Essentials of global marketing svend hollensen

Part I THE DECISION TO INTERNATIONALIZE 1Part I Video case study 21 Global marketing in the firm 42 Initiation of internationalization 343 Internationalization theories 534 Development of the firm’s international competitiveness 71Part I Case studies 103Part II DECIDING WHICH MARKETS TO ENTER 113Part II Video case study 1145 The political and economic environment 1166 The sociocultural environment 1397 The international market selection process 161Part II Case studies 186Part III MARKET ENTRY STRATEGIES 197Part III Video case study 1988 Some approaches to the choice of entry mode 2039 Export, intermediate and hierarchical entry modes 21510 International buyerseller relationships 261Part III Case studies 282Part IV DESIGNING THE GLOBAL MARKETING PROGRAMME 293Part IV Video case study 29411 Product and pricing decisions 30112 Distribution and communication decisions 353Part IV Case studies 397Part V IMPLEMENTING AND COORDINATING THE GLOBAL MARKETING PROGRAMME 411Part V Video case study 41213 Crosscultural sales negotiations 41414 Organization and control of the global marketing programme 438Part V Case studies 471

Essentials of Global Marketing offers a concise yet innovative approach to the subject The accessible

structure takes the reader through the entire global marketing process, and fundamental concepts are

illuminated by a wide range of companies around the world Hollensen includes brand new Case Studies

on Nintendo Wii, YouTube and the Apple iPhone to provide cutting-edge examples of the theory in the

real world.

The book breaks new ground with the quality and extensiveness of its supporting interactive

features, which include multiple choice quizzes for every chapter which can be downloaded onto your

iPod, and Video Case Studies on internationally recognised companies such as Land Rover and Tata

About the author

Svend Hollensen is an Associate Professor at the University of Southern Denmark His other

Financial Times Prentice Hall books include Marketing Management and Marketing Research: An

International Approach (co-authored with Marcus Schmidt).

“I like very much the distinction that Svend Hollensen makes between LSE and SME types of

companies, since our institution is very much focussed on real-life cases and projects This new,

concise text brings from the business world an understanding of how the differences between

LSEs and SMEs can have a great impact on the appropriate course of action.”

Ronald Salters, Docent Marketing and Sales, Fontys Hogeschool Eindhoven, Holland

"Essentials of Global Marketing is an exciting textbook that provides a concise introduction to the

theory and practice of Global Marketing in the 21st century Perfectly suited to students of one

semester marketing courses, this invaluable source of knowledge presents a solid grounding in the

fundamentals of contemporary marketing, in a clear, lively, practical and straightforward style Highly

recommended to marketing students, educators and marketing managers everywhere."

Prof Dr Marc Oliver Opresnik, Fachhochschule Lübeck, Germany

“Essentials of Global Marketing adds to Professor Svend Hollensen’s already impressive collection of

comprehensive, pragmatic yet easy-to-read publications The integration of theory with case

study-based realities makes Professor Hollensen’s work accessible to academics, students and practitioners

alike, and this text will, I am sure, become a key resource for forward-thinking, praxis-based

interna-tional strategists and business leaders.”

Dr Mark Bayly, Lecturer, University of Auckland, New Zealand, and Management Consultant in New

Zealand, Ireland and Singapore

“The character of marketing is changing dramatically these days Professor Hollensen has captured the

frontier concepts which are illustrated by exciting cases A gold mine for all marketers: executives as

well as students.”

Sten Soderman, Professor at School of Business, Stockholm University

About the author

Svend Hollensen is an Associate Professor at the University of Southern

Denmark His other Financial Times Prentice Hall books include Marketing

Management and Marketing Research: An International Approach

(co-authored with Marcus Schmidt).

section of the book will be immensely helpful to students for understanding the key

themes and content This book is recommended for an undergraduate course on

International Marketing.”

Banerjee Madhumita, Lecturer in Marketing and Programme Director for MSc

in International Marketing and Entrepreneurship, University of Essex, UK

Essentials of Global Marketing

Visit the Hollensen: Essentials of Global Marketing Companion Website at

www.pearsoned.co.uk/hollensento find valuable student learning materialincluding:

We work with leading authors to develop the strongest educational materials in marketing, bringing cutting-edgethinking and best learning practice to a global market.Under a range of well-known imprints, includingFinancial Times Prentice Hall, we craft high quality print and electronic publications that help readers to

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ESSENTIALS OF GLOBAL MARKETING

ESSENTIALS OF GLOBAL MARKETING

Svend Hollensen

Pearson Education Limited

Edinburgh Gate

Harlow

Essex CM20 2JE

England

and Associated Companies throughout the world

Visit us on the World Wide Web at:

www.pearsoned.co.uk

First published 2008

© Pearson Education Limited 2008

The right of Svend Hollensen to be identified as author of this work has been asserted

by him in accordance with the Copyright, Designs and Patents Act 1988.

All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS All trademarks used herein are the property of their respective owners The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation

with or endorsement of this book by such owners.

ISBN: 978-0-273-71784-3

British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library

Library of Congress Cataloging-in-Publication Data

Hollensen, Svend.

Essentials of global marketing / Svend Hollensen.

p cm.

Shortened version of: Global marketing 4th ed 2007.

Includes bibliographical references and index.

Printed and bound by Graficas Estella, Spain

The publisher’s policy is to use paper manufactured from sustainable forests.

Part I THE DECISION TO INTERNATIONALIZE 1

Part II DECIDING WHICH MARKETS TO ENTER 113

Part III MARKET ENTRY STRATEGIES 197

Part IV DESIGNING THE GLOBAL MARKETING PROGRAMME 293

Part V IMPLEMENTING AND COORDINATING THE GLOBAL

SUPPORTING RESOURCES

Companion website for students

fast-moving area

For instructors

audio and direct links to the web

including the extra case studies on the book’s website

the book

Also: The Companion Website provides the following features:

For more information please contact your local Pearson Education sales representative

Part I Video case studyAcme Whistles Ltd: An SME is globalizing its whistles sales 2

1.4 Forces for ‘global integration’ and ‘market responsiveness’ 121.5 The value chain as a framework for identifying international

Case study1.1 Bubba Gump Shrimp Co.: A US-based restaurant chain is going

1

2

Case study3.1 Entertainment Rights: Internationalization of ‘Postman Pat’ 67

Development of the firm’s international competitiveness 71

4.2 Analysis of national competitiveness (the Porter diamond) 73

Case study4.1 Wii: Nintendo’s Wii takes first place on the world market – can it last? 97

Part I Case studies

I.1 Manchester United: Still trying to establish a global brand 103I.2 Cereal Partners Worldwide (CPW): The No 2 world player is

Part II

Part II Video case studyLand Rover: Which markets should be selected for the new Freelander 2 114

5.4 The European Economic and Monetary Union and the euro 133

3

4

5

ContentsCase study

5.1 Sauer-Danfoss: Which political/economic factor would affect a

6.7 Convergence or divergence of the world’s cultures 1546.8 The effects of cultural dimensions on ethical decision making 155

Case study6.1 IKEA catalogue: Are there any cultural differences? 158

7.3 Building a model for international market selection 163

Case study7.1 Philips Lighting: Screening markets in the Middle East 183

Part II Case studies

II.1 Red Bull: The global market leader in energy drinks is considering

II.2 Skagen Designs: Becoming an international player in designed watches 192

Part III

Part III Video case studyTata: Which entry modes should be used for Tata Nano – the World’s

6

7

Case study8.1 Ansell condoms: Is acquisition the right way for gaining market shares

Part III Case studies

III.1 IKEA: Expanding through franchising to the South American market? 282III.2 Autoliv Air Bags: Transforming Autoliv into a global company 288

8

9

10

Part IV

Part IV Video case studyElectrolux: Trying to establish a global brand identity 294

11.2 The dimensions of the international product offer 302

11.10 Factors influencing international pricing decisions 329

11.12 Implications of the Internet for pricing across borders 347

Case study11.1 Zippo Manufacturing Company: Has product diversification beyond

12.5 Implications of the Internet for distribution decisions 365

11

12

Part IV Case studies

IV.1 Guinness: How can the iconic Irish beer brand compensate for

IV.2 Dyson Vacuum Cleaner: Shifting from domestic to international marketing with the famous bagless vacuum cleaner 404

13.5 Knowledge management and learning across borders 42813.6 Transnational bribery in cross-cultural negotiations 432

Case study13.1 Mecca Cola: Marketing of a ‘Muslim’ cola to the European market 434

Organization and control of the global marketing programme 438

14.3 The global management account (GAM) organization 444

14.6 The process of developing the global marketing plan 465

Case study14.1 iPhone: Apple’s entry into the global mobile phone business 466

Part V Case studies

V.1 Sony BMG: New worldwide organizational structure and the marketing,

V.2 Philips Shavers: Maintaining shaving leadership in the world market 475

13

14

The increase in world trade, an increasing integration of world’s major economies, andthe onward march on globalization, will mean that the global marketing strategy ofthe firm will continue to be an important issue Within a relatively short time span,globalization and global marketing has emerged as a research discipline and it hasenabled international marketing practitioners and academics to live up to the claim ofthe ancient Greek philosopher Socrates, who stated, ‘I am a citizen, not of Athens ofGreece, but of the world.’

The primary argument of the proponents of globalization rests on the assumption

of a homogenization of demand worldwide This homogenization of demand expressesitself in a worldwide consumer demand for high quality and low costs due to the impact

of technology In addition, Levitt (1983)* argued that firms could take advantage oftechnology by adopting a standardized approach that will result in products of highquality and low costs for the world market Other researchers have pointed out that theinternational markets continue to be different in spite of the forces of globalization.They argue that the evidence for standardization is weak and that standardization

of the strategy is not a must to compete in global markets Even in markets or countriesthat are apparently culturally similar such as the European Union, differences in customer needs continue to persist We also still see differences in the criteria that con-sumers used to make decisions In addition, there are too many differences betweencountries and too many constraints in different markets for a standardized approach

to be feasible

The task of global marketing management is complex enough when the companyoperates in one foreign national market It is much more complex when the companystarts operations in several countries Marketing programmes must, in these situations,adapt to the needs and preferences of customers that have different levels of purchas-ing power as well as different climates, languages and cultures Moreover, patterns ofcompetition and methods of doing business differ between nations and sometimesalso within regions of the same nation In spite of the many differences, however, it

is important to hold on to similarities across borders Some coordination of national activities will be required, but at the same time the company will gain synergyacross borders, in the way that experience and learning acquired in one country can betransferred to another

inter-ObjectivesThis book’s value chain offers the reader an analytic decision-oriented framework forthe development and implementation of global marketing programmes Consequently,the reader should be able to analyse, select and evaluate the appropriate conceptualframeworks for approaching the five main management decisions connected with theglobal marketing process

Having studied this book, the reader should be better equipped to understand howthe firm can achieve global competitiveness through the design and implementation ofmarket-responsive programmes

* Levitt, T (1983) ‘The Globalization of Markets’, Harvard Business Review, May–June, pp 92–102.

Target audienceThis book is written for people who want to develop effective and decision-orientedglobal marketing programmes It can be used as a textbook for undergraduate or grad-uate courses in global/international marketing A second audience is the large group ofpeople joining ‘global marketing’ or ‘export’ courses on non-university programmes.Finally, this book is of special interest to the manager who wishes to keep abreast of themost recent developments in the global marketing field

Prerequisites

An introductory course in marketing

Special featuresThis book has been written from the perspective of the firm competing in inter-national markets, irrespective of its country of origin It has the following key features:

the world, including Europe, the Middle East, Africa, the Far East, and North andSouth America;

applications (Examples of the practice of global marketing by actual companies areused throughout the book, in the form of exhibits Furthermore, each chapter andpart end with cases, which include questions for students.)

value chain);

extension of the traditional key account management (KAM);

value innovation, blue ocean strategy, social marketing, global account ment, viral branding, and sensory and celebrity branding;

planning process

Pedagogical/learning aids

One of the strengths of Essentials of Global Marketing is its strong pedagogical features.

each chapter

marketing models

presented in the chapter to a specific business situation

to watch the video before answering the questions

studies covering the themes met in the part To reinforce learning, all case studies areaccompanied by questions Case studies are based on real-life companies Furtherinformation about these companies can be found on the Internet Company cases arederived from many different countries representing all parts of the world Tables 1and 2 present the chapter and part case studies

Table 1 Chapter case studies: overview

Bubba Gump Shrimp Co.

A US-based restaurant chain is going international?

www.bubbagump.com

Case study 2.1

Elvis Presley Enterprises Inc (EPE)

Internationalization of a ‘cult’ icon

Lysholm Linie Aquavit

International marketing of the Norwegian Aquavit brand

www.linie-aquavit.com

Country/area

of company headquarters

Sweden, Holland

Holland

Australia

Norway

Geographical target area

Germany, the rest of the World

Zippo Manufacturing Company

Has product diversification beyond the lighter gone too far?

USA

USA

South Africa, UK

United Arab Emirates (UAE)

USA

Geographical target area

World China

World

Europe, World

Table 2 Part case studies: overview

(The video case studies can be downloaded at www.pearsoned.co.uk/hollensen)

Case study I.2

Cereal Partners Worldwide (CPW)

The No 2 world player is challenging the No 1 – Kellogg

The global market leader in energy drinks

is considering further market expansion

www.redbull.com

Country/area

of company headquarters

UK

UK

Switzerland, USA

UK /USA

Austria

Geographical target area

Case study III.2

Autoliv Air Bags

Transforming Autoliv into a global company

www.diageo.com

Case study IV.2

Dyson Vacuum Cleaner

Shifting from domestic to international marketing with the famous bagless vacuum cleaner

USA (Denmark)

India

Sweden, Holland

World

World

South America (Brazil)

Guided tour

An Overview outlines the topics, Case Studies, and Learning objectives in each chapter, showcasing what you should expect to learn.

Marginal definitions highlight the key terms in each chapter A full Glossary can be found at the end of

the book and on the Essentials of Global Marketing

website at www.pearsoned.co.uk/hollensen.

Case Studies, drawn from a wide range of

countries, products and industries, enhance

the end of each part of the book.

The Exhibits analyse and discuss specific

companies to show how the theories in the

chapter are used by well-known brands in

the business world.

Contents

Part I Video case study Acme Whistles Ltd: An SME is globalizing its whistles sales Introduction to Part I

1 Global marketing in the firm

2 Initiation of internationalization

3 Internationalization theories

4 Development of the firm’s international competitiveness

Part I Case studies

I.1 Manchester United: Still trying to establish a global brand I.2 Cereal Partners Worldwide (CPW): The No 2 world player is challenging the No 1 – Kellogg

Part I

THE DECISION TO INTERNATIONALIZE

Part II

Deciding which markets to enter Chs 5–7

Part III

Market entry strategies Chs 8–10 Part IV

Designing the global marketing programme Chs 11–12

Part V

Implementing and coordinating the global marketing programme Chs 13–14

Chapter 1 Global marketing in the firm

product, but can also influence a firm’s performance in many other ways For example suppliers, agents and independent retail outlets as the basis of its rapid and successful international development during the 1970s and 1980s.

In addition, products pass through the value chain channels on their way to the buyer.

Channels perform additional activities that affect the buyer and influence the firm’s The ultimate basis for differentiation is a firm and its product’s role in the buyer’s value chain, which is determined by buyer needs Gaining and sustaining competitive fits into the overall value system.

There are often circumstances where the overall cost can be reduced (or the value increased) by collaborative arrangements between different organizations in the value collaborative arrangements, such as joint ventures, subcontracting and outsourcing manufacture and electronics industries).

Exhibit 1.2 Pocoyo – upstream-downstream cooperation about globalization of an

animated preschool series

One of the most successful TV-programmes for preschool kids,

wide by Granada Ventures It is now a global brand and has

Produced with bright blocks of colour against a stark white

young children.

Pocoyo

Pocoyo is a young boy with an array of qualities ready to

listen and interact He is a curious enthusiastic little boy in blue.

and on occasion hindrance from his friends Loula, Pato, Elly and

Sleepy Bird.

Pocoyo has at its core a fascinating concept – one of

learn-ing through laughter Clinical studies have shown that laughter

the programme, but also is proven to increase learning by 15 per cent By working closely with behavioural

psy-discover magic and humour in the simplest of things And far from painting an idealized version of childhood,

Pocoyo is sometimes moody, noisy and miserable – just like a real pre-schooler.

The value chain of Pocoyo

As illustrated in Pocoyo’s value chain (see Figure 1.8) Zinkia Entertainment is taking care of the development and

publishing rights (downstream functions).

Zinkia Entertainment is a company founded in 2001 Located in Madrid, Spain, its main focus is to create

animated series for TV and games for mobile devices and for game platforms The company has more than

100 employees and its series have been sold in more than 95 countries worldwide It is a creative factory

produ-Source: Pocoyo TM & © 2005 Zinkia Entertainment S.L

Licensed by Granada Ventures.

Ë

203

Contents

8.1 Introduction 8.2 The transaction cost approach 8.3 Factors influencing the choice of entry mode 8.4 Summary

Case study 8.1 Ansell condoms

Learning objectives

After studying this chapter you should be able to do the following:

l Identify and classify different market entry modes.

l Explore different approaches to the choice of entry mode.

l Explain how opportunistic behaviour affects the manufacturer/intermediary relationship.

l Identify the factors to consider when choosing a market entry strategy.

Some approaches to the choice of entry mode

8

Entry modes

An institutional arrangement necessary for the entry of a company’s products and services into a new foreign market

The main types are:

export, intermediate and hierarchical modes.

8.1 Introduction

We have seen the main groupings of entry modes which are available to companies that wish to take advantage of foreign market opportunities At this point we are concerned with the question: what kind of strategy should be used for the entry mode selection?

According to Root (1994) there are three different rules:

1 Naive rule The decision maker uses the same entry mode for all foreign markets.

This rule ignores the heterogeneity of the individual foreign markets.

2 Pragmatic rule The decision maker uses a workable entry mode for each foreign

market In the early stages of exporting the firm typically starts doing business with will the firm look for another workable entry mode In this case not all potential

3 Strategy rules This approach requires that all alternative entry modes are

system-atically compared and evaluated before any choice is made An application of this decision rule would be to choose the entry mode that maximizes the profit

51

Chapter 2 Initiation of internationalization

In mid-2004, to commemorate the 50th anniversary Right’ was re-released, and made the charts around Kingdom and top 40 in Australia.

In mid-October 2005, Variety named the top

100 entertainment icons of the twentieth century, Beatles, Marilyn Monroe, Lucille Ball, Marlon Brando, James Dean and Mickey Mouse.

By the end of October 2005, Forbes magazine

named Elvis Presley, for the fifth straight year, the

top-earning dead celebrity, grossing US$45 million October 2004 to October 2005.

For further exercises and cases, see this book’s website at www.pearsoned.co.uk/hollensen

Questions for discussion

1 Export motives can be classified as reactive or proactive Give examples of each group of export motives How would you prioritize these motives? Can you think of motives other than those mentioned in the chapter? What are they?

2 What is meant by ‘change agents’ in global marketing? Give examples of different types of change agent.

3 Discuss the most critical barriers to the process of exporting.

4 What were the most important change agents in the internationalization of Haier (Exhibit 2.2)?

5 What were the most important export motives in Japanese firms (Exhibit 2.1)?

References

Albaum, G., Strandskov, J., Duerr, E and Dowd, L (1994) International Marketing and Export

Management (2nd edn), Addison-Wesley, Reading, MA.

Fillis, I (2002) ‘Barriers to internationalization: an investigation of the craft microenterprises’,

European Journal of Marketing, (7–8), pp 912–927.

Fletcher, R (2001) ‘A holistic approach to internationalization’, International Business Review, 10,

pp 25 – 49.

Forsman, M., Hinttu, S and Kock, S (2002) ‘Internationalization from an SME perspective’, Paper

presented at the 18th Annual IMP Conference, September, Lyon, pp 1–12.

Freeman, S (2002) ‘A comprehensive model of the process of small firm internationalization: a

network perspective’, Paper presented at the 18th Annual IMP Conference, September, Dijon,

pp 1–22.

Freeman, S., Edwards, R and Schroder, B (2006) ‘How smaller Born-Globals Firms use Networks

and Alliances to Overcome Constraints to Rapid Internationalization’, Journal of International

Marketing, Vol 14, No 3, pp 33 – 63.

Genestre, A., Herbig, D and Shao, A.T (1995) ‘What does marketing really mean to the Japanese?’,

Marketing Intelligence and Planning, 13(9), pp 16 –27.

to them.

For internationalization to take place someone or something (‘triggers’) inside or outside the firm must initiate it and carry it through To succeed in global marketing the firm has to overcome export barriers Some barriers mainly affect the export initiation and others are encountered in the process of exporting.

Even more than 25 years after his death Elvis Presley

in the world Despite the sorry state of his affairs in

to the efforts of the people who handled his estate after his grandmother died in 1980, including his ex-wife Priscilla Beaulieu Presley, his daughter Lisa Enterprises Inc (www.elvis.com), the company that handles all the official Elvis properties.

Priscilla Presley was involved in the master-stroke decision to open Elvis’s mansion, Graceland, to the visitors per year, according to EPE’s website Over While visitors come from all parts of the world the States The Graceland tour costs US$25, which means plus what it receives from photographs, hotel guests, meals and souvenirs.

EPE’s other revenue streams include a theme restaurant called Elvis Presley’s Memphis; a hotel, Hotel; licensing of Elvis-related products, the devel- stage productions; and more.

Ironically, EPE gets very little money from Elvis’s actual songs, thanks to a deal Elvis’s infamous former

1973, whereby Elvis traded the rights for all future point for a measly $5.4 million – half of which he had

to give to Parker.

In 2000, the 25th anniversary was an international spectacle A remix of the 1968 Elvis song ‘A little less more the CD ‘Elvis: 30 #1 Hits’ went triple platinum.

Elvis Presley Enterprises Inc (EPE): Internationalization

of a ‘cult icon’

CASE STUDY

2.1

© Elvis Presley Enterprises, Inc Used by permission.

Each chapter concludes with a Case Study, providing a range of material

for seminars and private study by illustrating the real life applications and

implications of the topics covered in the chapter.

Each part of the book is introduced with a

Video Case Study demonstrating practical

marketing issues with a variety of leading

international companies.

Test yourself at the end of each chapter with a set of Questions for Discussion Then try answering the self- assessment Multiple Choice Questions that accompany

each chapter on the Essentials of Global Marketing

Companion Website at www.pearsoned.co.uk/hollensen.

The Reference list sources – books, journal articles and websites – that will help develop your understanding and inspire independent learning.

2

In 1883 Joseph Hudson, a toolmaker and violinist, began making gadgets

had been used as musical instruments After observing British Police having

be used as a tool.

Today Acme (www.acmewhistles.co.uk) is the world’s largest and most famous producer of whistles Its patented designs are standards in loud

meaning a high point This indicates that the whistle is a tool for producing

a very high decibel level.

Acme’s first whistle for Scotland Yard was nicknamed the ‘Thunderer’

and it is still Acme’s best-selling brand, with 200 million sold units Acme is particularly famous for the production

orders for reproduction whistles manufactured using the original tooling.

Today Acme, employing about 50 people, sells about 6 million whistles per annum to about 120 countries

world-wide It has made over a billion whistles plastic, the original whistles were made from folded brass strips In addition to the calls, dog calls, safety whistles, sports whistles and party whoopers.

Acme Whistles has both B2C and B2B tomers Its B2B customers range from sport- organizations, for example, NATO forces, the Mountain Rescue Council, Boy Scouts of USA, Kong Lifeguards Association and NFL.

cus-Watch the video before answering the questions.

Questions

1 Which parts of Acme Whistles’ value chain are centralized (standardized) and which are decentralized

(adapted)?

2 How is the internet (online) helping Acme Whistles to expand global sales of whistles?

3 Initial market research conducted by the company has shown that there could be a market opportunity for the

production of a high value added jewelled whistle (e.g a silent dog whistle covered in diamonds to hang around customers?

Source: Video accompanying the text, www.acmewhistles.co.uk

Part I

VIDEO CASE STUDY

Writing any book is a long-term commitment and involves time-consuming effort.The successful completion of a book depends on the support and generosity of manypeople and the realization of this book is certainly no exception

I wish to thank the many scholars whose articles, books and other materials I havecited or quoted However, it is not possible to acknowledge everyone by name In par-ticular I am deeply indebted to the following individuals and organizations I thankyou all for your help and contribution:

University of Southern Denmark

environment for writing and completing this project

Reviewers

text In particular: Alexandra Murcsan (London Metropolitan), John Thomson(Napier), Chris Rock (Greenwich), Graeme Stephen (Aberdeen), Joel Arnott(Sunderland), Sten Söderman (Stockholm) and Jonathan Wilson (Anglia)

would like to thank for their important and valuable contribution: Henrik Agndal,Jönköping International Business School; Grahame Fallon, University CollegeNorthampton; Ronald Salters, Fontys Eindhoven; Ola Feurst, Gotland University

sug-gestions for improvement in different sections of the book

Case contributors

I also wish to acknowledge the help from the following firms whose managers haveprovided valuable material that has enabled me to write the following cases I havebeen in direct personal contact with most of the following companies and thank themanagers involved for their very useful comments

Chapter cases:

Part cases:

Designs

I would also like to thank Madame Tussaud Group, especially Global MarketingDirector Nicky Marsh from London and Cathy Wong, External Affairs Consultantfrom Shanghai for their contribution to Exhibit 11.2.

I am also grateful to the following international advertising agencies, which haveprovided me with examples of standardized and/or localized advertising campaigns:

for LUX soap

Kellogg’s Basmati Flakes in India and an ad for LUX soap in India

‘Me and my Magnum’ campaign

I would also like to thank LEGO and Langnese (special thanks to Silke for her efforts

to get the Magnum ad) for their contributions to different examples in the book

I am grateful to my publisher, Pearson Education I would like to thank AcquisitionsEditor David Cox and Desk Editor Georgina Clark-Mazo for their help with this edition

I also extend my greatest gratitude to my colleagues at the University of SouthernDenmark for their constant help and inspiration

Finally, I thank my family for their support through the process I am pleased todedicate this version to Jonna, Nanna and Julie

Svend Hollensen University of Southern Denmark, Sønderborg, Denmark

June 2008

svend@sam.sdu.dk

Acknowledgements

Publisher’s acknowledgements

We are grateful to the following for permission to reproduce copyright material:Figure 1.2 from ‘A framework for analysis of strategy development in globalizing

markets’, Journal of International Marketing, 5(1), reprinted by permission of the

American Marketing Association (Solberg, C.A 1997); Figure 1.6 adapted from

Competitive Advantage: Creating and Sustaining Superior Performance, reprinted by

permission of The Free Press, a Division of Simon & Schuster Adult Publishing Group

(Porter, M.E 1985); Table 2.1 adapted from International Marketing and Export

Management, 2nd edn, Addison-Wesley, reprinted by permission of Pearson Education

Ltd (Albaum, G et al 1994); Figure 3.1 adapted from International føretagsekonomi,

Norstedts, reprinted by permission of Mats Forsgren (Forsgren, M and Johanson, J

1975); Figure 3.2 from ‘Internationalization: evolution of a concept’, Journal of General

Management, 14(2), reprinted by permission of The Braybrooke Press Ltd (Welch, L.S.

and Loustarinen, R 1988); Figure 3.5 adapted from Internationalization Handbook for

the Software Business, reprinted by permission of Centre of Expertise for Software

Product Business (Âijö, T et al 2005); Table 4.1 from ‘Composite strategy: the bination of collaboration and competition’, Journal of General Management, 21(1),

com-reprinted by permission of The Braybrooke Press Ltd (Burton, J 1995); Figure 4.4adapted from ‘Competitive advantage: merging marketing and competence-based per-

spectives’, Journal of Business and Industrial Marketing, 9(4), reprinted by permission

of Hans P Wehrli (Jüttner, U and Wehrli, H.P 1994); Figure 4.5 from ‘Exploiting the

core competences of your organization’, Long Range Planning, 27(4), reprinted by permission of Elsevier (Tampoe, M 1994); Table 5.1 ‘The Big Mac Index’ from The

Economist 25 March 2006, © The Economist Newspaper Ltd, London (25.3.06),

reprinted by permission of The Economist Newspaper Ltd; Figure 5.2 from Global

Marketing, 1st edn, reprinted with permission of South-Western, a part of Cengage

Learning, Inc (Czinkota, M.R and Ronkainen, I.A 1996); Table 6.2 adapted from

International Marketing Strategy: Analysis, Development and Implementation,

Thomson Learning, reprinted by permission of Thomson Publishing Services

(Phillips, C et al 1994); Figure 6.3 from International Marketing: A Cultural Approach,

reprinted by permission of Pearson Education Ltd (Usunier, J.-C 2000); Table 6.4

from Going International: How to Make Friends and Deal Effectively in the Global

Marketplace, Random House, reprinted by permission of The Sagalyn Agency

(Copeland, L and Griggs, L 1985); Figure 7.6 from European Business: An Issue-Based

Approach, 3rd edn, Pitman, reprinted by permission of Pearson Education Ltd

(Welford, R and Prescott, K 1996); Figure 7.10 from International Marketing Strategy,

2nd edn, Prentice Hall, reprinted by permission of Pearson Education Ltd (Bradley, F.1995); Figure 7.11 from ‘Market expansion strategies in multinational marketing’,

Journal of Marketing, 43, Spring, reprinted by permission of the American Marketing

Association (Ayal, I and Zif, J 1979); Case Study II.1 Table 1 from Red Bull GmbH –

Softdrink – World, Global Company Profile, Euromonitor International, March, © Euromonitor International 2007 (Euromonitor 2007); Figure 9.8 adapted from Strat-

egiske allianser i globale strategier, Norges Eksportråd, reprinted by permission of Index

Publishing/Norwegian Trade Council (Lorange, P and Roos, J 1995); Figures 9.9 and

Publisher’s acknowledgements

9.10 from Joint Ventures, Alliances, and Corporate Strategy, reprinted by permission

of Beard Books (Harrigan, K.R 2003); Figure 19.13 from ‘Toward a theory of

inter-national new ventures’, Journal of Interinter-national Business Studies, 25(1), reprinted by

permission from Macmillan Publishers Ltd (Oviatt, B M and McDougall, P P 1994);

Figure 9.14 from ‘Organisational dimensions of global marketing’, European Journal of

Marketing, 23(5), reprinted by permission of Emerald Publishing Ltd (Raffée, H and

Kreutzer, R 1989); Figure 9.15 from ‘Regional headquarters: the spearhead for Asian

Pacific markets’, Long Range Planning, 29(1), reprinted by permission of Elsevier

(Lasserre, P 1996); Figure 9.16 from ‘Why are foreign subsidiaries divested? A

con-ceptual framework’ in The Nature of the International Firm, edited by I Björkman

and M Forsgren, Handelshøjskolens Forlag/Copenhagen Business School Press,reprinted by permission of the author (Benito, G.R.G 1997); Figure 10.1 adapted from ‘Alihankintajarjestelma 1990-luvulla [subcontracting system in the 1990s]’,

Publications of SITRA, No 114, reprinted by permission of SITRA (Lehtinen, U 1991);

Table 10.1 and Figure 10.6 from ‘Relationship marketing from a value system

perspect-ive’, International Journal of Service Industry Management, 5, reprinted by permission

of Emerald Publishing Ltd (Jüttner, U and Wehrli, H.P 1994); Figure 10.3 reproducedwith permission of Council of Supply Chain Management Professionals, from ‘A total

cost/value model for supply chain competitiveness’, Journal of Business Logistics, J.L.

Cavinato, 13(2), 1992, permission conveyed through Copyright Clearance Center, Inc.(Cavinato, J.L 1992); Figure 10.4 adapted from ‘Interactive strategies in supply chains:

a double-edged portfolio approach to SME’, Subcontractors Positioning Paper presented

at the Eighth Nordic Conference on Small Business Research, reprinted by permission

of Per Blenker (Blenker, P and Christensen, P.R 1994); Figure 10.5 from Strategies for

International Industrial Marketing, Croom Helm, reprinted by permission of Taylor

and Francis Books UK (Turnbull, P.W and Valla, J.P 1986); Part IV Figure 3, p 298,from ‘Marketing mix standardisation: an integrated approach to global marketing’,

European Journal of Marketing, 22(10), reprinted by permission of Emerald Group

Publishing Ltd (Kreutzer, R 1988); Table 11.2 adapted from ‘The international

dimen-sion of branding: strategic considerations and decidimen-sions’, International Marketing

Review, 6(3), reprinted by permission of Emerald Publishing Ltd (Onkvisit, S and

Shaw, J.J 1989); Table 11.3 from ‘The future of consumer branding as seen from the

picture today’, Journal of Consumer Marketing, 12(4), reprinted by permission of

Emerald Group Publishing Ltd (Boze, B.V and Patton, C.R 1995); Figure 11.4 adapted

from International Marketing: Analysis and Strategy, 2nd edn, Macmillan, reprinted by

permission of Sak Onkvisit (Onkvisit, S and Shaw, J.J 1993); Figure 11.13 from ‘Pricing

conditions in the European Common Market’, European Management Journal, 12(2),

reprinted by permission of Elsevier (Diller, H and Bukhari, I 1994); Figure 11.15 from

‘The European pricing bomb – and how to cope with it’, Marketing and Research Today,

February, reprinted by permission of ESOMAR (Simon, H and Kucher, E 1993);Figure 12.2 from ‘US –Japan distribution channel cost structures: is there a significant

difference?’, International Journal of Physical Distribution and Logistics Management,

27(1), reprinted by permission of Emerald Group Publishing Ltd (Pirog III, S.F and

Lancioni, R 1997); Figure 12.3 from Marketing Management: An Overview, The

Dryden Press, reprinted by permission of Dale M Lewison (Lewison, D.M 1996);

Figure 12.4 adapted from Marketing Management: An Overview, The Dryden Press,

reprinted by permission of Dale M Lewison (Lewison, D.M 1996); Table 12.4 from

International Marketing Strategy: Analysis, Development and Implementation,

Thomson Learning, reprinted by permission of Thomson Publishing Services

(Phillips, C et al 1994); Table 12.6 from ‘Guidelines for managing an international sales force’, Industrial Marketing Management, 24(2), reprinted by permission of

Publisher’s acknowledgements

Elsevier (Honeycutt, E.D and Ford, J.B 1995); Figure 12.7 from International

Marketing Management, 5th edn, South-Western College Publishing, reprinted by

permission of the author (Jain, S.C 1996); Exhibit 14.1 Figure, p 454, Sauer-DanfossProduction Locations reprinted by permission of Sauer-Danfoss Inc.; Table 14.1

adapted from Principles and Practice of Marketing, 3rd edn, reprinted by permission of

the McGraw-Hill Publishing Company (Jobber, D 1995)

We are grateful to the following for permission to reproduce Case Study material:Case Study 2.1 screen shot from www.elvis.com, Elvis image used by permission,Elvis Presley Enterprises, Inc.; Case Study 3.1 screen shot from www.entertainmen-trights.com and image, Postman Pat® © 1981 Woodland Animations Ltd, a division ofEntertainment Rights plc., licensed by Entertainment Rights Distribution Limited,Original writer John Cunliffe, Royal Mail and Post Office imagery is used by kind permission of Royal Mail Group plc, all rights reserved; Case Study I.1 screen shotfrom www.ManUtd.com reprinted by permission of Manchester United Limited; CaseStudy 5.1 screen shot from www.sauer-danfoss.com reprinted by permission of Sauer-Danfoss Inc.; Case Study III.1 screen shot from www.ikea.com reprinted by permission

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Publisher’s acknowledgements

We are grateful to the following for permission to reproduce texts:

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In some instances we have been unable to trace the owners of copyright material, and

we would appreciate any information that would enable us to do so

Maastricht Treaty in 1992

invests in a subsidiary or partnership in a foreign market (joint venture)

pro-duced in the economy in one year

an open market between the United States, Canada and Mexico

forum that allows the major industrialised nations to discuss economicpolicies and events

passing through four stages: introduction, growth, maturity, decline

that can be planned separately from the rest of the company

About the author

Svend Hollensen is an Associate Professor of International

Marketing at University of Southern Denmark He is also ing Professor of London Metropolitan University He holds anMSc (Business Administration) from Aarhus Business School Hehas practical experience from a job as International MarketingCoordinator in a large Danish multinational enterprise as well asfrom being International Marketing Manager in a company pro-ducing agricultural machinery

Visit-After working in industry Svend received his PhD in 1992from Copenhagen Business School

He has published articles in journals and is the author of twocase books that focus on general marketing and internationalmarketing (published by Copenhagen Business School Press)

With Pearson Education he has published Global Marketing (4th edition, which came out in April 2007) and Marketing

Management – A Relationship Approach (a 2nd edition is planned

for 2009) as well as Marketing Research – An International

Approach (May 2006), together with Marcus Schmidt.

Svend has also worked as a business consultant for severalmultinational companies, as well as global organizations such asthe World Bank

The author may be contacted via:

University of Southern Denmark

Alsion 2

DK-6400 Sønderborg

Denmark

e-mail: svend@sam.sdu.dk

ContentsPart I Video case studyAcme Whistles Ltd: An SME is globalizing its whistles salesIntroduction to Part I

Part I Case studies

the No 1 – Kellogg

Part I

THE DECISION TO INTERNATIONALIZE

Part II

Deciding which markets to enter Chs 5–7

Part III

Market entry strategies

Designing the global marketing programme Chs 11–12

Part V

Implementing and coordinating the global marketing programme

Part I

The decision to

internationalize

Chs 1–4

In 1883 Joseph Hudson, a toolmaker and violinist, began making gadgets

to sell One of the things he made was whistles Prior to that time whistles

had been used as musical instruments After observing British Police having

a hard time communicating with rattles, he realized that his whistle could

be used as a tool.

Today Acme (www.acmewhistles.co.uk) is the world’s largest and most

famous producer of whistles Its patented designs are standards in loud

noise production The name ‘Acme’ comes from the Greek word ‘acme’,

meaning a high point This indicates that the whistle is a tool for producing

a very high decibel level.

Acme’s first whistle for Scotland Yard was nicknamed the ‘Thunderer’

and it is still Acme’s best-selling brand, with 200 million sold units Acme is particularly famous for the production

of the Titanic whistles, which were subsequently used in the film Titanic This resulted in a significant number of

orders for reproduction whistles manufactured using the original tooling.

Today Acme, employing about 50 people, sells about 6 million whistles per annum to about 120 countries

world-wide It has made over a billion whistles altogether While most today are made of plastic, the original whistles were made from folded brass strips In addition to the

‘Thunderer’, Acme makes varieties of bird calls, dog calls, safety whistles, sports whistles and party whoopers.

Acme Whistles has both B2C and B2B tomers Its B2B customers range from sport- ing bodies, safety organizations and security organizations, for example, NATO forces, the

cus-UN, Royal Life Saving Society, International Mountain Rescue Council, Boy Scouts of USA, Singapore Police, Canadian Hockey, Hong Kong Lifeguards Association and NFL.

Watch the video before answering the questions.

Questions

1 Which parts of Acme Whistles’ value chain are centralized (standardized) and which are decentralized (adapted)?

2 How is the internet (online) helping Acme Whistles to expand global sales of whistles?

3 Initial market research conducted by the company has shown that there could be a market opportunity for the production of a high value added jewelled whistle (e.g a silent dog whistle covered in diamonds to hang around

a girl’s neck) Who might be potential customers for such a product? Where should Acme Whistles find these customers?

Source: Video accompanying the text, www.acmewhistles.co.uk

Introduction to Part I

It is often the case that a firm going into an export adventure should have stayed in thehome market because it did not have the necessary competences to start exporting.Chapter 1 discusses competences and global marketing strategies from the valuechain perspective Chapter 2 discusses the major motivations of the firm to inter-nationalize Chapter 3 concentrates on some central theories that explain firms’ internationalization processes Chapter 4 discusses the concept of ‘international competitiveness’ from a macro level to a micro level

1.6 Value shop and the ‘service value chain’

1.7 Information business and the virtual value chain1.8 Summary

Case study1.1 Bubba Gump Shrimp Co

Learning objectives

After studying this chapter you should be able to do the following:

l Characterize and compare the management style in SMEs (small andmedium-sized enterprises) and LSEs (large-scale enterprises)

l Identify drivers for ‘global integration’ and ‘market responsiveness’

l Explain the role of global marketing in the firm from a holistic perspective

l Describe and understand the concept of the value chain

l Identify and discuss different ways of internationalizing the value chain

Global marketing in the firm

1

The process of developing the global marketing plan

As the book has a clear decision-oriented approach, it is structured according to thefive main decisions that marketing people in companies face in connection with theglobal marketing process The 14 chapters are divided into five parts

Part 1: The decision to internationalize (Chapters 1– 4)Part 2: Deciding which markets to enter (Chapters 5 –7)Part 3: Market entry strategies (Chapters 8–10)

Part 4: Designing the global marketing programme (Chapters 11–12)Part 5: Implementing and coordinating the global marketing programme (Chapters 13 –14)

Chapter 1 Global marketing in the firm

Globalization

Reflects the trend of

firms buying, developing

producing and selling

products and services in

most countries and

regions of the world.

Internationalization

Doing business in many

countries of the world,

but often limited to a

certain region (e.g.

Europe).

1.2

In the end, the firm’s global competitiveness is mainly dependent on the end-result of

the global marketing stages: the global marketing plan (see Figure 1.1) The purpose of

the marketing plan is to create sustainable competitive advantages in the global place Generally, firms go through some kind of mental process in developing globalmarketing plans In SMEs this process is normally informal; in larger organizations it

market-is often more systematized Figure 1.1 offers a systematized approach to developing aglobal marketing plan – the stages are illustrated by the most important models andconcepts that are explained and discussed throughout the chapters It is advisable toreturn to this figure throughout the book

Introduction to globalization

attempt to expand their sales into foreign markets International expansion providesnew and potentially more profitable markets; helps increase the firm’s competitiveness;and facilitates access to new product ideas, manufacturing innovations and the latest

prepares in advance Advance planning has often been regarded as important to thesuccess of new international ventures (Knight, 2000)

Solberg (1997) discusses the conditions under which the company should ‘stay athome’ or further ‘strengthen the global position’ as two extremes (see Figure 1.2) Theframework in Figure 1.2 is based on the following two dimensions:

ful players (global), whereas the other end (local) represents a multidomestic market

environment, where markets exist independently from one another Examples of veryglobal industries are PCs, IT (software), records (CDs), movies and aircrafts (the twodominant players being Boeing and Airbus) Examples of more local industries are themore culture-bounded industries, like hairdressing, foods and dairies (e.g browncheese in Norway)

Preparedness for internationalizationThis dimension is mainly determined by the firm The degree of preparedness isdependent on the firm’s ability to carry out strategies in the international marketplace,i.e the actual skills in international business operations These skills or organizationalcapabilities may consist of personal skills (e.g language, cultural sensitivity), the man-agers’ international experience or financial resources The well-prepared company

(mature) has a good basis for dominating the international markets and consequently

it would gain higher market shares

In the global/international marketing literature the ‘staying at home’ alternative isnot discussed thoroughly However, Solberg (1997) argues that with limited inter-national experience and a weak position in the home market there is little reason for a

Part I The decision to internationalize

Chapter 1 Global marketing in the firm

Part I The decision to internationalize

Chapter 1 Global marketing in the firm

Part I The decision to internationalize

SMEs

SME occurs commonly in

the EU and in international

In the EU, SMEs (250

employees and less)

comprise approximately

99 per cent of all firms.

Source: Solberg, 1997, p 11 Reprinted with kind permission In the original article Solberg has used the concept ‘globality’ instead

as to attract partners for a future buyout bid This alternative (window number 7 in

subsuppliers) to large industrial companies with a global network In situations withfluctuations in the global demand the SME (with limited financial resources) will often

be financially vulnerable If the firm has already acquired some competence in national business operations it can overcome some of its competitive disadvantages bygoing into alliances with firms representing complementary competences (windownumber 8) The other windows in Figure 1.2 are further discussed by Solberg (1997)

inter-Development of the ‘global marketing’ concept

Basically ‘global marketing’ consists of finding and satisfying global customer needsbetter than the competition, and of coordinating marketing activities within the con-straints of the global environment The form of the firm’s response to global marketopportunities depends greatly on the management’s assumptions or beliefs, both conscious and unconscious, about the nature of doing business around the world.This worldview of a firm’s business activities can be described as the EPRG frame-work (Perlmutter, 1969; Chakravarthy and Perlmutter, 1985): its four orientations aresummarized as follows:

1 Ethnocentric: the home country is superior and the needs of the home country are

most relevant Essentially headquarters extends ways of doing business to its foreignaffiliates Controls are highly centralized and the organization and technology imple-mented in foreign locations will essentially be the same as in the home country

Chapter 1 Global marketing in the firm

2 Polycentric (multidomestic): each country is unique and therefore should be

tar-geted in a different way The polycentric enterprise recognizes that there are ent conditions of production and marketing in different locations and tries to adapt

differ-to those different conditions in order differ-to maximize profits in each location The trol with affiliates is highly decentralized and communication between headquartersand affiliates is limited

con-3 Regiocentric: the world consists of regions (e.g Europe, Asia, the Middle East) The

firm tries to integrate and coordinate its marketing programme within regions, butnot across them

4 Geocentric (global): the world is getting smaller and smaller The firm may offer

global product concepts but with local adaptation (‘think global, act local’).The regio- and geocentric firm (in contrast to the ethnocentric and polycentric)seeks to organize and integrate production and marketing on a regional or global scale.Each international unit is an essential part of the overall multinational network, andcommunications and controls between headquarters and affiliates are less top-downthan in the case of the ethnocentric firm

This leads us to a definition of global marketing:

Global marketing is defined as the firm’s commitment to coordinate its marketingactivities across national boundaries in order to find and satisfy global customer needsbetter than the competition This implies that the firm is able to:

markets;

diffusion (learning) and adaptations;

other international markets

There follows an explanation of some key terms:

l Coordinate its marketing activities: coordinating and integrating marketing strategies

and implementing them across global markets, which involves centralization,delegation, standardization and local responsiveness

l Find global customer needs: this involves carrying out international marketing

research and analysing market segments, as well as seeking to understand ities and differences in customer groups across countries

similar-l Satisfy global customers: adapting products, services and elements of the marketing

mix to satisfy different customer needs across countries and regions

l Being better than the competition: assessing, monitoring and responding to global

competition by offering better value, low prices, high quality, superior distribution,great advertising strategies or superior brand image

The second part of the global marketing definition is also illustrated in Figure 1.3and further commented on below

This global marketing strategy strives to achieve the slogan, ‘think globally but act

between headquarters and subsidiaries Organizations following such a strategy dinate their efforts, ensuring local flexibility while exploiting the benefits of globalintegration and efficiencies, as well as ensuring worldwide diffusion of innovation

coor-A key element in knowledge management is the continuous learning from experiences

In practical terms, the aim of knowledge management as a learning-focused activityacross borders is to keep track of valuable capabilities used in one market that could

Glocalization

The development and

selling of products or

services intended for

the global market, but

adapted to suit local

culture and behaviour.

(Think globally, act

locally.)