the transformation of formerly local or national industries into global ones is part of a broader economic process of globalization

the transformation of formerly local or national industries into global ones is part of a broader economic process of globalization

chaPter 1 • IntroductIon to Global MarketInG 29

the transformation of formerly local or national industries into global ones is part of a broader economic process of globalization, which Jagdish Bhagwati defines as follows:

economic globalization constitutes integration of national economies into the international economy through trade, direct foreign investment (by corporations and multinationals), short-term capital flows, international flows of workers and humanity generally, and flows of technology.13

From a marketing point of view, globalization presents companies with tantalizing opportunities—and challenges—as executives decide whether to offer their products and services everywhere. at the same time, globalization presents companies with unprecedented opportuni- ties to reconfigure themselves; as John Micklethwait and adrian Wooldridge put it, the same global bazaar that allows consumers to buy the best that the world can offer also allows produc- ers to find the best partners.14 For example, globalization is presenting significant marketing opportunities for professional sports organizations such as the national Basketball association, the national Football League, and Major League Soccer (exhibit 1-2). as Major League Soccer commissioner Don Garber noted, “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.”15

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 compet- itive advantage can be achieved by integrating and leveraging operations on a worldwide scale. Put another way, an industry is global to the extent that a company’s industry posi- tion 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 investment to total capital investment, and the proportion of industry revenue generated by companies that compete in all key world regions.16 one way to deter- mine the degree of globalization in an industry sector is to calculate the ratio of the annual

13Jagdish Bhagwati, In Defense of Globalization (new York: oxford University Press, 2004), p. 3.

Exhibit 1-2 The National Football League (NFL) promotes American football globally. The NFL is focusing on a handful of key markets, includ- ing Canada, China, Germany, Japan, Mexico, and the United Kingdom. In fall 2010 guitar legend Jeff Beck performed “God Save the Queen” at Wembley Stadium in London prior to an NFL exhibition game between the San Francisco 49ers and the Denver Broncos. The final score: 49ers 24, Broncos 16. Sources: Michael Zagaris/Getty Images and James Starling/Alamy.

14John Micklethwait and adrian Wooldridge, A Future Perfect: The Challenge and Hidden Promise of Globalization (new York: Crown Publishers, 2000), p. xxvii. 15Grant Wahl, “Football vs. Fútbol,” Sports Illustrated (July 5, 2004), pp. 68–72. 16Vijay Govindarajan and anil Gupta, “Setting a Course for the new Global Landscape,” Financial Times—Mastering Global Business, part I (1998), p. 3.

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30 Part 1 • IntroductIon

value of global trade in the sector—including the value of components shipped to various countries during the production process—to the annual value of industry sales. In terms of these metrics, the consumer electronics, apparel, automobile, and steel industries are highly globalized.17

achieving competitive advantage in a global industry requires executives and managers to maintain a well-defined strategic focus. Focus is simply the concentration of attention on a core business or competence. the importance of focus for a global company is evident in the follow- ing 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 competitive 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.19

However, company management may choose to initiate a change in focus as part of an overall strategy shift. even Coca-Cola has been forced to sharpen its focus on its core bever- age brands. Following sluggish sales in 2000 and 2001, former chairman and chief executive Douglas Daft formed a new alliance with nestlé that jointly developed and marketed coffees and teas. Daft also set about the task of transforming Coca-Cola’s Minute Maid unit into a global division that markets a variety of 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.20

examples abound of corporate executives addressing the issue of focus, often in response to changes in the global business environment. In recent years, Bertelsmann, Colgate, Danone, electrolux, Fiat, Ford, Fortune Brands, General Motors, Harley-Davidson, Henkel, LeGo, McDonald’s, royal Philips electronics, toshiba, and many other companies have stepped up efforts to sharpen their strategic focus on core businesses and brands. Specific actions can take a number of different forms besides alliances, including mergers, acquisitions, divestitures, and folding some businesses into other company divisions.21

Value, competitive advantage, and the focus required to achieve them are universal 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 a business intelligence 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 understanding. 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 participate 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.22

“We believe a company can only think in one set of terms. If you are premium, you have to focus on it.”18

—Helmut Panke, former chairman, Bayerische Motoren Werke (BMW) AG

17Diana Farrell, “assessing Your Company’s Global Potential,” Harvard Business Review 82, no. 12 (December 2004), p. 85.

19elizabeth 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.

18Scott Miller, “BMW Bucks Diversification to Focus on Luxury Models,” The Wall Street Journal (March 20, 2002), p. B4.

20Betsy McKay, “Coke’s ‘think Local’ Strategy Has Yet to Prove Itself,” The Wall Street Journal (March 1, 2001), p. B6. 21robert a. Guth, “How Japan’s toshiba Got Its Focus Back,” The Wall Street Journal (December 12, 2000), p. a6. 22C. 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.

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chaPter 1 • IntroductIon to Global MarketInG 31

evidence is mounting that companies in a range of industries are getting the 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 provided the model for the new business entity, which unites Poltrona Frau, Cassina, and Cappellini.23 Hong Kong’s tai Ping Carpets International is 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 minimultinational.”24

Global Marketing: What It Is and What It Isn’t the discipline of marketing is universal. It is natural, however, that marketing practices will vary from country to country for the simple reason that the countries and peoples of the world are different. these differences mean that a marketing approach that has proven successful in one country will not necessarily succeed in another country. Customer preferences, competitors, channels of distribution, and communication media may differ. an important managerial task in global marketing is learning to recognize the extent to which it is possible to extend marketing plans and programs worldwide, as well as the extent to which adaptation is required.

the way a company addresses this task is a reflection of its global marketing strategy (GMS). In single-country marketing, strategy development addresses two fundamental issues: choosing a target market and developing a marketing 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 is standardized (i.e., executed the same way) or adapted (i.e., executed in different ways) in various country markets. For example, nike recently adopted the slogan “Here I am” for its pan-european clothing advertising targeting women. the decision to drop the famous “Just do it” tagline in the region was based on research indicating that college-age women in europe are not as competitive about sports as men are.25

GMS has three 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

23Gabriel Kahn, “three Italian Furniture Makers Hope to Create a Global Luxury Powerhouse,” The Wall Street Journal (october 31, 2006), p. B1. 24Phred Dvorak, “Big Changes Drive Small Carpet Firm,” The Wall Street Journal (october 30, 2006), p. B3.

tabLe 1-2 Comparison of Single-Country Marketing Strategy and Global Marketing Strategy (GMS)

Single-country Marketing Strategy Global Marketing Strateg

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