Global Marketing Management Edited

Chapter 1
Globalization Imperative
Introduction
• Products have been traded across borders throughout recorded
civilization, extending back beyond the Silk Road that once
connected East with West from Xian (China) to Rome (Italy).
• Total world trade volume in goods and services grew from $6.5
trillion in 1998 to $7.6 trillion in 2000.
• According to the World Trade Organization (WTO), the world’s
five exporting countries were the United States ($781 billion),
Germany ($552 billion), Japan ($479 billion), France ($298
billion), and Britain ($284 billion), collectively accounting for 38
percent of global trade in 2002.
• The Triad Regions (North America, Western Europe, and Japan) of
the world collectively produce over 80 percent of world GDP.
Kotabe & Helsen's Global Marketing

Chapter 1 1
Management, Third Edition, 2004
Introduction (contd.)
• Big Emerging Markets (BEMs): In the next ten to
twenty years, BEMs such as the Chinese Economic
Area (CEA: including China, Hong Kong Region,
and Taiwan), India, South Korea, Mexico, Brazil,
Argentina, South Africa, Poland, Turkey, and the
Association of Southeast Asian Nations (ASEAN:
including Indonesia, Brunei, Malaysia, Thailand,
the Philippines, and Vietnam) will provide many
opportunities in global business.

Chapter 1 2
1. Why Global Marketing is Imperative
• Saturation of domestic markets: Domestic-
market saturation in the industrialized parts of
the world and marketing opportunities overseas
are evident in global marketing.
• Global competition: Competition around the
world and proliferation of the Internet are on
the rise.
• Need for global cooperation: Global
competition brings global cooperation.

Chapter 1 3
cont.…
• Internet revolution: The Internet and electronic
commerce (e-commerce) are bringing major
structural changes to the way companies operate
worldwide.
• The term “global” epitomizes both the
competitive pressure and expanding market
opportunities.
• Whether a company operates domestically or
across national boundaries, it can no longer avoid
competitive pressures from around the world.
Chapter 1 4
2. Globalization of Markets: Convergence and
Divergence
• International trade consists of exports and imports.
• International business includes international trade
and foreign production.
• Extensive international penetration of companies is
called global reach.
• International trade and foreign production activities
are managed on a global basis.
• Growth of Multinational Corporations (MNCs) and
intra-firm trade is a major aspect of global markets.
Chapter 1 5
cont.….
• International trade versus international business:
• International trade consists of exports and imports.
• International business includes international business
trade and foreign production.
• Who manages international trade?
• Intrafirm trade: Trade between MNCs and their
affiliates.

Chapter 1 6
3. Evolution of Global Marketing
• What is marketing? Marketing involves the planning and
execution of the conception, pricing, promotion, and
distribution of ideas, products, and services.
• Marketing involves customer satisfaction and their
current and future needs.
• Marketing is much more than selling and involves the
entire company.
• Within marketing strategies, companies are always under
competitive pressure to move forward both reactively and
proactively.

Chapter 1 7
cont.…
• Five stages in the evolution of global marketing (see Exhibit 1-2):
1. Domestic Marketing (domestic focus; home country
customers; ethnocentric orientation).
2. Export Marketing (indirect vs. direct exporting; country
choice, exports; ethnocentric orientation; home country
customers).
3. International Marketing (markets in many countries;
polycentric orientation; use of multidomestic marketing when
customer needs are different across national markets).
4. Multinational Marketing (many markets; consolidation on
regional basis; regiocentric orientation; standardization within
regions).
5. Global Marketing (international, multinational & geocentric
orientation; company’s willingness to adopt a global
perspective; global products with local variations).

Chapter 1 8
3. Evolution of Global Marketing (contd.)
Global Marketing: Global marketing refers to marketing
activities that emphasize the following:
1. Standardization efforts.
2. Coordination across markets.
3. Global integration.
• Global marketing does not necessarily mean that
products can be developed anywhere on a global scale.
• The economic geography, climate, and culture affect how
companies develop certain products.
• The Internet adds a new dimension to global marketing.
• E-commerce retailers gain substantial savings by selling
online.

Chapter 1 9
4. Appendix: Theories of International Trade &
the Multinational Enterprise
Comparative Advantage Theory (see Exhibit 1-3)
• Absolute Advantage
• Comparative Advantage
• Commodity Terms of Trade
• Principles of International Trade
• Factor Endowment Theory
International Product Cycle Theory (see Exhibit 1-4)
• Economies of Scale
• Economies of Scope
• Technological Gap
• Preference Similarity
• Stages of International Product Cycle Theory:

Chapter 1 10
cont.….
Stages of International Product Cycle Theory:
Introduction Stage --A U.S. company innovates on a new
product in its home country.
Growth Stage--Product standards emerge and mass
production becomes feasible.
Maturity Stage -- Many U.S. and foreign companies vie for
market share in the international markets.
Decline Stage --Companies in the developing countries also
begin producing the product and marketing it in the rest of
the world.
Internalization/Transaction Cost Theory
• Appropriability Regime
• Dominant Design
• Manufacturing and Marketing Ability
Chapter 1 11
Chapter 2
Global Economic Environment
Introduction
• In 2001, the annual global trade in goods and services
amounted to $7.4 trillion. (23 trillion in 2017)
• Daily international financial flows now exceed $1.2
trillion.
• From 1990 to 2000, world GDP grew some 30 percent.
• Total world exports of merchandise and services
increased by 80 percent.

Chapter 2 12
• According to Standard & Poor’s Global Insight,
world exports of goods and services will reach
$11.4 trillion by 2005 (24% of world GDP).
• The net result of these factors has been the
increased interdependence of countries/economies
and increased competitiveness.
• Consumers and companies in the U.S. and Japan
tend to be able to find domestic sources for their
needs since their economies are diversified and
extremely large.
Chapter 2 13
1. Intertwined World Economy
• Despite the increasingly intertwined world economy, the
United States is still relatively more insulated from the
global economy than other nations. In 2003, the U.S.
economy was about $10.5 trillion and imports about half
as much as it exports.
• Over the next two decades, the big emerging markets

(BEMs) will hold the greatest potential for U.S. exports.

Chapter 2 14
1. Intertwined World Economy (contd.)
• The larger the country’s domestic economy, the
less dependent it tends to be on exports and
imports relative to its GDP.
• Intertwining of economies by the process of
specialization due to international trade leads to
job creation in both the exporting and importing
country.
• Foreign direct investment (FDI) involves
investment in manufacturing and service facilities
in a foreign country.
Chapter 2 15
• Cross-border mergers and acquisitions (M&As) remain
the main stimulus, especially in developed countries.
• The increase in foreign direct investment has also been
promoted by the efforts of many national governments
to woo (entice) multinationals.
• Portfolio investment or indirect investment refers to
investments in foreign countries that are withdrawable
at short notice, such as investments in foreign stocks
and bonds.

Chapter 2 16
• The weekly volume of international trade in currencies
exceeds the annual value of the trade in goods and
services.
• All nations with even partially convertible currencies are
exposed to the fluctuations in the currency markets.
• A rise in the value of the local currencies make exports
more expensive; a rising currency value also deters
foreign investment in a country and may encourage
outflow of investment.

Chapter 2 17
• Examples of severe currency fluctuations are the 1995
Mexican meltdown and the Asian financial crisis (1997-
1999).
• Unfortunately, the influence of these short-term money
flows are nowadays far more powerful regarding
exchange rates than an investment by a Japanese or
German automaker.
• Recent examples of financial crisis occurred in Argentina
and Brazil.

Chapter 2 18
2. Country Competitiveness
• Country competitiveness refers to the productiveness of a
country, which is represented by its firms’ domestic and
international productive capacity.
• Country competitiveness is not a fixed thing.
• The role of human skill resources has become

increasingly important as a primary determinant of
industry and country competitiveness
Chapter 2 19
2. Country Competitiveness (contd.)
• The Institute of Industrial Policy Studies’ country
competitiveness report of 2002 placed two Asian Tigers
(Hong Kong and Singapore) among the world’s top 10
economies along with the United States, Finland,
Sweden, Belgium, the United Kingdom, Germany,
Norway, and Canada. (see Exhibits 2-3 & 2-4).
• Although the United States and Switzerland have been
the most innovative in the last three decades, other
OECD countries have been catching up.

Chapter 2 20
3. Evolution of Cooperative Global Trade Agreements
ITO (International Trade Organization):
• ITO was established after World War II.
GATT (General Agreements on Tariffs & Trade):
• After 1950, GATT succeeded ITO.
• The main operating principle of GATT was the concept of
most favored nations (MFN).
• GATT was successful in lowering trade barriers.
WTO (World Trade Organization Trade):
• The eighth and last round of GATT talks – called the
“Uruguay Round” (1986-1994) established an international
body called the WTO which took effect on January 1, 1995.
• As of January 1, 2002, WTO had 144 member
• countries.
• WTO has statutory powers to adjudicate trade disputes among
nations and has its own secretariat.
Chapter 2 21
cont.…
• WTO is the new legal and institutional foundation for a
multilateral trading system.
• WTO’s ninth round---called the “Doha Development
Agenda” (Doha Round) was launched in Doha, Qatar in
November 2001 (see Exhibit 2-5).
• The Doha Round of 2001 also facilitated the way for
China and Taiwan to get full membership in the WTO.
• Although WTO is a global institutional proponent of free
trade, it is not without critics.
• The WTO settlement mechanism is faster, more automatic,
and less susceptible to blockages than the old GATT system.
• The WTO Work Program on Electronic Commerce is in the
process of defining the trade-related aspects of electronic
commerce that would fall under the parameters of WTO
mandates.
Chapter 2
22
4. U.S. Position in Foreign Direct Investment and Trade
• The United States has been a significant overseas investor since 1945.
• The first wave of major investment was part of the Marshall Plan in
the 1950s.
• Most U.S. investment abroad has been concentrated in Europe.
• In 2000, U.S. firms invested $162 billion overseas.
• Firms based in Britain and the Netherlands have been the largest
investors in the United States.
• Throughout the last decade, firms based in Britain, Japan, and the
Netherlands were the largest investors in the United States.
• Regarding the balance of payments (BOP), the United States has run
a persistent deficit on the current account since the first oil shock in
1973.
• There is increasing concern that the conventional measures of the
deficit may not accurately reflect a country’s transactions with the
rest of the world. Kotabe & Helsen's Global Marketing
Chapter 2 23
5. Information Technology and the Changing Nature of Competition
• Information technology and the changing nature of competition have
created many challenges for the firms.
• Over the Internet, any piece of electronically represented intellectual
property can be copied.
• The Trade Related Aspects of Intellectual Property Rights (TRIPS)
Agreement was concluded as part of the GATT Uruguay Round.
• Proliferation of E-Commerce and Regulations: Countries’
regulators have not kept pace with the rapid proliferation of
international e-commerce and Internet-related activities.
• In many countries, rules and regulations are vague regarding e-
commerce transactions.
• The United Nations Commission on International Trade Law
(UNCITRAL) has formed a Working Group on Electronic Commerce
to reexamine these treaties.

Chapter 2 24
6. Regional Economic Arrangements
• An evolving trend in international economic activity is the
formation of multinational trading blocs.
• There are over 120 regional free trade areas worldwide.
• Market groups take many forms, depending on the degree
of cooperation and inter-relationships, which lead to
different levels of integration among the participating
countries.
Types of Regional Economic Arrangements:
• Free Trade Areas: Formal agreement among two or more
countries to reduce or eliminate customs duties and nontariff
barriers. Examples: NAFTA, MERCOSUR & FTAA (proposed)
• Customs Union: Addition of common external tariffs to the
provisions of free trade agreements. Example: ASEAN.

Chapter 2 25
6. Regional Economic Arrangements (contd.)
• Common Market: Eliminates all tariffs and other
barriers, adopts a common set of external tariffs on
nonmembers, and remove all restrictions on the flow of
capital and labor among member nations. Example:
European Union.
• Monetary Union: Represents the fourth level of
integration with a single currency among politically
independent countries. Example: EU and the euro.
• Political Union: Highest level of integration resulting in
a political union. Sometimes, countries come together in
a loose political union for historical reasons, as in the
case of the British Commonwealth which exists as a
forum for discussion and common historical ties.
Chapter 2 26
7. Multinational Corporations
• The U.S. government defines a multinational corporations (MNC)
for statistical purposes as a company that owns or controls 10
percent or more of the voting securities, or the equivalent, of at least
one foreign business enterprise.
• At present, there are 65,000 MNCs with 850,000 affiliates in foreign
countries.
• MNCs’ total sales amount to almost $19 trillion.
• One third of multinational companies’ trade is accounted for by
intra-firm activities.
• Two-thirds of of world trade in goods and services is controlled by
multinational companies.
• Of the 100 largest economies in the world, 51 are corporations.
• The sovereignty of nations will perhaps continue to weaken due to
multinationals and the increasing integration of economies.
Chapter 2 27
7. Multinational Corporations (contd.)
• In 1970, of the 7,000 multinationals identified by the United
Nations, more than half were from two countries: the United
States and Britain.
• By 1995, less than half of the 36,000 multinationals identified
by the United Nations came from four countries: the United
States, Japan, Germany, and Switzerland.
• The nation-state, while considerably weaker than its
nineteenth century counterpart, is likely to remain alive and
well.
• Currently, factors such as currency movements, capital
surpluses, faster growth rates, and falling trade and investment
barriers have all helped multinationals from other countries
join the cross-border fray.
• It is not unusual for a startup firm to become global at its
inception.
Chapter 2
Those firms are
Kotabe known
& Helsen's as
Global “born
Marketing global.” 28
Chapter 3
Financial Environment :Introduction
• Foreign exchange is the monetary mechanism allowing the
transfer of funds from one nation to another.
• The existing international monetary system always affects
companies as well as individuals whenever they buy or sell
products and services traded across national borders.
• Although international marketers have to operate in a currently
existing international monetary system for international
transactions and settlements, they should understand how the
scope and nature of the system has changed and how it has
worked over time.
• The 1990s – particularly, the second half of the decade –
proved to be one of the most turbulent periods in recent history.
• The adoption of the euro as a common currency in the
European Union in 1999 is just one example of the many
changes
Chapter 3
taking place inManagement,
today’s Thirdbusiness
Edition, 2004 world.
29
1. Historical Role of the U.S. Dollar
• Each country has its own currency through which it

expresses the value of its products.
• In the post-World War II period, the United States
agreed to to exchange the dollar at $35 per ounce
of gold.
• The dollar became the common denominator in
world trade.
• In the early seventies, the U.S. dollar standard was
dropped.

Chapter 3 30
2. Development of Today’s International Monetary System
• Post-World War II developments had long-range effects on
international financial arrangements.
• The negotiations to establish the postwar international
monetary system took place at the resort of Bretton Woods in
New Hampshire in 1944 which established the International
Monetary Fund (IMF).
• President Richard Nixon suspended the convertibility of the
dollar to gold on August 15, 1971.
• The IMF oversees the international monetary system and its
functions are as follows:
• To promote international monetary cooperation
• To facilitate the expansion and balanced growth of international trade
• To promote exchange stability and to maintain orderly exchange
arrangements
• To assist in the establishment of a multilateral system of payments in
respect to current transactions between member nations; to eliminate
foreign exchange restrictions

Chapter 3 31
2. Development of Today’s International Monetary
System (contd.)
• To make available the general resources of the fund temporarily
available to members under adequate safeguards; help members to
correct maladjustments in the balance of payments
• To shorten the duration and lessen the degree of disequilibrium in the
international balance of payments to members
• The IMF created special drawing rights (SDRs) in 1969.
• The value of SDRs is determined by a weighted average of a basket of
four currencies: the U.S. dollar, the Japanese yen, the European
Union’s euro, and the British pound.
• After the 1997-98 Asian financial crisis, the IMF has worked on
policies to overcome or even prevent future crisis.
• Another creation of of the Bretton Woods Agreement was the
International Bank for Reconstruction and Development, known as the
World Bank.
Chapter 3 32
3. Fixed Versus Floating Exchange Rates
• Two kinds of currency floats encompass free/clean float

(allows no government intervention) and managed float
(allows limited government intervention).
• In March 1973, the major currencies began to float in
the foreign exchange markets.
• Today, the global economy is dominated by three major
currency blocs: The U.S. dollar, the Japanese yen, and
the EU’s euro.

Chapter 3 33
4. Foreign Exchange and
Foreign Exchange Rates
• One of the most fundamental determinants of the exchange
rate is Purchasing Power Parity (PPP).
• Formula for PPP:
(1 + InflBritain)
Rt = R0 * _____________
(1 + InflU.S.)
Where R = the exchange rate quoted in a
currency
Infl = Inflation rate
t= time period

Chapter 3 34
4. Foreign Exchange and Foreign Exchange Rates
(contd.)
• The Economist publishes a PPP study (Big Mac Index)
every year based on McDonald’s Big Mac hamburger (see
Exhibit 3-2).
• Factors influencing Foreign Exchange Rates (see Exhibit 3-3):
• Macroeconomic Factors: Relative inflation, balance of payments,
foreign exchange reserves, economic growth, government
spending, money supply growth, and interest rate policy.
• Political Factors: Exchange rate control, election year or
leadership change.
• Random Factors: Unexpected and/or unpredicted events, fear
of uncertainty, etc.
• Many countries attempt to maintain a lower value for
their currency in order to encourage exports.

Chapter 3 35
4. Foreign Exchange and
Foreign Exchange Rates (contd.)
• Spot versus forward exchange rates
• Hard currencies are the world’s strongest and
represent the world’s leading economies.
• To avoid the risk of currency fluctuations, companies
use hedging.
• Target exchange rate
• Exchange rate pass through

Chapter 3 36
5. Balance of Payments
• The balance of payment (BOP) of a nation summarizes all the
transactions that take place between its residents and the
residents of other countries over a specified time period, usually
a month, quarter, or year.
• The BOP transactions contain three categories (see Exhibit 3-5):
• Current account
• Capital account
• Official reserves
• The BOP on capital account summarizes financial transactions
and is divided into short -and long-term capital accounts.
• Direct investments are controlled by residents of other nations.
• Portfolio investment includes long-term investments that do not
give the investors effective control over the investment.

Chapter 3 37
5. Balance of Payments (contd.)
• There are three balances to identify on the BOP
statement of a country:
• Balance of merchandise trade account
• The current account (including merchandise trade, trade in
services, and unilateral transfers)
• The basic balance (the current account and the long-term
capital)
• The internal market adjustment refers to movement of
prices and income in a country.
• The external market adjustment concerns exchange rates
or a nation’s currency and its value with respect to the
currencies of other nations.

Chapter 3 38
6. Economic and Financial Turmoil Around
the World
• The Asian financial crisis in the latter half of the
1990s escalated into the biggest threat to global
prosperity.
• China’s devaluation of its currency (yuan) triggered
the Asian financial crisis in 1994.
• Because of this financial crisis, Thailand lost almost
60 percent of its baht’s purchasing power in dollar
terms in 1997.
• The Malaysian ringgit lost some 40 percent of its
value during the same period.
Chapter 3 39
6. Economic and Financial Turmoil Around
the World (contd.)
• The Korean won depreciated 50 percent against
the U.S. dollar.
• Increased demand for Asian exports has helped the
region rebound quickly from the slump in 2001.
• The South American Financial Crisis took place in
2001 when Argentina defaulted and lost nearly 40
percent of its currency value.
• The Argentina crisis also hurt Brazil.

Chapter 3 40
6. Economic and Financial Turmoil Around the World
(contd.)
• Responses to the regional financial crises.
• Consumer response to the recession
• Corporate response to the recession
• Pull-out
• Emphasize a product’s value
• Change the product mix
• Repackage the goods
• Maintain stricter inventory
• Look outside the region for expansion opportunities
• Increase advertising in the region
• Increase local procurement

Chapter 3 41
7. Marketing in Euro-Land
• The European Union (EU) consists of twenty eight

countries. Of those fifteen, majority of the
countries form the “euro-zone” (see Exhibit 3-8).
• Their economies represent a combined 28 percent
of the world’s gross domestic product.
• The Maastricht Treaty which was signed on
February 7, 1992 spelled out the guidelines toward
European Monetary Union (EMU).
• The European Central Bank is headquartered in
Frankfurt, Germany.
Chapter 3 42
7. Marketing in Euro-Land (contd.)
• On January 1, 2002, the euro notes and coins
began to replace the German mark, the Dutch
guilder and other European currencies.
• Ramifications of the euro for Marketers:
• Price transparency
• Intensified competitive pressure
• Streamlined supply chains
• New opportunities for small and medium-sized
companies
• Adaptation of internal Organizational structures
• EU regulations crossing national boundaries
Chapter 3 43
Chapter 4
Global Cultural Environment and Buying Behavior
introduction
• Buyer behavior and consumer needs are largely
driven by cultural norms.
• Global business means dealing with consumers,
strategic partners, distributors, and competitors with
different cultural mindsets.
• Within a given culture, consumption processes can
include four stages: access, buying behavior,
consumption characteristics, and disposal (see Exhibit
4-1).
• Each of these stages is heavily influenced by the
culture in which the consumer thrives.
Chapter 4 44
1. Defining Culture
• There are numerous definitions of culture. In this text,
culture (in a business setting) is defined as being a
learned, shared, compelling, interrelated set of
symbols whose meanings provide a set of orientations
for members of society.
• Cultures may be defined by national borders,
especially when countries are isolated by natural
barriers.
• Cultures contain subcultures that have little in
common with one another.

Chapter 4 45
2. Elements of Culture
• Culture consists of many interrelated components.
Knowledge of a culture requires a deep understanding of its
different parts. Following are the elements of culture:
• Material life (technologies that are used to produce, distribute, and
consume goods and services)
• Language (language has two parts: the spoken and the silent
language)
Social Interaction (social interactions among people; nuclear family,
extended family; reference groups)
• Aesthetics (ideas and perceptions that a culture upholds in terms
of beauty and good taste)
• Religion (community’s set of beliefs that relate to a reality that
cannot be verified empirically)
• Education (One of the major vehicles to channel from one
generation to the next)
• Chapter
Value4 System (values shape
Kotabe people’s
& Helsen's norms and standards) 46
Global Marketing
3. Cross-Cultural Comparisons
• Cultures differ from one another, but usually share
certain aspects.
• High-context cultures: Interpretation of messages rests
on contextual cues; examples: China, Korea, Japan, etc.).
• Low-context cultures: Put the most emphasis on written
or spoken words; United States, Scandinavia, Germany,
etc.).

Chapter 4 47
Contextual Background of Various Countries
High context Japanese

IMPLICIT Arabian
Latin American
Spanish
Italian
English (UK)
French
English (US)
Scandinavian
German
Low context
Swiss EXPLICIT

Chapter 4 48
3. Cross-Cultural Comparisons (contd.)
• Geert Hofstede’s Cultural Classification Scheme (see Exhibit 4-8a & 4-8b):
• Power distance: The degree of inequality among people that is
viewed as being equitable
• Uncertainty avoidance: The extent to which people in a given
culture prefer structured situations with clear rules over
unstructured ones
• Individualism: The degree to which people prefer to act as
individuals rather than group members.
• Masculinity: The importance of “male” values (assertiveness,
success, competitive drive, achievement) versus Femininity
“female” values (solidarity, quality of life).
• Long-term orientation versus short-term focus: Future versus
past and present orientations

Chapter 4 49
Cross-Cultural Comparisons (contd.)
• Project GLOBE (Global Leadership and Organizational
Behavior Effectiveness)
• Project GLOBE is a large-scale ongoing research
project that explores cultural values and their impact on
organizational leadership in 61 countries (see Exhibit
4-9).
• The first three dimensions (uncertainty avoidance,
power distance, and collectivism) are the same as
Hofstede’s constructs.
• The remaining six dimensions include: collectivism II,
gender egalitarianism, assertiveness, future orientation,
performance orientation, and humane orientation.

Chapter 4 50
Cross-Cultural Comparisons (contd.)
World Value Survey:
• The WVS is organized by the University of Michigan.
• The WVS has been conducted multiple times and the
population covered is very broad.
• The WVS encompasses two broad categories:
traditional versus secular values, and the quality
of life (see Exhibit 4-10).

Chapter 4 51
4. Adapting to Cultures
• Global marketers need to become sensitive to cultural
biases that influence their thinking, behavior, and
decision making.
• Self-reference criterion (SRC): Refers to the people’s
unconscious tendency to resort to their own cultural
experience and value systems to interpret a given
business situation.
• Ethnocentrism refers to the feeling of one’s own cultural
superiority.

Chapter 4 52
5. Culture and the Marketing Mix
• Culture is a key pillar of the marketplace.
Product Policy: Certain products are more culture-bound than other
products. Food, beverages, and clothing products tend to be very
culture-bound.
Pricing: Pricing policies are driven by four Cs:
• Customers
• Company (costs, objectives, strategy)
• Competition
• Collaborators (e.g., distributors)
Distribution: Cultural variables may also dictate distribution
strategies.
Promotion: Promotion is the most visible marketing mix. Culture will
typically have a major influence on a firm’s communication strategy.
Local cultural taboos and norms also influence advertising styles.
Chapter 4 53
6. Organizational Cultures
• Organizational Culture: Most companies are
characterized by their organizational (corporate) culture.
• A model of organizational culture types includes the
following four cultures (see Exhibit 4-12):
• Clan culture
• Adhocracy culture (entrepreneurial)
• Hierarchy culture
• Market culture (competitive)

Chapter 4 54
7. Global Account Management (GAM)
• The coordination of the management of customer
accounts across national boundaries are referred to as
global account management (GAM).
• Global Accounts’ Requirements:
• May require a single point of contact
• May demand coordination of resources for serving
customers
• May push for uniform prices and terms of trade
• May have standardized products and service
• May require a high degree of consistency in service
quality and performance
• May support in countries where the company has no
presence
Chapter 4 55
7. Global Account Management (GAM)
(contd.)
• Managing Global Account Relationships:
• Clarify the role of the global account
management team.
• Make incentive structure realistic.
• Pick the right global account managers.
• Create a strong support network.
• Make sure that the customer relationship
operates at more than one level.

Chapter 4 56
8. Global Customer Relationship Management (CRM)
• The process of managing interaction between the company
and its customers is called customer relationship
management (CRM):
• Helps in customer retention
• Helps in richer communication and interactive marketing
• Helps in tailored services
• Helps to maintain a closer contact with the customers
• Benefits of CRM:
• A better understanding of customers’ expectations and behavior
• Ability to measure the customers’ value to the company
• Lower customer acquisition and retention costs
• Ability to interact and communicate with customers in countries
where access to traditional channels is limited

Chapter 4 57
8. Global Customer Relationship
Management (CRM) (contd.)
• Guidelines for Successful CRM Implementation:
• Make the program business-driven rather than IT-
driven
• Monitor and keep track of data protection and
privacy laws in those countries where CRM systems
are being used or are in the planning stage
• A good data is the main pre-requisite.
• Rewards being sent out to customers are relevant,
targeted, and personal.

Chapter 4 58
Chapter 5
Political and Legal Environment
Introduction
• International marketers should be aware that the
economic interests of their companies can differ widely
from those of the countries in which they do business.
• International marketers must abide by various
international agreements, treaties and laws.
• Political and legal climates are inherently related and
inseparable because laws are generally a manifestation of
a country’s political processes.

Chapter 5 59
1. Political Environment - Individual Governments
• Government affects almost every aspect of business life in a country.
• National politics affect business environment directly, through
changes in policies, regulations, and laws.
• The political stability and mood in a country affect the actions a
government will take.
• Home Country vs. Host Country.
• Structure of Government:
• Ideology
• Communism
• Capitalism
• Socialism
• Political Parties
• Single-party-dominant country
• Dual-party system
• 5Multi-party system
Chapter
60
1. Political Environment - Individual Governments (contd.)
• Government Policies and Regulations: It is the role of
government to promote a country’s interests in the
international arena for various reasons and objectives
such as: national security, developing new industries, and
protecting declining industries.
• Incentives and Government Programs
• Government Procurement
• Trade Laws
• Tariff and Nontariff Barriers (see Exhibit 5-1)
• Embargoes and Sanctions
• Export License Requirements

Chapter 5 61
1. Political Environment - Individual Governments (contd.)
• Investment Regulations (ownership & financial controls)
• Macroeconomic Policies (governments’ monetary & fiscal
policies such as the cost of capital, level of economic
growth, rates of inflation & international exchange rates)
2. Political Environment - Social Pressures and Political Risk
• Social Pressures and Special Interests
• Managing the Political Environment:
• Expropriation
• Confiscation
• Nationalization
• Domestication Policy/Phase-Out Policy
• Countertrade

Chapter 5 62
3. Terrorism and the World Economy
• According to an IMF study, the September 11, 2001
terrorist attacks in New York and Washington D.C.
resulted in major losses for the U.S. economy.
• The short-term lost economic output was estimated as
$47 billion.
• The stock market lost $1.7 trillion. In addition, 125,000
workers were laid off for 30 days.
• Terrorist activities disrupt international movement of
supplies and merchandise and financial flows.

Chapter 5 63
4. International Agreements
• G7 (Group of Seven) is an economic policy coordination
group made up of political leaders from Canada, England,
France, Germany, Italy, Japan, and the United States.
• G8 (Group of Eight) consists of G7 and Russia.
• COCOM (The Coordinating Committee for Multilateral
Controls) was founded in 1949 to stop the flow of
Western technology to the former Soviet Union;
members countries include Australia, Japan and the
NATO countries except Iceland.

Chapter 5 64
5. International Law and
Local Legal Environment
• International Law (the law of nations) comes
from three main sources:
• Customs
• International treaties
• Court decisions
• Local Legal Systems and Laws
• Business Practices and the Legal Systems
• Issues of green marketing
• Regulations on E-Commerce

Chapter 5 65
Local Legal Environments (contd.)
• Types of Legal Systems:
• Common Law
• Code (written) Law
• Islamic Law
• Socialist Laws
• Civil Law
• Commercial Law
• Cultural Values and Legal Systems:
• Japan’s population of lawyers is low.

Chapter 5 66
Local Legal Environment (contd.)
• In the U.S., emphasis is on explicit contracts and a
reliance on the legal system is high.
• In China, relationships (guanxi) and verbal
contracts are important.
• In Brazil, Jeitinho is used to find solutions outside
the legal system.
• Planning Ahead (clearly state the applicable law
agreed upon)
• Arbitration and Enforcement
Chapter 5 67
6. Issues Transcending National Boundaries
• ISO 9000 certification has become an essential marketing
tool for firms.
• ISO 14000 is based on the principle of self –regulation,
thereby minimizing surveillance and sanctions.
(Environmental Management Standardization)
• Intellectual Property Protection:
• TRIPs (Trade-Related Aspects of Intellectual Property Rights)
• Patent (first-to-file & first-to-invent principles)
• A patent, if granted, offers a patent holder a legal monopoly
status on the patented technology and/or process for a
certain extended period (usually 15-21 years depending on a
country).
• While most countries follow the ‘‘first-to-file’’ principle,
only the United States (along with the Philippines) follows
theChapter
‘‘first-to-invent’’
5 principle.
68
Cont.…
• Copyright. Copyrights protect original literary, dramatic,
musical, artistic, and certain other intellectual works.
Copyright protection lasts 50 years in the European Union
countries and Japan, compared with 95 years in the
United States.
• Copyright
• The Digital Millennium Copyright Act (DMCA)
• Trademark (prior-use, first-to-use & first-to-file principles)
• Trade Secret
• Paris Convention
• Patent Cooperation Treaty
• Patent Law Treaty
• European Patent Convention
• Berne Convention
Chapter 5 69
6. Issues Transcending National Boundaries
(contd.)
• Antitrust Laws of the United States:
• The Sherman Act
• The Clayton Act
• Extraterritorial application of U.S. antitrust laws
• Export Trading Company (ETC) Act of 1982
• Antitrust Laws of the European Union:
• Foreign Corrupt Practices Act (FCPA) of 1977:
• The FCPA was designed to prohibit the payment of any money
or anything of value to a foreign official, foreign political party,
or any candidate for foreign political office for purposes of
obtaining, retaining, or directing business.

Chapter 5 70
6. Issues Transcending National
Boundaries (contd.)
• The FCPA does not prohibit so called
facilitating or grease payments.
• Small payments to lower level officials are
allowed to expedite the process.
• FCPA does not prohibit bribery payments to
nongovernmental personnel.

Chapter 5 71
Chapter 6
Global Marketing Research
Introduction
• Given the complexity of the global marketplace, solid
marketing research is critical for a host of global marketing
decisions.
• Most of the cultural blunders in global marketing stem from
inadequate marketing research.
• Six steps in conducting global market research:
1. Define the research problem(s)
2. Develop a research design
3. Determine information needs
4. Collect the Data (secondary and primary)
5. Analyze the data and interpret the results
6. Report and present the findings of the study
Chapter 6 72
• Major challenges faced by global marketing researchers:
1. Complexity of research design due to environmental
differences
2. Lack and inaccuracy of secondary data
3. Time and cost requirements to collect primary data
4. Coordination of multicounty research efforts
5. Difficulty in establishing comparability across
multicounty studies

Chapter 6 73
1. Research Problem Formulation
• Any research starts off with a precise definition of the
research problem(s).
• In an international context, the marketing research
problem formulation is hindered by the self-reference
criterion (SRC).
• A major difficulty in formulating the research problem is
unfamiliarity with the foreign environment.
• Omnibus surveys are regularly conducted by research
agencies. (Omnibus surveys are regularly scheduled
surveys that are conducted by research agencies (e.g.,
ACNielsen) with questions from multiple clients.)
• Once the research issues have been stated, management
needs to determine the information needs.
Chapter 6 74
2. Secondary Global Marketing Research
• Secondary Data: Data/information which is already available.
• Primary Data: When the information is not useful, or simply
does not exist.
• Selected Secondary Data Sources: Lexis/Nexis, FINDEX,
National Trade Data Bank, U.S. Department of Commerce,
Japan External Trade Organization (JETRO), OECD, IMF, The
Economist Intelligence Unit (E.I.U.), ACNielsen Co, Taylor
Nelsen Sofres, etc.
• Problems with Secondary Data Research:
• Accuracy of Data
• Age of data
• Reliability over Time
• Comparability of Data
• Triangulate
• Functional or Conceptual Equivalence
• Lumping of Data (group of statistics on certain variables in very
broad categories)
Chapter 6 75
3. Primary Global Marketing Research
• Focus Groups
• Survey Methods for Cross-Cultural Marketing Research:
• Questionnaire Design
• Conceptual and Functional Equivalence (Conceptual
equivalence reflects the degree to which a given concept has
the same meaning in different environments. Many concepts
have totally different meanings or may simply not exist in
certain countries. The concept of ‘‘equal rights’’ for women is
unfamiliar in many Muslim societies. Likewise, the notion of
intellectual property’’ is often hard to grasp in some cultures.
Often, what one culture sees as obvious the other does not.
Chapter 6 76
• Focus Groups
• Survey Methods for Cross-Cultural Marketing Research:
• Questionnaire Design
• Conceptual and Functional Equivalence (Functional Equivalence
refers to the degree to which similar activities or products in
different countries fulfill similar functions. Many products
perform very different functions in different markets. In the
United States bicycles are used primarily for leisure. In countries
such as the Netherlands and China, bicycles are a major means
of transportation.
Chapter 6 77
(contd.)
• Sample size
• Sampling procedure
• Contact Method (see Exhibit 6-5)
• Mail
• Telephone
• Person-to-person interviews
• Online Survey Methods (see Exhibit 6-6):
• E-mail surveys
• Random Web site surveys
• Panel Web site surveys

Chapter 6 78
(contd.)
• Collecting the Information
• Issues of nonresponse
• Courtesy bias
• Social desirability bias
• Redundancy (asking the same question in
different ways)
• Issues of ethnographic research

Chapter 6 79
5. New Market Information Technologies
• Major developments/innovations:
• Point of sale (POS) store scanner data
• Consumer panel data
• Single source data (Collecting data on specific product
consumption, usage etc.)
• Shift from mass to micro marketing
• Continuous monitoring of brand sales/market share movements
• Scanning data are used by manufacturers to support marketing
decisions.
• Scanning data are used to provide merchandising support to
retailers.

Chapter 6 80
6. Managing Global Marketing Research
• Selecting a Research Agency: The following considerations
should be taken into account while choosing agency:
• Level of expertise
• Qualifications
• Track record
• Credibility and experience
• Client record
• Coordination of Multi-Country Research:
• Emic versus Etic dilemma
• The emic school focuses on the peculiarities of each country.
• The etic approach emphasizes universal behavioral and attitudinal
traits.
• In cross-cultural market research, the need for comparability favors
the etic paradigm with an emphasis on the cross-border similarities
and parallels.
• Several approaches may be used to balance these conflicting demands.
Chapter 6 81
Chapter 7
Global Segmentation and Positioning
Introduction
• Variation in customer needs is the primary motive for
market segmentation.
• Most companies will identify and target the most
attractive market segments that they can effectively
serve.
• In global marketing, market segmentation becomes
especially critical because of wide divergence in cross-
border consumer needs and lifestyles.
• Once the management has chosen its target segments,
management needs to determine a competitive
positioning strategy for its products.
Chapter 7 82
1. Reasons for International Market Segmentation
Segments ideally should possess the following set of properties:
1. Identifiable (The segments should be easy to define and
to measure.)
2. Sizable
3. Accessible (The segments should also be easy to reach
through promotional and distributional efforts.)
4. Stable (stability on composition or behavior over time)
5. Responsive (segments respond differently)
6. Actionable (the marketing mix necessary to address
their needs is consistent with the goals and the core
competencies of the company.

Chapter 7 83
1. Reasons for International Market
Segmentation (contd.)
Major reasons why international marketers
implement international market segmentation:
• Country Screening (Countries that meet all criteria
will be grouped in the ‘‘Go’’pile for further
consideration at the next stage. Countries that fail to
meet most of the criteria will enter the ‘‘No Go’’ pile.
The third set of countries meet some of the criteria
but not all of them. They may become of interest in
the future but probably not in the short term.

Chapter 7 84
1. Reasons for International Market
Segmentation (contd.)
Major reasons why international marketers
implement international market segmentation:
• Global Market Research
• Entry Decisions
• Positioning Strategy
• Resource Allocation
• Marketing Mix Policy
• Balance between standardization and customization

Chapter 7 85
2. International Market Segmentation
Approaches
• International segmentation procedures:
• Country-as-segments or aggregate segmentation (Country
based segmentation)
• Disaggregate international consumer segmentation
(Individual customer based segmentation)
• Two-stage international segmentation
• The first step—macro-segmentation—is the
classification of countries into different groups.

Chapter 7 86
2. International Market Segmentation
Approaches
• International segmentation procedures:
• The second phase—micro-segmentation—consists of
segmenting consumers for each country-cluster
identified in the first step)
• The standard country segmentation procedure classifies
prospect countries on a single dimension
(e.g., per capita GNP) or on a set of multiple
socioeconomic, political, and cultural criteria available from
secondary data sources.
• When there are numerous country traits, use smaller set of
dimensions using data reduction techniques such as factor
analysis.

Chapter 7 87
3. Segmentation Scenarios
• Universal or global segments
• Regional segments
• Unique (diverse) segments
4. Bases for Country Segmentation
• Demographics
• Demographics variables are among the most popular criteria.
• Socioeconomic Variables
• Caveats in using per capita income as an economic development
indicator:
• Monetization of transactions within a country
(compare measures such as per capita GNP across
countries, figures based on a local currency need to
be translated into a common currency (e.g., the U.S.
dollar or the euro).
Chapter 7 88
4. Bases for Country Segmentation (contd.)
• Gray and Black Market sections of the economy
(Many countries have a sizable gray sector,
consisting of largely untaxed (or under-taxed)
exchanges that often involve barter transactions.
Black sector, involving transactions that are
outright illegal. Examples of such activities include
the drug trade, smuggling, racketeering, gambling,
and prostitution.
• Income disparities
• Purchasing Power Parity (PPP) criteria
• Socioeconomic Strata (SES) Analysis
• Human development index (HDI) classification
• Behavior-Based Segmentation
Chapter 7 89
4. Bases for Country Segmentation
(contd.)
• Lifestyles
• Global Values Segments; the survey investigated 1000
consumers in 35 countries (source: Robert Starch
Worldwide):
• Strivers (23 percent)
• Devouts (22 percent)
• Altruists (18 percent)
• Intimates (15 percent)
• Fun Seekers (12 percent)
• Creative (10 percent)
Chapter 7 90
5. International Positioning Strategies
• The formulation of a positioning strategy (local or global)
includes the following steps:
1. Identify the relevant set of competing products or brands.
2. Determine current perceptions held by consumers about your
product/brand and the competition.
3. Develop possible positioning themes.
4. Screen the positioning alternatives and select the most appealing one.
5. Develop a marketing mix strategy.
6. Over time, monitor the effectiveness of your positioning strategy and if
needed, conduct an audit.
• Uniform vs. Localized Positioning Strategies
• Universal Positioning Appeals
• Positioning themes:
• Specific product features/attributes
• Product benefit, solutions for problems
• User application
• Lifestyles

Chapter 7 91
6. Global, Foreign, and Local Consumer Culture
Positioning
• Global consumer culture positioning (GCCP)
• Brand as a symbol of a given global consumer culture
• Local consumer culture positioning (LCCP)
• Brand as an intrinsic part of the local culture.
• Foreign consumer culture positioning (FCCP)
• Brand mystique built around a specific foreign culture

Chapter 7 92
7. Appendix
Segmentation techniques and tools:
• Cluster Analysis: Collection of statistical procedures for
dividing objects into groups (clusters). The grouping is
done in such a manner that members belonging to the
same group are very similar to one another but quite
distinct from members of other groups.
• Regression Analysis: In regression, one assumes that
there exists a relationship between a response variable,
Y, and one or more so-called predictor variables, X1, X2
and so on.
• For each of the parameter estimates, the regression
analysis will also produce standard error.
• The higher the R2 value, the better the ability of the
regression model to predict the data.

Chapter 7 93
Chapter 8
Global Marketing Strategies
Introduction
• On a political map, country borders are clear as ever. But
on a competitive map, financial, trading, and industrial
activities across national boundaries have rendered those
political borders increasingly irrelevant.
• Not only firms that compete internationally but also
those whose primary market is considered domestic will
be affected by competition from around the world.

Chapter 8 94
1. Information Technology and
Global Competition
• Today, we are observing the emergence of a gross
information product, and it dwarfs the gross domestic
product.
• Electronic Commerce (E-Commerce): The development
of transportation technology, including jet air transportation,
cold storage containers, and large ocean carriers, changed the
nature of world trade in the fifty years after the Second World
War. Since the 1980s, the explosion of information
technology, particularly telecommunications, and more
recently, electronic commerce (e-commerce), has forever
changed the nature of competition around the world.
Geographical distance has become increasingly less relevant in
designing global strategy.
• the total global e-commerce turnover in 2006 hit $12.8 trillion,
taking up 18 percent in the global trade of commodities.
Chapter 8 95
Global Competition
• Real-Time Management: Information that managers
have about the state of the firm’s operations is almost
in real time. Top retailers such as Wal-Mart and Toys
’R’ Us get information from their stores around the
world every two hours via telecommunications.
• Online Communications

Chapter 8 96
Global Competition
• “Internet” Organization (E-Company): An increasing
number of multinational firms have begun to use
internal Web servers on the Internet to facilitate
communications and transactions among employees,
suppliers, independent contractors, and distributors.
Siemens, for example, spent 1 billion to turn itself into an
e-company.
• Faster Product Diffusion: The obvious impact of
information technology is the more rapid dispersion of
technology and the shorter product life cycles in global
markets than ever before.

Chapter 8 97
1. Information Technology and Global Competition (contd.)
• Global Citizenship: recognizes the importance of setting

strategy beyond the home-country-focused ethnocentric
orientation or the multicounty focused polycentric orientation
of many multinational firms. Thus firms need to adopt a
geocentric orientation that views the entire world as a
potential market and integrates firm activities on a global
basis.
• The acid test of a well-managed company is being able to
conceive, develop, and implement an effective global strategy.
• Conceptualization of Global Strategies:
1. Global Industry
2. Competitive industry structure
3. Competitive advantage
4. Hyper competition
5. Interdependency
Chapter 8 98
2. Global Strategy
• Global Industry:
• Those industries where a firm’s competitive
position in one country is affected by its
position in other countries.
• The first question that faces managers is the
extent of globalization of their industry.
• Every industry has global or potentially global
aspects.

Chapter 8 99
2. Global Strategy (contd.)
Industry Globalization Drivers (Yip, G. S., Total Global Strategy,
Prentice Hall, 1992).
Market Drivers
Cost Industry Government

Drivers Globalization Drivers
Potential
Competitive Drivers

Chapter 8 100
• Industry Globalization Drivers (see Exhibit 8-1):
• Market Globalization Drivers
1. Common customer needs
2. Global customer and channels
3. Transferable marketing
4. Lead countries
• Cost Globalization Drivers
1. Global economies of scale and scope
2. Steep experience curve
3. Global sourcing efficiencies
4. Favorable logistics
5. Difference in country costs
6. High product development costs
7. Fast-changing technology

Chapter 8 101
• Government Globalization Drivers
1. Favorable trade policies
2. Compatible technical standards
3. Common Market Regulations
4. Government-owned Competitors
5. Government-owned Customers
• Competitive Globalization Drivers
1. High exports and imports
2. Competitors from different continents and countries
3. Interdependent countries
4. Globalized competitors

Chapter 8 102
• Competitive Advantage
Firms develop their competitive advantages through
the following strategies:
• Cost leadership
• Product differentiation
• Niche strategy
• Nature of Competitive Industry Structure (see Exhibit 8-2):
»Industry competitors
»Potential entrants

Chapter 8 103
»Bargaining power of suppliers
»Bargaining power of buyers
»Threats of substitute products or services
• Hyper competition
No type of competitive advantage can last—it is bound
to erode.
For instance, it is not clear how tomorrow’s competitor can
differ from today’s. A new competitor can emerge from a
completely different industry given the convergence of
industries.
• Creative destruction
• Cost and quality
• Timing and know-how
• Strongholds

Chapter 8 104
• Such a shift in competition is referred to as creative
destruction.
• In a hypercompetitive environment, a firm competes on
the basis of
• Price/cost
• Quality
• Timing and know-how
• Strongholds in the markets it operates
• Financial resources that outlast competitors
• Interdependency: Interdependency of modern companies
Example: Global computer industry (firms use components from various sources.
HP/Compaq, Dell, and Acer all use semiconductor chips from Intel, AMD, or
Cyrix, hard drives from Seagate Western Digital, Maxtor, or Hitachi, and software
from Microsoft.
• Governments alsoKotabe
play&aHelsen's
larger role, affecting parts of the firm’s
Global Marketing
strategy.
Chapter 8
105
3. Global Marketing Strategy
• Benefits of Global Marketing:
• Cost Reduction
• Improved Products and Program Effectiveness
• Enhanced Customer Preference
• Increased Competitive Advantage
• Limits to Global Marketing:
• Standardization vs. adaptation issues
• Globalization vs. localization
• Global integration vs. local responsiveness
• Scale vs. sensitivity

Chapter 8 106
4. Regionalization of Global Marketing Strategy
• Global marketing strategy cannot be developed without
considering competitive and other market forces from
different regions around the world.
• To face those regional forces proactively, four additional
strategies need to be considered at the firm level. These
are
• cross subsidization of markets,
• identification of weak market segments, and
• the lead market concept.
• Strategy for emerging markets

Chapter 8 107
4. Regionalization of Global Marketing Strategy
• Issues in regionalization of global marketing strategy:
• Cross-Subsidization of Markets (to cover
costs from more profitable market to
another market where competition is
intensified
• Identification of Weak Markets
(untapped)
• Use of Lead Market Concept
• Marketing Strategies for Emerging
Markets

Chapter 8 108
5. Competitive Analysis
• SWOT (Strengths, Weaknesses, Opportunities, and
Threats) Analysis (see Exhibit 8-6)
• A SWOT analysis divides the information into two main
categories: internal and external factors.
• Based on SWOT analysis, marketing executives can
construct alternative strategies.
• The aim of any SWOT analysis should be to isolate the
key issues that will be important to the future of the
firm and that will be addressed by subsequent
marketing strategy.

Chapter 8 109
Chapter 9
Global Market-Entry Strategies
Introduction
• The need for a solid market entry decision is an integral part
of a global market entry strategy.
• Entry decisions will heavily influence the firm’s other
marketing-mix decisions.
• Global marketers have to make a multitude of decisions
regarding the entry mode which may include:
• (1) the target product/market
• (2) the goals of the target markets
• (3) the mode of entry
• (4) The time of entry
• (5) A marketing-mix plan
• (6) A control system to check the performance in the entered
markets

Chapter 9 110
1. Target Market Selection
• A crucial step in developing a global expansion strategy is
the selection of potential target markets (see Exhibit 9-1 for the
entry decision process).
• A four-step procedure for the initial screening process:
1. Select indicators and collect data
2. Determine importance of country indicators
3. Rate the countries in the pool on each
indicator
4. Compute overall score for each country

Chapter 9 111
2. Choosing the Mode of Entry
• Decision Criteria for Mode of Entry (see Exhibit 9-12):
• Market Size and Growth
• Risk
• Government Regulations
• Competitive Environment
• Local Infrastructure
• Classification of Markets:
• Platform Countries (Singapore & Hong Kong)
(countries that can be used to gather
intelligence and establish a network)

Chapter 9 112
2. Choosing the Mode of Entry (contd.)
• Emerging Countries (Vietnam & the Philippines)
• Growth Countries (China & India)
• Maturing and established countries (examples:
South Korea, Taiwan & Japan)
• Company Objectives
• Need for Control
• Internal Resources, Assets and Capabilities
• Flexibility

Chapter 9 113
2. Choosing the Mode of Entry (contd.)
• Mode of Entry Choice: A Transaction Cost
Explanation
• Regarding entry modes, companies normally face a
tradeoff between the benefits of increased control and
the costs of resource commitment and risk.
• Transaction Cost Analysis (TCA) perspective
• Transaction-Specific Assets (assets valuable for a very
narrow range of applications)

Chapter 9 114
3. Exporting
• Indirect Exporting
• Export management companies
• Cooperative Exporting (Companies that are
unwilling to commit the resources to set up their
own distribution organization but still want to
have some control over their foreign operations)
• Piggyback Exporting (With piggybacking, the company
uses the overseas distribution network of another
company (local or foreign) for selling its goods in the
foreign market.)
• Direct Exporting
• Firms set up their own exporting departments
Chapter 9 115
4. Licensing
• Licensor and the licensee
• Benefits:
• Appealing to small companies that lack resources
• Faster access to the market
• Rapid penetration of the global markets
• Caveats:
• Other entry mode choices may be affected
• Licensee may not be committed
• Lack of enthusiasm on the part of a licensee
• Biggest danger is the risk of opportunism
• Licensee may become a future competitor
• How to seek a good licensing agreement:
• Seek patent or trademark protection
• Thorough profitability analysis
• Careful selection of prospective licensees
• Contract parameter (technology package, use conditions, compensation, and
provisions Kotabe & Helsen's
for the settlement Global Marketing
of disputes)
Chapter 9 116
5. Franchising
• Franchisor and the franchisee
• Master franchising
• Benefits:
• Overseas expansion with a minimum investment
• Franchisees’ profits tied to their efforts
• Availability of local franchisees’ knowledge
• Caveats:
• Revenues may not be adequate
• Availability of a master franchisee
• Limited franchising opportunities overseas
• Lack of control over the franchisees’ operations
• Problem in performance standards
• Cultural problems
• Physical proximity

Chapter 9 117
6. Contract Manufacturing
• Benefits:
• Labor cost advantages
• Savings via taxation, lower energy costs, raw
materials, and overheads
• Lower political and economic risk
• Quicker access to markets
• Caveats:
• Contract manufacturer may become a future
competitor
• Lower productivity standards
Chapter 9 118
6. Contract Manufacturing (contd.)
• Backlash from the company’s home-market
employees regarding HR and labor issues
• Issues of quality and production standards
Qualities of an ideal subcontractor:
• Flexible/geared toward just-in-time delivery
• Able to meet quality standards
• Solid financial footings
• Able to integrate with company’s business
• Must have contingency plans

Chapter 9 119
7. Joint Ventures
• Cooperative joint venture
• Equity joint venture
• Benefits:
• Higher rate of return and more control over the
operations
• Creation of synergy
• Sharing of resources
• Access to distribution network
• Contact with local suppliers and government officials

Chapter 9 120
7. Joint Ventures (contd.)
• Caveats:
• Lack of control
• Lack of trust
• Conflicts arising over matters such as strategies, resource
allocation, transfer pricing, ownership of critical assets like
technologies and brand names
• Drivers Behind Successful International Joint Ventures :
• Pick the right partner
• Establish clear objectives from the beginning
• Bridge cultural gaps
• Gain top managerial commitment and respect
• Use incremental approach

Chapter 9 121
8. Wholly Owned Subsidiaries
• Acquisitions
• Greenfield Operations (firms established from scratch)
• Benefits:
• Greater control and higher profits
• Strong commitment to the local market on the part of companies
• Allows the investor to manage and control marketing, production, and
sourcing decisions
• Caveats:
• Risks of full ownership
• Developing a foreign presence without the support of a third part
• Risk of nationalization
• Issues of cultural and economic sovereignty of the host country
• Acquisitions and Mergers
• Quick access to the local market
• Good way to get access to the local brands

Chapter 9 122
9. Strategic Alliances
• Greenfield Operations
• Offer the company more flexibility than acquisitions in the areas of
human resources, suppliers, logistics, plant layout, and manufacturing
technology.
• Types of Strategic Alliances
• Simple licensing agreements between two partners
• Market-based alliances
• Operations and logistics alliances
• Operations-based alliances
• The Logic Behind Strategic Alliances
• Defend
• Catch-Up
• Remain
• Restructure
• Cross-Border Alliances that Succeed:
• Alliances between strong and weak partners seldom work.

Chapter 9 123
9. Strategic Alliances (contd.)
• Autonomy and flexibility
• Equal ownership
• Other factors:
• Commitment and support of the top of the
partners’ organizations
• Strong alliance managers are the key
• Alliances between partners that are related in terms
of products, technologies, and markets
• Similar cultures, assets sizes and venturing
experience
• A shared vision on goals and mutual benefits

Chapter 9 124
10. Timing of Entry
• International market entry decisions should also cover the
following timing-of-entry issues:
• When should the firm enter a foreign market?
• Other important factors include: level of international
experience, firm size
• Mode of entry issues, market knowledge, various economic
attractiveness variables, etc.
• Reasons for exit:
• Sustained losses
• Volatility
• Premature entry
• Ethical reasons
• Intense competition
• Resource reallocation

Chapter 9 125
11. Exit Strategies
• Risks of exit:
• Fixed costs of exit
• Disposition of assets
• Signal to other markets
• Long-term opportunities
• Guidelines:
• Contemplate and assess all options to salvage the
foreign business
• Incremental exit
• Migrate customers

Chapter 9 126
Chapter 10
Global Sourcing Strategy: R&D, Manufacturing, and
Marketing Interfaces
Introduction
• Global competition suggests a drastically shortened
life cycle for most products, and it no longer permits
companies a polycentric, country-by-country
approach to international business.
• An increasing number of countries are competing
head-on for global leadership.
• In today’s competitive world, technology diffuses
quickly.

Chapter 10 127
• Without established sourcing plans, distribution and
service networks, it is extremely difficult to exploit
both emerging technology and potential markets
around the world simultaneously.
• The increased pace of new product introduction and
reduction in innovational lead time calls for more
proactive management of locational and corporate
resources on a global basis.
• Global sourcing strategy requires a close coordination
among R&D, manufacturing, and marketing activities
across national borders.

Chapter 10 128
1. Extent and Complexity of Global Sourcing
Strategy
• Marketing managers should understand and
appreciate the important roles that product
designers, engineers, production managers, and
purchasing managers, among others, play in
marketing decision making. Marketing decisions
cannot be made in the absence of these people.
• U.S. MNCs are the most experienced in the
industrialized world, and sell more than three times
as much overseas through their subsidiaries as they
export to the world.

Chapter 10 129
1. Extent and Complexity of Global
Sourcing Strategy (contd.)
• Intra-firm trade is the primary factor leading to the
total volume of international trade among the Triad
region (i.e., the United States, European Union, and
Japan) increasing more than tenfold to $735.0 billion
in 2001.
• An increasing segment of international trade of
components and finished products is strongly
influenced by multinational companies’ foreign
production and sourcing investment activities.

Chapter 10 130
2. Trends in Global Sourcing Strategy
• Trend 1: The Decline of Exchange Rate
Determinism of Sourcing
• Trend 2: New Competitive Environment
Caused by Excess Worldwide Capacity
• Trend 3: Innovations in and Restructuring of
International Trade Infrastructure
• Trend 4: Enhanced Role of Purchasing
Managers
• Trend 5: Trend Toward Global Manufacturing

Chapter 10 131
3. Value Chain and Functional Interfaces
• The design of global sourcing strategy is based on the
following:
• Competitive advantage
• Comparative advantage
• The Value Chain Concept can be divided into two major
activities:
1. Primary activities
2. Support activities
• Five steps are involved in developing a global sourcing strategy
which include:
1. Identify the separable links in the company’s value chain.
2. In the context of those links, determine the location of the
company’s competitive advantages (considering both economies of
scale and scope).
3. Ascertain the level of transaction costs between the links in the
value chain and select the lowest cost mode.
Chapter 10 132
3. Value Chain and Functional Interfaces (contd.)
4. Determine the comparative advantage of countries relative to
each link in the value chain and to the relevant transaction
costs.
5. Develop adequate flexibility in corporate decision making
and organizational design so as to permit the company to
respond to changes in both its comparative advantages and the
comparative advantages of other countries.
• R&D/Manufacturing Interface
• Manufacturing/Marketing Interface
• Core Components Standardization
• Product Design Families
• Universal Products with all Features
• Universal Product with Different Positioning
• Marketing/R&D Interface
Chapter 10 133
4. Procurement: Types of Sourcing Strategy
• Intra-Firm Sourcing
• Domestic-in-house Sourcing
• Offshore Subsidiary Sourcing
• Outsourcing
• Domestic sourcing/purchase arrangement
• Offshore sourcing
• Hollow corporations (companies adopting a
“designer role” in global competition; see Global
Perspective 10-4)

Chapter 10 134
5. Long-Term Consequences of Global Sourcing
• Requires close coordination of R&D, manufacturing, and
marketing activities, among others, on a global basis.
• Ability and willingness of companies to integrate and streamline
operations worldwide
• Many MNCs with plants in various parts of the world are
exploiting not only their own competitive advantages but
also the locational advantages.
• Sustainable Versus Transitory Core Competence (long-
term implications of offshore sourcing)
• Strategic alliances
• Dependence
• Gradual loss of design and manufacturing abilities

Chapter 10 135
6. Outsourcing of Service Activities
• In 2000, the U.S. was ranked the largest exporter and
importer of services, providing $274 .6 billion of services
to the world and receiving $189.9 billion worth of
services.
• The technological revolution in data processing and
telecommunications makes the global tradability of some
services possible.
• Intellectual Outsourcing
• Outsourcing of service activities may serve the following
purposes:
(a). Reducing time to implement internal processes
(b). Sharing risk
(c). Improving customer service
(d). Improving access to expertise not available in-house
Chapter 10 136
6. Outsourcing of Service Activities
(contd.)
(e). Reducing head-count
(f). Instilling a sense of competition
• Service companies provide two types of
services:
• Core Services (necessary outputs of an
organization)
• Supplementary Services (indispensable for
execution of the core services)

Chapter 10 137
Chapter 11
Global Product Policy Decisions I: Developing
New Products for Global Markets
Introduction
• A cornerstone of a global marketing mix program is
the set of product policy decisions that
multinational companies (MNCs) constantly need
to formulate.
• The range of product policy questions may include:
• What new products should be developed for what
markets?
• What products should be added, removed, or modified
for the product line in each of the countries in which
the company operates?
Chapter 11 138
• What brand names should be used?
• How should the product be packaged and
serviced?
• Examples of improper product policy decisions
in global marketing:
• Ikea in the United States
• Proctor & Gamble in Australia
• U.S. Car Makers in Japan
• Ford in Brazil

Chapter 11 139
1. Global Product Strategies
• Three global strategies to penetrate foreign markets:
• Extension strategy
• Adaptation strategy
• Invention strategy
Five strategic options for the global marketplace:
Strategic Option 1: Product and Communication Extension --
Dual Extension
Strategic Option 2: Product Extension -- Communications
Adaptation
Strategic Option 3: Product Adaptation -- Communications
Extension
Strategic Option 4: Product and Communications Adaptation --
Dual Adaptation
Strategic Option 5: Product Invention
Chapter 11 140
2. Standardization Versus Customization
• Five forces favoring a globalized product strategy:
1. Common customer needs
2. Global customers
3. Scale economies
4. Time to market
5. Regional market agreements
• Degree of Standardization
• Modular Approach (This first approach consists of developing a
range of product parts that can be used worldwide. The parts
can be assembled into numerous product configurations.)
• Core-Product (Common Platform) Approach
• Balancing act between standardization and
adaptation
• Over-standardization vs. over-customization
Chapter 11 141
3. Multinational Diffusion
Examples: Microsoft’s Xbox videogame
• NTT DoCoMo’s iMode
• The Adoption of new products is driven by three types of factors:
• Individual Differences
• Personal Influences
• Product Characteristics
1. Relative advantage
2. Compatibility (Is the product consistent with existing values
and attitudes of the individuals in the social system?
3. Complexity (Is the product easy to understand? Easy to use?)
4. Trialability (Are prospects able to try out the product on a
limited basis?)
5. Observability (How easy is it for possible adopters to observe
the results or benefits of the innovation? Can these benefits
easily be communicated?
Chapter 11 142
3. Multinational Diffusion (contd.)
Other country characteristics used to predict new product
penetration patterns include:
• Homogeneous population (e.g Japan, South Korea, Thailand; the
adoption rate for new products in countries is usually faster than in
countries with a highly diverse culture.)
• Lead countries (the good introduced first)
• Lag countries (the good entered later)
• Cosmopolitanism (Cosmopolitans are people who look beyond their
immediate social surroundings, while locals are oriented more
toward their immediate social system. The more cosmopolitan the
country’s population, the higher its propensity for innovation.)
• Mobility (the ease with which member of a social system can move
around and interact with other members.)
• Labor force profile
• Individualism and national innovativeness (see Exhibit 11-4)
Chapter 11 143
4. Developing New Products for Global Markets
• Identifying New Product Ideas
• 4 C’s ( sources of new ideas):
• Company (e.g R&D)
• Customers
• Competition
• Collaborators
• New Product Development (NPD) Process
• Screening (see Exhibit 11-5)
• Concept Testing (Once the merits of a new product idea have
been established in the previous stage, it must be translated
into a product concept. A product concept is a fairly detailed
description, verbally or sometimes visually, of the new
product or service.)
• Conjoint Analysis (tradeoff analysis)
• To Standardize or not to Standardize

Chapter 11 144
4. Developing New Products for Global Markets
(contd.)
• Test Marketing (a field experiment where the new
product is marketed in a select set of cities to
assess its sales potential and scores of other
performance measures.)
• Timing of Entry: Waterfall versus Sprinkler
Strategies (see Exhibit 11-11)
• Waterfall Strategy: Global phased rollout where new
products trickle down in a cascade-like manner
• Sprinkler Strategy: Simultaneous worldwide entry

Chapter 11 145
5. Global NPD and Culture
• Global linkages between the new product development
process and national cultures where cultural differences
heavily influence the NPD process.
• Differences between European and North American new
product development programs:
• The NPD process among European firms is much more
formalized.
• European Go/No Go standards tend to be far stricter than
American norms.
• NPD projects within European firms are more likely to have a
well-defined project leader and an assigned team of players than
projects run by North American companies; European teams are
much more multifunctional than American teams.

Chapter 11 146
5. Global NPD and Culture (contd.)
• European companies punish project leaders less in case
of failure, reward intrapreneurs more generously, and
offer more seed money for pet projects.
• Japanese Companies and Product Churning:
• Japanese companies strongly believe in rushing new
products to the markets with little or no market
research and then gauge the market’s reaction.
• Japanese NPD managers constantly listen to the
“voice of the customers.”

Chapter 11 147
Chapter 12
Global Product Policy Decisions II: Marketing
Products and Services
Introduction
• Companies that brand their products have various
options when they sell their goods in multiple countries.
• More and more companies see global (or at least
regional) branding as a must.
• Multinational product line management entails issues
such as:
• What product assortment should the company launch when it
first enters a new market?

Chapter 12 148
• How should the firm expand its multinational
product line over time?
• What product lines should be added or dropped?
• Global marketers also face the issue of global
piracy.
• In global marketing, firms have to use a
multitude of strategies to handle the negative
country-of-origin stereotypes.

Chapter 12 149
1. Global Branding Strategies
• Global Brands (see Exhibit 12-1)
• A truly global brand is one that has a consistent identity with
consumers across the world.
• The development costs for products launched under the global
brand name can be spread over large volumes.
• A global brand has much more visibility than a local brand.
• The fact of being global adds to the image of a brand country.
• Global brands are also able to leverage the country association
for the product.
• The value of a global brand (brand equity) usually varies a great
deal from country to country.
• Inter-country gaps in brand equity may be due to any following
factors: -History
• Competitive climate
• Marketing support
Chapter 12 150
1. Global Branding Strategies (contd.)
• Cultural receptivity to brands
• Product category penetration
• Local Branding
• Examples: Interbrew has a portfolio of 200 local and regional
brands across the globe; Mecca Cola from France
• Global or Local Brands?
• Solo branding, hallmark branding, family branding, and
extension branding.
• A firm’s global brand is shaped by three types of factors:
• Firm-based drivers
• Product-market drivers
• Market dynamics
Chapter 12 151
• Brand Name Changeover Strategies
• Fade-in/fade-out
• Co-branding
• Umbrella branding
• Transparent forewarning
• Summary axing
• Private Label Branding (“Store Brands”): Factors
explaining success of private labels:
1. Improved quality of private-label products
2. Development of premium private-label brands

Chapter 12 152
• A system where a single banner brand is used
worldwide, often with a sub-brand name, for almost
the entire product mix of the company.
3. Shift in balance of power between retailers and
manufacturers
4. Expansion into new product categories
5. Internationalization of retail chains
6. Economic downturns
Umbrella (Corporate) Branding
• Umbrella branding facilitates brand-building efforts
over a range of products.
• Umbrella branding makes it easier to add or drop new
products. Kotabe & Helsen's Global Marketing
Chapter 12 153
Protecting Brand Names
• Brands are vital assets to brand owners.
• In the area of brand protection, the oldest treaty
is the Paris Convention for the Protection of
Intellectual Property.
• The difference in opinion held by industrialized
and developing countries on intellectual property
(see Exhibit 12-6)
• Many elements of the brand franchise may
require protection.

Chapter 12 154
2. Managing Multinational Product Lines
• The product assortment is usually described on two
dimensions: the width and the length.
• Drivers affecting the composition of a firm’s international
product line:
• Customer Preference
• Price Spectrum
• Competitive Climate
• Organizational Structure
• History
• Categories of product lines:
• Core products
• Niche products
• Seasonal products
• Filler products Kotabe & Helsen's Global Marketing
Chapter 12 155
3. Product Piracy
• Any aspect of the product is vulnerable to piracy,
including the brand name, the logo, the design, and the
package (see Exhibit 12-10).
• Strategic Options Against Product Piracy:
• Lobbying Activities
• Legal Action
• Customs
• Product Policy Options
• Distribution
• Communication Options

Chapter 12 156
4. Country-of-Origin Stereotypes
• Country-of-Origin (COO) Influences on Consumers
• For many products, the “made in” label matters a
great deal to consumers.
• Key research findings of COO effects:
• COO effects are not stable
• Consumers prefer domestic products over
imports
• Both the country of design and the country of
manufacturing/assembly play a role in consumer
attraction.

Chapter 12 157
4. Country of Origin Stereotypes (contd.)
• COO particularly influences the elderly, less educated,
and politically conservative; consumer expertise also
makes a difference.
• Cultural orientation play a role.
• Consumers are likely to use the origin of a product as a
cue when they are unfamiliar with the brand name
carried by the product.
• COO effects depend on the product category.
• Strategies to Cope with COO Stereotypes (see Exhibit 12-11):
• Product Policy
• Pricing
• Distribution
• Communication
Chapter 12 158
5. Global Marketing of Services
Challenges in Marketing Services Internationally:
• Protectionism
• Immediate Face-to-Face Contacts with Service Transactions
• Difficulties in Measuring Customer Satisfaction Overseas
Opportunities in the Global Service Industries:
• Deregulation of Service Industries
• Increasing Demand for Premium Services
• Increased Value Consciousness
Global Service Marketing Strategies:
• Capitalize on Cultural Forces in the Host Market
• Standardize and Customize
• Give Information Technologies (IT) a Central Role
• Add Value by Differentiation
• Establish Global Service Networks
Chapter 12 159
Chapter 13
Global Pricing
Introduction
• Global pricing is one of the most critical and complex
issues in international marketing.
• Price is the only marketing mix instrument that creates
revenues. All other elements entail costs.
• A company’s global pricing policy may make or break its
overseas expansion efforts.
• Multinationals also face the challenges of how to
coordinate their pricing across different countries.

Chapter 13 160
1. Drivers of Foreign Market Pricing
• Main drivers affecting global pricing:
• Company Goals
• Satisfactory ROI
• Market Share
• Specified Product Goal
• Company Costs
• Cost-Plus Pricing
• Dynamic Incremental Pricing
• Incremental Costs

Chapter 13 161
1. Drivers of Foreign Market Pricing
(contd.)
• Customer Demand
• Competition
• Cross-Border Price Differentials
• Nonprice Competition
• Distribution Channels
• Variations in Trade Margins and Length of Margins
• Issues of Everyday Low Prices (EDLP)
• Parallel Imports (Gray Market)
• Government Policies

Chapter 13 162
2. Managing Price Escalation
• Several options exist to lower the export price:
1. Rearrange the distribution channel
2. Eliminate costly features (or make them
optional)
3. Downsize the product
4. Assemble or manufacture the product in
foreign markets
5. Adapt the product to escape tariffs or tax
levies

Chapter 13 163
3. Pricing in Inflationary Environments
• Alternative ways to safeguard against inflation
may include:
1. Modify components, ingredients, parts and/or
packaging materials.
2. Source materials from low-cost suppliers.
3. Shorten credit terms.
4. Include escalator clauses in long-term contracts.
5. Quote prices in a stable currency.
6. Pursue rapid inventory turnovers.
7. Draw lessons from other countries.

Chapter 13 164
3. Pricing in Inflationary Environments
(contd.)
Companies faced with price controls can consider
several alternatives:
1. Adapt the product line
2. Shift target segments or markets.
3. Launch new products or variants of existing
products.
4. Negotiate with the government.
5. Predict incidence of price controls.

Chapter 13 165
4. Global Pricing and Currency
Movements
• Currency Gain/Loss Pass Through (see Exhibit 13-3)
• Pass-through issue (How much of an exchange rate
gain (loss) should be passed through to our customers
?)
• Pricing-to-market (PTM) (adjustment of markup in
response to exchange-rate movement)
• Local-currency price stability (LCPs) (to adjust mark-
ups in such a way that local currency prices remain
fairly stable.
• Currency Quotation

Chapter 13 166
5. Transfer Pricing
• Sales transactions between related entities of the same
companies are called transfer prices.
• Determinants of Transfer Prices:
1. Market conditions in the foreign country
2. Competition in the foreign country
3. Reasonable profit for foreign affiliate
4. U.S. federal income taxes
5. Economic conditions in the foreign country
6. Import restrictions
7. Customs duties
8. Price controls
9. Taxation in the foreign country
10. Exchange controls
Chapter 13 167
5. Transfer Pricing (contd.)
• Criteria for making transfer pricing decisions:
• Tax regimes (Ideally, firms would like to boost their
profits in low-tax countries and dampen them in high-
tax countries. To shift profits from high-tax to low-tax
markets, companies would set transfer prices as high
as possible for goods entering high-tax countries and
vice-versa for low-tax countries.)
• Local market conditions (
• Market imperfections
• Joint venture partner
• Morale of local country managers

Chapter 13 168
• Setting Transfer Prices: Market-based transfer pricing:
• Arm’s length prices (company charges the price that any buyer outside
the MNC would pay, as if the transaction had occurred between two unrelated
companies (at ‘‘arm’s length’’).
• Nonmarket-based pricing:
• Cost-based pricing
• Negotiated pricing
• A recent study shows that compliance with financial reporting
norms, fiscal and custom rules, and anti-dumping regulations prompt
companies to use market-based transfer pricing.
• Government-imposed market constraints (e.g., import restrictions,
price controls, exchange controls) favor nonmarket-based transfer
pricing.
• Most firms use a mixture of market-based and non-market pricing
procedures.
• Minimizing the Risk of Transfer Pricing Tax Audits:
• Chapter
Basic13Arm’s Length Standard (BALS)
169
• To minimize the risk of tax audits, decisions should center
around the following five questions (see Exhibit 13-6):
1. Do comparable/uncontrollable transactions exist?
2. Where is the most value added? Parent? Subsidiary?
3. Are combined profits of parent and subsidiary shared
in proportion to contributions?
4.Does the transfer price meet the benchmark set by the
tax authorities?
5. Does the tax MNC have the information to justify the
transfer prices used?

Chapter 13 170
6. Global Pricing and Antidumping Regulation
• Dumping occurs when imports are sold at an “unfair”
price.
• Voluntary Export Restraint (VER)
• To minimize risk exposure to antidumping actions,
exporters might pursue any of the following marketing
strategies:
• Trading up (Move away from low-value to high-value products
via product differentiation.)
• Service enhancement (by adding support services to the core
product.)
• Distribution and communication (

Chapter 13 171
7. Price Coordination
• The following considerations will be necessary when
developing a global pricing strategy: 1. Nature of customers
2. Amount of product differentiation
3. Nature of channels
4. Nature of competition
5. Market integration
6. Internal organization
7. Government regulation
• Global-Pricing Contracts –GPCs (see Exhibit 13-7):
• Purchasers often demand GPCs from their suppliers.
• GPCs can also benefit suppliers.
• A GPC can offer the opening toward nurturing a lasting customer
relationship.
• Small suppliers can use GPCs as a differentiation tool to get access
to new accounts. Kotabe & Helsen's Global Marketing
Chapter 13 172
7. Price Coordination (contd.)
• Aligning Pan-Regional Prices
• A Pricing Corridor (to find the middle ground by
upping prices in low-price countries and cutting them
in high-price countries) works as follows:
Step 1. Determine optimal price for each
country.
Step 2. Find out whether parallel imports (“gray
markets”) are likely to occur at these
prices.
Step 3. Set a pricing corridor.

Chapter 13 173
7. Price Coordination (contd.)
• Implementing Price Coordination: Global marketers
can choose from four alternatives to promote price
coordination within their organizations:
1. Economic measures (Corporate headquarters influence
pricing decisions at the local level via the transfer prices
or by setting upper and lower limits)
2. Centralization (In the extreme case, pricing decisions are
made at corporate or regional headquarters level)
3. Formalization (headquarters spells out a set of pricing
rules that the country managers should comply with.)
4. Informal coordination (The emphasis here is on
informing and persuasion rather than prescription and
dictates.)

Chapter 13 174
8. Pricing Policies and the Euro
• As of January 1, 2002, the euro is the common
currency within the 12 EU member states.
• Companies operating in the euro-zone will need to
make strategic decisions in two areas:
• 1. Harmonization of Prices
• The biggest impact is likely to be price harmonization.
• 2. Transfer Pricing
• Prices within the European Union countries will become
more transparent.

Chapter 13 175
9. Countertrade
• Forms of Countertrade:
• Simple barter (Simple barter is a swap of one product for
another product without the use of any money. Usually,
no third party is involved to carry out the transaction.)
• Clearing agreement (two governments agree to import a
set specified value of goods from one another over a given
period.)
• Switch trading (This is a variant of clearing arrangements
where a third party is involved.)
• Buyback (compensation) (the seller provides the
equipment and agrees to be paid (partially or fully) by the
products resulting from using the equipment. E.g sale of
technology, turnkey plants, or machinery equipment.

Chapter 13 176
9. Countertrade
• Counterpurchase (Each party agrees to buy a
specified amount of goods from the other for hard
currency over a set period. Contrary to buybacks, the
products are unrelated.)
• Offset (Offset is a variation of counter purchase: the
seller agrees to offset the purchase price by sourcing
from the importer’s country or transferring
technology to the other party’s country

Chapter 13 177
9. Countertrade (contd.)
• Motives behind Countertrade:
• Gain access to new or difficult markets
• Overcome exchange rate controls or lack of hard currency
• Overcome low country credit worthiness
• Increase sales volume
• Generate long-term customer goodwill
• Shortcomings of Countertrade:
• No “in-house” use for goods offered by customers
• Time consuming and costly negotiations
• Uncertainty and lack of information on future prices
• Transaction costs

Chapter 13 178
9. Countertrade (contd.)
• Words of advice regarding countertrade:
1. Always evaluate the pros and cons of countertrade
against other options.
2. Minimize the ratio of compensation goods to cash.
3. Strive for goods that can be used in-house.
4. Assess the relative merits of relying on middlemen
versus an in-house staff.
5. Check whether the goods are subject to any
restrictions.
6. Assess the quality of goods.

Chapter 13 179
Chapter 14
Communicating with the World Customer
Introduction
• There are many cultural challenges that advertisers
face in global marketing.
• Global advertising encompasses areas such as
advertising planning, budgeting, resource allocation
issues, message strategy, and media decisions.
Other areas include: local regulations, advertising
agency selection, coordination of multi-country
communication efforts and regional and global
campaigns.

Chapter 14 180
1. Global Advertising and Culture
• Language Barriers
• Language is one of the most formidable barriers in global
marketing.
• Three types of translation errors can occur in international
marketing:
• Simple carelessness
• Multiple-meaning words
• Idioms
• Other Cultural Barriers
• Religion
• Cultural traps/cultural dimensions

Chapter 14 181
1. Global Advertising and Culture (contd.)
• Geert Hofstede’s cultural grid can be used to

assess the appropriateness of comparative
advertising campaigns (see Exhibit 14-2). The
five cultural dimensions include:
• Power distance
• Uncertainty avoidance
• Individualism
• Masculinity
• Long-termism

Chapter 14 182
2. Setting the Global Advertising Budget
• Companies rely on different kind of advertising
budgeting methods which include: See Exhibit 14-3
• Percentage of Sales
• Competitive Parity
• Objective-and-Task Method
• Resource Allocation

Chapter 14 183
3. Creative Strategy
• The “Standardization” versus “Adaptation Debate”
• Merits of Standardization:
• Scale Economies
• Consistent Image
• Global Consumer Segments
• Creative Talent
• Cross-Fertilization
• Barriers to Standardization:
• Cultural Differences
• Advertising Regulations
• Market Maturity
• “Not-Invented-Here” (NIH) Syndrome

Chapter 14 184
3. Creative Strategy (contd.)
• Approaches to Creating Advertising Copy:

• “Laissez Faire”
• Export Advertising
• Global Prototype Advertising
• Prototype Standardization
• Regional Approach
• Pattern Standardization
• Modular Approach

Chapter 14 185
4. Global Media Decisions
Media Infrastructure
• Media infrastructure differs from country to country
Media Limitations
• The major limitation in many markets is media
availability.
Recent Developments in the Global Media Landscape:
• Growing commercialization and deregulation of mass
media
• Shift from radio and print to TV advertising
• Rise of global and regional media
• Growing spread of interactive marketing
• Growing popularity of text messaging
• Improved monitoring
• Improved TV-viewership measurement
Chapter 14 186
5. Advertising Regulations
• The major types of advertising regulations include:
• Advertising of “Vice Products” and Pharmaceuticals
• Comparative Advertising
• Content of Advertising Messages
• Advertising Targeting Children
• Other Advertising Regulations: Issues of local languages, tax
issues, and advertising rates.
• Strategies to deal with advertising regulations:
• Keep track of regulations and pending legislation
• Screen the campaign early on
• Lobbying activities
• Challenge regulations in court
• Adapt marketing mix strategy
Chapter 14 187
6. Choosing an Advertising Agency
• In selecting an ad agency, the international
marketer has several options:
1. Work with the agency that handles the
advertising in the firm’s home market.
2. Pick a purely local agency in the foreign market.
3. Choose the local office of a large international
agency.
4. Select an international network of ad agencies
that spans the globe.

Chapter 14 188
6. Choosing an Advertising Agency (contd.)
• When screening ad agencies, the following set of
criteria can be used:
• Market coverage
• Quality of coverage
• Expertise with developing a central international campaign
• Creative reputation
• Scope and quality of support services
• Desirable image (“global” versus “local”)
• Size of the agency
• Conflicting accounts

Chapter 14 189
7. Coordinating International Advertising
• Global or pan-regional advertising approaches
require a great deal of coordination. The following
mechanisms can help:
• Monetary Incentives (cooperative advertising)
• Advertising Manuals (brand book)
• Lead-Country Concept
• Global or Pan-Regional Meetings: Six guidelines to
implement a global or pan-regional advertising
approach include:

Chapter 14 190
7. Coordinating International Advertising (contd.)
(1). Top management must be dedicated to going
global.
(2). Use a third party (e.g., the ad agency) to help sell
key managers the benefits of a global advertising
approach.
(3). A global brief based on cross-border consumer
research can help persuade managers to think in terms
of global consumers.
(4). Find product champions and give them a charter for
the success of the global marketing program.
(5). Convince local staff that they have an opportunity in
developing a global campaign.
(6). Get local managers on the global marketing team --
have them do the job themselves.

Chapter 14 191
8. Other Forms of Communication
• Sales Promotions: Sales promotion refers to a
collection of short-term incentive tools that lead to
quicker and/or larger sales of a particular product by
consumers or the trade.
• Rationales explaining the local character of promotions:
• Economic development
• Market maturity
• Cultural perceptions
• Trade structure (pull vs. push promotions)
• Government regulations

Chapter 14 192
(contd.)
• Direct Marketing
• Event Sponsorships
• Trade Shows: When attending an international trade
show, the following guidelines might prove useful:
• Decide on what trade shows to attend at least a year in
advance.
• Prepare translation of product materials, price lists, selling
aids.
• Bring plenty of literature. Bring someone who knows the
language or have a translator.
• Send out, ahead of time, direct-mail pieces to potential
attendees.

Chapter 14 193
(contd.)
• Find out the best possible space, for instance, in terms of
traffic.
• Plan the best way to display your products and to tell your
story.
• Do your homework on potential buyers from other
countries.
• Assess the impact of trade show participation on the
company’s bottom line. Performance benchmarks may
need to be adjusted when evaluating trade show
effectiveness in different countries since attendees might
behave differently.

Chapter 14 194
9. Globally Integrated Marketing
Communications (GIMC)
• Integrated Marketing Communications (IMC):
• IMC coordinates different communication vehicles – mass
advertising, sponsorships, sales promotion, packaging,
point-of-purchase displays, so forth.
• Globally Integrated Marketing Communications
(GIMC):
• GIMC is a system of active promotional management that
strategically coordinates global communications in all of its
component parts.
• Both horizontally (country-level) and vertically (promotion
tools) are used in GIMC.

Chapter 14 195
Chapter 15
Sales Management
Introduction
• The salesperson is the front line for many
companies.
• The success or failure of the company rests largely
on the ability of its sales force.
• International sales management can be divided into
two categories: (a) international strategy
considerations, and (b) intercultural considerations.
• Issues such as recruiting, training, supervising, and
evaluating sales force are an integral part of
international sales management.

Chapter 15 196
1. Market Entry Options and
Sales Force Strategy
• The sales management “process” starts with
setting objectives and strategy.
• Other issues include: recruiting, training,
supervising, and evaluating. In addition, market
entry methods and level of integration are equally
important (see exhibit 15-2).
• Low-Involvement Options include:
• Export Management Companies(EMCs)
• Export Trading Companies (ETCs)

Chapter 15 197
1. Market Entry Options and
Sales Force Strategy (contd.)
• Sogoshosha (Japanese general trading
companies)
• Examples: Mitsubishi, Mitsui, Sumitomo,
and Marubeni
• Midlevel Involvement
• High-Involvement
• Role of Foreign Governments
• Issues of host governments’ rules and practices
• Companies as “corporate citizens” in the host countries

Chapter 15 198
2. Cultural Considerations
• Personal Selling
• Cultural Generalization
• Organization (Corporate) Culture
• Relationship Marketing
• Myers-Briggs Type Indicator – MBTI (see Exhibit 15-3)
• Popular tool for characterizing people which addresses their
cognitive styles and is based on the following four personal
dimensions:
1. Extrovert vs. Introvert
2. Sensing vs. Intuitive
3. Thinking vs. Feeling
4. Judging vs. Perceiving
Chapter 15 199
3. Impact of Culture on Sales Management and Personal
Selling Process
• Sales force management consists of the following six
steps:
1. Setting salesforce objectives
2. Designating salesforce strategy
3. Recruiting and selecting salespeople
4. Training salespeople
5. Supervising salespeople
6. Evaluating salespeople
• Salesforce Objectives
• What the salesforce will be asked to do
• Salesforce Strategy
• Sales structures: Territorial salesforce, product salesforce, and
customer salesforce
Chapter 15 200
3. Impact of Culture on Sales Management
and Personal Selling Process (contd.)
• Recruiting and Selecting

• Training
• Supervising
• Motivation and Compensation
• Management Style
• Ethical Perceptions
• Evaluating
• Quantitative evaluations
• Qualitative evaluations
Chapter 15 201
4. Cross-Cultural Negotiations
• Conducting successful cross-cultural negotiations is a
key ingredient for many international business
transactions.
• Stages of the Negotiation Process:
• Non-task surroundings
• Task-related information exchange
• Persuasion
• Concessions and agreement

Chapter 15 202
4. Cross-Cultural Negotiations (contd.)
• Cross-Cultural Negotiation Strategies include the
following:
• a. Employ an agent or advisor
• b. Involve a mediator
• c. Induce the counterpart to follow one’s own negotiation
script
• d. Adapt the counterpart’s negotiation script
• e. Coordinate adjustment of both parties
• f. Embrace the counterpart’s script
• g. Improvise an approach.
• h. Effect symphony.

Chapter 15 203
4. Cross-Cultural Negotiations (contd.)
• To pick a strategy, the following steps ought to
be considered:
• 1. Reflect on your culture’s negotiation practices
• 2. Learn the negotiation script common in the
counterpart’s culture
• 3. Consider the relationship and contextual cues
• 4. Predict or influence the counterpart’s approach
• 5. Choose a strategy

Chapter 15 204
5. Expatriates
• Expatriates are home-country personnel sent
overseas to manage local operations in the foreign
market.
• Advantages of Expatriates
• Better Communications
• Development of Talent
• Difficulties of Sending Expatriates Abroad
• Cross-Cultural Training
• Motivation
• Compensation
• Family Discord
• Security Risk

Chapter 15 205
5. Expatriates (contd.)
• The Return of the Expatriate – Repatriation
• Repatriation is the return of the expatriate employee from
overseas.
GMAC Relocation Services’ 2001 Survey reported a number of effective
ways to reduce attrition rates. These include the following:
• 1. Chances to use international experience
• 2. A choice of positions upon return
• 3. Recognition
• 4. Repatriation career support
• Generalizations About When Expatriates are Good/Bad
• Expatriates are important whenever communication with the home
country office is at a premium.
• Expatriates are especially important in complex operating
environments, or when elevated political risk requires constant
monitoring.
Chapter 15 206
Chapter 16
Global Logistics and Distribution
Introduction
• Global logistics and distribution have played a critical
role in the growth and development of world trade
and in the integration of manufacturing on a
worldwide scale.
• The use of appropriate distribution channels in
international markets increases the chances of
success dramatically.
• In the United States, the total logistics cost has
amounted to ten to eleven percent of the country’s
GDP every year in the last decade.

Chapter 16 207
• As firms start operating on a global basis, logistics

managers need to manage shipping of raw
materials, components, and supplies among
various manufacturing sites at the most economical
and reliable rates.
• The development of intermodal transportation and
electronic tracking technology has resulted in a
quantum jump in the efficiency of the logistic
methods employed by firms worldwide.

Chapter 16 208
1. Definition of Global Logistics
• Global logistics is defined as the design and
management of a system that directs and controls the
flows of materials into, through and out of the firm
across national boundaries to achieve its corporate
objectives at a minimum total cost (see Exhibit 16-1).
• Materials management refers to to the inflow of raw
material, parts, and supplies through the firm.
• Physical distribution refers to the movement of the firm’s
finished products to its customers, consisting of
transportation, warehousing, inventory, customer
service/order entry, and administration.

Chapter 16 209
2. Managing Global Logistics
• The following factors contribute to the increased complexity
and cost of global logistics:
• Distance
• Exchange rate fluctuations
• Foreign intermediaries
• Regulation
• Security
• Modes of Transportation
• Value-to-Volume Ratio
• Perishability
• Cost of Transportation
• Ocean Shipping
• Liner Service
• Bulk Shipping
• Air Freight
• Intermodal Transportation

Chapter 16 210
2. Managing Global Logistics (contd.)
• Warehousing and Inventory Management
• Hedging Against Inflation and Exchange Rate
Fluctuations
• Benefiting from Tax Differences
• Logistic Integration and Rationalization
• E-Commerce and Logistics
• Third-Party Logistic (3PL) Management
• The largest 3PL sector is the value-added warehousing
and distribution industry.

Chapter 16 211
3. Free Trade Zones
• Logistical Revolution with the Internet
• The trend toward third-party logistics is a result of
the Internet and the intranet as well as
concentrating on core competencies.
• A free trade zone (FTZ) is an area that is located within a
nation (say, the United States), but is considered outside
of the customs territory of the nation.

Chapter 16 212
3. Free Trade Zones (contd.)
• FTZs provide many cash flow and operating benefits to
zone users and include (see Exhibit 16-2):
• 1. Duty deferral and elimination
• 2. Lower tariff rates
• 3. Lower tariff incidence
• 4. Exchange rate hedging
• 5. Import quota not applicable
• 6. “Made in U.S.A.” designation

Chapter 16 213
4. Maquiladora Operation
• The maquiladora industry, also known as the in-

bond or twin-plant program, is essentially a special
Mexican version of a free trade zone and was
started in 1965.
• Mexico allows duty-free imports of machinery and
equipment for manufacturing as well as
components for further processing and assembly,
as long as 80 percent of the plant’s output is
exported.

Chapter 16 214
4. Maquiladora Operation (contd.)
• Mexico permits 100 percent foreign ownership of

the maquiladora plants in the designated
maquiladora zone.
• Most of the maquiladora plants are located along
the U.S.-Mexico border, such as Tijuana across from
San Diego, Ciudad Juarez across from El Paso, and
Nuevo Laredo across from Laredo. Other cities
include Monterrey, Mexico City, and Guadalajara.
• Mexico has been an attractive location for labor-
intensive assembly because of cheaper labor.
Chapter 16 215
5. U.S. Special Import Tariff Provisions
• Under NAFTA regulations, local content requirements
have encouraged companies to move their operations to
Mexico.
Special U.S. tariff provisions have encouraged U.S.-based
companies to export U.S.-made components and other
in-process materials to foreign countries for further
processing and/or assembly and subsequently to
reimport finished products back into the United States.
U.S. imports under these tariff provisions are officially
called U.S. imports under items 9802.00.60 and
9802.00.80 of the U.S. Harmonized Tariff Schedule (the
9802 tariff provisions, for short).

Chapter 16 216
6. Global Retailing
• In developed countries, retailing employs between 7
percent and twelve percent of the workforce.
• In 2002, Wal-Mart was the largest retailer in the world
with a total revenues of $220 billion. Only 10 percent of
its sales are generated outside its core NAFTA region.
• “Push” versus “Pull”:
• The traditional supply chain powered by the manufacturing
push is becoming a demand chain driven by consumer pull,
especially in the developed countries.

Chapter 16 217
6. Global Retailing (contd.)
• On-Time Retail Information Management
• Reduced Inventory
• Market Information at the Retail Level
• Strong logistics capabilities can be used as an
offensive weapon to help a firm gain competitive
advantage in the marketplace.
• Retailing Differences Across the World:
• Industrialized countries tend to have a lower distribution outlet
density than the emerging markets.
• The advanced facilities available in the developed world allow a
much higher square footage of retail space per resident, due to
the large size of the retail outlets.

Chapter 16 218
• Large-Scale Retail Store Law (LSRSL) in Japan
• This law helped to protect the small retail stores
• E-Commerce and Retailing
• Countries such as Japan and Germany are
warming up to the same e-commerce revolution
as the United States has experienced.
• E-commerce is not limited to the developed
countries.
• China is already the fastest growing Internet
market in Asia.

Chapter 16 219
• Brazil is the most wired nation in Latin America.
• Despite the rapid growth of the Internet, the
need for local or regional distribution of products
is likely to remain as important as it was before
the Internet revolution.
• Despite the rapid growth of the Web, the need
for local or regional distribution of products is
likely to remain as important as it was before the
Internet revolution.

Chapter 16 220
Chapter 17
Export and Import Management
Chapter 17 Kotabe & Helsen's Global Marketing 221

Chapter Overview
1. Organizing for Exports

2. Indirect Exporting
3. Direct Exporting
4. Mechanics of Exporting
5. Role of the Government in Promoting Exports
6. Managing Imports—the Other Side of the Coin
7. Mechanics of Importing
8. Gray Markets

Introduction
 Exporting is the most popular way for many
companies to become international.
 Exporting is usually the first mode of foreign entry
used by companies.
 Selling to foreign markets involves numerous high
risks, arising from a lack of knowledge about and
unfamiliarity with foreign environments, which
can be heterogeneous, sophisticated, and turbulent.
 Manufactured goods accounted for almost 60
percent of the exports of developing countries (see
Exhibit 17-1).
 Because of every export transaction, there is, by

definition, an import transaction as well.
 Aside from differences between the procedure and
rationale for exports and imports, both are largely
the same the world over.
 For successful development of export activities,
systematic collection of information is critical.

1. Organizing for Exports
 Research for Exports: The first step is to use

available secondary data to research potential
markets.
– The identification of an appropriate overseas
market involves the following criteria:
1. Socioeconomic characteristics
2. Political and legal characteristics
3. Consumer variables (lifestyle, preferences,
culture, taste, purchase behavior)
4. Financial conditions
1. Organizing for Exports (contd.)
 Export Market Segments

– Homogeneous market segments and clusters
– Geographical and psychographic segments
– Issues of standardization vs. adaptation

2. Indirect Exporting
 Indirect exporting involves the use of independent

middlemen to market the firm’s products overseas.
 Combination Export Manager (CEM)
 Export Merchants
 Export Broker
 Export Commission House
 Trading Companies (sogoshosha; see Exhibit
17-1)
 Piggyback Exporting

3. Direct Exporting
 Direct exporting occurs when a manufacturer or

exporter sells directly to an importer or buyer
located in a foreign market (see Exhibit 17-2).
 Export Department
 Export Sales Subsidiary
 Foreign Sales Branch

4. Mechanics of Exporting
 The Automated Export System (AES) on the

Internet
– In the U.S., the AES which was launched in
October 1999, enables exporters to file export
information at no cost over the Internet. AES is
a nationwide system operational at all ports.
 Legality of Exports
– Export license (general or validated license)
 Export Transactions
– The terms of sale
4. Mechanics of Exporting (contd.)
– Monitoring the transportation and delivery of
the goods to the assigned party
– Shipping and obtaining the bill of lading
» Bill of lading
 A straight bill of lading
 A shipper’s order bill of lading
– Commercial invoice
– Freight forwarders
 Terms of Shipment and Sale
– INCOTERMS 2000 (International Commercial
Terms)
– Terms of Shipment (see Exhibit 17-5):

» Ex-Works (EXW) at the point of origin
» Free Alongside Ship (FAS)
» Free on Board (FOB)
» Cost and Freight (CFR)
» Carriage Paid To (CPT)
» Cost, Insurance and Freight (CIF)
 Payment Terms (see Exhibit 17-6)
– Advanced Payment

– Confirmed irrevocable letter of credit
– Unconfirmed irrevocable letter of credit
– Documents Against Payment (D/P)
– Documents Against Acceptance (D/A)
– Open account
– Consignment
 Currency Hedging
– It is done through a banker or the firm’s
treasury in case there is a foreign risk in the
export transaction.
5. Role of the Government in
Promoting Exports
 Export promotion activities generally comprise:
1. Export service programs
2. Market development programs
 Export Enhancement Act of 1992
 Export - Import Bank (Ex-Im Bank; see Exhibit
17-7)
 Tariff Concessions
– Foreign Trade Zones
– Foreign Sales Corporation (FSC)

Promoting Exports (contd.)
 American Export Trading Company
– The Export Trading Company Act of 1982
 Export Regulations:
– The Trade Act of 1974
– The Foreign Corrupt Practices Act (FCPA) of
1977
– COCOM (Coordinating Committee for
Multilateral Exports)
– U.S. Antitrust Laws
Promoting Exports (contd.)
– Tariffs and local laws of foreign governments
which may include: tariffs, local laws relating
to product standards and classification, and
taxes.

6. Managing Imports – the Other
Side of the Coin
 For organizations in the United States, importing

is considerably easier than for most firms in the
rest of the world.
 About 60 percent of the world’s trade is still
denominated in U.S. dollars.
 Most of the time, a U.S. importer does not have
to bother with hedging foreign exchange
transactions or with trying to accumulate foreign
currency to pay for imports.
6. Managing Imports – the Other
Side of the Coin (contd.)
– Model of Importer Buyer Behavior (see Exhibit
17-8):
Stage 1. Need recognition and problem
formulation (triggered by competition and
unavailability)
Stage 2. Search (guided by country
characteristics, vendor characteristics, and
information sources)
Stage 3. Choice (vendors evaluation and
selection)
7. Mechanics of Importing
 Steps in Importing:
– Finding a bank that either has a branch in the
exporter’s country or has a correspondent bank
– Establishing a letter of credit with the bank
– Deciding on the mode of transfer of goods from
exporter to importer
– Checking compliance with national laws of the
importing country
– Making allowances for foreign exchange
fluctuations
7. Mechanics of Importing (contd.)
– Fixing liability of payment of import

transactions and warehousing
 Import Documents and Delivery
– Entry documents filed by the consignee:
» The bill of lading
» Customs form 7533
» Customs form 3461
» Packing list
» Commercial invoice

» Also accompanied by evidence that a bond is

posted with customs to cover any potential
duties, penalties, and taxes
– For Special Permit for Immediate Delivery, use
Customs form 3461 for fast release after
arrival.
 Import Duties in the United States:
– Ad valorem duty
– Specific duty
– Compound duty
– Antidumping import duty

– Countervailing duty
– Duty drawback:
» Direct identification drawback
» Substitution drawback

8. Gray Markets
 Gray market channel refers to the legal
export/import transaction involving genuine
products into a country by intermediaries other
than the authorized distributors.
 From the importer side, it is also known as
“parallel imports.”
 Three conditions are necessary for gray markets to
develop:
1. Products must be available in other markets.
2. Trade barriers must be low enough for
parallel importers.
8. Gray Markets (contd.)
3. Price differentials among various markets
must be great enough to provide the basic
motivation for gray marketers. Such price
differences arise for various reasons:
 Currency fluctuations
 Differences in market demand
 Legal differences
 Opportunistic behavior
 Segmentation strategy

 How to Combat Gray Market Activity (see Exhibit
17-9):
– Reactive Strategies:
» Strategic Confrontation
» Participation
» Price cutting
» Supply interference
» Promotion of gray market product
limitations
» Collaboration
» Acquisitions
 Proactive Strategies:
» Product/service differentiation and
availability
» Strategic pricing
» Dealer development
» Marketing information systems
» Long-term image reinforcement

» Establishing legal precedence

» Lobbying

Chapter 18
Planning, Organization, and

Control of Global Marketing
Operations

Chapter Overview
1. Global Strategic Marketing Planning

2. Key Criteria in Global Organizational
Design
3. Organizational Design Options
4. Organizing for Global Brand Management
5. Life Cycle of Organizational Structures
6. To Centralize or Decentralize?
7. Controlling Global Marketing Efforts
Introduction
 The capstone of a company’s global marketing

activities will be its marketing plan.
 To implement its global plans effectively, a
company needs to reflect on the best
organizational setup that enables it to
successfully meet the threats and opportunities
posed by the global marketing arena.
 Global marketers must confront organizational
issues such as:

(a). What is the proper communication and

reporting structure?
(b). Who within the organization should bear
responsibility for each of the functions that need
to be carried out?
(c). How can an organization leverage the
competencies and skills of its individual
subsidiaries?
(d). Where should the decision-making authority
belong for the various areas?
 The content of a global strategic marketing plan

usually covers four areas:
1. Market situation analysis
2. Objectives
3. Strategies
4. Action plans
 Bottom-Up versus Top-Down Strategic Planning

(contd.)
 Pitfalls: Marketing plans can go wrong. The top
three stumbling blocks are:
1. Lack of proper information
2. Too little emphasis on the development of
alternative strategic options
3. Unrealistic strategic objectives

2. Key Criteria in Global Organizational
Design
 Environmental Factors:
– Competitive Environment
– Rate of Environmental Change
– Regional Trading Blocs
– Nature of Customers
 Firm-Specific Factors:
– Strategic Importance of International Business
– Product Diversity

2. Key Criteria in Global Organization
Design (contd.)
– Company Heritage
– Quality of Local Managerial Skills

 International Division Structure
 Global Product Division Structure (see Exhibit
18-2)
 Geographic Structure (see Exhibit 18-2)
– Country-Based Subsidiaries
– New Role of Country Managers: Country
managers of the twenty-first century should
have the following five profiles:
» The trader
» The builder
(contd.)
» The cabinet member
» The ambassador
» The representative
– Regional Structures: A recent survey done in
the Pacific region singles out five distinct roles
for regional headquarters (RHQs):
» Scouting
» Strategic simulation
» Signaling commitment
(contd.)
» Coordination
» Pooling resources
 Matrix Structure (see Exhibit 18-4)
– The matrix structure explicitly recognizes the
multidimensional nature of global strategic
decision making.
– With a matrix organization, two dimensions are
integrated into the organization.

(contd.)
 The Global Network Solution (see Exhibit 18-5)
– The networked global organization is
sometimes also referred to as a transnational.
Example: Asea-Brown Boveri (ABB)
– In the network model, each national unit can be
viewed as a source of ideas, skills, capabilities,
and knowledge that can be harnessed for the
benefit of the total organization.

4. Organizing for Global Brand
Management
 Global Branding Committee
– Usually made up of top-line executives from
headquarters, regional, or local offices.
 Brand Champion
– A brand champion is a top-line executive
(sometimes a CEO).
 Global Brand Manager: For the global brand
manager to be effective, the following conditions
should hold:
– The top of the organization is committed to
branding.
4. Organizing for Global Brand
Management (contd.)
– There is a solid strategic planning process in
place.
– Managers see the need to travel to learn about
local management and best practices.
– There is a system to identify, mentor, and train
prospects who can fill the role.
 Informal, Ad-hoc Branding Meetings

5. Life Cycle of Organization Structures
 Several management theorists have made an

attempt to come up with the “right” fit between
the MNC’s environment (internal and external)
and the organization.
 One of the major popular schemas is the stages
model developed by Stopford & Wells (see
Exhibit 18-6). The schema shows the relationship
between the organizational structure, foreign
product diversity, and the importance of foreign
sales to the company (as a share of total sales).
5. Life Cycle of Organization Structures
(contd.)
 Glocal Mind-Set: Country and regional managers
must look at strategic issues from multiple
perspectives.

 Centralization and Consolidations: In practice,

MNCs are somewhere between these two
extremes (see Exhibit 18-7).
 Transnational Solution: Companies strike a
balance between centralization and
decentralization.
 Federalism: Federalism is a way to combine the
autonomy of the local units with the benefits of
coordination. The model has the following
characteristics:
– Noncentralization
(contd.)
– Negotianalism
– Constitutionalism
– Territoriality
– Balance of Power
– Autonomy

 Formal (“Bureaucratic”) Control Systems
– Establishing Standards (Metrics)
» Behavior and outcome-based
– Evaluating Performance
– Analyzing and Correcting Deviations
 Informal Control Methods
– Corporate Culture:
» Clan cultures & market cultures

(contd.)
– To shape a shared vision, cultural values should
have three properties:
» Clarity
» Continuity
» Consistency
– Human Resource Development
 “Soft” versus “Hard” Levers: There are seven
management tools or levers that companies can
use to resolve the global/local tradeoffs:
(contd.)
– 1. Organizational structure
– 2. Process
– 3. Incentives
– 4. Metrics
– 5. Strategy
– 6. Networks
– 7. Culture

(contd.)
 For a proper structure and strategic coherence, the
following pieces of advice are offered (see Exhibit
18-10 & Summary):
– Recognize the need for business asymmetry
– Democracy is a must.
– A shared vision is important.
– There is a need for a good mix of specialists of
three types – country; functional; and business.
– Moving unit headquarters abroad seldom solves
the organization’s problems.
Chapter 19
Global Marketing and the Internet

Chapter Overview
1. The Internet and the Global Marketplace

2. Structural Barriers to Global E-Commerce
3. Using the Internet for Understanding
Global Buyers
4. Competitive Advantage and Cyberspace
5. Global Internet Consumers
6. Ramifications of the Internet for Global
Marketing Strategies

Introduction
 The Internet has revolutionized the international

business arena and global marketing in particular.
 Roughly speaking, the Internet is a network of
computers interconnected throughout the world
operating on a standard protocol that allows data
to be transmitted.
 Until the early 1990s, the Internet was primarily
the preserve of the military and academic
researchers.

 The Web clearly provides a unique distribution

and communication channel to marketers across
the globe.
 The development of new software and other
technologies during the early 1990s turned the
Internet into a commercial medium that has
transformed businesses worldwide.
 This chapter looks at the impact of the World
Wide Web (WWW) on global marketing activities.

1. The Internet and the Global
Marketplace
 Internet usage worldwide is growing rapidly (see
Exhibit 19-1A & 19-1B).
 The global e-commerce market is expected to
grow to $3.2 trillion in 2004.
 Asia-Pacific
– Asia-Pacific region is quickly catching up in
the Internet.
– Most of the action in the region is business-to-
business.
Marketplace (contd.)
– Online e-commerce revenues are expected to
grow from $76 billion in 2001 to $338.5 billion
by the end of 2004.
– To boost e-commerce and Internet-related
activities, Hong Kong has planned a Cyberport
and Singapore a wired Island.
– Several obstacles hinder the spread of e-
commerce in Asia which include: face-to-face
business instead of via anonymous channels,

relationships and networking, problems of
secrecy and family-owned businesses, and
knowledge barriers.
 Europe
– Consumer spending on e-commerce in Europe
is growing at a very fast pace.
– Small and medium-sized European companies
are finding the Internet a cheap way to broaden
their geographic scope.

– Several challenges to e-commerce in Europe
persist , including: government red tape and
regulations, knowledge barriers, and reluctance
to reveal credit cards numbers.
 Latin America
– Net fever is also spreading in Latin America.
– Latin America’s B2B market is expected to be
worth $9.3 billion by 2005.

– Like other regions, e-commerce faces a number
of obstacles which include: high cost of Internet
access, customs regulations and import duties,
and consumers’ reluctance to release their credit
card numbers.

2. Structural Barriers to Global
E-Commerce
 Language Barriers:
– Much of the content on the Web is in the
English language.
– A recent study found that business users on the
Web are three times more likely to purchase
when the Web site “speaks” their language.
– The demand for Web site localization services
has boosted a new Web-oriented translation
industry.

E-Commerce (contd.)
 Cultural Barriers:
– Cultural norms and traditions can hinder the
spread of the Internet.
– In Confucian-based cultures like most East
Asian nations, business is conducted on a
personal basis.
– In many countries, credit card penetration is
low.
– To become familiar with local markets as well
as local cultures is not possible through the
Internet.
E-Commerce (contd.)
 Infrastructure:
– In many emerging markets, ownership of
personal computers is still very low.
– Slow Internet access remains a major problem
in many countries.
 Knowledge Barriers:
– Setting up an e-business requires certain
knowledge and skills.
– In emerging markets, scarcity of proper talent
and skills will restrain the development of a
digital economy.
E-Commerce (contd.)
 Access Charges:
– In numerous countries, high Internet access
charges may deter users.
– Rates vary a great deal across countries.
 Legal Constraints and Government Regulations:
– Red tape and government regulations stall e-
commerce in dozens of countries.
– E-commerce is global but the laws are mostly
local.

E-Commerce (contd.)
– Fragmented government regulations and laws
affect e-commerce.
– Difference in value-added taxes, currencies,
and culture may pose problems for the
companies.

Global Buyers
 In terms of primary research, the possibilities

created by the Internet are stunning. There are
many measurement tools available which include:
– Online surveys
– Bulletin boards and chat groups
– Web visitor tracking
– Virtual panels
– Focus groups

Global Buyers (contd.)
 Shortcomings of Online research:
– Sample representativeness
– Low Internet access
– Incorrect or out-dated e-mail addresses
– Problems with the Web sites
– Integrity of the respondents
– Problems in identity validation when the same
e-mail address is used by multiple people

4. Competitive Advantage and
Cyberspace
 The Internet offers two major benefits to
companies that use the tool as a gateway to global
marketing:
1. Cost/efficiency savings
2. Accessibility (connectivity)
 The Internet also offers access to customers
around the world.
 The value of some of the pre-Internet sources of
competitive advantage has been deflated.
4. Competitive Advantage and
Cyberspace (contd.)
 Some observers have argued that one of the major
consequences of the Internet is that small and
large firms are on an equal footings now as far as
global competition is concerned.
 Although size-related advantages will probably
lessen, claims that the Internet provides a level
playing field to small and large global players
alike are somewhat overblown.

5. Global Internet Consumers
 The following are some of the emerging issues

and questions facing global marketers:
– To what extent do online customers differ from
offline ones?
– To what degree do Internet buyers differ across
cultures?

6. Ramifications of the Internet for
Global Marketing Strategies
 Globally Integrated Versus Locally Responsive
Web Marketing Strategies (see Exhibit 19-3):
– At the core of any global Web marketing
strategy is the basic conflict between local
responsiveness and global integration.
 One-to-One Marketing
 Product Policy
– Global branding
» Internet-based new products
Global Marketing Strategies (contd.)
 Marketing of Services
– Features of Services:
» Intangibility
» Simultaneity
» Heterogeneity
» Perishability
 Global Pricing
– Cost transparency

 Distribution
– Role of Existing Channels
» Replacement effect/complementary effect
(see Exhibit 19-4)
– E-Tailing Landscape
» Click-and-retailing model
 E-Tailing model depends on three factors:
Consumer behavior, cost structure, and
government policies
 Global Communication and the Web:

– According to Forrester Research, worldwide
advertising on the Internet is expected to grow
to $29 billion by 2006.
– Online advertising techniques include the
following (see Global Perspective 19-4):
» Banners
» Permanent buttons

» Affiliate programs
» Sponsorships
» E-mailing lists
» Rich-media expanding banners
» Interstitials
» Superstitials

– The ultimate success of an online campaign
depends on the following four factors:
» The nature of the product
» The targeting
» Choice of site
» Execution of the ad
– Direct E-Marketing: More and more global
companies recognize the promise of the Web as
a direct marketing tool to build ties with
customers worldwide.

Global Marketing Management Edited

Caricato da

Informazioni sul documento

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

Global Marketing Management Edited

Caricato da

Copyright:

Formati disponibili

Chapter 1

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

• Over the next two decades, the big emerging markets

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

• Country competitiveness is not a fixed thing.

• The role of human skill resources has become

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

• Each country has its own currency through which it

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

• Two kinds of currency floats encompass free/clean float

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

• The European Union (EU) consists of twenty eight

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

High context Japanese

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing

Kotabe & Helsen's Global Marketing