Global Marketing
Sixth Edition
Svend Hollensen
‘All good marketing is local. Global companies know this and are going “glocal”. Svend Hollensen has captured all the latest trends in this new edition of his Global Marketing.’
Philip Kotler, Northwestern University, USA
Global marketinG
iii
Global Marketing
Sixth Edition
Svend Hollensen
PEARSON EDUCATION LIMITED Edinburgh Gate Harlow CM20 2JE United Kingdom Tel: +44 (0)1279 623623 Web: www.pearson.com/uk
First published 1998 by Prentice Hall (print) Second edition published 2001 by Pearson Education Limited (print) Third edition published 2004 (print) Fourth edition published 2007 (print) Fifth edition published 2011 (print) Sixth edition published 2014 (print and electronic)
© Prentice Hall Europe 1998 (print) © Pearson Education Limited 2001, 2011 (print) © Pearson Education Limited 2014 (print and electronic)
The right of Svend Hollensen to be identified as author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988.
The print publication is protected by copyright. Prior to any prohibited reproduction, storage in a retrieval system, distribution or transmission in any form or by any means, electronic, mechanical, recording or otherwise, permission should be obtained from the publisher or, where applicable, a licence permitting restricted copying in the United Kingdom should be obtained from the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS.
The ePublication is protected by copyright and must not be copied, reproduced, transferred, distributed, leased, licensed or publicly performed or used in any way except as specifically permitted in writing by the publishers, as allowed under the terms and conditions under which it was purchased, or as strictly permitted by applicable copyright law. Any unauthorised distribution or use of this text may be a direct infringement of the author’s and the publisher’s rights and those responsible may be liable in law accordingly.
All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners.
The screenshots in this book are reprinted by permission of Microsoft Corporation.
Pearson Education is not responsible for the content of third-party internet sites.
ISBN 978-0-273-77316-0 (print) 978-0-273-77319-1 (PDF) 978-0-273-79440-0 (eText)
British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data A catalog record for this book is available from the Library of Congress
10 9 8 7 6 5 4 3 17 16 15
Print edition typeset in 10/12pt Minion by 35 Printed and bound by L.E.G.O S.p.A, Italy
NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION
brief ContentS
Preface xviii Guided tour xxxii Acknowledgements xxxiv Publisher’s acknowledgements xxxvi Abbreviations xli About the author xlv
Part i THE DECISION WHETHER TO INTERNATIONALIzE 3 1 Global marketing in the firm 5 2 Initiation of internationalization 52 3 Internationalization theories 76 4 Development of the firm’s international competitiveness 100
Part I Case studies 144
Part ii DECIDING WHICH MARKETS TO ENTER 169 5 Global marketing research 173 6 The political and economic environment 208 7 The sociocultural environment 243 8 The international market selection process 270
Part II Case studies 308
Part iii MARKET ENTRY STRATEGIES 325 9 Some approaches to the choice of entry mode 331 10 Export modes 346 11 Intermediate entry modes 368 12 Hierarchical modes 398 13 International sourcing decisions and the role of the subsupplier 419
Part III Case studies 446
Part iV DESIGNING THE GLOBAL MARKETING PROGRAMME 471 14 Product decisions 479 15 Pricing decisions and terms of doing business 534 16 Distribution decisions 570 17 Communication decisions (promotion strategies) 606
Part IV Case studies 650
Part V IMPLEMENTING AND COORDINATING THE GLOBAL MARKETING PROGRAMME 681
18 Cross-cultural sales negotiations 683 19 Organization and control of the global marketing programme 710
Part V Case studies 744
Index 775
This page is intentionally left blank.
ContentS
Preface xviii Guided tour xxxii Acknowledgements xxxiv Publisher’s acknowledgements xxxvi Abbreviations xli About the author xlv
Part I THE DECISION WHETHER TO INTERNATIONALIzE 3
Part I Video case study: Cisco systems 4
1 Global marketing in the firm 5 Learning objectives 5
1.1 Introduction to globalization 6 1.2 The process of developing the global marketing plan 6 1.3 Comparison of the global marketing and management style of SMEs and LSEs 7
Exhibit 1.1 LEGO’s strategic drift 14 Exhibit 1.2 Economies of scale with Nintendo Game Boy 16 Exhibit 1.3 Ford Focus global marketing plan 18
1.4 Should the company internationalize at all? 19 1.5 Development of the ‘global marketing’ concept 20
Exhibit 1.4 Persil Black & Persil Abaya = glocalization (same product, but different packaging and market communication) 23
1.6 Forces for global integration and market responsiveness 24 Exhibit 1.5 McDonald’s is moving towards a higher degree of market
responsiveness 26 1.7 The value chain as a framework for identifying international competitive advantage 27 1.8 Value shop and the ‘service value chain’ 33 1.9 Global experiential marketing 37 1.10 Information business and the virtual value chain 39 1.11 Summary 41
Case studies 1.1 Green Toys, Inc.: a manufacturer of eco-friendly toys is going international 42 1.2 Hunter Boot Ltd: the iconic British brand is moving into exclusive fashion 47 1.3 Video case study: Nivea 49
Questions for discussion 50 References 50
2 Initiation of internationalization 52 Learning objectives 52
2.1 Introduction 53 2.2 Internationalization motives 53
Exhibit 2.1 Jägermeister: the famous herbal liqueur is going global as a result of ‘managerial urge’ in the family-owned company 54
CONTENTSviii
Exhibit 2.2 Global marketing and economies of scale in Japanese firms 57 Exhibit 2.3 Internationalization of Haier – proactive and reactive motives 60
2.3 Triggers of export initiation (change agents) 61 2.4 Internationalization barriers/risks 65
Exhibit 2.4 De-internationalization at British Telecommunications (BT) 67 2.5 Summary 69
Case studies 2.1 LifeStraw: Vestergaard-Frandsen transforms dirty water into clean
drinking water 70 2.2 Elvis Presley Enterprises Inc. (EPE): internationalization of a cult icon 72 2.3 Video case study: TOMS Shoes 73
Questions for discussion 74 References 75
3 Internationalization theories 76 Learning objectives 76
3.1 Introduction 77 3.2 The Uppsala internationalization model 79 3.3 The transaction cost analysis (TCA) model 83 3.4 The network model 86 3.5 Born globals 88
Exhibit 3.1 K-pop – a ‘born global’ phenomenon has worldwide success 88 3.6 Summary 92
Case studies 3.1 zumba: a dance phenomenon is going global 93 3.2 DreamWorks Classics: internationalization of Postman Pat 96 3.3 Video case study: Reebok 97
Questions for discussion 97 References 97
4 Development of the firm’s international competitiveness 100 Learning objectives 100
4.1 Introduction 101 4.2 Analysis of national competitiveness (the Porter diamond) 101 4.3 Competition analysis in an industry 107 4.4 Value chain analysis 111 4.5 The sustainable global value chain 121 4.6 Corporate social responsibility (CSR) 122
Exhibit 4.1 Chiquita – integrating CSR in the resource base 123 4.7 The value net 125
Exhibit 4.2 Value net – cooperation/competition between competitors within each airline alliance. The three alliances are competing against each other 126
4.8 Blue ocean strategy and value innovation 127 Exhibit 4.3 Hotel Formule 1 – value innovation in action 129
4.9 Summary 131 Case studies
4.1 Nintendo Wii: Nintendo’s Wii took first place on the world market – but it didn’t last 132
4.2 Microsoft ‘Surface’ tablet: the software producer is moving into the hardware tablet PC market and challenging Apple 138
4.3 Video case study: Nike 141 Questions for discussion 141 References 142
CONTENTS ix
Part i Case studies
I.1 zara: the Spanish retailer goes to the top of world fashion 144 I.2 Manchester United: still trying to establish a global brand 150 I.3 Adidas: the No. 2 in the global sportswear market is challenging the No. 1, Nike 153 I.4 Cereal Partners Worldwide (CPW): the No. 2 world player is challenging
the No. 1, Kellogg 159
Part ii DECIDING WHICH MARKETS TO ENTER 169
Part ii Video case study: embraer business jets 171
5 Global marketing research 173 Learning objectives 173
5.1 Introduction 174 5.2 The changing role of the international researcher 174 5.3 Linking global marketing research to the decision-making process 175 5.4 Secondary research 177 5.5 Primary research 181
Exhibit 5.1 Market research in India is challenging 190 5.6 Other types of marketing research 193 5.7 Setting up an international marketing information system (MIS) 197 5.8 Marketing research based on Web 2.0 198 5.9 Summary 200
Case studies 5.1 Teepack Spezialmaschinen GmbH: organizing a global survey of
customer satisfaction 200 5.2 LEGO Friends: the world’s third largest toy manufacturer is moving into
the girls’ domain 201 5.3 Video case study: ziba 206
Questions for discussion 206 References 207
6 The political and economic environment 208 Learning objectives 208
6.1 Introduction 209 6.2 The political/legal environment 209
Exhibit 6.1 Huawei Technologies Corporation: the role of home government in the internationalization process 211
6.3 The economic environment 219 6.4 The European economic and monetary union and the euro 226 6.5 BRIC – the new growth markets of the world 228
Exhibit 6.2 ChotuKool – Indian Godrej is creating a disruptive innovation (a low-cost refrigerator) for the BOP market 231
6.6 ‘Bottom of pyramid’ (BOP) as a market opportunity 233 Exhibit 6.3 Vodacom – reaching both BOP customers and BOP entrepreneurs
in Africa 234 Exhibit 6.4 Voltic Cool Pac – distribution of water in Ghana 235
6.7 Summary 236 Case studies
6.1 G-20 and the economic and financial crises: what on earth is globalization about? Massive protests during a meeting in Mexico City, June 2012 238
CONTENTSx
6.2 Sauer-Danfoss: which political/economic factors would affect a manufacturer of hydraulic components? 240
6.3 Video case study: debate on globalization 241 Questions for discussion 241 References 242
7 The sociocultural environment 243
Learning objectives 243 7.1 Introduction 244 7.2 Layers of culture 245
Exhibit 7.1 Electrolux is adapting its vacuum cleaner for the Japanese market 247 7.3 High- and low-context cultures 247 7.4 Elements of culture 249
Exhibit 7.2 In China the Citroën C4 brand name was changed to Citroën c-Quatre 250
Exhibit 7.3 Sensuality and touch culture in Saudi Arabian versus European advertising 252
Exhibit 7.4 Polaroid’s success in Muslim markets 256 7.5 Hofstede’s original work on national cultures (the ‘4 + 1’ dimensions model) 257
Exhibit 7.5 Pocari Sweat – a Japanese soft drink expands sales in Asia 258 7.6 Managing cultural differences 259 7.7 Convergence or divergence of the world’s cultures 260 7.8 The effects of cultural dimensions on ethical decision-making 260
Exhibit 7.6 The quest for beauty opens a huge market for whitening products in Asia 262
7.9 Summary 263 Case studies
7.1 Cirque du Soleil Inc.: the show that revolutionized the circus arts is expanding its global scope 264
7.2 The IKEA catalogue: are there any cultural differences? 266 7.3 Video case study: communicating in the global world 268
Questions for discussion 268 References 269
8 The international market selection process 270
Learning objectives 270 8.1 Introduction 271 8.2 International market selection: SMEs versus LSEs 271 8.3 Building a model for international market selection 272
Exhibit 8.1 Bosch Security Systems: IMS in the Middle East for fire detection systems 285
8.4 Market expansion strategies 289 Exhibit 8.2 Sunquick’s waterfall approach 289 Exhibit 8.3 An example of the ‘trickle-up’ strategy 291 Exhibit 8.4 Bajaj is selecting new international markets ignored by global leaders 295
8.5 The global product/market portfolio 296 8.6 Summary 296
Case studies 8.1 Tata Nano: international market selection with the world’s cheapest car 298 8.2 Philips Lighting: screening markets in the Middle East 303 8.3 Video case study: Hasbro 305
Questions for discussion 306 References 306
CONTENTS xi
Part ii Case studies
II.1 Bajaj Auto: the Indian motorcycle manufacturer internationalizes its business 308 II.2 The Female Health Company (FHC): the female condom is seeking
a foothold in the world market for contraceptive products 311 II.3 Gerolsteiner: a German bottled water manufacturer is trying to increase its
global market share 314 II.4 Porsche: international market selection (IMS) for the exclusive sports car brand 319
Part iii MARKET ENTRY STRATEGIES 325
Part iii Video case study: müller Yogurts 329
9 Some approaches to the choice of entry mode 331 Learning objectives 331
9.1 Introduction 332 9.2 The transaction cost approach 332 9.3 Factors influencing the choice of entry mode 334
Exhibit 9.1 zara is modifying its preferred choice of entry mode, depending on the psychic distance to new markets 338
9.4 Summary 339 Case studies
9.1 Jarlsberg: the king of Norwegian cheeses is deciding on entry modes into new markets 340
9.2 Ansell condoms: is acquisition the right way to gain market shares in the European condom market? 341
9.3 Video case study: understanding entry modes into the Chinese market 345 Questions for discussion 345 References 345
10 Export modes 346 Learning objectives 346
10.1 Introduction 347 10.2 Indirect export modes 349 10.3 Direct export modes 353
Exhibit 10.1 Lofthouse of Fleetwood’s (Fisherman’s Friend) decision criteria when selecting new distributors 356
10.4 Cooperative export modes/export marketing groups 360 10.5 Summary 361
Case studies 10.1 Lysholm Linie Aquavit: international marketing of the Norwegian Aquavit brand 362 10.2 Parle Products: an Indian biscuit manufacturer is seeking agents and
cooperation partners in new export markets 364 10.3 Video case study: Honest Tea 366
Questions for discussion 366 References 367
11 Intermediate entry modes 368 Learning objectives 368
11.1 Introduction 369 11.2 Contract manufacturing 369 11.3 Licensing 371
CONTENTSxii
11.4 Franchising 374 Exhibit 11.1 Build-A-Bear Workshop’s use of the indirect franchising model 375
11.5 Joint ventures/strategic alliances 379 Exhibit 11.2 Safedom: a Chinese condom manufacturer needs a partner with
which to enter the European market 388 11.6 Other intermediate entry modes 389 11.7 Summary 392
Case studies 11.1 Hello Kitty: can the cartoon cat survive the buzz across the world? 392 11.2 Ka-Boo-Ki: licensing in the LEGO brand 395 11.3 Video case study: Marriott 396
Questions for discussion 396 References 397
12 Hierarchical modes 398 Learning objectives 398
12.1 Introduction 399 12.2 Domestic-based sales representatives 400 12.3 Resident sales representatives/foreign sales branch/foreign sales subsidiary 400 12.4 Sales and production subsidiary 402 12.5 Subsidiary growth strategies 403 12.6 Region centres (regional HQ) 404 12.7 Transnational organization 406 12.8 Establishing wholly owned subsidiaries – acquisition or greenfield 407 12.9 Location/relocation of HQ 407 12.10 Foreign divestment: withdrawing from a foreign market 408
Exhibit 12.1 Tesco’s withdrawal from Japan in 2012 after nine years 409 Exhibit 12.2 Wal-Mart’s withdrawal from the German market 411
12.11 Summary 412 Case studies
12.1 Polo Ralph Lauren: Polo moves distribution for South-east Asia in-house 413 12.2 Durex condoms: SSL will sell Durex condoms in the Japanese market
through its own organization 416 12.3 Video case study: Starbucks 417
Questions for discussion 417 References 417
13 International sourcing decisions and the role of the subsupplier 419 Learning objectives 419
13.1 Introduction 420 13.2 Reasons for international sourcing 421 13.3 A typology of subcontracting 423 13.4 Buyer–seller interaction 424 13.5 Development of a relationship 427 13.6 Reverse marketing: from seller to buyer initiative 429 13.7 Internationalization of subcontractors 430
Exhibit 13.1 An example of Japanese network sourcing: the Mazda seat-sourcing case 432
13.8 Project export (turnkey contracts) 433 13.9 Summary 434
Case studies 13.1 ARM: challenging Intel in the world market of computer chips 435 13.2 Bosch Indego: how to build B2B and B2C relationships in a new global
product market – robotic lawnmowers 440
CONTENTS xiii
13.3 Video case study: Eaton Corporation 444 Questions for discussion 444 References 444
Part iii Case studies
III.1 Raleigh bicycles: does the iconic bicycle brand still have a chance on the world market? 446
III.2 IKEA: expanding through franchising to the South American market? 451 III.3 Autoliv airbags: transforming Autoliv into a global company 458 III.4 IMAX Corporation: globalization of the film business 464
Part iV DESIGNING THE GLOBAL MARKETING PROGRAMME 471
Part iV Video case study: tequila avión 478
14 Product decisions 479 Learning objectives 479
14.1 Introduction 480 14.2 The dimensions of the international product offer 480 14.3 Developing international service strategies 480 14.4 The product life cycle 486
Exhibit 14.1 The iOS (Apple)/Android (Google) global contest in the smartphone business 490
14.5 New products for the international market 493 Exhibit 14.2 Product invention – solar-powered portable charging systems
for India 499 14.6 Product positioning 499
Exhibit 14.3 Chinese piano manufacturers are experiencing the ‘country of origin’ (COO) effect 500
Exhibit 14.4 Madame Tussauds – a brand that brings people closer to celebrities on a global basis 501
14.7 Brand equity 502 14.8 Branding decisions 503
Exhibit 14.5 Unilever’s Snuggle fabric softener – an example of local brands in multiple markets 504
Exhibit 14.6 Kellogg under pressure to produce under Aldi’s own label 507 Exhibit 14.7 Shell’s co-branding with Ferrari and LEGO 509 Exhibit 14.8 Roundup – a global brand for multiple markets 510 Exhibit 14.9 Maggi – local brands for multiple markets through acquisitions 511
14.9 Sensory branding 512 Exhibit 14.10 Sensory branding at SIA (Singapore Airlines) 514
14.10 Celebrity branding 515 Exhibit 14.11 Ricola is using celebrity endorsement in the international
marketing of its herbal drops 516 14.11 Implications of the internet for collaboration with customers on
product decisions 519 Exhibit 14.12 Ducati motorcycles – product development through
web communities 520 14.12 ‘Long tail’ strategies 524 14.13 Brand piracy and anti-counterfeiting strategies 525
Exhibit 14.13 The next stage in pirating, faking an entire company – NEC 525
CONTENTSxiv