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GLOBAL MARKETING
MANAGEMENT
SECOND E D I T I O N
Masaaki Kotabe
Temple University
Kristiaan Helsen
Hong Kong University of Science and Technology
JOHN WILEY & SONS, INC.
NEW YORK / CHICHESTER
BRISBANE / SINGAPORE /
/ WEINHEIM
TORONTO
CONTENTS
U.S. Position in Foreign Direct
Investment and Trade 46
U.S. Direct Investment Overseas 46
Foreign Direct Investment
in the United States 47
Balance of Payments Position 48
Information Technology and the Changing Nature
of Competition 49
Value of Intellectual Property in Information Age 50
Proliferation of e-commerce and regulations 51
Regional Economic Arrangements 53
Free Trade Area 54
Customs Union 55
Common Market 56
Monetary Union 56
Political Union 56
Multinational Corporations 57
PART ONE: GLOBALIZATION l
l • GLOBALIZATION IMPERATIVE
l
Why Global Marketing is Imperative 2
Globalization of Markets and Competition 6
International Trade versus
International Business 7
Who Manages International Trade? 8
Evolution of Global Marketing 9
What is Marketing? 9
Domestic Marketing 11
-^Export Marketing 13
International Marketing - 14
Multinational Marketing 14
Global Marketing 15
The Impact of Economic Geography
and Climate on Global Marketing 16
The Impact of the Internet
on Global Marketing 17
3 • GLOBAL FINANCIAL ENVIRONMENT
PART TWO: GLOBAL MARKETING
ENVIRONMENT 29
2 • GLOBAL ECONOMIC ENVIRONMENT
29
Intertwined World Economy 30
Foreign Direct Investment 33
Portfolio Investment 34
Country Competitiveness 36
Changing Country Competitiveness 36
Human Resources and Technology 36
Evolution of Cooperative Global
Trade Agreements 38
General Agreements on Tariffs and Trade 38
World Trade Organization 39
Financial Services in WTO/GATT 44
WTO and E-Commerce 45
62
Historical Role of the U.S. Dollar 63
Development of Today's International
Monetary System 64
The Bretton Woods Conference 64
The International Monetary Fund 65
The International Bank for Reconstruction
and Development 67
Fixed Versus Floating Exchange Rates 67
Currency Blocs 68
Foreign Exchange and Foreign Exchange Rates 70
Purchasing Power Parity 70
Forecasting Exchange Rate Fluctuation 70
Coping with Exchange Rate Fluctuations 73
Spot versus Forward Foreign Exchange 74
Exchange Rate Pass-Through 77
Balance of Payments 78
The Internal and External Adjustments 82
The Asian Financial Crisis 85
The Nature of the Asian Financial Crisis 85
XV11
{"1 r-
xviii
•
Contents
The Southeast Asian Countries Scenario 88
The Japan Scenario 88
The Korea Scenario 90
The China Scenario 90
The Asian Financial Crisis in Perspective 91
Responses to the Asian Financial Crisis 91
Consumer Response to the Recession 92
Corporate Response to the Recession 92
Marketing in Euro-Land 96
What is the "Euro"? 96
Historical Background 98
Ramifications of the "Euro" for Marketers 99
4 • GLOBAL CULTURAL ENVIRONMENT
;
105
Defining Culture 107
Elements of Culture 109
Material Life 109
Language 110
Social Interactions 112
Aesthetics 114
Religion 114
Education 118
Value systems 119
Cross-Cultural Comparisons 122
High- versus Low-Context Cultures 122
Polychronic versus Monochronic Cultures 123
Cultural Homogeneity 123
Hofstede's Classification Scheme 123
Adapting to Foreign Cultures 126
Culture and the Marketing Mix 130
Product Policy 130
Pricing 131
Distribution 132
Promotion 132
Organizational Cultures 133
Cross-Cultural Negotiations 135
Stages of Negotiation Process 135
Cross-Cultural Negotiation Strategies 136
5 • POLITICAL AND LEGAL ENVIRONMENT 142
Political Environment—Individual
Governments 143
Home Country versus Host Country 143
Structure of Government 145
Ideology 1.45
Political Parties 146
Government Policies and Regulations 147
Incentives and Government Programs 148
Government Procurement 150
Trade Laws 150
"^Investment Regulations 153
Ownership Controls 153
Financial Controls 154
Macroeconomic Policies 154
Political Environment—Social Pressures
and Political Risk 155
Social Pressures and Special Interests 157
Managing the Political Environment 158
International Agreements 162
G7 (Group of Seven) and G8
(Group of Eight) 163
COCOM (The Coordinating Committee \
for Multilateral Controls) 163
International Law and Local Legal
Environment 164
International Law 165
Local Legal Systems and Laws 165
Business Practices and the Legal System 166
Regulations on E-Commerce 168
Types of Legal Systems 168
Cultural Values and Legal Systems 169
Jurisdiction 169
Planning Ahead 170
Arbitration and Enforcement 170
Issues Transcending National Boundaries 170
ISO 9000 and 14000 170
Intellectual Property Protection 171
Patent 172
Copyright 174
Trademark 174
Trade Secret 174
Paris Convention 175
Berne Convention 176
European Patent Convention 176
Antitrust Laws of the United States 177
U.S. Foreign Corrupt Practices Act of 1977 179
PART THREE: DEVELOPMENT
OF COMPETITIVE MARKETING
STRATEGY 186
6 • GLOBAL MARKETING RESEARCH
186
Research Problem Formulation 188
Secondary Global Marketing Research 189
' Secondary Data Sources 191
Problems with Secondary Data Research 193
Accuracy of Data 193
Age of Data 194
Contents
Reliability over Time 194
Comparability of Data 194
Lumping of Data 195
Primary Global Marketing Research 195
Focus Groups 195
Survey Methods for Cross-Cultural
Marketing Research 196
Questionnaire Design 197
Sampling 198
Contact Method 200
Collecting the Information 201
Market Size Assessment 202
Analogy Method 203
Trade Audit 204
Chain Ratio Method 205
Cross-Sectional Regression Analysis 206
New Market Information Technologies 208
Point-of-Sale (POS) Store Scanner Data 208
Consumer Panel Data 208
Single-Source Data 209
Managing Global Marketing Research 211
Selecting a Research Agency 211
Coordination of Multi-Country Research 214
;
/
7 • GLOBAL SEGMENTATION AND
POSITIONING 2 1 8
Reasons for International
Market Segmentation 219
Country Screening 220
Global Market Research 220
Entry Decisions 221
Positioning Strategy 221
Marketing Mix Policy 221
International Market Segmentation
Approaches 223
Segmentation Scenarios 225
Bases for Country Segmentation 227
Demographics 228
Socioeconomic Variables 230
Monetization of Transactions
within a Country 230
Gray and Black sectors of the economy 231
Income Disparities 231
Behavior-Based Segmentation 231
Lifestyle 233
International Positioning Strategies 235
Uniform versus Localized
Positioning Strategies 236
Universal Positioning Appeals 238
Global, Foreign, and Local Consumer
Culture Positioning 240
8 • GLOBAL MARKETING STRATEGIES
xix
247
Information Technology and
Global Competition 248
Electronic Commerce (E-Commerce) 248
Real-Time Management 249
On Line Communication 250
"Internet" Organization 250
Faster Product Diffusion 251
Global Citizenship 251
Global Strategy 252
Global Industry 252
Competitive Structure 253
Hypercompetition 258
Cost and Quality 259
Timing and Know-how 259
Strongholds 260
Financial Resources 260
Interdependency 263
Global Marketing Strategy 263
Benefits of Global Marketing 265
Cost Reduction 265
Improved Products and Program
Effectiveness 265
Enhanced Customer Preference 267
Increased Competitive Advantage 267
Limits to Global Marketing 268
Regionalization of Global Marketing Strategy 269
Cross-Subsidization of Markets 273
Identification of Weak Market Segments 273
Use of "Lead Market" Concept 274
Marketing Strategies for Emerging Markets 275
Competitive Analysis 277
9 • GLOBAL MARKET ENTRY
STRATEGIES 2 8 1
Target Market Selection 282
Choosing the Mode of Entry 285
Decision Criteria for Mode of Entry 285
Market Size and Growth 286
Risk 286
Government Regulations 287
Competitive Environment 287
Local Infrastructure 287
Company Objectives 288
Need for Control 289
Internal Resources, Assets
and Capabilities 289
Flexibility 289
Mode-of-Entry Choice: A Transaction
Cost Explanation 289
IIHHltllll
xx • Contents
Exporting 290
Indirect Exporting 291
Cooperative Exporting 291
Direct Exporting 292
Licensing 292
Benefits 292
Caveats 293
Franchising 294
Benefits 295
Caveats 296
Contract Manufacturing 297
Benefits 297
Caveats 297
Joint Ventures 298
Benefits 299
Caveats 299
Drivers Behind Successful
International Joint Ventures 300
Pick the Right Partner 300
Establish Clear Objectives from the Beginning
301
Bridge Cultural Gaps 301
Gain Top Managerial Commitment and
Respect 301
Use Incremental Approach 301
Wholly Owned Subsidiaries 302
Benefits 302
Caveats 303
Acquisitions and Mergers 304
Greenfield Operations 305
Strategic Alliances 305
Types of Strategic Alliances 306
The Logic behind Strategic Alliances 306
Cross-Border Alliances that Succeed 307
10 • GLOBAL SOURCING STRATEGY:
R&D, MANUFACTURING, AND
MARKETING INTERFACES 313
Extent and Complexity of Global Sourcing
Strategy 315
Trends in Global Sourcing Strategy 318
Trend 1: The Decline of Exchange Rate
Determinism of Sourcing 319
Trend 2: New Competitive Environment
Caused by Excess Worldwide Capacity 320
Trend 3: Innovations in and Restructuring
of International Trade Infrastructure 320
Trend 4: Enhanced Role of
Purchasing Managers 321
Trend 5: Trend Toward Global
Manufacturing 322
Value Chain and Functional Interfaces 322
>'R & D/Manufacturing Interface 325
Manufacturing/Marketing Interface 328
Core Components Standardization 328
Product Design Families 328
Universal Product with All Features 329
Universal Product with Different
Positioning 329
Marketing/R & D Interface 330
Procurement: Types of Sourcing Strategy 331
Intra-Firm Sourcing 332
Outsourcing 333
Costs and Consequences of Global Sourcing 334
Need for Coordination 334
Functional Mismatch 336
Sustainable Core Competence vs.
Transitory Core Competence 338
Strategic Alliances 338
Dependence 339
Gradual Loss of Design and
Manufacturing Abilities 340
Outsourcing of Service Activities 340
PART FOUR: GLOBAL MARKETING
STRATEGY DEVELOPMENT 346
ll • GLOBAL PRODUCT POLICY DECISIONS L.
DEVELOPING NEW PRODUCTS FOR
GLOBAL MARKETS 346
Global Product Strategies 347
Strategic Option 1: Product and Communication
Extension - Dual Extension 348
Strategic Option 2: Product Extension Communications Adaptation 350
Strategic Option 3: Product Adaptation Communications Extension 350
Strategic Option 4: Product
and Communications Adaptation - Dual
Adaptation 350
Strategic Option 5: Product Invention 351
Standardization Versus Customization 351
Common Customer Needs 352
Global Customers 354
Scale Economics 354
Time to Market 355
Regional Market Agreements 355
Modular Approach 355
Core-Product (Platform) Approach 355
Multinational Diffusion 357
Developing New Products for
Global Markets 359
Contents
Identifying New Product Ideas 360
Screening 361
Concept Testing 363
To standardize or not to standardize 364
Test Marketing 367
Timing of Entry: Waterfall versus
Sprinkler Strategies 368
Global New Product Development
and Culture' 370
12 • GLOBAL PRODUCT POLICY
DECISIONS I: MARKETING
PRODUCTS AND SERVICES 376
Global Branding Strategies 377
Global Brands 378
Local Branding 382
Global or Local Brands? 383
Brand Name Changeover Strategies 386
Private Label Branding ("Store Brands") 389
Umbrella (Corporate) Branding 391
Protecting Brand Names 392
Managing Multinational Product Lines 394
f Customer Preferences 397
Price Spectrum 397
Competitive Climate 397
Organizational Structure 398
History 398
Product Piracy 400
Strategic Options Against Product Piracy 401
Lobbying Activities 401
LegalAction 401
Customs 401
Product Policy Options 401
Communication Options 402
Country of Origin Stereotypes 402
Country-of-Origin (COO) Influences
on Consumers 402
Strategies to Cope with COO-Stereotypes 404
Product Policy 405
Pricing 405
Distribution 405
Communication 405
Global Marketing of Services 406
Challenges in Marketing Services
Internationally 406
Protectionism 406
Immediate Face-to-Face Contacts
with Service Transactions 407
Difficulties in Measuring Customer
Satisfaction Overseas 407
I
Opportunities in the Global
Service Industries 407
Deregulation of Service Industries 407
Increasing Demand for Premium Services 408
Increased Value Consciousness 409
Global Service Marketing Strategies 409
Capitalize on Cultural Forces
in the Host Market 409
Standardize and Customize 409
Central Role of Information Technologies 410
Add Value by Differentiation 410
Establish Global Service Networks 410
13 • GLOBAL PRICING
414
Drivers of Foreign Market Pricing 415
Company Goals 415
Company Costs 416
Customer Demand 417
Competition 418
Distribution Channels 419
Government Policies 420
Managing Price Escalation 420
Pricing in Inflationary Environments 422
Global Pricing and Currency Movements 424
Currency Gain/Loss Pass Through 424
Currency Quotation 428
Transfer Pricing 428
Determinants of Transfer Prices 428
Setting Transfer Prices 430
Minimizing the Risk of Transfer
Pricing Tax Audits 431
Global Pricing and Anti-Dumping Regulation 431
Price Coordination 433
Aligning Pan-Regional Prices 435
Implementing Price Coordination 437
Pricing Policies and the Euro 437
Harmonization of Prices 438
Dual Pricing 438
Transfer Pricing 438
Price Points 439
Countertrade 440
Forms of Countertrade 440
Motives Behind Countertrade 442
Shortcomings of Countertrade 443
14 • COMMUNICATING WITH THE
WORLD CUSTOMER 447
Global Advertising and Culture 448
Language Barriers 448
Other Cultural Barriers 450
xxiv •
Contents
Structural Barriers to Global E-Commerce 611
Language Barriers 611
Cultural Barriers 611
Personal Computers Ownership 613
Knowledge Barrier 614
Access Charges 614
Legal Constraints and Government
/ Regulations 615
Using the Internet for Understanding
Global Buyers 616
Competitive Advantage and Cyberspace 617
Ramifications of the Internet for Global
Marketing Strategies 618
One-to-One Marketing 618
Product Policy 619
Global Branding 619
Internet-Based New Products 619
Marketing of Services 619
Global Pricing 620
Distribution 622
Role of Existing Channels 622
Retailing Landscape 624
Global Promotion and the Web 625
CASES
631
Club Med
Starbucks
Dowbrands Ziploc
Nova Incorporated
Shiseido, Ltd.: Facing Global Competition
Texas Instruments
SMS Pacs
Sanex
Anheuser Busch International
AOL Goes Far East
WEB RESOURCES WWW.WILEY.
COM/COLLEGE/KOTABE
Online Cases
Gap, Inc.
Daimler-Benz Ag: The A-Class and the
"Moose-Test"
Baxter International
Pepsi One
Unisys
Ford Motor Company and Die Development
Citibank in Japan
Kao Corporation: Direction for the
21st Century
Planet Hollywood: The Plate is Empty
Hoechst Marion Roussel: Rabipur
Rabies Vaccine
Ceras Deserticas and Mitsuba Trading Company
Wal-Mart Operations in Brazil
Docomo's Quest to Go Global
SUBJECT INDEX
AUTHOR INDEX
COMPANY INDEX
PHOTO CREDITS
