2008 global marketing keegan 5e

BRIEF CONTENTS Preface xv Acknowledgments xix About the Authors xxii In Memoriam xxiv Chapter 1 Introduction to Global Marketing 2 Case 1-1 McDonald’s Expands Globally While Adjusting It

Library of Congress Cataloging-in-Publication Data

Keegan, Warren J.

Global marketing/Warren J Keegan, Mark C Green.—5th ed.

p cm.

Includes bibliographical references and index.

ISBN-13: 978-0-13-175434-8 (pbk : alk paper)

1 Export marketing I Green, Mark C II Title.

HF1416.K443 2008 658.8 ⬘4—dc22

2007039742

Editor-in-Chief:David Parker

Product Development Manager:Ashley Santora

Project Manager, Editorial:Melissa Pellerano

Editorial Assistant:Christine Ietto

Assistant Editor, Media:Denise Vaughn

Media Project Manager:Lisa Rinaldi

Marketing Manager:Anne Howard

Marketing Assistant:Susan Osterlitz

Senior Managing Editor:Judy Leale

Project Manager, Production:Kelly Warsak

Manager, Rights & Permissions:Charles Morris

Senior Operations Supervisor:Arnold Vila

Art Director:Steve Firm

Interior Design:Michael Fruhbeis

Cover Design:Steve Firm

Cover Photo Brazil:Antonio Scorza/AFP/

Getty Images

Cover Photo Russia:Alexander Nemenov/AFP/

Getty Images, Inc.

Cover Photo India:Steve Raymer/Corbis

Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on appropriate page within text as well as on pages 613–616.

Copyright © 2008, 2005, 2003, by Warren J Keegan.Published by Pearson Prentice Hall All rights reserved Printed in the United States of America This publication is protected by Copyright and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise For information regarding permission(s), write to: Rights and Permissions Department.

Pearson Prentice Hall ™is a trademark of Pearson Education, Inc.

Pearson ®is a registered trademark of Pearson plc

Prentice Hall ®is a registered trademark of Pearson Education, Inc.

Pearson Education LTD Pearson Education Australia PTY, Limited Pearson Education Singapore, Pte Ltd Pearson Education North Asia Ltd Pearson Education, Canada, Ltd Pearson Educación de Mexico, S.A de C.V Pearson Education–Japan Pearson Education Malaysia, Pte Ltd.

10 9 8 7 6 5 4 3 2 1 ISBN-13: 978-0-13-175434-8 ISBN-10: 0-13-175434-3

Cover Photo China:Linda Whitwam/ Dorling Kindersley

Illustration (Interior):Integra Software Services

Director, Image Resource Center:

Melinda Patelli

Manager, Rights and Permissions:

Zina Arabia

Manager, Visual Research:Beth Brenzel

Manager, Cover Visual Research & Permissions:Karen Sanatar

Image Permission Coordinator:Ang’John Ferreri

Photo Researcher:Teri Stratford

Composition:Integra Software Services

Full-Service Project Management:Jennifer Welsch/BookMasters, Inc.

Printer/Binder:Courier/Kendallville

Cover Printer:Phoenix Color Corp.

Typeface:10/12 Palatino

To Lauren, Tommy, and Jonny

—WJK

To John W Green, Jr and Virginia G Green

—MCG

BRIEF CONTENTS

Preface xv Acknowledgments xix About the Authors xxii

In Memoriam xxiv

Chapter 1 Introduction to Global Marketing 2

Case 1-1 McDonald’s Expands Globally While Adjusting Its

PART 2 THE GLOBAL MARKETING ENVIRONMENT 40

Chapter 2 The Global Economic Environment 40

Chapter 3 The Global Trade Environment 76

Chapter 4 Social and Cultural Environments 110

Case 4-1 Fair Trade Coffee: Ethics, Religion, and Sustainable

Case 4-2 Barbie: Growing Pains as the American Girl Goes Global 143

Chapter 5 The Political, Legal, and Regulatory Environments of Global

Marketing 146

Chapter 6 Global Information Systems and Market Research 184

Case 6-1 Research Helps Whirlpool Act Local in

Chapter 7 Segmentation, Targeting, and Positioning 220

Case 7-1 The Youth of the World Proclaim, “We Want Our

Chapter 8 Importing, Exporting, and Sourcing 258

Case 8-1 Concerns About Factory Safety and Worker Exploitation in

Chapter 9 Global Market Entry Strategies: Licensing, Investment,

and Strategic Alliances 292

PART 4 THE GLOBAL MARKETING MIX 326Chapter 10 Product and Brand Decisions 326

Case 10-1 Now Underway in Your Living Room: The Video Game

Chapter 11 Pricing Decisions 362

Chapter 12 Global Marketing Channels and Physical Distribution 398

Chapter 13 Global Marketing Communications Decisions I: Advertising

and Public Relations 434

Chapter 14 Global Marketing Communications Decisions II: Sales Promotion,

Personal Selling, Special Forms of Marketing Communication 468

Case 14-1 Marketing an Industrial Product in Latin America 500PART 5 STRATEGY AND LEADERSHIP IN THE TWENTY-FIRST

Chapter 15 Strategic Elements of Competitive Advantage 502

Case 15-1 Kodak in the Twenty-First Century: The Search for New

Chapter 16 Leading, Organizing, and Controlling the Global Marketing

Effort 536

Case 16-1 Boeing Versus Airbus: A Battle for the Skies 564

Chapter 17 The Digital Revolution and the Global E-Marketplace 568

Glossary 597 Credits 613 Author/Name Index 617 Subject/Organization Index 627

vi Brief Contents

CONTENTS

Preface xv Acknowledgments xix About the Authors xxii

In Memoriam xxiv

Chapter 1 Introduction to Global Marketing 2

Competitive Advantage, Globalization, and Global Industries 6

Global Marketing: What It Is and What It Isn’t 10

Ethnocentric Orientation 19 Polycentric Orientation 20 Regiocentric Orientation 21 Geocentric Orientation 22

Forces Affecting Global Integration and Global Marketing 24

Multilateral Trade Agreements 24 Converging Market Needs and Wants and the Information Revolution 25 Transportation and Communication Improvements 26 Product Development Costs 26

World Economic Trends 28 Leverage 28

Restraining Forces 30

Chapter 2 The Global Economic Environment 40

Market Capitalism 45 Centrally Planned Socialism 45 Centrally Planned Capitalism and Market Socialism 46

Low-Income Countries 50 Lower-Middle-Income Countries 52 Upper-Middle-Income Countries 52 Marketing Opportunities in LDCs and Developing Countries 53 High-Income Countries 57

The Triad 60 Marketing Implications of the Stages of Development 60

Trade in Merchandise and Services 63

Purchasing Power Parity 66 Economic Exposure 67 Managing Exchange Rate Exposure 67

Chapter 3 Regional Market Characteristics and Preferential

Trade Agreements 76

Free Trade Area 79 Customs Union 7979 Common Market 80 Economic Union 80

Asia-Pacific: The Association of Southeast Asian Nations (ASEAN) 91 Marketing Issues in the Asia-Pacific Region 92

The European Union (EU) 93 The European Free Trade Area (EFTA) and European Economic Area (EEA) 96 Marketing Issues in the EU 96

The Lomé Convention and the Cotonou Agreement 98 Central European Free Trade Association (CEFTA) 98

Cooperation Council for the Arab States of the Gulf 100 Marketing Issues in the Middle East 102

Africa 102

Economic Community of West African States (ECOWAS) 102 East African Cooperation 105

Southern African Development Community (SADC) 105

Chapter 4 Social and Cultural Environments 110

Attitudes, Beliefs, and Values 112 Religion 113

Aesthetics 114 Dietary Preferences 117 Language and Communication 118 Marketing’s Impact on Culture 122

The Self-Reference Criterion and Perception 132

The Adoption Process 134 Characteristics of Innovations 135 Diffusion of Innovations in Pacific Rim Countries 136

Marketing Implications of Social and

viii Contents

Contents ix

Chapter 5 The Political, Legal, and Regulatory Environments

of Global Marketing 146

Nation-States and Sovereignty 147 Political Risk 148

Licensing and Trade Secrets 167 Bribery and Corruption: Legal and Ethical Issues 169

Conflict Resolution, Dispute Settlement, and Litigation 173

Alternatives to Litigation for Dispute Settlement 174

Regional Economic Organizations: The EU Example 176

Chapter 6 Global Information Systems and

Market Research 184

Step 1: Identify the Information Requirement 195 Step 2: Problem Definition 195

Step 3: Choose Unit of Analysis 196 Step 4: Examine Data Availability 196 Step 5: Assess Value of Research 198 Step 6: Research Design 198 Step 7: Analyzing Data 208 Step 8: Presenting the Findings 213

The Marketing Information System as a Strategic Asset 214

Chapter 7 Segmentation, Targeting, and Positioning 220

Demographic Segmentation 224 Psychographic Segmentation 230 Behavior Segmentation 232 Benefit Segmentation 234 Ethnic Segmentation 235

Assessing Market Potential and Choosing Target Markets

Current Segment Size and Growth Potential 238 Potential Competition 239

Feasibility and Compatibility 240

A Framework for Selecting Target Markets 240

Standardized Global Marketing 244

Differentiated Global Marketing 246

Positioning 247

Attribute or Benefit 248 Quality and Price 248 Use or User 248 Competition 249 Global, Foreign, and Local Consumer Culture Positioning 250

Chapter 8 Importing, Exporting, and Sourcing 258

Organizational Export Activities 260National Policies Governing Exports

Government Programs that Support Exports 263 Governmental Actions to Discourage Imports and Block Market Access 265

Customs Duties 272 Other Duties and Import Charges 272

Organizing for Exporting in the Manufacturer’s Country 275

Organizing for Exporting in the Market Country 276

Documentary Credit 277 Documentary Collections (Sight or Time Drafts) 278 Cash in Advance 279

Sales on Open Account 279

Sourcing 280

Management Vision 282 Factor Costs and Conditions 282 Customer Needs 283

Logistics 284 Country Infrastructure 284 Political Factors 284 Foreign Exchange Rates 285

Chapter 9 Global Market Entry Strategies: Licensing, Investment,

and Strategic Alliances 292

Licensing 293

Special Licensing Arrangements 295

Investment 297

Joint Ventures 298 Investment via Ownership or Equity Stake 301

Global Strategic Partnerships 306The Nature of Global Strategic Partnerships 307

Alliances with Asian Competitors 311 CFM International, GE, and SNECMA: A Success Story 312 Boeing and Japan: A Controversy 312

International Partnerships in Developing Countries 314

Cooperative Strategies in Japan: Keiretsu 315

How Keiretsu Affect American Business: Two Examples 317

Cooperative Strategies in South Korea: Chaebol 318

x Contents

Contents xi

Twenty-First Century Cooperative Strategies:

Targeting the Digital Future 319

Beyond Strategic Alliances 319

Chapter 10 Brand and Product Decisions in Global

Marketing 326

Product Types 327 Brands 328 Local Products and Brands 330 International Products and Brands 331 Global Products and Brands 331 Global Brand Development 335 Local Versus Global Products and Brands: A Needs-Based Approach 337

Packaging 342

Labeling 343 Aesthetics 344

How to Choose a Strategy 352

Identifying New-Product Ideas 353 New-Product Development 354 The International New Product Department 355 Testing New Products 356

Chapter 11 Pricing Decisions 362

Global Pricing Objectives and Strategies 364

Market Skimming and Financial Objectives 364 Penetration Pricing and Nonfinancial Objectives 365 Companion Products: “Razors and Blades” Pricing 366 Target Costing 367

Calculating Prices: Cost-Plus Pricing and Export Price Escalation 368 Terms of the Sale 370

Currency Fluctuations 373 Inflationary Environment 376 Government Controls, Subsidies, and Regulations 378 Competitive Behavior 380

Using Sourcing as a Strategic Pricing Tool 380

Global Pricing: Three Policy Alternatives 380

Extension or Ethnocentric 381 Adaptation or Polycentric 381 Geocentric 382

Dumping 385

Compensation Trading 392 Switch Trading 392

Chapter 12 Global Marketing Channels

and Physical Distribution 398

Physical Distribution, Supply Chains, and

Order Processing 423 Inventory Management 423 Warehousing 424

Transportation 424 Logistics Management: A Brief Case Study 428

Chapter 13 Global Marketing Communications Decisions I:

Advertising and Public Relations 434

Global Advertising Content: The “Standardization” Versus

“Adaptation” Debate 438

Art Direction and Art Directors 448 Copy and Copywriters 448

Cultural Considerations 450

Global Advertising Expenditures and Media Vehicles 454

Media Decisions 456

Public Relations and Publicity 457

The Growing Role of PR in Global Marketing Communications 461

How PR Practices Differ Around the World 462

Chapter 14 Global Marketing Communications Decisions II:

Sales Promotion, Personal Selling, and Special Forms of Marketing Communication 468

Sampling 472 Couponing 473 Sales Promotion: Issues and Problems 474

xii Contents

Contents xiii

The Strategic/Consultative Selling Model 478 Sales Force Nationality 483

Special Forms of Marketing Communications:

Direct Marketing, Support Media, Event Sponsorship,

Direct Mail 488 Catalogs 489 Infomercials, Teleshopping, and Interactive Television 491 Support Media 492

Sponsorship 493 Product Placement: Motion Pictures, Television Shows, and Public Figures 495

CENTURY 502

Chapter 15 Strategic Elements of Competitive

Advantage 502

Industry Analysis: Forces Influencing Competition 503

Threat of New Entrants 503 Threat of Substitute Products 505 Bargaining Power of Buyers 505 Bargaining Power of Suppliers 507 Rivalry Among Competitors 507

Generic Strategies for Creating Competitive Advantage 508 The Flagship Firm: The Business Network with Five Partners 512 Creating Competitive Advantage via Strategic Intent 515

Factor Conditions 520 Demand Conditions 521 Related and Supporting Industries 522 Firm Strategy, Structure, and Rivalry 523 Chance 524

Government 525

Hypercompetitive Industries 525 Additional Research on Comparative Advantage 530

Chapter 16 Leadership, Organization, and Corporate Social

Responsibility 536

Leadership 537

Top Management Nationality 538 Leadership and Core Competence 540

Patterns of International Organizational Development 545

Ethics, Corporate Social Responsibility, and Social Responsiveness in the Globalization Era 557

Chapter 17 The Digital Revolution and the Global

Global E-Commerce 576

Broadband 583 Mobile Commerce and Wireless Connectivity 585 Smart Cell Phones 586

Internet Phone Service 588

Glossary 597 Credits 613 Author/Name Index 617 Subject/Organization Index 627

xiv Contents

PREFACE

Global Marketing, Fifth Edition, builds on the worldwide success of the previous

editions of Principles of Global Marketing and Global Marketing Those books took an

environmental and strategic approach by outlining the major dimensions of the

global business environment We also provided a set of conceptual and analytical

tools that would prepare students to successfully apply the four Ps to global

marketing We have approached all five editions with the same goal: to write a

book that is authoritative in content yet relaxed and assured in style and tone The

following student comments suggest that we accomplished our goal: “the textbook

is very clear and easy to understand,” “an excellent textbook with many real-life

examples,” “the authors use simple language and clearly state the important

points,” “this is the best textbook that I am using this term,” “the authors have

done an excellent job of writing a text than can be read easily.” When Principles of

Global Marketing first appeared in 1996, we invited students to “look ahead” to such

developments as the ending of America’s trade embargo with Vietnam, Europe’s

new currency, Daimler-Benz’s Smart car project, and Whirlpool’s expansion into

emerging markets Those topics represented “big stories” in the global marketing

arena and continue to receive press coverage on a regular basis

As was the case with the first four editions, we wrote Global Marketing, Fifth

Edition, with today’s students and instructors in mind Guided by our experience

using the text in undergraduate and graduate classrooms and in corporate

train-ing seminars, we have revised, updated, and expanded Global Markettrain-ing, Fifth

Edition We have benefited tremendously from adopter feedback and input; we

also continue to draw on our direct experience in the Americas, Asia, Europe,

Africa, and the Middle East The result is a text that addresses the needs of

students and instructors in every part of the world Global Marketing has been

adopted at scores of colleges and universities in the United States; international

adoptions of the English-language edition include Australia, Canada, China,

Ireland, Japan, Malaysia, South Korea, and Sri Lanka The text is also available in

Chinese (simplified and traditional), Portuguese, and Spanish editions

WHAT’S NEW

If there is a single unifying theme in the fifth edition, it is the growing impact of

emerging nations on the global scene Brazil, Russia, India, and China—the BRIC

nations—figure prominently in the text A new sidebar feature, “BRIC Briefing

Book,” includes timely information and marketing insights drawn from

practitioner experience in these key markets More broadly, the book examines

emerging markets as a whole; it is safe to say that Indonesia, Mexico, and Turkey

and a handful of other emerging nations are rapidly approaching the “tipping

point” in terms of both competitive vigor and marketing opportunity We can also

expect that global companies such as Embraer (Brazil), Lukoil (Russia), Cemex

(Mexico), Lenovo (China), and India’s Big Three—Wipro, Infosys, and Tata—will

becoming increasingly visible on the global stage That these companies are likely

to stand alongside established global giants such as Coca-Cola, Nestlé, and Toyota

is one measure of how, as Thomas L Friedman has noted, the world has flattened

The fifth edition also includes new material on newsworthy and relevanttopics such as the expanded European Union, the impact of religion on global

marketing activities, and the global music industry’s ongoing efforts to combat

xvi Preface

music piracy Current research findings have been incorporated into each of thechapters For example, Shaoming Zou and S Tamer Cavusgil’s work on global

marketing strategy (from Journal of Marketing, October 2002) is an important

addi-tion to Chapter 1 “Introducaddi-tion to Global Marketing.” Similarly, our thinkingabout global market segmentation and targeting has been influenced by David

Arnold’s recent book, The Mirage of Global Markets We have added scores of

current examples of global marketing practice as well as quotations from globalmarketing practitioners and industry experts Throughout the text, organizationalWeb sites are referenced for further student study and exploration A Companion

Website ( www.prenhall.com/keegan )is integrated with the text as well

Each chapter contains several illustrations, photos, and ads that bring globalmarketing to life Chapter-opening vignettes introduce a company, a country, aproduct, or a global marketing issue that directly relates to chapter themes andcontent More than half the opening vignettes in the fifth edition are new,including: Microsoft’s antitrust woes in Europe (Chapter 5), EU tariffs on shoeimports from China (Chapter 8), Pernod Ricard and Chivas Regal (Chapter 10),and Lenovo (Chapter 14) In addition, every chapter contains one or more side-bars on various themes including global marketing in action, strategic decisions,

a look behind the scenes of global marketing, issues that are “open to sion,” and the cultural differences that challenge the global marketer A newsidebar, “Global Marketing Q&A,” features interview excerpts with top execu-tives of well-known global companies

discus-CASES

The case set in Global Marketing, Fifth Edition, strikes a balance between revisions

of earlier cases (e.g., Case 1-1 “McDonald’s Expands Globally While Adjusting ItsLocal Recipe” and Case 16-1 “Boeing Versus Airbus: A Battle for the Skies”) andentirely new cases (e.g., Case 3-1 “The Free Trade Area of the Americas,” Case 9-1

“Ford Bets Billions on Jaguar,” Case 16-2 “Boeing Versus Airbus: A Battle for theSkies,” and Case 17-1 “eBay in Asia”) The cases vary in length from a few hun-dred words to more than 2,600 words, yet they are all short enough to be covered

in an efficient manner The cases were written with the same objectives in mind: toraise issues that will encourage student interest and learning, to stimulate classdiscussion, and to enhance the classroom experience for students and instructorsalike Every chapter and case has been classroom tested Supplements include aninstructor’s resource manual, a video collection, PowerPoint slides, and a testbank prepared by the authors Special consideration was given to the test bank,with considerable effort devoted to minimizing the number of simplistic, superfi-cial multiple-choice questions with “all of the above”-type answers

SUPPLEMENTS

We’re pleased to offer an Instructor’s Manual, Video, a PowerPoint Set, a Test Item

File, and TestGen to accompany Global Marketing, Fifth Edition.

All these resources can be accessed on our password-protected Instructor’sResource Center online at www.prenhall.com/keegan Many of these resourcesare included on the Instructor’s Resource CD as well, while the Video is available

on DVD One of the challenges facing your author team is the rate of change inthe global business environment Yesterday’s impossibility becomes today’sreality; new companies explode onto the scene; company leadership changesabruptly In short, any book can be quickly outdated by events Even so, we setout to create a compelling narrative that captures the unfolding drama that is

Preface xvii

inherent in marketing in the globalization era The authors are passionate about

the subject of global marketing; if our readers detect a note of enthusiasm in our

writing, then we have been successful We believe that adopters will find Global

Marketing, Fifth Edition, to be the most engaging, up-to-date, relevant, useful

text of its kind

ACKNOWLEDGMENTS

We are grateful to the reviewers of this book for their many insights and helpful

suggestions

Ajay S Sukhdial, Oklahoma State University

Lizzie Ngwenya-Scoburgh, The University of Northwestern Ohio

Concha Neeley, University of North Texas

Jaebeom Suh, Kansas State University

Julie Stanton, Saint Joseph’s University

Paul Callahan, Cincinnati State Technical and Community College

Scott R Davidson, University at Albany

Paul Wellen, Roosevelt University

Barbara Ross Wooldridge, The University of Tampa

Roberto Sanchez, Oregon State University

This book reflects the contributions, labor, and insights of many persons

I would like to thank my students, colleagues, associates, and clients for ing their insights and understanding of global marketing theory and practice It is

shar-impossible to single out everyone who has contributed to this edition, but I would

especially like to thank Stephen Blank, Jean Boddewyn, Lawrence G Bridwell,

Steve Burgess, Arthur Centonze, J Hugh Davidson, Bertrand de Frondeville, John

Dory, Bob Fulmer, Pradeep Gopalakrisna, Doug Jebb, Steve Kobrin, Susan

Douglas, Donald Gibson, Jim Gould, David Heenan, Robert Isaak, Hermawan

Kartajaya, Suren Kaushik, Hermann Kopp, Raymond Lopez, Malcolm McDonald,

Bodo B Schlegelmilch, Barbara Stöttinger, Oleg Smirnoff, John Stopford, Jim

Stoner, Martin Topol, Robert Vambery, , Kathy Winsted, Dominique Xardel,

Michael Szenberg, and Alan Zimmerman

I also wish to acknowledge the many contributions of the students in mydoctoral seminar on global strategic marketing The Pace doctoral students are a

remarkable group of experienced executives who have decided to pursue a

doctoral degree while working full time Michael Friedman, CEO of Purdue

Pharma and a Pace DPS graduate of the class of 2006, has been particularly

supportive and helpful in sharing his experience and insight with me and my

M.B.A and doctoral students while at the same time providing exceptional

leadership to Purdue Pharma

My associates at Keegan & Company, Eli Seggev, Mark Keegan, and AnthonyDonato, are outstanding expert consultants Their collective backgrounds include

doctoral degrees in marketing and law, and a masters degree in public

adminis-tration The cross-fertilization of their training and experience and challenging

client assignments addressing contemporary marketing issues is a continuing

source of new ideas and insights on global strategic marketing

My research assistants, Nitin Singula, Ashish Agarwal, and Kandarp Shah,provided invaluable research assistance in many areas, including the very diffi-

cult task of creating the global income and population data that appears in this

edition My office managers, Gail Pietrangolare Weldon and my secretary Mary

O’Connor at the Pace Graduate Center, Dianna Powell Ward and Nicola

Simpson at the Center for Applied Research at the Pace NYC campus, and Sally

Basso at Keegan & Company have provided support above and beyond the call

of duty

Special thanks are due to the superb librarians at Pace University: MichelleLang, head, Graduate Center Library, and Anne B Campbell, reference librarian,

have a remarkable ability to find anything Like the Canadian Mounties whoalways get their man, Michelle and Anne always get the document My admira-tion for their talent and appreciation for their effort is unbounded.

Elyse Arno Brill, my co-author of Offensive Marketing (Butterworth Heinemann),

has provided invaluable assistance in research, writing, and teaching Her energyand creativity are unbounded I am in awe of her ability to juggle a large and grow-ing family, community service, and a working farm with our joint projects She is anoriginal and creative thinker with an impressive ability to identify important newdirections and insights in marketing

Jeff Shelstad, editor-in-chief, and Katie Stevens, acquisitions editor, ing, at Prentice Hall, were quick to endorse and support this great fifth edition aswas Melissa Pellerano, our project manager David Parker, our new editor-in-chief, has also been very supportive We are grateful for the continuity of thesupport at Prentice Hall

market-Finally, I wish to thank my partner, Dr Cynthia MacKay, who is a constantsource of inspiration, support, and delight, as well as my companion in globalmarket field research trips (many by motorcycle)

Warren J Keegan March 2007

I am indebted to the many colleagues and friends who carefully read and tiqued individual manuscript sections and chapters Their comments improvedthe clarity and readability of the text In particular, I would like to thank HunterClark, Frank Colella, Dave Collins, Wendy Foughty, Mark Freyberg, AlexandreGilfanov, Carl Halgren, Kathy Hill, Mark Juffernbruch, Peter Kvetko, Keith Miller,Gayle Moberg, James Palmieri, and Alexandre Plokhov

cri-Several individuals were instrumental in helping us secure permissions, and Iwant to acknowledge everyone who “went the extra mile” in supporting this revi-sion I would especially like to thank Kirk Edmondson, Lexus Advanced Business

Development; Adam Huening, Greensburg (Ind.) Daily News; Lou Ireland, Pioneer

Hi-Bred International; Daniel McDonnell, Forrester Research; Pat McFadden,

Nucor; Morgan Molinoff, Edelman; Peter VanVaalen, Greensburg (Ind.) Daily News;

and Jeff Wilson, Firestone Agricultural Tire

Colleagues at several institutions contributed material to this revision Theauthors are indebted to Keith Miller, Ellis and Nelle Levitt DistinguishedProfessor of Law at Drake University Law School, for contributing a timely newcase on Internet gambling Thanks also to Alexandra Kennedy-Scott, DavidHenderson, and Michel Phan of the ESSEC Business School for permission toinclude a revised version of “Barbie: Growing Pains as the American Girl GoesGlobal” in this edition’s case set Yong Tae Bang of the College of BusinessAdministration at Paichai University kindly offered feedback and suggestionsthat improved our discussion of South Korea

I would also like to thank the many present and former students at SimpsonCollege and the University of Iowa who have offered feedback on previous edi-

tions of Global Marketing and suggested improvements Simpson alumna Beth

Dorrell graciously offered her expertise on export documentation MikkelJakobsen wrote about his first job in global marketing for a Chapter 8 “Day in theLife” sidebar; Mikkel also provided source material on Denmark for the openingvignette in Chapter 4 Thanks also to Alanah Davis for her work on Case 1-2 “AcerInc.” and to Caleb Hegna for supplying important data about the white goodsmarket in Germany I have relied heavily on Jing Hao (Simpson College) andChao-Hsiang Cheng (University of Iowa) for useful insights about China; theyalso contributed English-to-Chinese and Chinese-to-English translations to thisedition My conversations with Benedikt Schwoll helped shaped the textdiscussion of marketing practices in Germany

xx Acknowledgments

Acknowledgments xxi

It was a great pleasure working with the Prentice Hall team that supervisedproduction of this edition My thanks to Melissa Pellerano and Kelly Warsak

Jennifer Welsch at BookMasters rounded out our virtual team; she deserves much

credit for keeping the production process on track and on schedule Kudos also to

our photo researcher, Teri Stratford, for demonstrating once again that “every

picture tells a story,” and to Melinda Alexander for permissions research on ads and

other illustrations Thanks also to Anne Howard for her great work on marketing

support materials and to the entire PH sales team for helping promote the book in

the field Daniel Wells, the PH sales representative for the Midwest, also gets a

heartfelt “thank you” for his support and encouragement I also want to

acknowl-edge the contributions of Tony L Henthorne at University of Southern Mississippi

for his fine work on the Instructor’s Manual, Jill Solomon at the University of South

Florida for preparing a new set of PowerPoint slides, and Mahmood A Khan at

Virginia Tech for preparing the Test Item File As was the case with previous

editions, administration and faculty colleagues at Simpson College were very

supportive of my research and writing endeavors

Last, but not least, my love and appreciation to Lauren, Tommy, and Jonny forunderstanding and supporting what dad is trying to do during those long hours

he spends in the office

Mark C Green March 2007

Dr Keegan is the author of many books His text, Global Marketing Management,

Seventh Edition (Prentice Hall, 2002), is recognized as the leading global marketing

text for M.B.A courses around the world His other books include Global Marketing, Fourth Edition (Prentice Hall, 2005); Offensive Marketing: An Action Guide to Gaining

the Offensive in Business (with Hugh Davidson) (Elsevier, Butterworth Heinemann,

2004); Marketing Plans That Work, Second Edition (with Malcolm McDonald) (Butterworth-Heinemann, 2002); Marketing, Second Edition, (Prentice Hall, 1995);

Marketing Sans Frontieres (InterEditions, 1994); Advertising Worldwide (Prentice Hall,

1991); and Judgments, Choices and Decisions (Wiley, 1984) He has published in the leading business journals including the Harvard Business Review, Journal of

Marketing, Journal of International Business Studies, Administrative Science Quarterly

and the Columbia Journal of World Business.

He is a former MIT Fellow in Africa where he served as Assistant Secretary,Ministry of Development Planning, and Secretary of the Economic DevelopmentCommission for the Government of Tanzania He was a consultant with BostonConsulting Group and Arthur D Little, and chairman of Douglas A Edwards, aNew York corporate real estate firm

Dr Keegan holds an M.B.A and doctorate from the Harvard Business School

He has been a visiting professor at New York University, INSEAD (France), IMD(Switzerland), the Stockholm School of Economics, Emmanuel College ofCambridge University, and the University of Hawaii He is a former faculty mem-ber of Columbia Business School, Baruch College, and the School of Governmentand Business Administration of The George Washington University

He is a Lifetime Fellow of the Academy of International Business, IndividualEminent Person (IEP) Appointed by Asian Global Business Leaders Society (otherawardees include: Noel Tichy, Rosabeth Moss Kanter, and Gary Wendt) His biog-

raphy is listed in Who’s Who in America (A N Marquis) He is a member of the

International Advisory Board of École des Hautes Études Commerciales (HEC),Montreal; the Editorial Advisory Board, Cranfield School of Management and

Financial Times Management Monograph Series; and is a current or former director

of The S.M Stoller Company, Inc.; The Cooper Companies, Inc (NYSE); Inter-Ad,Inc.; American Thermal Corporation, Inc.; Halfway Houses of Westchester, Inc.;Wainwright House; and The Rye Arts Center

He is an enthusiastic global traveler and enjoys teaching and learning, cycle touring, tennis, reading, theatre, movies, museums, swimming and rowing,loafing and working, home improvements, and life

motor-Dr Mark C Green

Dr Green is Professor of Management and Marketing at Simpson College inIndianola, Iowa, where he teaches courses in management, marketing, advertising,international marketing, and entrepreneurship and innovation He is also a

About the Authors xxiii

Visiting Professor at the University of Iowa’s Tippie College of Business Dr Green

earned his B.A degree in Russian literature from Lawrence University, M.A and

Ph.D degrees in Russian linguistics from Cornell University, and an M.B.A degree

in marketing management from Syracuse University

In addition to co-authoring Global Marketing, Fifth Edition with Warren

Keegan, Dr Green has also contributed case studies and chapter materials to

several other textbooks published by Prentice Hall These include: Advertising

Principles and Practices, Fourth Edition, by William Wells, John Burnett, and Sandra

Moriarty (1997); Behavior in Organizations, Sixth Edition, by Jerald Greenberg and

Robert Baron (1996); Business, Fourth Edition, by Ricky Griffin and Ronald Ebert

(1995); and Principles of Marketing by Warren Keegan, Sandra Moriarty, and Thomas

Duncan (1992) Dr Green has also written essays on technology and global

business that have appeared in the Des Moines Register and other newspapers.

Dr Green has traveled to the former Soviet Union on numerous occasions In

1995 and 1996, he participated in a grant project funded by the U.S Agency for

International Development (USAID) and presented marketing seminars to

audi-ences in Nizhny Novgorod In addition, Dr Green has served as a consultant to

several Iowa organizations that have business and cultural ties with Russia and

other former Soviet republics Dr Green has lectured in Russia and Ukraine on

topics relating to emerging market economies His 1992 monograph, Developing

the Russian Market, received an award from the Iowa-based International Network

on Trade

In 1997, Dr Green was the recipient of Simpson College’s DistinguishedResearch and Writing Award Dr Green also received the 1995 Distinguished

Teaching Award for senior faculty In 1990, he was the recipient of Simpson’s

Excellence in Teaching Award for junior faculty He also received the 1988

Outstanding Faculty of the Year awarded by the Alpha Sigma Lambda adult

student honorary at Simpson College

Dr Green enjoys playing bass and guitar with the Sonny Humbucker Band;

the members include Simpson colleagues David Wolf (associate professor of

English) and Mark Juffernbruch (associate professor of accounting) Rounding out

the lineup are David Kochel, a political consultant with JDK Marketing & Public

Affairs, and Thom Wright, an architect with RDG Planning & Design Dr Green

also manages tenor saxophone jazz great Dave Tofani, who records for the

SoloWinds label

IN MEMORIAM

Since the publication of the fourth edition of Global Marketing, two of the major

contributors to the field of global marketing have died We are in their debt fortheir contributions to the field and to this book

Theodore Levitt(1925–2006) died at the age of 81 and was one of the most ognized and influential marketing thinkers of all time His article “Marketing

rec-Myopia” was one of the most popular Harvard Business Review articles of all time.

In this article, he argued that industries decline because managers think toonarrowly about markets Professor Levitt used the unforgettable example of therailroad industry; it went into decline, he argued, because managers and execu-tives failed to recognize that they were in the transportation business, not in therailroad business

In his 1983 Harvard Business Review article “The Globalization of Markets,”

Professor Levitt argued that the future belonged not to the multinational tion but to the global corporation The difference between the two was the globalcorporation’s deeper understanding of what customers in markets wanted: valueand an organizational ability to deliver that value The article is as relevant today

corpora-as it wcorpora-as the day it wcorpora-as written

Professor Levitt was born in Germany and moved with his family to Ohio toescape the Nazis He was drafted into the U.S Army and served in Europe duringWWII His first job upon returning to the United States after the war was as asports writer He had a doctorate in economics from Ohio State University andbegan teaching at the University of North Dakota After a stint as a consultant, hejoined the Harvard Business School faculty where he was a popular teacher andprolific author

Sumantra Ghoshal(1948–2004) died at the age of 55 He was one of the mostinfluential academics in the field of international business With Professor ChrisBartlett, his mentor at Harvard Business School, he coined the phrase “transnationalcorporation” and developed the important five stage model of development of thetransnational corporation, which distinguishes between the domestic, international,multinational, global, and transnational He, like Ted Levitt, had a sharp mind and anintense and charming style that held the attention of generations of students andexecutives He was appointed the first dean of the Indian School of Business inHyderabad He quit six months before the school opened, explaining that he was notcut out for daily management

Ghoshal was born in Calcutta He graduated in physics at Delhi Universityand joined Indian Oil before moving to the United States on a FulbrightFellowship in 1981 In the United States, he earned doctoral degrees at MIT’sSloan School of Management and at Harvard Business School He was appointed

to INSEAD in France in 1985, becoming a full professor in record time andproducing a stream of influential books and articles on multinational enterprise;

he joined the London Business School in 1994

I had the privilege of knowing both of these great scholars They will bemissed, but their contributions and insights live on in this fifth edition

Warren J Keegan March 2007

Global Marketing

C onsider the following proposition: We live in a global marketplace.

McDonald’s restaurants, Sony digital TVs, LEGO toys, Swatch watches,Burberry trench coats, and Caterpillar earthmoving equipment are found prac-tically everywhere on the planet Global companies are fierce rivals in key markets For example,American auto industry giants General Motors and Ford are locked in a competitive struggle withToyota, Hyundai, and other global Asian rivals as well as European companies such as Volkswagen.U.S.-based Intel, the world’s largest chip maker, competes with South Korea’s Samsung In the globalcell phone market, Nokia (Finland), Ericsson (Sweden), Motorola (United States), and Samsung arekey players Appliances from Whirlpool and Electrolux compete for precious retail space with prod-ucts manufactured and marketed by China’s Haier Group and LG of South Korea

Now consider a second proposition: We live in a world in which markets are local In China, forexample, Yum Brands’ new East Dawning fast-food chain competes with local restaurants such asNew Asia Snack.1France’s domestic film industry generates about 40 percent of local motion picturebox office receipts; U.S.-made movies account for about 50 percent In Turkey, local artists such asSertab Erener account for more than 80 percent of recorded music sales Kiki, a Japanese magazinefor teenage girls, competes for newsstand sales with Vogue Girl, Cosmo Girl, and other titles fromWestern publishers In Germany, children’s television powerhouse Nickelodeon competes with localbroadcaster Super RTL In Brazil, many consumers are partial to Antarctica and other local soft drinkbrands made from guaraná, a berry that grows in the Amazon region

The global marketplace versus local markets paradox lies at the heart of this textbook In laterchapters, we will investigate the nature of local markets in more detail For now, however, we willfocus on the first part of the paradox Think for a moment about brands and products that are foundthroughout the world Ask the average consumer where this global “horn of plenty” comes from, andyou’ll likely hear a variety of answers It’s certainly true that some brands—McDonald’s, CoronaExtra, Swatch, Waterford, Benetton, and Burberry, for instance—are strongly identified with a par-ticular country In much of the world, McDonald’s is the quintessential American fast-food restaurant,just as Burberry is synonymous with British country life However, for many other products, brands,and companies, the sense of identity with a particular country is becoming blurred Which brandsare Japanese? American? Korean? German? Where is Nokia headquartered? When is a Germancar not a German car? Can a car be both German and American? Consider:

• A 2005 American-built Ford Mustang has 65 percent American and Canadian content; a 2005American-built Toyota Sienna XLE minivan has 90 percent American and Canadian content.2

Introduction to Global Marketing

• China’s Nanjing Automobile Group has purchased the rights to the MG, the legendary two-seatBritish sports car Nanjing plans to manufacture MGs in a new factory in Oklahoma.

• German carmaker BMW exports the X5 sport utility vehicle that it builds in Spartanville, SouthCarolina, to more than 100 countries

INTRODUCTION AND OVERVIEW

As the preceding examples illustrate, the global marketplace finds expression in many ways Someare quite subtle, others are not While shopping, you may have noticed more multilanguage label-ing on your favorite products and brands Your local filling station may have changed its name fromGetty to Lukoil, reflecting the Russian energy giant’s expanding global reach Wal-Mart buys about

$10 billion worth of goods from China each year When you shop at your local gourmet coffee store,you may have noticed that some beans are labeled “Fair Trade Certified.” Your toll-free telephonecall to a software technical support service or an airline customer service center may be answered in

Mumbai Quentin Tarantino’s movie Kill Bill was filmed on soundstages in China, and Chinese films such as Hero and House of Flying Daggers have been international hits Possibly you heard or

read recent news accounts of antiglobalization protesters disrupting meetings of the World TradeOrganization in Cancún, London, or some other major city

The growing importance of global marketing is the one aspect of a sweeping transformation thathas profoundly affected the people and industries of many nations during the past 160 years.International trade has existed for centuries; beginning in 200 BC, for example, the legendary Silk Roadconnected the East with the West Even so, prior to 1840, students sitting at their desks would not havehad any item in their possession that was manufactured more than a few miles from where theylived—with the possible exception of the books they were reading From the mid-1800s to the early1920s, with Great Britain the dominant economic power in the world, international trade flourished Aseries of global upheavals, including World War I, the Bolshevik Revolution, and the Great Depression,

England’s Burberry Group celebrated its 150th anniversary in 2006 Burberry’s trademark is registered in more than 90 countries The company’s signature plaid pattern—often referred to as "the check"—is incorporated into a wide range of apparel items and accessories The Burberry brand is enjoying renewed popularity throughout the world; sales in Asia are particularly strong New CEO Angela Ahrendts wants to broaden the brand’s appeal To do this, she intends to introduce two new logos: an equestrian knight and the cursive signature of company founder Thomas Burberry.

brought that era to an end Then, following World War II, a new era began.Unparalleled expansion into global markets by companies that previously servedonly customers located in their home country characterizes this new global era.

Three decades ago, the phrase global marketing did not even exist Today, savvy

businesspeople utilize global marketing for the realization of their companies’ fullcommercial potential That is why, no matter whether you live in Asia, Europe, NorthAmerica, or South America, you may be familiar with the brands mentioned in theopening paragraphs However, there is another, even more critical reason why com-panies need to take global marketing seriously: survival A management team thatfails to understand the importance of global marketing risks losing its domestic busi-ness to competitors with lower costs, more experience, and better products

But what is global marketing? How does it differ from “regular” marketing?

Marketingis an organizational function and a set of processes for creating, cating, and delivering value to customers and for managing customer relationships

communi-in ways that benefit the organization and its stakeholders.3Marketing activities ter on an organization’s efforts to satisfy customer wants and needs with productsand services that offer competitive value The marketing mix (product, price, place,and promotion) comprises a contemporary marketer’s primary tools Marketing is auniversal discipline, as applicable in Argentina as it is in Zimbabwe

cen-This book is about global marketing An organization that engages in global marketingfocuses its resources and competencies on global market opportunities andthreats A fundamental difference between “regular” marketing and “global” market-ing is the scope of activities A company that engages in global marketing conductsimportant business activities outside the home-country market The scope issue can

be conceptualized in terms of the familiar product or market matrix of growth

strate-gies (see Table 1-1) Some companies pursue a market development strategy; this

involves seeking new customers by introducing existing products or services into newgeographical markets For example, as Wal-Mart expands into Guatemala and otherCentral America countries, it is implementing a market development strategy Global

marketing may also take the form of a diversification strategy in which a company

creates new products or services and introduces them into new geographical markets.This is the strategy that South Korea’s LG Electronics has used to target the Americanhome appliance market LG’s product offerings include a stylish, high-tech refrigera-tor priced at $3,000; the unit features a built-in flat-panel LCD television LG’scommitment to innovative products prompted Home Depot to start carrying the LGappliance line.4When successfully formulated and implemented, these globallyoriented growth strategies can result in increased revenues for a company

Companies that engage in global marketing frequently encounter unique orpeculiar features in specific countries or regions of the world In China, for example,product piracy is rampant Companies doing business there must take extra care toprotect their intellectual property and deal with “knockoffs.” In some regions of theworld, bribery and corruption are deeply entrenched A successful global marketerunderstands specific concepts and has a broad and deep understanding of theworld’s varied business environments He or she also must understand the strategiesthat, skillfully implemented in conjunction with universal marketing fundamentals,

4 Part 1 Introduction

3 American Marketing Association.

4 Cheryl Lu-Lien Tan, “The New Asian Import: Your Oven,” The Wall Street Journal, June 22, 2005,

pp D1, D4.

Table 1-1

Product/Market Growth Matrix

Product Orientation Existing Products New Products

Market Orientation Existing markets 1 Market penetration

strategy

2 Product development strategy

New markets 3 Market development

strategy

4 Diversification strategy

Chapter 1 Introduction to Global Marketing 5

increase the likelihood of market success This book concentrates on the major

dimensions of global marketing A brief overview of marketing is presented next,

although the authors assume that the reader has completed an introductory

market-ing course or has equivalent experience

PRINCIPLES OF MARKETING: A REVIEW

As defined in the previous section, marketing is one of the functional areas of a

business, distinct from finance and operations Marketing can also be thought of

as a set of activities and processes that, along with product design, manufacturing,

and transportation logistics, comprise a firm’s value chain Decisions at every

stage, from idea conception to support after the sale, should be assessed in terms

of their ability to create value for customers

For any organization operating anywhere in the world, the essence of marketing

is to surpass the competition at the task of creating perceived value (i.e., a superior

value proposition) for customers The value equation is a guide to this task:

Value = Benefits/Price (money, time, effort, etc.)The marketing mix is integral to the equation because benefits are a combination of

the product, promotion, and distribution As a general rule, value, as the customer

perceives, can be increased in two basic ways Markets can offer customers an

improved bundle of benefits or lower prices (or both) Marketers may strive to

improve the product itself, to design new channels of distribution, to create better

communications strategies, or a combination of all three Marketers may also seek

to increase value by finding ways to cut costs and prices Nonmonetary costs are

also a factor, and marketers may be able to decrease the time and effort that

customers must expend to learn about or seek out the product.5Companies that

use price as a competitive weapon may scour the globe to ensure an ample supply

of low-wage labor or access to cheap raw materials Companies can also reduce

prices if costs are low because of process efficiencies in manufacturing or because

of economies of scale associated with high production volumes

Recall the definition of a market: people or organizations that are both able and

willing to buy In order to achieve market success, a product or brand must measure

up to a threshold of acceptable quality and be consistent with buyer behavior,

expectations, and preferences If a company is able to offer a combination of

supe-rior product, distribution, or promotion benefits and lower prices than the

competi-tion, it should enjoy an extremely advantageous position Toyota, Nissan, and other

Japanese automakers made significant gains in the American market in the 1980s by

creating a superior value proposition: They offered cars with higher quality and

lower prices than those made by General Motors, Ford, and Chrysler

However, some of Japan’s initial auto exports were market failures In thelate 1960s, for example, Subaru of America began importing the Subaru 360 auto-

mobile and selling it for $1,297 After Consumer Reports judged the 360 “not

acceptable,” sales ground to a halt Similarly, the Yugo automobile achieved a

modest level of U.S sales in the 1980s (despite a “don’t buy” rating from a

con-sumer magazine) because its sticker price of $3,999 made it the cheapest new car

available Low quality was the primary reason for the market failure of both the

Subaru 360 and the Yugo.6Wal-Mart’s departure from the German market was

due in part to the fact that Germans could find lower prices at stores known as

“hard discounters.” In addition, many German consumers prefer to go to several

small shops rather than seek out the convenience of a single “all-in-one” store

5 With certain categories of differentiated goods, including designer clothing and other luxury

products, higher price is often associated with increased value.

6 The history of the Subaru 360 is documented in Randall Rothman, Where the Suckers Moon: The Life

and Death of an Advertising Campaign (New York: Vintage Books, 1994), Chapter 4.

6 Part 1 Introduction

Competitive Advantage, Globalization, and Global Industries

When a company succeeds in creating more value for customers than its

competi-tors, that company is said to enjoy competitive advantage in an industry.7Competitive advantage is measured relative to rivals in a given industry Forexample, your local Laundromat is in a local industry; its competitors are local In

a national industry, competitors are national In a global industry—consumer tronics, apparel, automobiles, steel, pharmaceuticals, furniture, and dozens ofother sectors—the competition is, likewise, global (and, in many industries, local

elec-as well) Global marketing is essential if a company competes in a global industry

or one that is globalizing

The transformation of formerly local or national industries into global ones is

part of a broader process of globalization, which Thomas L Friedman defines as

follows:

Globalization is the inexorable integration of markets, nation-states and technologies to

a degree never witnessed before—in a way that is enabling individuals, corporations and nation-states to reach around the world farther, faster, deeper and cheaper than ever before, and in a way that is enabling the world to reach into individuals, corpora- tions and nation-states farther, faster, deeper, and cheaper than ever before 8

From a marketing point of view, globalization presents companies withtantalizing opportunities—and challenges—as executives decide whether or not

to offer their products and services everywhere At the same time, globalizationpresents companies with unprecedented opportunities to reconfigure themselves;

as John Micklethwait and Adrian Wooldridge put it, “the same global bazaar thatallows consumers to buy the best that the world can offer also allows producers tofind the best partners.”9

7 Jay Barney notes that “a firm is said to have a competitive advantage when it is implementing

a value-creating strategy not simultaneously being implemented by any current or potential

competitors.” See Barney, “Firm Resources and Sustained Competitive Advantage,” Journal of Management 17, no 1 (1991), p 102.

8 Thomas L Friedman, The Lexus and the Olive Tree (New York: Anchor Books, 2000), p 9.

9 John Micklethwait and Adrian Wooldridge, A Future Perfect: The Challenge and Hidden Promise of Globalization (New York: Crown Publishers, 2000), p xxvii.

10 Grant Wahl, “Football vs Fútbol,” Sports Illustrated, July 5, 2004, pp 68–72.

National Football League (NFL) Europe and Major League Soccer

(MLS) are dedicated to promoting,

respectively, American football in globally and soccer in the United States The NFL is focusing on a handful of key markets: Canada, Germany, Japan, Mexico, the United

Kingdom, and China Placekicker

Gao Wei hopes to be in the lineup

when the Seattle Seahawks and the

New England Patriots play an exhibition game in Beijing's Workers

Stadium in 2008.

Soccer United Marketing, an MLS

offshoot, has purchased language TV rights for several World

English-Cup championships As MLS’s Don

Garber notes, “In the global culture

the universal language is soccer.

That’s the sweet spot If it weren’t for

the shrinking world caused by globalization, we wouldn’t have the

opportunity we have today.” 10

Chapter 1 Introduction to Global Marketing 7

11 Vijay Govindarajan and Anil Gupta, “Setting a Course for the New Global Landscape,” Financial

Times—Mastering Global Business, part I (1998), p 3.

12 Elizabeth Ashcroft, “Nestlé and the Twenty-First Century,” Harvard Business School Case 9–595–074,

1995 See also Ernest Beck, “Nestlé Feels Little Pressure to Make Big Acquisitions,” The Wall Street

Journal, June 22, 2000, p B4.

13 Betsy McKay, “Coke’s ‘Think Local’ Strategy Has Yet to Prove Itself,” The Wall Street Journal,

March 1, 2001, p B6.

Is there more to a global industry than simply global competition? Definitely

As defined by management guru Michael Porter, a global industry is one in

which competitive advantage can be achieved by integrating and leveraging

oper-ations on a worldwide scale Put another way, an industry is global to the extent

that a company’s industry position in one country is interdependent with its

industry position in other countries Indicators of globalization include the ratio of

cross-border trade to total worldwide production, the ratio of cross-border

invest-ment to total capital investinvest-ment, and the proportion of industry revenue

gener-ated by companies that compete in all key world regions.11Figure 1-1 ranks

sev-eral industries in terms of degree of globalization The figure was created by

calculating the ratio of the annual value of global trade in the sector—including

components shipped to various countries during the production process—to the

annual value of industry sales

Achieving competitive advantage in a global industry requires executives and

managers to maintain a well-defined strategic focus Focus is simply the

concen-tration of attention on a core business or competence The importance of focus for

a global company is evident in the following comment by Helmut Maucher,

former chairman of Nestlé SA:

Nestlé is focused: We are food and beverages We are not running bicycle shops.

Even in food we are not in all fields There are certain areas we do not touch For the

time being we have no biscuits [cookies] in Europe and the United States for

com-petitive reasons, and no margarine We have no soft drinks because I have said we

either buy Coca-Cola or we leave it alone This is focus 12

However, company management may choose to initiate a change in focus aspart of an overall strategy shift Even Coca-Cola has been forced to sharpen its

focus on its core beverage brands Following sluggish sales in 2000 and 2001,

former Chairman and CEO Douglas Daft formed a new alliance with Nestlé that

jointly developed and marketed coffees and teas Daft also tried to transform

Coca-Cola’s Minute Maid unit into a global division that marketed juice brands

worldwide As Daft explained:

We’re a network of brands and businesses You don’t just want to be a total beverage

company Each brand has a different return on investment, is sold differently, drunk

for different reasons, and has different managing structures If you mix them all

together, you lose the focus 13

Figure 1-1

Degree of Industry Globalization

Source: Diana Farrell, “Assessing Your Company’s Global Potential,” Harvard Business Review 82,

no 12 (December 2004), p 85.

8 Part 1 Introduction

Examples abound of corporate executives addressing the issue of focus, often

in response to changes in the global business environment In recent years Fiat,Volvo, Electrolux, Toshiba, Colgate, Royal Philips Electronics, Henkel,Bertelsmann, and many other companies have stepped up efforts to sharpen theirstrategic focus on core businesses Specific actions can take a number of different

In 2006, Honda Motor announced

plans to build a new $550 million

auto assembly plant in the Midwest.

Michigan, Ohio, and other job-hungry states were under consideration as potential sites To

encourage Honda to build the plant

in their town, 200 residents of Greensburg, Indiana posed for this

photo while standing in the shape of

Honda’s “H” logo Jordan Fischer, a

photographer for the Greensburg Daily News, captured this image from

the roof of a nearby building Honda

eventually did choose Greensburg as

the site for its plant, which will produce 200,000 fuel-efficient cars

each year and employ 2,000 people.

Executive Percy Barnevik was legendary in business circles for his charismatic and visionary leadership However, one of his acquisitions, Combustion Engineering, an American producer of power-plant boilers, proved disastrous because of asbestos- related liability claims Although his decentralized management structure helped the company grow, it also resulted in conflict and breakdowns in communication between far-flung manage- ment units Between 1997 and 2003, two chief executives— Göran Lindahl and Jörgen Centerman—came and went in quick succession The company lost nearly $700 million in 2001; also

in 2001, Barnevik, who had remained with the company as a nonexecutive chairman, was forced to resign after a scandal involving pension benefits The following year, losses totaled nearly $800 million ABB’s next chief executive, Jürgen Dormann, sold the finance unit and other non-core assects in an effort to reduce debt; the slimmed-down company’s two core businesses are focused around automation and power technolo- gies Commenting on Barnevik’s legacy, Dormann noted “We had a lack of focus as Percy went on an acquisition spree The company wasn’t disciplined enough.”

Sources: Bruce Orwall, “Universal Script: Vivendi-Seagram Deal Has the Former MCA Playing Familiar Role,” The Wall Street Journal, June 20, 2000, pp A1, A8; John Carreyrou and Martin Peers, “Damage Control: How Messier Kept Cash Crisis at Vivendi Hidden for Months,” The Wall Street Journal, October 31, 2002,

pp A1, A15; Dan Bilefsky and Anita Raghavan, “Blown Fuse: How ‘Europe’s GE’ and Its Star CEO Tumbled to Earth,” The Wall Street Journal, January 23, 2003,

pp A1, A8.

The beginning of the twenty-first century has challenged making top executives at several global companies In 1998, Edgar Bronfman, Jr., the CEO of Montreal-based Seagram Company, paid $1 billion for music giant PolyGram NV and sold Seagram’s Tropicana orange juice unit to PepsiCo.

deal-Bronfman then sold Chivas Regal, several other major spirits brands, and Seagram’s wine business to Diageo PLC and Pernod Ricard SA Collectively, these transactions shifted Seagram’s focus from beverages to entertainment; the combination of PolyGram with Seagram’s MCA record unit created a global music powerhouse In 2000, Bronfman agreed to a $32 billion takeover by France’s Vivendi The resulting company, Vivendi Universal, was tightly focused

in two industry sectors: environmental services and munications The strategic plan for the communications businesses called for distributing Universal’s entertainment content via an Internet portal that PCs, wireless phones, and other electronic devices could access However, Vivendi Universal had taken on too much debt, and Chairman Jean- Marie Messier was forced to resign in 2002 In 2003, the theme park, movie, and television businesses were sold to GE.

com-Today, the company is known simply as Vivendi.

ABB Inc., the Swiss and Swedish electrical and engineering firm that was once comprised of 1,300 companies in 140 coun- tries, is another global giant that has been forced to restructure.

During the 1990s, ABB was frequently cited as a textbook example of a successful transnational company Former Chief

from the global marketplace

LESSONS

Managing Global Growth

Chapter 1 Introduction to Global Marketing 9

“We believe a company can only think inone set of terms If you are premium, youhave to focus on it.”

Helmut Panke, Chairman Bayerische Motoren Werke AG 15

forms besides alliances, including mergers, acquisitions, divestitures, and folding

some businesses into other company divisions.14

Value, competitive advantage, and the focus required to achieve them areuniversal in their relevance and they should guide marketing efforts in any part of

the world Global marketing requires attention to these issues on a worldwide

basis and utilization of an information system capable of monitoring the globe for

opportunities and threats A fundamental premise of this book can be stated as

follows: Companies that understand and engage in global marketing can offer

more overall value to customers than companies that do not have that

under-standing There are many who share this conviction In the mid-1990s, for

example, C Samuel Craig and Susan P Douglas noted:

Globalization is no longer an abstraction but a stark reality Choosing not to

par-ticipate in global markets is no longer an option All firms, regardless of their size,

have to craft strategies in the broader context of world markets to anticipate,

respond, and adapt to the changing configuration of these markets 16

Evidence is mounting that companies in a range of industries are gettingthe message For example, three Italian furniture companies have joined

together to increase sales outside of Italy and ward off increased competition

from Asia Luxury goods purveyors such as LVMH and Prada Group

pro-vided the model for the new business entity, which unites Poltrona Frau,

also globalizing Top managers have been dispersed to different parts of the

world; while the finance and technology functions are still in Hong Kong, the

marketing chief is based in New York City and the head of operations is

in Singapore As company director John Ying noted, “We’re trying to create a

what PC customers needed and wanted; namely, low prices and increased speed Within a few years, however, then-CEO Lou Gerstner succeeded in refocusing the company’s PC business and broadening its scope to higher-margin products such as servers for electronic commerce Gerstner and e-business marketing chief Abby Kohnstamm also leveraged IBM’s reputation for providing expertise-based solutions for its customers; in 2006, global services accounted for 53 percent

of revenues and 37 percent of profits In 2006, IBM became even more tightly focused with the sale of its personal computer business to China’s Lenovo.

14 Robert A Guth, “How Japan’s Toshiba Got Its Focus Back,” The Wall Street Journal, December 12,

2000, p A6.

15 Scott Miller, “BMW Bucks Diversification to Focus on Luxury Models,” The Wall Street Journal,

March 20, 2002, p B4.

16 C Samuel Craig and Susan P Douglas, “Responding to the Challenges of Global Markets:

Change, Complexity, Competition, and Conscience,” Columbia Journal of World Business 31, no 4

(Winter 1996), pp 6–18.

17 Gabriel Kahn, “Three Italian Furniture Makers Hope to Create a Global Luxury Powerhouse,”

The Wall Street Journal, October 31, 2006, p B1.

18 Phred Dvorak, “Big Changes Drive Small Carpet Firm,” The Wall Street Journal, October 30, 2006, p B3.

Single-Country Marketing Strategy Global Marketing Strategy

Target Market Strategy Marketing Mix Development Product

Price Promotion Place

Global Market Participation Marketing Mix Development Product adaptation or standardization Price adaptation or standardization Promotion adaptation or standardization Place adaptation or standardization Concentration of Marketing Activities Coordination of Marketing Activities Integration of Competitive Moves

19 Shaoming Zou and S Tamer Cavusgil, “The GMS: A Broad Conceptualization of Global

Marketing Strategy and Its Effect on Performance,” Journal of Marketing 66, no 4 (October 2002),

marketing approach that has proven successful in one country will not necessarily

succeed in another country Customer preferences, competitors, channels ofdistribution, and communication media may differ An important task in globalmarketing is learning to recognize the extent to which marketing plans and pro-grams can extend worldwide, as well as the extent to which they must adapt

The way a company addresses this task is a reflection of its global marketing

strategy (GMS) Recall that in single country marketing, strategy developmentaddresses two fundamental issues: choosing a target market and developing amarketing mix The same two issues are at the heart of a firm’s GMS, although

they are viewed from a somewhat different perspective (see Table 1-2) Global

market participation is the extent to which a company has operations in major

world markets Standardization versus adaptation is the extent to which each

marketing mix element can be standardized (i.e., executed the same way) oradapted (i.e., executed in different ways) in various country markets GMS hasthree additional dimensions that pertain to marketing management First,

concentration of marketing activities is the extent to which activities related to the

marketing mix (e.g., promotional campaigns or pricing decisions) are performed

in one or a few country locations Coordination of marketing activities refers to the

extent to which marketing activities related to the marketing mix are planned and

executed interdependently around the globe Finally, integration of competitive

moves is the extent to which a firm’s competitive marketing tactics in different

parts of the world are interdependent The GMS should enhance the firm’sperformance on a worldwide basis.19

Some brands are found in virtually every country; Coke is a case in point.Coke is the best-known, strongest brand in the world; its enviable global positionhas resulted in part from the Coca-Cola Company’s willingness and ability to backits flagship brand with a network of local bottlers and a strong local marketingeffort However, companies that engage in global marketing do not necessarilyconduct business in every one of the world’s 200-plus country markets For exam-ple, in the $30 billion market for recorded music, 12 countries—including theUnited States, Japan, the United Kingdom, and France—account for 70 percent of

sales Global marketing does mean widening business horizons to encompass the

world in scanning for opportunities and threats The decision to enter one or moreparticular markets outside the home country depends on a company’s resources,

Chapter 1 Introduction to Global Marketing 11

20 Joanne Lipman, “Ad Fad: Marketers Turn Sour on Global Sales Pitch Harvard Guru Makes,”

The Wall Street Journal, May 12, 1988, p 1.

21 Kenichi Ohmae, The Borderless World: Power and Strategy (New York: Harper Perennial, 1991),

pp 26–27.

22 Nikhil Deogun and Jonathan Karp, “For Coke in India, Thums Up Is the Real Thing,” The Wall

Street Journal, April 29, 1998, pp B1, B2.

23 William C Taylor and Alan M Webber, Going Global: Four Entrepreneurs Map the New World

Marketplace (New York: Penguin Books USA, 1996), pp 48–49.

its managerial mind-set, and the nature of opportunities and threats Today, most

observers agree that Brazil, Russia, India, and China—four emerging markets

known collectively as BRIC—represent significant growth opportunities

Throughout this text, marketing issues and opportunities in these countries are

highlighted in “BRIC Briefing Book” sidebars

The issue of standardization versus adaptation has been at the center of a standing controversy among both academicians and business practitioners Much

long-of the controversy dates back to Prlong-ofessor Theodore Levitt’s 1983 article in the

Harvard Business Review, “The Globalization of Markets.” Levitt argued that

marketers were confronted with a “homogeneous global village.” He advised

orga-nizations to develop standardized, high-quality world products and market them

around the globe by using standardized advertising, pricing, and distribution Some

well-publicized failures by Parker Pen and other companies that tried to follow

Levitt’s advice brought his proposals into question The business press frequently

quoted industry observers who disputed Levitt’s views As Carl Spielvogel,

chair-man and CEO of the Backer Spielvogel Bates Worldwide advertising agency, told

the Wall Street Journal in the late 1980s, “Theodore Levitt’s comment about the world

becoming homogenized is bunk There are about two products that lend themselves

to global marketing—and one of them is Coca-Cola.”20

Global marketing made Coke a worldwide success However, that success

was not based on a total standardization of marketing mix elements For example,

Coca-Cola achieved success in Japan by spending a great deal of time and money

to become an insider; that is, the company built a complete local infrastructure

with its sales force and vending machine operations Coke’s success in Japan is a

function of its ability to achieve “global localization,” being as much of an insider

as a local company but still reaping the benefits that result from world-scale

oper-ations.21Similarly, in India, the company’s local Thums Up cola brand competes

with—and even outsells—the flagship cola.22

What does the phrase global localization really mean? In a nutshell, it means

that a successful global marketer must have the ability to “think globally and act

locally.” As we will see many times in this book, global marketing may include a

combination of standard (e.g., the actual product itself) and nonstandard (e.g.,

dis-tribution or packaging) approaches A global product may be the same product

everywhere and yet different Global marketing requires marketers to behave in

a way that is both global and local at the same time by responding to similarities

and differences in world markets Kenichi Ohmae summed up this paradox as

follows:

The essence of being a global company is to maintain a kind of tension within the

organization without being undone by it Some companies say the new world

requires homogeneous products—“one size fits all”—everywhere Others say the

world requires endless customization—special products for every region The best

global companies understand it’s neither and it’s both They keep the two

perspec-tives in mind simultaneously 23

As the Coca-Cola Company has convincingly demonstrated, the ability tothink globally and act locally can be a source of competitive advantage Because

the company is adept at adapting sales promotion, distribution, and customer

service efforts to local needs, Coke has become a billion-dollar-plus brand in six

12 Part 1 Introduction

HSBC Holdings is the largest banking

firm in the United Kingdom.

The company has more than 1,000 offices in 80 countries, including HSBC USA, HSBC Bank

Canada, and HSBC Bank Middle East HSBC takes pride in being “The

world’s local bank.” The company’s

current marketing campaign extends

that notion by asking the question,

“Isn’t it better to be open to other people’s points of view?” The campaign is integrated with a Web

site, www.yourpointofview.com;

visitors to the site can view all of HSBC’s ads and also write blog- entries on weekly topics of general

20 percent of the Coca-Cola Company’s total worldwide operating revenues.24The Coca-Cola Company supports its Coke, Fanta, and Powerade brandswith marketing mix elements that are both global and local Dozens of othercompanies also have successfully pursued global marketing by creating strongglobal brands This has been accomplished in various ways The Altria Group forexample, made Marlboro the world’s number one cigarette by identifying thebrand with a cowboy By creating distinctive, user-friendly handset designs,Nokia has become the world’s leading cell phone brand In automobiles,Daimler AG’s Mercedes enjoys global recognition thanks to Germany’s reputationfor excellence in automotive engineering Virtually all Nokia phones aremanufactured in Finland; by contrast, some Mercedes models are manufacturedoutside Germany Gillette uses the same packaging for its flagship Mach3 razoreverywhere in the world Italy’s Benetton utilizes a sophisticated distributionsystem to quickly deliver the latest fashions to its worldwide network of stores

Chapter 1 Introduction to Global Marketing 13

Some of Coke’s many faces around the world Although the basic design

of the label is the same (white letters against a red background), the Coca- Cola name is frequently translated into local languages In the left-hand column, the Arabic label (second from top) is read from right to left; the Chinese label’s (fourth from the top) translation is “delicious/happiness.”

25 John A Quelch and Edward J Hoff, “Customizing Global Marketing,” Harvard Business Review 64,

no 3 (May–June 1986), p 59.

26 “Working Time Required to Buy ,” Prices and Earnings, 2006 Edition (UBS), p 11.

The backbone of Caterpillar’s global success is a network of dealers who support

a promise of “24-hour parts and service” anywhere in the world As these

exam-ples indicate, there are many different paths to success in global markets In this

book, we do not propose that global marketing is a knee-jerk attempt to impose a

totally standardized approach to marketing around the world A central issue in

global marketing is how to tailor the global marketing concept to fit particular

products, businesses, and markets.25

As shown in Table 1-3, McDonald’s global marketing strategy is based on acombination of global and local marketing mix elements For example, a vital

element in McDonald’s business model is a restaurant system that can be set up

virtually anywhere in the world McDonald’s offers core menu items—hamburgers,

French fries, and soft drinks—in most countries, and the company also customizes

menu offerings in accordance with local eating customs The average price of a Big

Mac in the United States is $3.10 By contrast, in China, Big Macs sell for the

equiva-lent of $1.31 In absolute terms, Chinese Big Macs are cheaper than American ones

But is it a fair comparison? Real estate costs vary from country to country, as do per

capita incomes McDonald’s prices can be understood in terms of the length of time

a person must work to earn enough money to buy a Big Mac Each year UBS, a

Swiss bank, publishes a study of purchasing power based on a weighted average of

hourly wages across 13 occupations For example, in Los Angeles and Tokyo,

earn-ings from 10 minutes of work can buy a Big Mac; by contrast, in Bogotá and Nairobi,

the corresponding figures are, respectively, 97 minutes and 91 minutes.26

14 Part 1 Introduction

The particular approach to global marketing that a company adopts willdepend on industry conditions and its source or sources of competitive advan-tage For example:

all-American bike Should Harley-Davidson start manufacturing cycles in a low-wage country such as Mexico?

motor-● The success of Honda and Toyota in world markets was initially based onexporting cars from factories in Japan Now, both companies have invested

in manufacturing and assembly facilities in the Americas, Asia, and Europe.From these sites, the automakers supply customers in the local market andalso export to the rest of the world For example, each year Honda exportstens of thousands of Accords and Civics from U.S plants to Japan anddozens of other countries Will European consumers continue to buyHonda vehicles exported from America? Will American consumers con-tinue to snap up American-built Toyotas?

● As of 2007, Gap operated 2,692 stores in the United States and more than

450 stores internationally The company sources most of its clothing fromapparel factories in Honduras, the Philippines, India, and other low-wagecountries Should Gap open more stores in Asia?

The answer to these questions is: It all depends Because Harley’s competitiveadvantage is based in part on its “Made in the USA” positioning, shifting produc-tion outside the United States is not advisable The company has opened a newproduction facility in Kansas and taken a majority stake in Buell Motorcycle, amanufacturer of “American street bikes.” Toyota’s success in the United States ispartly attributable to its ability to transfer world-class manufacturing skills toAmerica while using advertising to stress that American workers build the Camrywith many components purchased from American suppliers As noted, severalhundred Gap stores are located outside the United States; key country marketsinclude Canada, the United Kingdom, Japan, and France Japan may present anopportunity for Gap to increase revenues and profits in a major non-U.S market

A recent annual report noted that, in terms of sales revenues, the apparel marketoutside the United States is twice as large as that within the United States Also,

“American style” is in high demand in Japan and other parts of the world Gap’smanagement team has responded to this situation by selectively targetingkey country markets—especially areas with high population densities—while

Place

Price

Big Mac Brand name

Advertising slogan

“i’m loving it”

Free-standing restaurants

in high-traffic public areas

Average price of a Big Mac

is $3.10 (United States);

same in Turkey

McAloo Tikka potato burger (India) Slang nicknames, for example, Macca’s (Australia), MakDo (Philippines), McDoo” (Germany) McJoy magazine “Hawaii Surfing Hula” promotion (Japan)

McDonald’s Switzerland operates themed dining cars on Swiss national rail system; McDonald’s served on Stena Line ferry from Helsinki to Oslo; home delivery (India)

$5.21 (Switzerland);

$1.31 (China)

Chapter 1 Introduction to Global Marketing 15

continuing to concentrate on trends in the U.S fashion marketplace However,

recent operating difficulties in the core U.S market led to the departure of several

executives; CEO Paul Pressler left Gap early in 2007 after five years at the helm

This situation suggests that management’s top priority at this time should be the

domestic market.27

THE IMPORTANCE OF GLOBAL MARKETING

The largest single market in the world in terms of national income is the United

States representing roughly 25 percent of the total world market for all products

and services U.S companies that wish to achieve maximum growth potential

must “go global” because 70 percent of world market potential is outside their

home country Management at Coca-Cola clearly understands this; it generates

about 75 percent of the company’s operating income and two-thirds of its

operat-ing revenue outside North America Non-U.S companies have an even greater

motivation to seek market opportunities beyond their own borders; their

opportu-nities include the 300 million people in the United States For example, even

though the dollar value of the home market for Japanese companies is the second

largest in the world (after the United States), the market outside Japan is almost 90

percent of the world potential for Japanese companies For European countries,

the picture is even more dramatic Even though Germany is the largest single

country market in Europe, about 94 percent of the world market potential for

German companies is outside Germany

Many companies have recognized the importance of conducting businessactivities outside their home country Industries that were essentially national in

scope only a few years ago are dominated today by a handful of global companies

The rise of the global corporation closely parallels the rise of the national

corporation, which emerged from the local and regional corporation in the 1880s

Gap is a global brand, but recently the company has struggled to connect with customers in the United States Despite its problems, the company continues to expand overseas Gap’s first Asian stores outside of Japan opened recently The Singapore Gap, with 9,000 square feet of floor space, is located in the Wisma Atria mall; the opening of the Singapore store, and another in Malaysia, mark the time the company has used franchising as an expansion strategy Joshua Schulman, Gap’s managing director of international strategic alliances, explained, “As we have a strong following of customers from these markets who shop at Gap while abroad, these markets will be ideal for the Gap brand's franchise debut.”

Source: Courtesy of Monica Almeida/The New York Times.

27 Gap’s transformation into a global brand is chronicled in Nina Munk, “Gap Gets It,” Fortune,

August 3, 1998, pp 68–74+; see also Jayne O’Donnell and Mindy Fetterman, “Can Gap Be Saved?”

USA Today, January 24, 2007, pp 1B, 2B.

16 Part 1 Introduction

and 1890s in the United States The auto industry provides a dramatic example: Inthe early twentieth century, there were thousands of auto companies scatteredaround the globe The United States alone was home to more than 500 automakers.Today, fewer than 20 major companies remain worldwide A dramatic illustration

of the ongoing consolidation in the auto industry is Daimler-Benz’s $36 billiontakeover of Chrysler in 1998 In most industries, the companies that will surviveand prosper in the twenty-first century will be global enterprises Some companiesthat fail to formulate adequate responses to the challenges and opportunities ofglobalization will be absorbed by more dynamic, visionary enterprises Others—ABB, for example—will undergo wrenching transformations and, if the effortsucceeds, will emerge from the process greatly transformed There is a third,grimmer, scenario as well: Some companies will simply disappear Table 1-4 lists

the top 25 of Fortune magazine’s 2006 ranking of the 500 largest service and

manufacturing companies by revenues Market capitalization figures are listed inthe third column

Four of the companies in the top 10 are giants in the global auto industry: GM,Ford, Daimler AG, and Toyota Note too that, measured by market capitalization,Toyota (ranked eighth in revenue) is the world’s most valuable car company.Today, Toyota sells more cars worldwide than Ford; its market capitalization

(roughly $200 billion) is nearly equal to the combined valuations of the eight leading

Western automakers! Clearly, Toyota is doing something right Oil companiesoccupy half of the spots in the top 10 rankings by revenues; ExxonMobil also

ranked first in profitability in the Fortune Global 500 This showing is not

surpris-ing given the recent surge in oil prices Wal-Mart, the world’s top retailer, rounds

discussion

workers against the interests of newly recruited, lower-paid workers Greider warns that deeper political instability lies ahead for the United States, Germany, France, and Britain as workers take up the fight to save their jobs.

In addition, the globalization of industries such as steel, automobiles, and consumer electronics has created surplus production capacity on a massive scale Greider notes that the U.S economy serves as a sort of safety valve for the global system Because the U.S market places relatively few restric- tions on imports, this “benevolent openness” means that the United States serves as a “buyer of last resort” by absorbing much of the world’s excess production As a result of the chronic imbalance in the trading system, the United States continues to post massive trade deficits that defy conventional economic analysis.

What can, or should, be done? Greider argues that based global companies that create jobs overseas at the expense

U.S.-of domestic jobs should not be permitted to finance export deals

by borrowing from tax-supported agencies such as the Import Bank At the same time, Greider says that American public interest would be better served if government policy shifted away from supporting and underwriting the interests of global companies and focused instead on jobs and wages Finally, Greider advocates the use of emergency tariffs to reduce the trade deficit if American policy makers are unable to gain more access in foreign markets to U.S export.

Export-Sources: William Greider, One World, Ready or Not: The Manic Logic of Global Capitalism (Upper Saddle River, NJ: Simon & Schuster, 1997); William Greider,

“Who Governs Globalism?” American Prospect, no 30 (January–February 1997),

pp 73–80.

Are We Ready for One World?

William Greider believes that the globalization of industries and markets will have some unintended, possibly dire, consequences

in the coming years In his book One World, Ready or Not, Greider describes how the logic of commerce and capital in the closing years of the twentieth century created an economic revolution and launched great social transformations As Greider sees it, the message of globalization contains good news and bad news The good news is that modern technology and global marketing are enabling people and nations throughout the world to leap into the modern era The bad news, Greider warns, is that modern technology tends to be more individualistic and antiegalitarian than the mass assembly technology that revolutionized production in the first part of the twentieth century As a result, disregard for basic human rights and the exploitation of the weak in developing nations may result in great social upheavals and, eventually, a breakdown in the global system.

One issue that concerns Greider is the fact that productivity and revenues at many global corporations have risen dramati- cally, while overall worldwide employment has not Meanwhile,

a dispersal of productive wealth is underway as global tions establish operations in key developing countries like Brazil and China Many economists agree that this dispersal will narrow the gap between poor and rich nations Back in the industrialized nations, however, there is an increasing sense of social distress as workers see their plants close and jobs shipped out of the country One by-product of globalization, Greider observes, is that it pits the interests of the older, more prosperous