Global Marketing

Global Marketingarketing

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)

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ISBN 978-0-273-77316-0 (print) 978-0-273-77319-1 (PDF) 978-0-273-79440-0 (eText)

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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

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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

14.14 Summary 526 Case studies

14.1 Danish Klassic: launch of a cream cheese in Saudi Arabia 526 14.2 zippo Manufacturing Company: has product diversification beyond

the lighter gone too far? 530 14.3 Video case study: Swiss Army 531

Questions for discussion 531 References 532

15 Pricing decisions and terms of doing business 534 Learning objectives 534

15.1 Introduction 535 15.2 International pricing strategies compared with domestic pricing strategies 535 15.3 Factors influencing international pricing decisions 535 15.4 International pricing strategies 539

Exhibit 15.1 A ‘market pricing’ (‘mass point’) strategy in use: the Converse brand is making a comeback under Nike ownership 541

Exhibit 15.2 The Gillette price premium strategy 545 Exhibit 15.3 Kodak is following the reverse ‘buy-in/follow-on’

strategy for its printer and cartridge division 546 15.5 Implications of the internet for pricing across borders 555 15.6 Terms of sale and delivery 557 15.7 Terms of payment 558 15.8 Export financing 562 15.9 Summary 564

Case studies 15.1 Harley-Davidson: does the image justify the price level? 565 15.2 Gillette Co.: is price standardization possible for razor blades? 566 15.3 Video case study: Vaseline pricing strategy 567

Questions for discussion 568 References 569

16 Distribution decisions 570 Learning objectives 570

16.1 Introduction 571 16.2 External determinants of channel decisions 572 16.3 The structure of the channel 574

Exhibit 16.1 Burberry: the iconic British luxury brand targets 25 of the world’s wealthier cities 577

16.4 Managing and controlling distribution channels 578 16.5 Managing logistics 583 16.6 Implications of the internet for distribution decisions 588 16.7 Online retail sales 589 16.8 Smartphone marketing 590 16.9 Channel power in international retailing 592

Exhibit 16.2 The ‘banana split’ model 593 16.10 Grey marketing (parallel importing) 596 16.11 Summary 597

Case studies 16.1 De Beers: forward integration into the diamond industry value chain 598 16.2 Tupperware: the global direct distribution model is still working 601 16.3 Video case study: DHL 604

Questions for discussion 604 References 605

CONTENTS xv

17 Communication decisions (promotion strategies) 606 Learning objectives 606

17.1 Introduction 607 17.2 The communication process 607

Exhibit 17.1 Product placement escalates 610 17.3 Communication tools 610

Exhibit 17.2 Husqvarna’s consumer wheel 611 Exhibit 17.3 Baileys Irish Cream liqueur: sales expansion with market and

product development 618 Exhibit 17.4 Ambush marketing strategy – Dutch brewery vs Anheuser

Busch’s Budweiser during the FIFA World Cup 2010 621 17.4 International advertising strategies in practice 625

Exhibit 17.5 Jarlsberg cheese – cross-border communication 629 17.5 Implications of the internet for communication decisions 630 17.6 Social media marketing 631

Exhibit 17.6 Nike strengthens brand loyalty and brand awareness through social media 634

Exhibit 17.7 Amazon’s online communities 635 Exhibit 17.8 Ford initiates a Facebook campaign to engage potential customers 636

17.7 Developing a viral marketing campaign 636 Exhibit 17.9 Chevrolet Dream Garage – a viral marketing campaign 638

17.8 Crowdsourcing 640 Exhibit 17.10 Threadless T-shirt crowdsourcing business 640

17.9 Summary 641 Case studies

17.1 Helly Hansen: sponsoring fashion clothes in the US market 643 17.2 Morgan Motor Company: can the British retro sports car brand still

be successful after 100 years? 644 17.3 Video case study: BMW Motorcycles 647

Questions for discussion 648 References 648

Part iV Case studies IV.1 Absolut Vodka: defending and attacking for a better position in the

global vodka market 650 IV.2 Guinness: how can the iconic Irish beer brand compensate for declining

sales in the home market? 658 IV.3 Dyson Vacuum Cleaner: shifting from domestic to international marketing

with the famous bagless vacuum cleaner 666 IV.4 Triumph Motorcycles Ltd: rising from the ashes in the international

motorcycle business 674

Part V IMPLEMENTING AND COORDINATING THE GLOBAL MARKETING PROGRAMME 681

Part V Video case study: Stella & Dot 682

18 Cross-cultural sales negotiations 683 Learning objectives 683

18.1 Introduction 684 Exhibit 18.1 Google gives a clock as a gift in China 684

CONTENTSxvi

18.2 Cross-cultural negotiations 685 Exhibit 18.2 Euro Disney becomes Disneyland Resort Paris – Disney learns to

adapt to European cultures 694 18.3 Intercultural preparation 695 18.4 Coping with expatriates 697 18.5 Knowledge management and learning across borders 699 18.6 Transnational bribery in cross-cultural negotiations 702 18.7 Summary 703

Case studies 18.1 zamzam Cola: marketing of a ‘Muslim’ cola from Iran to the European market 704 18.2 TOTO: the Japanese toilet manufacturer seeks export opportunities for its

high-tech brands in the US 706 18.3 Video case study: Dunkin’ Donuts 708

Questions for discussion 708 References 708

19 Organization and control of the global marketing programme 710 Learning objectives 710

19.1 Introduction 711 19.2 Organization of global marketing activities 711 19.3 The global account management organization 716