Daniel W. Baack, Barbara Czarnecka & Donald Baack

International

Marketing

§>SAGE

Los Angeles | London | New Delhi Singapore | Washington DCI Melbourne

DETAILED CONTENTS

List of Tables, Figure and Maps xxiv About the Autbors xxx Preface xxxii Acknowledgements xxxvi Online Resources xxxviii

Part I Essentials of International Marketing 1

1 Introduction to International Marketing 3 Opening Vignette: Lloyd's: A Strong Brand Seeks New Global

Marketing Opportunities 4 Overview 6 The Worldwide Marketplace 7 Types of Global Businesses 8 Company Orientation 8

Ethnocentric Companies 9 Polycentric Companies 10 Regiocentric Companies 10 Geocentric Companies 10 Implications 10

The Essence of Marketing 10 The Marketing Mix 11 Markets, Needs, and Wants 12 Segmentation, Target Markets, and Positioning (STP) 12

Marketing in an International Context 13 The Drivers of Globalization 14 The Factors That Create International Marketing Complexity 16

Culture 16 Language 16 Poliöcal and Legal Factors 16 Economic Systems 17 Infrastructure 17 Implications 18

International Marketing in Daily Life 20 Bathing Products and the Drivers of Globalization 20 Bathing Products and the Factors That Create International Marketing Complexity 22 The International Marketing Context 23

The Organization of This Book 23 Part I: Essentials of International Marketing 24 Part II: International Markets and Market Research 25 Part III: International Product Marketing 26 Part IV: International Pricing and Finance 26 Part V: International Place or Distribution 26 Part VI: International Promotion 26

Sustainability and the Bottom-of-the-Pyramid 27 Sustainability 27 Bottom-of-the-Pyramid 28

X INTERNATIONAL MARKETING

Ethical Decision-Making and International Marketing 28 Strategie Implications 29 Tactical Implications 30 Operational Implications 30 Terms 30 Review Questions 31 Discussion Questions 31 Analytical and Internet Exercises 32 Gase 1. Carrefour: Retailing in an International Marketplace 33

2 Culture in International Marketing 36 Opening Vignette: Home Design, Furniture, and Culture 37 Overview 39 The Many Definitions of Culture 40 Material Culture 40

Dietary Preferences 41 Subjective Culture 42 Origins of Culture 42

History 42 Geography 43

Culture and Values: Hofstede, GLOBE, and Schwartz 44 Applying Cultural Values to Marketing Acüvities 45

Value Levels 47 Time Orientation 48 Three Cultures World 49 Global and Local Cultural Influences 50

Consumer Culture 51 Cultural Distance and Psychic Distance 52 Culture and Behaviors 53

Cultural Imperatives 54 Cultural Electives 54 Cultural Exclusives 54 Subcultures and Countercultures 55 Cultural Change 55

Culture and Purchasing Behavior 57 Aesthetics 58 Religion 58

Ethics, Social Responsibility, and Culture 59 Strategie Implications 60 Tactical Implications 60 Operational Implications 60 Terms 61 Review Questions 61 Discussion Questions 61 Analytical and Internet Exercises 62 Gase 2. KitKat in Japan: Accidental Success in a Foreign Market 63

3 Global Trade and Integration 65 Opening Vignette: Kikkoman Soy Sauce: A Tradition of Trade 66 Overview 67 Free Trade 68

Governmental Forms 68

Absolute Advantage Comparative Advantage The Benefits of Free Trade Governmental Policies Supporting Trade

Integration Levels of Integration Integration Success Factors Integration Trends

The World Trade Organization and Integration Most-Favored-Nation Status Tariff Rates Dispute Resolution The Future

International Marketing in Daily Life Beef Exports and Integration European Integration

The European Union Organization of the European Union Beefs Exports in the European Union Other European Trade Organization Brexit and the European Union

Integration in the Americas North American Free Trade Agreement Southern Cone Common Market Andean Community Other Trade Organization or Agreements

Integration in Asia, Africa, and the Middle East Association of Southeast Asian Nation Free Trade Area Asia-Pacific Economic Cooperation Trans-Pacific Partnership South Asian Association for Regional Cooperation Beef Exports in Asia Integration in the Middle East and Africa

Protectionism vs. Free Trade Government Policies Limiting Trade Arguments for Protectionism The Future

Legal and Ethical Issues Strategie Implications Tactical Implications Operational Implications Terms Review Questions Discussion Question Analytical and Internet Exercises Case 3. DHL and Facilitating Small Business Trade

4 Country Selection and Entry Strategies Opening Vignette: Teens and Jeans: Clothing in Transition Overview Economic Systems

Market Economy

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xii INTERNATIONAL MARKETING

Command Economy 111 Mixed Economy 113

Economic Development 113 Most-, Less-, and Least-Developed Economies 113 Rostow Modernization Model 114 Emerging Markets 115 Newly Industrialized Countries 116 Transition Economies 116 Effects on International Marketing 118 Stage of Development and Bottom-of-the-Pyramid 119

Global Competition and National Competitive Advantage 119 Demand Conditions 120 Related and Supporting Industries 120 Firm Strategy, Structure, and Rivalry 120 Factor Conditions 121 Government 122

Industry-Level Competitive Advantage 122 Threat of New Entrants 123 Threat of Substitute Products 123 Bargaining Power of Suppliers 123 Bargaining Power of Consumers 124 Rivalry among Competitors 124

Economic Forces and International Marketing 125 Sustainability and International Marketing 125 Modes of Entry 127

Exporting 127 Licensing 128 Franchising 129 Joint Ventures 130 Strategie Alliances 130 Wholly Owned Subsidiary 131 Entry Mode Failure and Exit 132

Theories of Entry Mode Selecüon 132 Internationalization Theory 132 Intemalizadon Theory 133 Eclectic or Oll Theory 133 Analysis 134

Strategie Implicadons 134 Tactical Implicadons 135 Operational Implicadons 135 Terms 135 Review Questions 136 Discussion Questions 136 Analydcal and Internet Exercises 137 Case 4. Mobile Communications: Entry into Africa 138

5 International Marketing Flanning, Organizing, and Control 141 Opening Vignette: The Syrian Refugee Crisis Affects Marketing in the EU 142 Overview 143 International Marketing Programs 144

Flanning Levels 145 International Strategie Flanning 146

DETAILED CONTENTS xiii

Mission Statements 146 Environmental Assessments 147 Forecasting Future Events 148 Selection of Strategies 149 Determination of Strategie Goals 150 Allocation of Resources in Pursuit of the Goals 150

International Marketing Tactics 151 Steps Used to Create International Marketing Tactics 151 International Operational Plans 153

Organizing and Organizational Structures 153 Direct Exporting Structure 154 International Division Structure 154 Direct Functional Reporting 155 Strategie Alliance Organizations 155 Region-Based Organization 156 Matrix Organization 157 Internal Factors and Organizational Structure 157 Extemal Factors and Organizational Structure 160

International Marketing Controls 161 Strategie Controls 161 Tactical Controls 161 Operational Controls 162 Strategie Corrections 162 Tactical Corrections 163 Operational Corrections 163

Emerging Trends in International Marketing Flanning and Control 164 Technological Issues 164 Cultural Issues 164 Economic Issues 166 Bottom-of-the-Pyramid 167 Emerging Markets Ascending 168

Strategie Implications 169 Tactical Implications 169 Operational Implications 169 Terms 170 Review Questions 170 Discussion Questions 170 Analytical and Internet Exercises 171 Case 5. Samsung: Overcoming Strategie, Tactical, and

Operational Challenges 172

Part II International Markets and Market Research 175

6 Markets and Segmentation in an International Context 177 Opening Vignette: Musical Segmentation 178 Overview 180 Markets and Segmentation 181

The STP Approach 182 International Market Segmentation 183 International Consumer Market Segments 184

Demographics 184 Psychographics 187

xiv INTERNATIONAL MARKETING

Geographie Area 187 Geodemographic Segmentation 187 Benefit Segmentation 188 Consumer Types 189

Global Consumers and Internet Usage Segmentation 190 Glocal Consumers 191 Local Consumers 191

Green Marketing and Sustainability-Oriented Segments 191 Consumer Preferences 191 Green by Necessity 191

Usage Segmentation 192 International Business-to-Business Market Segmentation 192

Segmentation by Industry 192 Segmentation by Size 193 Geographie Location 193 Product Usage 193 Customer Value 194 Dual Channel Marketing 194

Regional and National Segmentation 195 Wants and Needs 195 Money to Spend 196 Willingness to Spend 196 Language 196 Regionally Based Market Segments 197

Segmentation and the Bottom-of-the-Pyramid 197 Products 198 Pricing 199 Delivery 199 Promotion 199

A Market Segment Analysis 200 Assessing Market Potential 201 Assessment Criteria 201

Ethical Issues in International Segmentation 202 Strategie Implications 202 Tactical Implications 203 Operational Implications 203 Terms 204 Review Questions 204 Discussion Questions 205 Analytical and Internet Exercises 205 Gase 6. UNIQLO: Apparel and Segmentation 206

7 International Positioning 209 Opening Vignette: The Expanding World of Hummus 210 Overview 212 The Nature of International Product Positioning 212 Positioning Statements and Approaches 213

Product Attributes 214 Competitors 214 Use or Application 215 Price-Quality Relationship 215 Product User 215

Product Class Cultural Symbol

International Positioning Objectives Brand Equity Brand Parity

International Product Positioning Challenges Changes in Technology Country-of-Origin Effects Regulations Packaging and Labels

International Positioning Methods Identify Target Markets Analyze the Competition within the Target Market Identity Points of Difference Enhancing Position or Repositioning

Sustainability and International Positioning Ethical Issues in International Positioning Strategie Implications Tactical Implications Operational Implications Terms Review Questions Discussion Questions Analytical and Internet Exercises Gase 7. TOTO: Positioning Plumbing Products Globally

8 Market Research in the International Environment Opening Vignette: Tesco Clubcard Overview International Market Research

Market Choices Product Research Pricing Research Promotion Research Distribution Research

The International Market Research Process Define the Problem or Situation Complete a Cost/Benefit Analysis Develop a Research Design Primary Data Secondary Data Micro-Level Analysis Macro-Level Analysis

International Marketing in Daily Life Methods of Transportation

Qualitative and Quantitative Research Qualitative Methods Quantitative Methods Online Research: A Hybrid Approach

Develop a Sample Collect Data

Big Data

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xvi INTERNATIONAL MARKETING

Analyze and Interpret Data 263 Linguistic Problems 264 Metrie Equivalence Issues 264

Formulating Conclusions and Writing Reports 264 Issues and Challenges in International Market Research 265

Objectivity 265 The Face of Change 265 Reliability and Validity 266 Political Risk 267 Legal Risk \ 267

Ethics and International Market Research 268 Bottom-of-the-Pyramid and International Market Research 268 Strategie Implications 269 Tactical Implications 269 Operational Implications 269 Terms 269 Review Questions 270 Discussion Questions 271 Analytical and Internet Exercises 271 Gase 8. Nestle: Researching the Confectionary Market 272

Part III International Product Marketing 275

9 International Product and Brand Marketing 277 Opening Vignette: A Good Night's Sleep 278 Overview 280 Types of Products 281 Classifications of Goods 282

Convenience Goods 282 International Marketing in Daily Life 282 Candy 282

Shopping Goods 283 Specialty Goods 283

Product Dimensions 284 Packaging 285

International Business Products 288 Raw Materials 288 Maintenance, Repair, and Operating Supplies 288 Component Parts 289 Accessory Equipment 289 Process Materials 289 Installations 289 Distinctions between Business and Consumer Products 289

International Product Quality Standards 290 Quality Standards 290

Bottom-of-the Pyramid International Product Marketing 291 International Services 292

International Product Support Services 295 , The Product Life Cycle 295

Development 296 Introduction 296

DETAILED CONTENTS xvii

Growth 296 Maturity 297 Decline 297

Product Cycle Theory 298 International Product Mix Management 298

Product Lines and Mix 298 Market/Product Matrix 299

Market Penetration 299 Product Development 299 Diversification 300 Market Development 300

International Brand Management 300 Family and Individual Branding 301 Brand and Product Line Extensions 301 Cobranding 301

Building Powerful International Brands 302 Brand Awareness 302 Brand Meaning 302 Brand Loyalty 303 Double Jeopardy 303 Brand Valuation 303

Ethical Issues in International Product Marketing 304 Strategie Implications 304 Tactical Implications 305 Operational Implications 305 Terms 305 Review Questions 306 Discussion Questions 306 Analytical and Internet Exercises 307 Gase 9. Interface: Prize-Winning, Sustainable Modular Flooring 308

10 International Product Standardization and Adaptation 311 Opening Vignette: Costa Coffee Global Expansion: Adaptation

and Differences in Taste 312 Overview 313 Legal Systems 315 International Intellectual Property Protection 316

Intellectual Property Piracy 317 Corporate Spying 317 Reverse-Engineering 318 Country Development 318

International Dispute Resolution 319 Jurisdiction 320 Methods of Dispute Resolution 320 Marketing Implications 322

Standardization 323 The GMS: Global Marketing Strategy 324 Service Standardization 325

Adaptation 326 International Marketing in Daily Life 326 Food Products 326

Laws and Adaptation 327

xviii INTERNATIONAL MARKETING

Adaptation of Services 329 Service Quality 330 Adaptation and Service Quality 331

Music: Legal Systems, Standardization, and Adaptation 331 Legal Adaptation 332

Combining Standardization and Adaptation 334 The Product and Communication Adaptation Model 334

Sustainability and Adaptation 336 Global Innovation 336

Types of Adopters 338 Global Product Diffusion 338

New Product Development and Bottom-of-the-Pyramid 339 Ethical Issues in Standardization and Adaptation 340

Ethics and Laws 340 Strategie Implications 340 Tactical Implications 341 Operational Implications 341 Terms 341 Review Questions 342 Discussion Questions 342 Analytical and Internet Exercises 343 Gase 10. Banana Republic in the UK 344

Part IV International Pricing and Finance 347

11 International Pricing 349 Opening Vignette: Wind Turbines in Finland: Pricing Sustainability

and Economic Incentives 350 Overview 352 The Nature of Price 353

International Prices 354 Price and Perception 354

Value Considerations 355 Emotional Factors 356 Situational Factors 357

International Pricing Methods 357 Cost-Based Pricing 358 Demand-/Supply-Based Pricing 361

International Marketing in Daily Life 362 Calculating Supply and Demand Equilibrium 362

Competition-Based Pricing 364 Competition-Based Price Setting for New Products 365 Profit-Based Pricing 3 66 International Consideration in Pricing Goals 368 Pricing to Bottom-öf-the-Pyramid Consumers 370

International Pricing Discounts 371 Loss Leader 371 Seasonal Discounts • 372 Quantity Discounts " • '•' 372 Early-Payment Discounts ! 373 Channel Discounts «t r 373

Price Changes in International Markets Price Reductions Price Increases Weber s Law

Ethical Issues in International Pricing Collusion Predatory Pricing Deceptive Pricing Dumping

Strategie Implications Tactical Implications Operational Implications Terms Review Questions Discussion Questions Analytical and Internet Exercises Gase 11. Pricing Air Travel

12 International Finance and Pricing Implications Opening Vignette: Pricing ArcelorMitall Steel Globally:

The Effects of Currency Changes Overview Money and Currency

Currency Methods of Payment and Banking

Hard Currency Soft Currency Cryptocurrency

International Finance Capital Markets The Financing of Transactions

The Nature of Currency Exchange Computing Exchange Rates

Factors Affecting Currency Movements Individual and Business Transactions Trade and Investment Activity Trade Deficits Inflation Interest Rates

The Law of One Price and Purchasing Power Parity Purchasing Power Purchasing Power Parity

Governmental Activity and International Finance Currency Regimes

Global Currency Institutions Managing Currency Risk

Predicting Currency Risk Hedging Currency Risk

The Basics of International Finance Funding Financing Ongoing Trade Operations Internal Pricing

International Finance and International Marketing

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INTERNATIONAL MARKETING

Markets Products Prices Place (Distribution) Promotions

Strategie Implications Tactical Implications Operations! Implications Terms Review Questions Discussion Questions Analytical and Internet Exercises Gase 12. Microfinance and Bottom-of-the-Pyramid Consumers

Part V International Place or Distribution

13 International Marketing Channel Management Opening Vignette: Mercedes-Benz: Distributing Luxury Overview International Marketing Channels

Distribution Intensity International Marketing Channel Decisions

The 5 Cs of Channel Selection Types of Distribution Channels

Direct Marketing Indirect Channels Channel Length Standardization of Channel Structure Environmental Factors and Marketing Channel Decisions Existing Channels Future Channels

Managing International Distribution Channels Establishing International Channel Strategies Intermediary Arrangements Gray Markets

International Marketing in Daily Life Managing International Marketing Channel Functions

Research Market Needs Promote Products Order Processing Communicate with Channel Members Warehousing, Inventory Control, and Materials Handling Address Discrepancies of Assortment Secure Paymeht and Extend Credit Transportation Makmg Channel Arrangements and Choosing Channel Partners

Managing Channel Power and Negotiation Processes Managing Channel Power Trust and Commitment in International Marketing Channels Cross-Cultural Negotiation and International Marketing Channels Stages in the Negotiation Process Cultural Influences on Negotiations

DETAILED CONTENTS xxi

Strategie Implications 450 Tactical Implications 450 Operational Implications 450 Terms 450 Review Questions 451 Discussion Questions 451 Analytical and Internet Exercises 452 Gase 13. JDA Software Services 453

14 International Distribution: Exporting and Retailing 455 Opening Vignette: Exporting and the Business-to-Business

Market: Alibaba.com 456 Overview 457 Exporting Choices 458

Internal Motives for Exporting 459 Extemal Explanations for Exporting 461

Market Selecüon 462 Export Entry Modes 463

Home-Based Direct Exporting 463 Foreign-Based Direct Exporting 464

International Marketing in Daily Life 464 Exporting Chopsticks 464

Indirect Exporting 464 Pricing Exports 466 Exporting Documentation 466

Regulations and Documentation 467 Export and Import Licenses 467 Financing 467

Physical Distribution 469 Materials Handling 469 Inventory Location 469 Inventory Control 470 Order Processing 472 Methods of Transportation 472 Sustainability and International Distribution Systems 475 Radio Frequency Identification Development and International Transportation 47 6 International Distribution and the Bottom-of-the-Pyramid 476 Terrorism and International Marketing Channels 477

International Marketing Channels and Utility 477 International Retailing 478 Types of International Retail Outlets 478

Convenience Stores 479 Supermarkets 479 Hypermarkets 479 Open Air Markets and Bazaars 479 Department Stores 479 Discount Stores 480 Specialty Stores 480

Online Purchasing 480 The Future 480

Strategie Implications 480 Tactical Implications 482

xxii INTERNATIONAL MARKETING

Operational Implications 482 Terms 482 Review Questions 482 Discussion Questions 483 Analytical and Internet Exercises 484 Gase 14. Marks and Spencer s International Expansion Problems 485

Part VI International Promotion 487

15 Globally Integrated Marketing Communications 489 Opening Vignette: Advertising Jewelry 490 Overview 492 The Communication Process 493

Individual Interpersonal Communications 494 Barriers to Communication 494 Overcoming Barriers to Communication 498 Communicating Marketing Messages 499

International Advertising Management 500 Establish International Advertising Objectives 500 Create an International Advertising Budget 501 Choose an Advertising Agency 502 Oversee the Advertising Program 503 Media Selection Factors 506 Assess Advertising Effectiveness 506

Standardization or Adaptation 507 International Law and Globally Integrated Marketing Communications 509 Message Design: Types of Appeals 511 International Marketing in Daily Life 512 Culture, Gender and Advertising 512

Cultural Paradoxes 513 International Advertising Appeals 514 Global, Local, and Foreign Consumer Culture Positioning Strategies 517

Advertising Executional Frameworks 518 Traditional Executional Frameworks 520 International Executional Frameworks 521

Alternative Marketing Communications 523 Buzz Marketing 523 Guerrilla Marketing 525 Product Placements and Branded Entertainment 525 Lifestyle Marketing 526

Ethical Issues in International Advertising 527 Strategie Implications 528 Tactical Implications 529 Operational Implications 529 Terms 529 Review Questions 530 Discussion Questions 530 Analytical and Internet Exercises 531 Case 15. Smart Phone Apps: MyBabyBio and MyLifeBio—

Born Global Firms in a Crowded App Market 532

DETAILED CONTENTS xxiii

16 International Sales Promotions and Public Relation* 534 Opening Vignette: Marketing Herbai Remedies 535 Overview 537 International Sales Promotions 538

Push vs. Pull Strategies 538 International Consumer Promotions 539

Coupons 539 Premiums 540 Bonus Packs 541 Contests and Sweepstakes 542 Rebates 542 Price-off Promotions 543 Sampling 543 Social Media and Consumer Promotions 545 Types of Consumers and International Consumer Promotions 545 Consumer Promotions and Bottom-of-the-Pyramid Consumers 546 Additional Issues in Consumer Promotions 547

International Trade Promotions 547 Trade Shows 548 Trade Allowances 549 Cooperative Advertising 551 Trade Contests 551 Training Programs 551 Point-of-Purchase Materials 551 Challenges 552

International Sales Promotions Campaign Management 552 International Public Relations 553

Channel Members 553 Addressing Negative Publicity and Events 554 Positive Publicity and Image-Enhancing Activities 555 Social Media and Public Relations 557 Marketing Implications 557

Strategie Implications 558 Tactical Implications 558 Operational Implications 558 Terms 559 Review Questions 559 Discussion Questions 560 Analytical and Internet Exercises 560 Case 16. Marketing Facial Tissues 561

Notes 563 Bibliography 5-79 Glossary Index 621