GLOBAL MARKETING MANAGEMENT

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GLOBAL MARKETING MANAGEMENT

SECOND EDITION

Masaaki Kotabe

Temple University

Kristiaan Helsen

Hong Kong University of Science and Technology

JOHN WILEY & SONS, INC.

NEW YORK / CHICHESTER / WEINHEIM BRISBANE / SINGAPORE / TORONTO

CONTENTS

PART ONE: GLOBALIZATION l

l ? GLOBALIZATION IMPERATIVE l

Why Global Marketing is Imperative 2 Globalization of Markets and Competition 6

International Trade versus International Business 7

Who Manages International Trade? 8 Evolution of Global Marketing 9

What is Marketing? 9 Domestic Marketing 11 -^Export Marketing 13 International Marketing - 14 Multinational Marketing 14 Global Marketing 15 The Impact of Economic Geography

and Climate on Global Marketing 16 The Impact of the Internet

on Global Marketing 17

PART TWO: GLOBAL MARKETING ENVIRONMENT 29

2 ? GLOBAL ECONOMIC ENVIRONMENT 29

Intertwined World Economy 30 Foreign Direct Investment 33 Portfolio Investment 34

Country Competitiveness 36 Changing Country Competitiveness 36 Human Resources and Technology 36

Evolution of Cooperative Global Trade Agreements 38

General Agreements on Tariffs and Trade 38 World Trade Organization 39

Financial Services in WTO/GATT 44 WTO and E-Commerce 45

U.S. Position in Foreign Direct Investment and Trade 46

U.S. Direct Investment Overseas 46 Foreign Direct Investment

in the United States 47 Balance of Payments Position 48 Information Technology and the Changing Nature

of Competition 49 Value of Intellectual Property in Information Age 50 Proliferation of e-commerce and regulations 51 Regional Economic Arrangements 53

Free Trade Area 54 Customs Union 55 Common Market 56 Monetary Union 56 Political Union 56 Multinational Corporations 57

3 ? GLOBAL FINANCIAL ENVIRONMENT 62

Historical Role of the U.S. Dollar 63 Development of Today's International

Monetary System 64 The Bretton Woods Conference 64 The International Monetary Fund 65 The International Bank for Reconstruction

and Development 67 Fixed Versus Floating Exchange Rates 67 Currency Blocs 68 Foreign Exchange and Foreign Exchange Rates 70 Purchasing Power Parity 70 Forecasting Exchange Rate Fluctuation 70 Coping with Exchange Rate Fluctuations 73 Spot versus Forward Foreign Exchange 74 Exchange Rate Pass-Through 77 Balance of Payments 78 The Internal and External Adjustments 82 The Asian Financial Crisis 85 The Nature of the Asian Financial Crisis 85

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The Southeast Asian Countries Scenario 88 The Japan Scenario 88 The Korea Scenario 90 The China Scenario 90 The Asian Financial Crisis in Perspective 91 Responses to the Asian Financial Crisis 91 Consumer Response to the Recession 92 Corporate Response to the Recession 92 Marketing in Euro-Land 96 What is the "Euro"? 96 Historical Background 98 Ramifications of the "Euro" for Marketers 99

4 ? GLOBAL CULTURAL ENVIRONMENT 105

Defining Culture 107 Elements of Culture 109

Material Life 109 Language 110 Social Interactions 112 Aesthetics 114 ; Religion 114 Education 118 Value systems 119 Cross-Cultural Comparisons 122 High- versus Low-Context Cultures 122 Polychronic versus Monochronic Cultures 123 Cultural Homogeneity 123 Hofstede's Classification Scheme 123 Adapting to Foreign Cultures 126 Culture and the Marketing Mix 130 Product Policy 130 Pricing 131 Distribution 132 Promotion 132 Organizational Cultures 133 Cross-Cultural Negotiations 135 Stages of Negotiation Process 135 Cross-Cultural Negotiation Strategies 136

5 ? POLITICAL AND LEGAL ENVIRONMENT 142

Political Environment--Individual Governments 143

Home Country versus Host Country 143 Structure of Government 145

Ideology 1.45 Political Parties 146 Government Policies and Regulations 147 Incentives and Government Programs 148 Government Procurement 150

Trade Laws 150 "^Investment Regulations 153 Ownership Controls 153 Financial Controls 154 Macroeconomic Policies 154 Political Environment--Social Pressures and Political Risk 155 Social Pressures and Special Interests 157 Managing the Political Environment 158 International Agreements 162 G7 (Group of Seven) and G8 (Group of Eight) 163 COCOM (The Coordinating Committee \ for Multilateral Controls) 163 International Law and Local Legal Environment 164 International Law 165 Local Legal Systems and Laws 165 Business Practices and the Legal System 166 Regulations on E-Commerce 168 Types of Legal Systems 168 Cultural Values and Legal Systems 169 Jurisdiction 169 Planning Ahead 170 Arbitration and Enforcement 170 Issues Transcending National Boundaries 170 ISO 9000 and 14000 170 Intellectual Property Protection 171 Patent 172 Copyright 174 Trademark 174 Trade Secret 174 Paris Convention 175 Berne Convention 176 European Patent Convention 176 Antitrust Laws of the United States 177 U.S. Foreign Corrupt Practices Act of 1977 179

PART THREE: DEVELOPMENT OF COMPETITIVE MARKETING STRATEGY 186

6 ? GLOBAL MARKETING RESEARCH 186

Research Problem Formulation 188 Secondary Global Marketing Research 189 ' Secondary Data Sources 191

Problems with Secondary Data Research 193 Accuracy of Data 193 Age of Data 194

Reliability over Time 194

Comparability of Data 194

Lumping of Data 195

Primary Global Marketing Research 195

Focus Groups 195

Survey Methods for Cross-Cultural

Marketing Research 196

Questionnaire Design 197

Sampling 198

Contact Method 200

Collecting the Information 201

Market Size Assessment 202

Analogy Method 203

Trade Audit 204

Chain Ratio Method 205

Cross-Sectional Regression Analysis 206

New Market Information Technologies 208

Point-of-Sale (POS) Store Scanner Data 208

Consumer Panel Data 208

Single-Source Data 209

Managing Global Marketing Research 211

Selecting a Research Agency 211

Coordination of Multi-Country Research 214

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7 ? GLOBAL SEGMENTATION AND POSITIONING 2 1 8

Reasons for International Market Segmentation 219

Country Screening 220 Global Market Research 220 Entry Decisions 221 Positioning Strategy 221 Marketing Mix Policy 221 International Market Segmentation

Approaches 223 Segmentation Scenarios 225 Bases for Country Segmentation 227

Demographics 228 Socioeconomic Variables 230

Monetization of Transactions within a Country 230

Gray and Black sectors of the economy 231 Income Disparities 231 Behavior-Based Segmentation 231 Lifestyle 233 International Positioning Strategies 235 Uniform versus Localized Positioning Strategies 236 Universal Positioning Appeals 238 Global, Foreign, and Local Consumer Culture Positioning 240

Contents

xix

8 ? GLOBAL MARKETING STRATEGIES 2 4 7

Information Technology and Global Competition 248

Electronic Commerce (E-Commerce) 248 Real-Time Management 249 On Line Communication 250 "Internet" Organization 250 Faster Product Diffusion 251 Global Citizenship 251 Global Strategy 252 Global Industry 252 Competitive Structure 253 Hypercompetition 258

Cost and Quality 259 Timing and Know-how 259 Strongholds 260 Financial Resources 260 Interdependency 263 Global Marketing Strategy 263 Benefits of Global Marketing 265 Cost Reduction 265 Improved Products and Program

Effectiveness 265 Enhanced Customer Preference 267 Increased Competitive Advantage 267 Limits to Global Marketing 268 Regionalization of Global Marketing Strategy 269 Cross-Subsidization of Markets 273 Identification of Weak Market Segments 273 Use of "Lead Market" Concept 274 Marketing Strategies for Emerging Markets 275 Competitive Analysis 277

9 ? GLOBAL MARKET ENTRY STRATEGIES 2 8 1

Target Market Selection 282 Choosing the Mode of Entry 285

Decision Criteria for Mode of Entry 285 Market Size and Growth 286 Risk 286 Government Regulations 287 Competitive Environment 287 Local Infrastructure 287 Company Objectives 288 Need for Control 289 Internal Resources, Assets and Capabilities 289 Flexibility 289

Mode-of-Entry Choice: A Transaction Cost Explanation 289

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Exporting 290 Indirect Exporting 291 Cooperative Exporting 291 Direct Exporting 292

Licensing 292 Benefits 292 Caveats 293

Franchising 294 Benefits 295 Caveats 296

Contract Manufacturing 297 Benefits 297 Caveats 297

Joint Ventures 298 Benefits 299 Caveats 299 Drivers Behind Successful International Joint Ventures 300 Pick the Right Partner 300 Establish Clear Objectives from the Beginning 301 Bridge Cultural Gaps 301 Gain Top Managerial Commitment and Respect 301 Use Incremental Approach 301

Wholly Owned Subsidiaries 302 Benefits 302 Caveats 303 Acquisitions and Mergers 304 Greenfield Operations 305

Strategic Alliances 305 Types of Strategic Alliances 306 The Logic behind Strategic Alliances 306 Cross-Border Alliances that Succeed 307

10 ? GLOBAL SOURCING STRATEGY: R&D, MANUFACTURING, AND MARKETING INTERFACES 313

Extent and Complexity of Global Sourcing Strategy 315

Trends in Global Sourcing Strategy 318 Trend 1: The Decline of Exchange Rate Determinism of Sourcing 319 Trend 2: New Competitive Environment Caused by Excess Worldwide Capacity 320 Trend 3: Innovations in and Restructuring of International Trade Infrastructure 320 Trend 4: Enhanced Role of Purchasing Managers 321 Trend 5: Trend Toward Global Manufacturing 322

Value Chain and Functional Interfaces 322 >'R & D/Manufacturing Interface 325

Manufacturing/Marketing Interface 328 Core Components Standardization 328 Product Design Families 328 Universal Product with All Features 329 Universal Product with Different Positioning 329

Marketing/R & D Interface 330 Procurement: Types of Sourcing Strategy 331

Intra-Firm Sourcing 332 Outsourcing 333 Costs and Consequences of Global Sourcing 334 Need for Coordination 334 Functional Mismatch 336 Sustainable Core Competence vs.

Transitory Core Competence 338 Strategic Alliances 338 Dependence 339 Gradual Loss of Design and

Manufacturing Abilities 340 Outsourcing of Service Activities 340

PART FOUR: GLOBAL MARKETING STRATEGY DEVELOPMENT 346

ll ? GLOBAL PRODUCT POLICY DECISIONS L. DEVELOPING NEW PRODUCTS FOR GLOBAL MARKETS 346

Global Product Strategies 347 Strategic Option 1: Product and Communication Extension - Dual Extension 348 Strategic Option 2: Product Extension Communications Adaptation 350 Strategic Option 3: Product Adaptation Communications Extension 350 Strategic Option 4: Product and Communications Adaptation - Dual Adaptation 350 Strategic Option 5: Product Invention 351

Standardization Versus Customization 351 Common Customer Needs 352 Global Customers 354 Scale Economics 354 Time to Market 355 Regional Market Agreements 355 Modular Approach 355 Core-Product (Platform) Approach 355

Multinational Diffusion 357 Developing New Products for

Global Markets 359

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