhone 5, industry observers began to wonder whether Apple’s hot streak of hit product introduc- tions was starting to cool. Apple’s reputation was based on its proven ability to disrupt existing markets (e.g., the music and telecommunica- tions industries) and to create new markets through the introduction of technical and design innovations. However, some viewed the 2012 launch of the iPhone 5 as an evolutionary step rather than a revolution- ary breakthrough. In fact, many consumers opted to buy the slower, cheaper iPhone 4 or 4S rather than upgrade to the iPhone 5. Without Jobs, who was considered by many to be the heart and soul of the company, were Apple’s best days behind it?

The Competitive Threat As growth in the key smartphone sector began to slow, Apple’s most formidable competitor was Samsung Electronics, a division of Korean industrial giant Samsung Group, whose products range from semicon- ductors to household appliances to smartphones. Samsung’s popular Galaxy series of phones are powered by Android, an operating system developed by Google. Some Galaxy models, including the Galaxy Note (also known as a “phablet”), have larger screens than the iPhone—a point of difference that has helped drive sales of those devices. The

rivalry between Apple and Samsung has been heated, with the two sides squaring off in court over alleged patent infringement.

China and Europe are two of Samsung’s key markets; in 2012, the company launched the Galaxy S III in Europe. In 2013, however, Samsung staged a lavish event at Radio City Music Hall in New York to launch the Galaxy S4. Why the change? As J. K. Shin, the executive in charge of Samsung’s mobile business, noted, “We’re a global player in the smartphone market and a global company, and the U.S. is an impor- tant market for us. . . . I’m not satisfied with our U.S. market share.”

In many developing countries, there is strong demand for inexpen- sive mobile phones. Some Android-based models from Samsung and other companies sell for much less than Apple’s cheapest models. For many years, Apple did not offer a lower-cost version of the iPhone. In the United States, wireless carriers such as Verizon and AT&T subsidized the price of the iPhone for consumers who signed multiyear service contracts—a factor that explained why an American iPhone 5 sold for $199. By contrast, in other countries consumers paid the full, unsubsi- dized price of the iPhone but were not tied to a contract. Moreover, the iPhone 5 was the same in every world market. By contrast, Samsung made several versions of the Galaxy S4—using different processors, for example—to suit the needs of different regions.

Not surprisingly, smartphone makers are setting their sights on China, India, and other emerging markets. For example, Greater China, which includes China, Hong Kong, and Taiwan, is now Apple’s second- largest market. In 2013, Cook announced that China Mobile, the larg- est carrier in the region and the world’s largest carrier overall, would begin selling the iPhone. Apple faces strong competition from local competitors such as Oppo and Xiaomi; Oppo’s R9 bested the iPhone 6 as the top-selling smartphone in 2016. Distribution is critical, and Cook is aggressively expanding the number of outlets in China that sell iPhones.

As growth in China and Europe slows, India, the number 2 smart- phone market, is becoming increasingly important. Here, however, Apple’s 3 percent market share means that it lags far behind Samsung and Chinese producers in terms of smartphone shipments. Two-thirds of the phones sold in India cost less than $180. By contrast, Indian con- sumers pay about $300 for an iPhone 5S, the older model that Apple launched in 2013. These devices are sold through small, independent retailers; for entry-level buyers, Apple’s Web site offers only the iPhone SE and iPhone 6. In May 2017, Apple began manufacturing the SE in India, bringing the price down to approximately $325. Local manufac- turing will also allow Apple to open its own flagship stores in India.

Famously, Steve Jobs downplayed the importance of formal mar- ket research, saying that consumers don’t know what they want. By contrast, Samsung Electronics relies heavily on market research; it has 60,000 staff members working in dozens of research centers in China, Great Britain, India, Japan, the United States, and elsewhere. Samsung designers have backgrounds in such diverse disciplines as psychology, sociology, and engineering. Researchers track trends in fashion and interior design. Also, Samsung spends more on advertising and promo- tion than does Apple.

The Post-Jobs Era Begins In the months following Jobs’s death, Cook made a number of key stra- tegic decisions. For example, he authorized the introduction of the iPad mini, a product that Jobs had opposed. It quickly became a bestseller.

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New to This Edition As with previous editions, the Tenth Edition offers up-to-date, original insights into the complexities and subtleties of shifts in the external environment and their implications for global marketers. Specific updates and revisions include:

● More than fifty percent of the chapter-opening vignettes and related end- of-chapter cases are new to the Tenth Edition. Cases retained from the prior edition have also been revised and updated for this new edition.

● Revised and updated end-of-chapter cases include Case 1-2, “McDonald’s Expands Globally While Adjusting Its Local Recipe”; Case 1-3, “Apple versus Samsung: The Battle for Smartphone Supremacy Heats Up”; Case 4-2, “Will Tourism Ruin Venice?”; Case 10-1, “Google”; Case 11-1, “Global Automakers Target Low-Income Consumers”; Case 16-1, “IKEA.”

● New cases in the Tenth Edition include Case 2-1, “India’s Economy at the Crossroads: Can Prime Minister Narendra Modi Deliver Acche Din?”; Case 3-1, “Breaking Up Is Hard to Do: Britons Contemplate ‘Brexit’”; Case 4-1, “Strange Brew: Coffee Culture Around the World”; Case 5-1, “Travis Kalanick and Uber"; Case 12-1, “Welcome to the World of Fast Fashion”; Case 15-1, “How Do You Like Your Reality? Virtual? Augmented? Mixed?”

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xviii PREFACE

● New discussion of social media is integrated throughout the Tenth Edition. Chapter 15, “Global Marketing and the Digital Revolution,” has been thoroughly revised and updated to include discussion of location-based mobile platforms, cloud computing, tablets, wearable devices, autonomous mobility, and other cutting-edge topics.

● In MyLab Marketing, in this edition, new Mini Sims put students in professional roles and give them the opportunity to apply course concepts and develop decision-making skills through real-world business challenges.20 PART 1 • INTRODUCTION

Kevin Systrom and Mike Krieger are entrepreneurs. They developed an innovative product, created a brand, and cofounded a company to market it. By applying the basic tools and principles of modern market- ing, the two Stanford University graduates have achieved remarkable success.

As is true with many entrepreneurs, Systrom’s idea was based on his recognition of a problem that needed to be solved and his own needs and wants. Systrom had a passion for photography, and also appreciated the potential of social media. He hit upon an idea for a location-based photo-sharing app that he dubbed Burbn (after his favorite distilled spirit). He then recruited Krieger, who was working on his own app called Meebo. Krieger liked Systrom’s idea, but the two agreed that Burbn was overloaded with functionality. Realizing that “There has to be a better way,” the duo stripped out everything but the photo-sharing function, which they conceptualized as an “instant telegram” (see Exhibit 1-9).

In October 2010, Systrom and Krieger launched Instagram on Apple’s App Store. Within two years, the photo-filtering and photo- sharing app had 30 million users. Soon thereafter, the platform was also launched on the Android and Windows Phone platforms.

Systrom’s insight was that, even in prehistoric times, people com- municated visually. Today, Instagram makes visual information acces- sible, just as Gutenberg’s printing press made the printed word more accessible. Instagram’s popularity is due in part to the dozens of filters that users can apply to their photos (the idea for filters came from Systrom’s girlfriend Nicole).

In 2012, Facebook acquired Instagram for $1 billion. Today, Ins- tagram has more than 600 million users who upload approximately 100 million photographs and videos each day; only 20 percent of users are in the United States. In 2016, Instagram generated more than $1.5 billion in revenues from mobile ads.

Social-media savvy companies in the luxury goods industry have been quick to embrace Instagram. To justify their products’ high prices,

managers of luxury brands need to help consumers understand the craftsmanship and heritage that are integral to the brand stories. Using photo images and videos, companies can take consumers “behind the scenes” and show the process by which luxury products are made by skilled artisans.

Nearly two-thirds of Instagram users use the app to learn about products and brands. Companies can leverage parent Facebook’s pow- erful data and online advertising tools to reach different segments— say, current versus potential luxury consumers—by inserting targeted, photography-based ads in their respective Instagram feeds. One such segment is known as “Henrys,” referring to younger Millennials who are described as “high earning, not rich yet.”

Food is another category that is driving Instagram’s popularity; to date, users have “IG-ed” (i.e., Instagrammed) more than 200 mil- lion posts with the hashtag #food. In response to this trend, social- media–conscious hospitality managers in London, New York, and other food-centric cities are taking steps to ensure that a restaurant’s inte- rior design, menus, and dishes lend themselves to Instagram posts. These range from Michelin-approved restaurants with posh addresses to Mexican-themed chains that feature burritos wrapped in branded foil. The most popular color? “Millennial Pink.” Recent trending food items include “freakshakes” and “unicorn lattes.”

Two new Instagram features, Stories and Live, launched in August 2016; they allow users to upload short video clips, live feeds, and photos that disappear within 24 hours. The features proved to be so addictive that parent company Facebook added similar functionality to WhatsApp, Messenger, and Facebook. Some critics have observed that, with Stories, Instagram was simply copying Snapchat. Systrom disagrees. To him, execution trumps originality. Stories “clearly pro- vides unique value to people that they’re not getting elsewhere,” he says.

The music industry’s embrace of Instagram and Stories illus- trates Systrom’s point. Musicians and bands of all types—from global superstars like Adele and Beyoncé to indie artists seeking to break through—are using the platform to connect with fans in an organic way. According to Nielsen, Instagram users spend more time listening to music and are likely to pay for streaming music services than nonus- ers. Artists use Stories and Live to announce new releases and tours, and to provide behind-the-scenes looks at the creative process. Popular posts can quickly go viral, allowing record companies and the artists themselves to see the impact on music sales.

Sources: John Paul Titlow, “How Instagram Became the Music Industry’s Secret Weapon,” Fast Company (September 29, 2017); Deepa Seetharaman, “A Copy- cat? No, Call It Competition,” The Wall Street Journal (May 31, 2017), p. B5; Deepa Seetharaman, “‘Efficiency Guru’ Sharpens Instagram,” The Wall Street Journal (April 14, 2017), p. B4; Deepa Seetharaman Natalie Whittle, “A Square Meal: How Restau- rants Are Courting the Instagram Crowd,” FT Magazine (April 7, 2017); Alexandra Wolfe, “Weekend Confidential: Kevin Systrom,” The Wall Street Journal (July 2–3, 2016), p. C11; Hannah Kuchler, “Snap Happy: Instagram Rolls out Carpet for Fashion Brands,” Financial Times—FT Special Report: The Business of Luxury (May 23, 2016), p. 2; Murad Ahmed, “The Camera-Shy Half of Instagram’s Founding Duo,” Financial Times (November 24, 2015), p. 10.

ENTREPRENEURIAL LEADERSHIP, CREATIVE THINKING, AND THE GLOBAL STARTUP

Kevin Systrom and Mike Krieger, Instagram

Exhibit 1-9 Stanford University graduates Kevin Systrom and Mike Krieger are Instagram's co-founders.

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90 PART 2 • THE GLOBAL MARKETING ENVIRONMENT

Exhibit 3-8 GNH (gross national happiness), rather than GNP (gross national product), guides policy in Bhutan. Some critics argue that promoting happiness in the Himalayan state has resulted in some negative consequences. For example, the emphasis on the Buddhist culture shared by the majority of the population has caused resentment among the Nepalese minority living in the south.

When Britain’s Prince William visited Bhutan in 2016 with his wife Catherine, the Duchess of Cambridge, the world got a rare glimpse into a country that has been called the “forbidden kingdom.” Why “for- bidden?” For one thing, the country’s leaders limit tourism; only about 57,000 foreign visitors traveled to Bhutan in 2015. One hopes that the royal couple were able to glean some insights into their host country’s secret regarding happiness.

Bhutan is a kingdom of 754,000 people in the Himalaya Mountains (see Exhibit 3-8). Per capita GNI is approximately $2,330; using this fig- ure as a metric, Bhutan is included in the ranks of lower-middle-income nations. However, for the past several decades, Bhutan has relied on another measure besides economic growth to assess its success—namely, gross national happiness (GNH).

It has been argued that indicators such as GDP and GNI per capita are inadequate when explaining a nation’s well-being. For example, China’s GDP has doubled twice since 1990, yet ordinary Chinese citi- zens do not appear any happier today than they were when the coun- try’s leaders began transitioning to a free market economy. If increased income and consumption don’t correlate with happiness, then what does? According to some economists and policymakers, supplemental indicators that measure factors such as social progress, quality of life, and sustainability are needed.

The GNH Index includes both objective and subjective indicators: psychological well-being, time use, community vitality, culture, health, education, environmental diversity, living standards, and governance. As Lyonpo Jigmi Thinley, home minister of Bhutan, explained, “We have to think of human well-being in broader terms. Material well-being is only one component. That doesn’t ensure that you’re at peace with your envi- ronment and in harmony with each other.”

Not surprisingly, there is some disagreement among social scientists regarding the best way to define, track, and measure such intangibles as happiness and quality of life. In Britain, for example, officials have devel- oped a summary of “sustainable development indicators” that include measures of traffic, pollution, and crime. In another approach, survey

participants report the feelings they experience as they go about their daily routines, with these activities ranging from paying bills to participat- ing in sports activities. In France, former President Nicolas Sarkozy estab- lished the Commission on the Measurement of Economic Performance and Social Progress to address issues related to national well-being.

Meanwhile, officials in Bhutan have launched a number of initia- tives to promote happiness in the kingdom. For example, teachers are rotated between rural and urban areas to ensure all schoolchildren have access to a top-quality education. As Thakur S. Powdyel, an official at Bhutan’s Ministry of Education, puts it, “The goal of life should not be limited to production, consumption, more production, and more consumption. There is no necessary relationship between the level of possession and the level of well-being.”

With the global economic crisis as a backdrop, a first-ever Happi- ness Congress was held in Madrid in the fall of 2010. The Congress was sponsored by the Coca-Cola Company, which uses the tagline “Open Happiness” in its global advertising. The global beverage giant also established the Coca-Cola Institute of Happiness in Spain after research indicated that Spanish consumers associate Coke, more than any other brand, with happiness.

Minister Thinley from Bhutan was the keynote speaker at the Con- gress; his address was titled “Happiness in Difficult Times.” As Thin- ley told attendees, “Our economic models are greatly, deeply flawed. They are not sustainable.” The 7th International Congress was held in November 2017 in Thimphu, Bhutan.

Sources: Kai Schultz, “In Bhutan, Happiness Index as Gauge for Social Ills,” The New York Times (January 28, 2017), p. A6; “Forbidden Kingdom,” CBS Sunday Morning (April 17, 2016); Jody Rosen, “Higher State of Being,” New York Times Style Magazine: Travel (November 2, 2014), pp. 144–151; Richard Easterlin, “When Growth Outpaces Happiness,” The New York Times (September 28, 2012), p. A31; Tim Harford, “Happi- ness: A Measure of Cheer,” Financial Times (December 27, 2010), p. 5; Victor Mallet, “Bhutan and Coke Join Hands for Happiness,” Financial Times (October 22, 2010), Andrew C. Revkin, “A New Measure of Well-Being from a Happy Little Kingdom,” The New York Times (October 4, 2005), p. F1.

THE CULTURAL CONTEXT

Bhutan and GNH (Gross National Happiness)

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86 PART 2 • THE GLOBAL MARKETING ENVIRONMENT

As the data in Figure 3-5 clearly show, Brazil is an economic powerhouse in South America. Brazil has the largest geographical territory and the larg- est population in the region. It has emerged on the world stage as a strong exporter, and its rapid economic growth has given Brazilian policymakers a greater presence on the global stage and more clout at global trade talks.

One symbol of Brazil’s new role in the global economy is Embraer, a jet aircraft manufacturer (see Exhibit 3-6). Specializing in regional jets that seat between 37 and 124 passengers, Embraer has won orders from a variety of carriers. A cornerstone of Embraer’s strategy is its management’s policy of sourcing the best components available anywhere in the world. This approach, known as reverse outsourcing, has proved its worth in the development of new models such as the E-170/175. In that program, more than one dozen partners, including GE and Honeywell, shared the development risks in exchange for a percentage of revenue from aircraft sales. To sell more regional jets to China, Embraer has also established a $50 million joint venture with China Aviation Industry Corporation.

In the United States alone, more than 850 Embraer jets are cur- rently in service. The reason is simple: It is a huge market. As Paulo Cesar Silva, Embraer’s top executive for Commercial Aviation, notes, “For us, North America is—and will continue to be—the most impor- tant market in terms of the potential to sell new products here. Aviation in North America is about 40 percent of aviation in the world.” Embraer is also aggressively pursuing the defense sector with its light attack aircraft, the Super Tucano. The U.S. military has expressed interest, and orders have come in from Colombia, Indonesia, and other nations.

Brazil’s agricultural sector is also a leading exporter. Brazil is the world’s number 1 exporter of beef, coffee, orange juice (check the label on your orange juice carton), and sugar. Annual coffee bean production totals 40 million 60-kilo bags—one-third of the world total. JBS is the world’s largest meat processor. Brazil is also rapidly gaining a reputation as a producer of sugar-based ethanol fuel. Says Ermor Zambello, man- ager of the Grupo Farias sugar mill, “Globalization has made us think more about foreign markets. Now, we have more of a global outlook, and we are concerned about global production.”

The central issue in the stalled Doha Round of WTO negotiations was agriculture. Brazil and India are taking the lead of the Group of Twenty developing nations calling for agricultural sector reform. For example, the

average tariff on Brazil’s exports to the 34 Organisation for the Economic Co-operation and Development (OECD) nations is 27 percent.

Government subsidies are also a key issue. In the EU, government spending accounts for approximately one-third of gross farm receipts; in the United States, the government provides about one-fourth of gross farm receipts. By contrast, Brazil farm support spending amounts to only 3 percent of farm receipts.

Moving forward, Brazil faces a number of other challenges. Reper- cussions are still being felt from Lava Jato (“Car Wash”), a massive corruption scandal that ensnared politicians and top officials at Brazil’s national oil company. Former president Luiz Inácio Lula da Silva was convicted on corruption charges and sentenced to prison. In the wake of the scandal, Brazil’s current president, Michel Temer, is privatizing a wide range of state-owned businesses.

Despite improvements made prior to the country’s hosting of the 2016 Summer Olympics, Brazil’s infrastructure remains woefully under- developed. Significant investment is required to improve highways, rail- roads, and ports. Businesspeople speak of “the Brazil cost,” a phrase that refers to delays related to excessive red tape.

Trade with China is presenting both opportunities and threats. In 2009, China surpassed the United States to become Brazil’s top trading partner and is investing tens of billions of dollars in the country. China’s explosive economic growth has created great demand for soybeans, iron ore, and other Brazilian commodity exports. However, Brazilian manufac- turers in light-industry sectors such as toys, eyeglasses, and footwear are facing increased competition from low-priced Chinese imports.

Sources: Joe Leahy, Andres Schipani, and Lucy Hornby, “‘Suddenly Everything Is for Sale,’” Financial Times (November 14, 2017), p. 9; Ben Mutzabaugh, “Brazil’s Embraer Jets Are Sized Just Right,” USA Today (July 6, 2012), pp. 1B, 2B; Joe Leahy, “In Search of More High-Flyers,” Financial Times (April 17, 2012), p. 10; Joe Leahy, “The Brazilian Economy: A High-Flyer Now Flags,” Financial Times (January 11, 2012), p. 7; Antonia Regalado, “Soccer, Samba, and Outsourcing?”, The Wall Street Journal (January 25, 2007), pp. B1, B8; David J. Lynch, “Brazil Hopes to Build on Its Ethanol Success,” USA Today (March 29, 2006), pp. 1B, 2B; David J. Lynch, “China’s Growing Pull Puts Brazil in a Bind,” USA Today (March 21, 2006), pp. 1B, 2B; David J. Lynch, “Comeback Kid Embraer Has Hot New Jet, and Fiery CEO to Match,” USA Today (March 7, 2006), pp. 1B, 2B; David J. Lynch, “Brazil’s Agricultural Exports Cast Long Shadow,” USA Today (March 10, 2006), pp. 1B, 2B.

EMERGING MARKETS BRIEFING BOOK

Brazil

Exhibit 3-6 Embraer is the world’s fourth-largest aircraft manufacturer, but is second only to Canada’s Bom- bardier in the regional aircraft sector. Source: Alexandre Meneghini/AP Images.

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● In addition, most chapters contain sidebar features on the following themes: Emerging Markets Briefing Book; Entrepreneurial Leadership, Creative Thinking, and the Global Startup; and The Cultural Context.

● Among the entrepreneurs profiled in these sidebars are Kevin Systrom (Instagram); Reed Hastings (Netflix); Daniel Ek (Spotify); Oscar Farinetti (Eataly); Elon Musk (Tesla); Jack Ma (Alibaba), Sir James Dyson (Dyson), and Brian Chesky and Joe Gebbia (Airbnb).

● The Entrepreneurial Leadership, Creative Thinking, and the Global Startup sidebars also contain expanded coverage of digital entrepreneurship, includ- ing financial technology (“fintech”), in this Tenth Edition.

● All tables containing key company, country, and industry data have been updated. Examples include Table 2-3, “Index of Economic Freedom”; all the income and population tables in Chapters 3 and 7; Table 10-2, “The World’s Most Valuable Brands”; Table 13-1, “Top 25 Global Marketers”; and Table 13-2, “Top 20 Global Advertising Agency Companies.”

● The discussion of the BRICS nations has been updated to incorporate the impact of slowing growth in China and the volatility of commodity prices.

● Income and population data in Chapter 3 have been reorganized for improved clarity, comparability, and visual impact.

● More infographics have been incorporated into the text to enhance clarity and visual appeal.

Solving Teaching and Learning Challenges Today’s Millennial and Generation Z students are networked and technology-savvy. They have access to more content across more platforms than previous generations. Many are also taking on substantial debt loads as they pursue their college degrees. For these and other reasons, it is important to give them a textbook that is “worth the money,” and that provides an experience that is rewarding and motivates them to “keep reading.”

We have been gratified to receive positive feedback from students who have benefited from college courses in which Global Marketing was the required text. The following student comments suggest that Global Marketing does exactly that:

“The textbook is very clear and easy to understand.” “An excellent textbook with many real-life examples.” “The authors use simple language and clearly state the important points.” “This is the best textbook that I am using this term.” “The authors have done an excellent job of writing a text that can be read easily.”

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PREFACE xix

The Tenth Edition helps students develop cross-cultural awareness and engage with issues relating to sustainability and corporate social responsibility. The new edition also profiles some of the most innovative thinkers and entrepreneurial leaders of the modern era.

Each chapter opens with a brief case study introducing a company, a country, a product, or a global marketing issue that directly relates to chapter themes and content. The cases were written with the same objectives in mind: to raise issues that will encourage student interest and learning; to stimulate class discussion; to give students a chance to apply theory and concepts while developing critical-thinking skills; and to enhance the classroom experience for students and instructors alike. Every chapter and case has been classroom-tested in both undergraduate and graduate courses.

Throughout the text, we have added scores of current examples of global marketing practice as well as quotations from global marketing practitioners and industry experts. Organizational Web sites are referenced for further student study and exploration.

We have benefited tremendously from adopter feedback and input; we also continue to draw on our direct experience in key world regions. The result is a text that addresses your needs and the needs of instructors in every part of the world.

Developing Employability Skills Employers at global companies want to know that the people they hire understand and can think critically about contemporary issues such as the dynamics of globalization and growth opportunities in emerging markets. One MBA student wrote to say that reading Global Marketing for coursework in 2017 provided her with a competitive advantage when pursuing a new career opportunity. She said, “I used many of the text’s theories during my interview process, and I incorporate the lessons learned on a daily basis as I work with our offices in 12+ locations around the world!”

The Tenth Edition addresses current global trends and issues, including the economic dis- ruption and social disruption that are among the forces at work in the world today. The resulting shifts in global market opportunities and threats are important themes in this revision, as are the rise of economic nationalism and populism. Terms such as austerity, capital flight, currency wars, double-dip recession, global imbalances, global rebalancing, quantitative easing (QE), secular stagnation, sovereign-debt crisis, and negative interest rates appear regularly in the busi- ness news. New terms such as tax inversion are now part of the conversation as well.

Recent research findings have been integrated into each chapter of Global Marketing to help students be conversant in the most current conversations that are happening in this field. For example, our thinking about the benefits of globalization has been influenced by Richard Baldwin’s 2016 book, The Great Convergence: Information Technology and the New Globalization. As Baldwin notes, the process of removing constraints on the costs of moving goods, people, and ideas began in the late 19th century. The first wave of globalization was driven by the falling costs of water transport (e.g., ocean-going freighters) and land transport (e.g., the railroads). In keeping with the theory of competitive advantage, this meant that coun- tries with manufacturing prowess benefited by trading with countries whose primary outputs were agricultural production. The current wave of globalization has resulted in part from the digital revolution that allows supply chains to stretch around the world.

Instructor Teaching Resources The following supplements are available with this text:

Supplements available to instructors at www.pearsonhighered.com

Features of the Supplement

Instructor’s Manual authored by Kerry Walsh from University of South Florida

• Chapter-by-chapter summaries

• Examples and activities not in the main book

• Teaching outlines

• Teaching tips

• Solutions to all questions and problems in the book

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http://www.pearsonhighered.com
xx PREFACE

Supplements available to instructors at www.pearsonhighered.com

Features of the Supplement

Test Bank authored by Mahmood Khan from Pamplin College of Business, Virginia Tech

4,000 multiple-choice, true/false, short- answer, and graphing questions with these annotations:

• Difficulty level (1 for straight recall, 2 for some analysis, 3 for complex analysis)

• Type (Multiple-choice, true/false, short-answer, essay

• Topic (The term or concept the question supports)

• Learning outcome

• AACSB learning standard (Written and Oral Communication; Ethical Understanding and Reasoning; Analytical Thinking; Information Technology; Interpersonal Relations and Teamwork; Diverse and Multicultural Work; Reflective Thinking; Application of Knowledge)

Page number in the text

Computerized TestGen TestGen allows instructors to: • Customize, save, and generate classroom tests

• Edit, add, or delete questions from the Test Item Files

• Analyze test results

• Organize a database of tests and student results.

PowerPoints authored by Jill Solomon from University of South Florida

Slides include all the graphs, tables, and equations in the textbook. PowerPoints meet accessibility standards for students with disabilities. Features include, but not limited to:

• Keyboard and Screen Reader access

• Alternative text for images

• High color contrast between background and foreground colors

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http://www.pearsonhighered.com
xxi

I am indebted to the many colleagues, friends, and adopters who carefully read and critiqued individual manuscript sections and chapters. Their comments improved the clarity and read- ability of the text. In particular, I would like to thank Steven J. Archambault, James A. Baggett, Hunter Clark, Frank Colella, Dave Collins, Diana Dickinson, Mark Freyberg, Lora Friedrich, Alexandre Gilfanov, Carl Halgren, Kathy Hill, Mark Juffernbruch, David Kochel, Peter Kvetko, Keith Miller, Gayle Moberg, Christopher “Kit” Nagel, Alexandre Plokhov, Chatt Pongpatipat, Yao Lu Swanson, David Wolf, and Thomas Wright.

Many individuals were instrumental in helping us secure permissions, and I want to acknowledge everyone who “went the extra mile” in supporting this revision. I would especially like to thank Nicholas Arnold, Meredith Corporation; Jane Bachmann, DuPont; John Baloff, ATI Amplifier Technologies; Jeremy Banks, banxcartoons; William Bassett, Kikkoman; Julien Benatar, Pandora; Chris Boyens, Deere & Company; Paul Button, Jill Camp, Kohler; Lee Carter, Mower; Buzz Delano, Delano Associates; Kirk Edmondson, Lexus Advanced Business Development; Jemma Gould, IPG; Mandy Guss, Las Cruces; Jennifer Hall, Champagne Bureau, USA; Emma Hamm, Subaru; Sean Higgins, Frrester Research; David Johnson, Meredith Corporation; Allison Joyce, Allison Joyce Photojournalism; Tom Kingsbury, Bridgestone Americas, Inc.; Denise Lavoie, Henkel; Ilana McCabe, QVC Inc.; Edward Linsmier, Edward Linsmier Photography; Mike Lovell, Meredith Corporation; Katherine Miller, Nucor; Brad Miller, New Balance Athletic Shoe, Inc.; Morgan Molinoff, Edelman; Kerry Ann Nolan, Subaru; Meghan Reutzel, GoDaddy; Lenore Rice, Seibert & Rice; Michael Ross, Michael Ross Photography; Vivian Santangelo, Meredith Corporation; Mara Seibert, Seibert & Rice; Greg Selfe, Two Sides UK; Lindsy Shrewsberry, STIHL USA; Brady Spangenberg, BASF; Katie Szadziewska, McArthurGlen; and Vibhav Valdore, Bridgestone Latin America.

Colleagues and adopters at several institutions contributed material to this revision and made helpful suggestions. Thanks to Professor Steven Archambault, Cal-Poly Pomona Univer- sity, and Professor Christopher “Kit” Nagel of Concordia University–Irvine, for suggestions that we incorporated in Chapter 2 and Chapter 8. Dominic Standish, a colleague at CIMBA Italy, organized the panel discussion “Death in Venice: Is Tourism Killing or Saving the City?” in fall 2011. That panel, our subsequent discussions during my visits to London and Venice, and Domi- nic’s book Venice in Environmental Peril? Myth and Reality all were key resources for the open- ing case in Chapter 4. Lora Friedrich, Professor of Sociology at Simpson College, and Chatt Pongpatipat, Assistant Professor of Marketing at Saginaw Valley State University, contributed the Chapter 7 sidebar about Thailand. Paul Button created a wonderful new set of infographic maps for Chapter 3. Thanks also to my daughter, Lauren Konrad, for additional last-minute help with infographic design.

I would also like to thank the many present and former students at Simpson College and the University of Iowa who have offered feedback on previous editions of Global Marketing, contrib- uted case studies, and suggested improvements. These include Han Wang’s contributions to the Chapter 7 opening case on segmenting the Chinese luxury market. Glynis Gallagher, a University of Iowa graduate, contributed a wonderful Chapter 2 case about her experience as a contracts analyst at Cargill. Brady Spangenberg wrote in detail about his vocational journey to BASF in a new case in Chapter 6. Simpson alumna Beth Dorrell graciously offered her expertise on export documentation. Mikkel Jakobsen wrote about his first job in global marketing for Case 8-2.

The students in my international marketing course at CIMBA Italy worked collaboratively on the issue of tourism in Venice; Case 4-2 represents, in part, a mashup of the various team efforts. Hats off to Kaleb Beckett, Luci Boat, Leslie Bourland, Lauren Camerieri, Lucas Commodore, Jeff Dellinger, Chris Duncan, Jacque Ford, Brian Fry, Glynis Gallagher, Katie Greif, Kim Halamicek, Harper Hier, Jake Hirsch, Mike Johnson, Sarah Jones, Josh Kroll, Sean Miller, Chris Nucero, Mark Parmalee, Jack Roeder, Chris Shonkwiler, Slava Sinitsyn, and Chloe Suh. All were enthusiastic participants in the project and our work together in Italy made a lasting impression on me.

It was a great pleasure working with the Pearson team that managed the production of this edition. Thanks to: Stephanie Wall, Editor-in-Chief; Lynn M. Huddon, Executive Portfolio Man- ager; and Michelle Zeng, Content Producer, for their continued support. The production moved

Acknowledgments

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xxii ACKNOWLEDGMENTS

along smoothly, thanks to our friends at SPi Global. These include Anna Iremedio and Michelle Alojera, Content Production Managers; Maya Lane, Rights and Permissions Project Manager; Gowri Duraiswamy, Senior Project Manager. Kudos also to our photo researcher, Jason Acibes, for demonstrating once again that “every picture tells a story.” Thanks also to the marketing team for the fantastic work on marketing support materials, and to the entire Pearson sales team for helping promote the book in the field. I also want to acknowledge the contributions of Mah- mood Khan for in-depth updates to the TestBank, Kerry Walsh for her fine work on the Instruc- tor’s Manual, and Jill Solomon for preparing a new set of PowerPoint slides.

Mark C. Green September 2018

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Consider the following proposition: We live in a global marketplace. Apple iPhones, Burberry trench coats, Caterpillar earthmoving equipment, Facebook, LEGO toys, McDonald’s restau- rants, Samsung HDTVs, and Swatch watches are found practically everywhere on the planet. Global companies are fierce rivals in key markets. For example, American auto industry giants General Motors and Ford are locked in a competitive struggle with Toyota, Hyundai, and other global Asian rivals as well as European companies such as Volkswagen. U.S.-based Intel, the world’s largest chip maker, competes with South Korea’s Samsung. In the global smartphone market, Apple (United States), Motorola (China), and Samsung are dominant players. The globalization of the appliance industry means that Bosch, Electrolux, Haier Group, LG, and Whirlpool all compete for precious retail floor space and consumer awareness and preference.

Now consider a second proposition: We live in a world in which markets are local. In China, for example, Yum! Brands’ East Dawning fast-food chain competes with local restaurants such as New Asia Snack and Haidi Lao. Likewise, the best-selling smartphone in China isn’t marketed by Samsung or Apple. In fact, the top four smartphone brands in China—Huawei, Vivo, Oppo, and Xiaomi—are all from domestic producers.

In Taiwan, 85C has overtaken Starbucks as the largest chain of coffee shops. In India, Dunkin’ Donuts goes head-to-head with local chain Mad Over Doughnuts. In Poland, many consumers frequent small, family-owned shops rather than huge stores operated by France’s Carrefour and U.K.–based Tesco.1 In Southeast Asia, Uber jockeys for position with ride-hailing service Grab. Similarly, Brazilian com- panies such as Natura Cosméticos and O Boticário compete with Avon for direct-sale customers. Across Latin America, e-commerce giants eBay and Amazon compete with local market leader MercadoLibre.

Introduction to Global Marketing

CASE 1-1

The Global Marketplace Is Also Local

L E A R N I N G O B J E C T I V E S

1-1 Use the product/market growth matrix to explain the various ways a company can expand globally.

1-2 Describe how companies in global industries pursue competitive advantage.

1-3 Compare and contrast a single- country marketing strategy with a global marketing strategy (GMS).

1-4 Identify the companies at the top of the Global 500 rankings.

1-5 Explain the stages a company goes through as its management orien- tation evolves from domestic and ethnocentric to global and geocentric.

1-6 Discuss the driving and restraining forces affecting global integration today.

1

PA RT O N E

INTRODUCTION

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brand? When is a Japanese car not a Japanese car? Even U.S. President Donald Trump appeared to be unaware of the global nature of the automobile business when, in 2017, he threatened to slap tariffs on German cars sold in the United States. Consider:

• In 2016, BMW produced 411,000 vehicles at its plant in South Carolina. More than two-thirds of the plant’s production is exported, making BMW America’s top auto exporter.

• A Mercedes-Benz plant in Alabama produces 300,000 cars annually. • For several years, the top-selling “American” car (assembled in the

United States with at least 75 percent domestic content) was the Toyota Camry.

At the end of this chapter, you will find the rest of Case 1-1. Taken together, the two parts give you the opportunity to learn more about the global marketplace and test your knowledge of current issues in global marketing. You may be surprised at what you learn!

The “global marketplace versus local markets” paradox lies at the heart of this textbook. In later chapters, we will investigate the nature of local markets in more detail. For now, however, we will focus on the first part of the paradox. Think for a moment about brands and products that are found throughout the world. Ask the average consumer where this global “horn of plenty” comes from, and you’ll likely hear a variety of answers. It’s certainly true that some brands—McDonald’s, Dos Equis, Swatch, Waterford, Ferragamo, Volkswagen, and Burberry, for instance—are strongly identified with a specific country. In much of the world, Coca-Cola and McDonald’s are recognized as iconic American brands, just as Ferragamo and Versace are synonymous with classic Italian style (see Exhibit 1-1).

However, for many other products, brands, and companies, the sense of identity with a specific country is becoming blurred. Which brands are Japanese? American? Korean? German? Indian? Can you name the corporate owner of the Nokia smartphone

1-1 Introduction and Overview As the preceding examples illustrate, the global marketplace finds expression in many ways. Some are quite subtle; others are not. While shopping, you may have noticed more multilan- guage labeling on your favorite products and brands. Chances are you were one of the millions of people around the world who tuned in to television coverage of the World Cup Soccer cham- pionship in 2018. On the highway, you may have seen a semitrailer truck from FedEx’s Global Supply Chain Services fleet. Or perhaps you are one of the hundreds of millions of Apple iTunes customers who got a free download of U2’s 2014 album Songs of Innocence—whether you wanted it or not! When you pick up a pound of Central American coffee at your favorite café, you will find that some beans are labeled Fair Trade Certified.

Exhibit 1-1 Salvatore Ferragamo, based in Florence, Italy, is one of the world’s leading fashion brands. Ferragamo and other companies in the luxury sector face challenges as consumer habits change. Historically, the luxury shopper was brand loyal and had an eye for classic designs. Now, many shoppers pursue the “next big thing” via online retail channels. Source: Roussel Bernard/Alamy Stock Photo.

1-1 Use the product/market growth matrix to explain the various ways a company can expand globally.

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4 PART 1 • INTRODUCTION

The growing importance of global marketing is one aspect of a sweeping transformation that has profoundly affected the people and industries of many nations during the past 160 years. International trade has existed for centuries. Beginning in 200 b.c., for example, the legendary Silk Road was a land route connecting China with Mediterranean Europe. From the mid-1800s to the early 1920s, with Great Britain the dominant economic power in the world, international trade flourished. However, a series of global upheavals, including World War I, the Bolshevik Revolution, and the Great Depression, brought that era to an end. Then, following World War II, a new era began. Unparalleled expansion into global markets by companies that previously served only customers located in their respective home countries is one hallmark of this new global era.