chaPter 1 • IntroductIon to Global MarketInG 27

chaPter 1 • IntroductIon to Global MarketInG 27

available. after a successful launch in the United States, Starbucks rolled out Via in Great Britain, Japan, South Korea, and several other asian countries. Starbucks also recently introduced its first coff

chaPter 1 • IntroductIon to Global MarketInG 27
chaPter 1 • IntroductIon to Global MarketInG 27

ee machine. the Versimo allows Starbucks’ customers to “prepare their favorite beverages at home.”

● Diversification: Starbucks has launched several new ventures, including music CDs and movie production. next up: revamping stores so they can serve as wine bars and attract new customers in the evening.7

to get some practice applying table 1-1, create a product/market growth matrix for another global company. IKea, LeGo, and Walt Disney are all good candidates for this type of exercise.

Companies that engage in global marketing frequently encounter unique or unfamiliar features in specific countries or regions of the world. In China, for example, product counterfeiting and piracy are rampant. Companies doing business there must take extra care to protect their intellec- tual property and deal with “knockoffs.” In some regions of the world, bribery and corruption are deeply entrenched. a successful global marketer understands specific concepts and has a broad and deep understanding of the world’s varied business environments. He or she also must understand the strategies that, when skillfully implemented in conjunction with universal marketing funda- mentals, increase the likelihood of market success. and, as John Quelch and Katherine Jocz assert, “the best global brands are also the best local brands.” that is, managers at global companies understand the importance of local excellence.8 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 marketing 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—that is, 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, the promotion, and the distribution. as a general rule, value, as the customer perceives it, can be increased in these 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

7Bruce Horovitz, “Starbucks remakes Its Future with an eye on Wine and Beer,” USA Today (october 22, 2010), p. 1B. 8John Quelch and Katherine Jocz, All Business Is Local (new York: Portfolio/Penguin, 2012).

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

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28 Part 1 • IntroductIon

must expend to learn about or seek out the product.9 Companies 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 superior product, distribution, or promotion benefits and lower prices than the competition’s, 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, bet- ter mileage, and lower prices than those made by General Motors, Ford, and Chrysler. today, the auto industry is shifting its attention to emerging markets such as India and africa. renault and its rivals are racing to offer middle-class consumers a new value proposition: high-quality vehicles that sell for the equivalent of $10,000 or less. on the heels of renault’s success with the Dacia Logan come the $2,500 nano from India’s tata Motors and a $3,000 Datsun from nissan (see Case 11-1).

achieving success in global marketing often requires persistence and patience. Following World War II, some of Japan’s initial auto exports were market failures. In the late 1960s, for example, Subaru of america began importing the Subaru 360 automobile and selling it for $1,297. after Consumer Reports judged the 360 to be unacceptable, 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 consumer 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.10 the Subaru story does have a happy ending, however, due in no small measure to the company’s decades-long efforts to improve its vehicles. In fact, in 2012 Consumer Reports put Subaru at the top of its quality rankings, surpassing Mazda, toyota, Honda, and nissan.11 History has not been so kind to the Yugo, however; it ended up on Time magazine’s list of the “50 Worst Cars of all time.”

even some of the world’s biggest, most successful companies stumble while pursuing global opportunities. Walmart’s recent exit from the German market was due, in part, to the fact that German shoppers 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 conve- nience of a single, “all-in-one” store located outside a town center. Likewise, United Kingdom (UK)–based tesco’s attempts to enter the U.S. market with its Fresh & easy stores failed, in part, because U.S. consumers were unfamiliar with the private-label goods that make up much of the merchandise stock (see Case 12-2).

Competitive Advantage, Globalization, and Global Industries When a company succeeds in creating more value for customers than its competitors do, that company is said to enjoy competitive advantage in an industry.12 Competitive advantage is measured relative to rivals in a given industry. For example, your local laundromat is in a local industry; its competitors are local. In a national industry, competitors are national. In a global industry—consumer electronics, apparel, automobiles, steel, pharmaceuticals, furniture, and dozens of other sectors—the competition is, likewise, global (and, in many industries, local as well). Global marketing is essential if a company competes in a global industry or one that is globalizing.

9With certain categories of differentiated goods, including designer clothing and other luxury products, higher price is often associated with increased value. 10the 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), p. 4. 11“Who Makes the Best Cars?” Consumer Reports (april 2012), pp. 14–18. 12Jay Barney notes that “a firm is said to have a competitive advantage when it is implementing a value-creating strat- egy not simultaneously being implemented by any current or potential competitors.” See Jay Barney, “Firm resources and Sustained Competitive advantage,” Journal of Management 17, no. 1 (1991), p. 102.

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