Chapter 21 Tapping into Global Markets

Red Bull X-Fighters event, 2004.

IN THIS CHAPTER, WE WILL ADDRESS THE FOLLOWING QUESTIONS:

1. What factors should a company review before deciding to go abroad?
2. How can companies evaluate and select specific foreign markets to enter?

3. What are the major ways of entering a foreign market? 4. To what extent must the company adapt its products and marketing program to each foreign country? 5. How should the company manage and organize its international activities? With faster communication, transportation, and financial flows, the world is rapidly shrinking. Products developed in one countryGucci purses, Mont Blanc pens, McDonald's hamburgers, Japanese sushi, Chanel suits, German BMWsare finding enthusiastic acceptance in others. A German businessman may wear an Armani suit to meet an English friend at a Japanese restaurant, who later returns home to drink Russian vodka and watch an American soap on TV. Consider the international

success of Red Bull. A billion-dollar brand in less than 15 years, Red Bull has gained 70 percent of the worldwide energy drink market by skillfully connecting with global youth. Founded in Austria by Dietrich Mateschitz, Red Bull was introduced into its first foreign market, Hungary, in 1992, and is now sold in over 100 countries. Red Bull consists of amino acid taurine, B-complex vitamins, caffeine, and carbohydrates. The drink was sold originally in only one sizethe silver 250 ml (8.3 oz.) canand received little traditional advertising support beyond animated television commercials with the tagline "Red Bull Gives You Wiiings." Red Bull built buzz about the product through its "seeding program": the company microtargets "in" shops, clubs, bars, and stores, gradually moves from bars and clubs to convenience stores and restaurants, and finally enters supermarkets. It targets "opinion leaders" by making Red Bull available at sports competitions, in limos before award shows, and at exclusive afterparties. Red Bull also built its cool image through sponsorship of extreme sports like its XFighters events, and unique grassroots efforts. In cities throughout the world, for example, the company sponsors an annual Flugtag where contestants build flying machines that they launch off ramps into water, true to the brand's slogan!
[1]

Although the opportunities for companies to enter and compete in foreign markets are significant, the risks can also be high. Companies selling in global industries, however, really have no choice but to internationalize their operations. In this chapter, we review the major decisions in expanding into global markets.

Competing on a Global Basis

Two hundred giant corporations, most of them larger than many national economies, have sales that in total exceed a quarter of the world's economic activity. On that basis, Philip Morris is larger than New Zealand and operates in 170 countries. International trade in 2003 accounted for over one-quarter of U.S. GDP, up from 11 percent in 1970.[2]

Many companies have conducted international marketing for decadesNestl, Shell, Bayer, and Toshiba are familiar to consumers around the world. But global competition is intensifying. Domestic companies that never thought about foreign competitors suddenly find them in their backyards. Newspapers report on the gains of Japanese, German, Swedish, and Korean car imports in the U.S. market, and the loss of textile and shoe markets to imports from developing countries in Latin America, Eastern Europe, and Asia. Many companies that are thought to be American firms are really foreign firms. Dannon, Red Roof Inn, Wild Turkey, Interscope, and L'Oral, for example, are all French-owned.[3] Although some U.S. businesses may want to eliminate foreign competition through protective legislation, the better way to compete is to continuously improve products at home and expand into foreign markets. A global industry is an industry in which the strategic positions of competitors in major geographic or national markets are fundamentally affected by their overall global positions.[4] A global firm is a firm that operates in more than one country and captures R&D, production, logistical, marketing, and financial advantages in its costs and reputation that are not available to purely domestic competitors. Global firms plan, operate, and coordinate their activities on a worldwide basis. Ford's "world truck" has a European-made cab and a North Americanbuilt chassis, is assembled in Brazil, and is imported into the United States for sale. Otis Elevator gets its door systems from France, small geared parts from Spain, electronics from Germany, and special motor drives from Japan; it uses the United States for systems integration. One of the most successful global companies is ABB, formed by a merger between the Swedish company ASEA and the Swiss company Brown Boveri.[5] ABB
ABB's products include power transformers, electrical installations, instrumentation, auto components, air-conditioning equipment, and railroad equipment. The company has annual revenues of $32 billion and 200,000 employees. Its motto: "ABB is a global company local everywhere." English is its official language (all ABB managers must be conversant in English), and all financial results must be reported in dollars. ABB aims to reconcile three contradictions: to be global and local; to be big and small; and to be radically decentralized with centralized reporting and control. It has fewer than 200 staff at company headquarters in Switzerland, compared to the 3,000 people who populate the Siemens headquarters. The company's many product lines are organized into 8 business segments, 65 business areas, 1,300 companies, and 5,000 profit centers, with the average employee belonging to a profit center of around 50 employees. Managers are regularly rotated among countries and mixed-nationality teams are encouraged. Depending on the type of business, some units are treated as superlocal businesses with lots of autonomy, while others are governed with [6] major central control and are considered global businesses.

A company need not be large, however, to sell globally. Small and medium-sized firms can practice global nichemanship. The Poilane Bakery sells 15,000 loaves of old-style bread each day in Paris2.5 percent of all bread sold in that cityvia company-owned delivery trucks. But each day, Poilane-branded bread is also shipped via FedEx to loyal customers in roughly 20 countries around the world.[7] For a company of any size to go global, it must make a series of decisions (see Figure 21.1). We'll examine each of these decisions here.
Figure 21.1. Major Decisions in International Marketing

Deciding Whether to Go Abroad

Most companies would prefer to remain domestic if their domestic market were large enough. Managers would not need to learn other languages and laws, deal with volatile currencies, face political and legal uncertainties, or redesign their products to suit different customer needs and expectations. Business would be easier and safer. Yet several factors are drawing more and more companies into the international arena:

The company discovers that some foreign markets present higher profit opportunities than the domestic market. The company needs a larger customer base to achieve economies of scale. The company wants to reduce its dependence on any one market. Global firms offering better products or lower prices can attack the company's domestic market. The company might want to counterattack these competitors in their home markets. The company's customers are going abroad and require international servicing.

Before making a decision to go abroad, the company must weigh several risks:

The company might not understand foreign customer preferences and fail to offer a competitively attractive product. The company might not understand the foreign country's business culture or know how to deal effectively with foreign nationals. The company might underestimate foreign regulations and incur unexpected costs. The company might realize that it lacks managers with international experience. The foreign country might change its commercial laws, devalue its currency, or undergo a political revolution and expropriate foreign property.

Because of the conflicting advantages and risks, companies often do not act until some event thrusts them into the international arena. Someonea domestic exporter, an international importer, a foreign governmentsolicits the company to sell abroad, or the company is saddled with overcapacity and must find additional markets for its goods. Most countries lament that too few of their companies participate in international trade. This keeps the country from earning foreign exchange to pay for needed imports. It also raises the specter of domestic companies eventually being hurt or taken over by foreign multinationals. These countries are trying to encourage their domestic companies to grow domestically and expand globally. Many countries sponsor aggressive export-promotion programs to get their companies to export.

These programs require a deep understanding of how companies become internationalized. The company logo being carved into a loaf of Poilane bread, which is shipped daily via FedEx to loyal customers in countries around the world.

The internationalization process has four stages:[8] 1. No regular export activities. 2. Export via independent representatives (agents). 3. Establishment of one or more sales subsidiaries. 4. Establishment of production facilities abroad. The first task is to get companies to move from stage 1 to stage 2. This move is helped by studying how firms make their first export decisions.[9] Most firms work with an independent agent and enter a nearby or similar country. A company then engages further agents to enter additional countries. Later, it establishes an export department to manage its agent relationships. Still later, the company replaces its agents with its own sales subsidiaries in its larger export markets. This increases the company's investment and risk, but also its earning potential.

To manage these subsidiaries, the company replaces the export department with an international department. If certain markets continue to be large and stable, or if the host country insists on local production, the company takes the next step of locating production facilities in those markets. This means a still larger commitment and still larger potential earnings. By this time, the company is operating as a multinational and is engaged in optimizing its global sourcing, financing, manufacturing, and marketing. According to some researchers, top management begins to pay more attention to global opportunities when they find that over 15 percent of revenues comes from foreign markets.[10]

Deciding Which Markets to Enter

In deciding to go abroad, the company needs to define its marketing objectives and policies. What proportion of foreign to total sales will it seek? Most companies start small when they venture abroad. Some plan to stay small; others have bigger plans. Ayal and Zif have argued that a company should enter fewer countries when:

Market entry and market control costs are high. Product and communication adaptation costs are high. Population and income size and growth are high in the initial countries chosen. Dominant foreign firms can establish high barriers to entry.[11]

How Many Markets to Enter

The company must decide how many countries to enter and how fast to expand. Consider Amway's experience: Amway
Amway Corp., one of the world's largest direct-selling companies, markets its products and services through independent business owners worldwide. Amway expanded into Australia in 1971. In the 1980s, it moved into 10 more countries. By 2004, Amway had evolved into a multinational juggernaut with a sales force of more than 3.6 million independent distributors hauling in $4.5 billion in sales. Established in 1998, Amway India quickly grew to 200,000 active Amway distributors by 2004. Amway currently sells products in 80 countries and territories worldwide. The corporate goal is to have overseas markets account for 80 percent of its sales. This is not unrealistic or overly ambitious considering that Amway [12] already gains 70 percent of its sales from markets outside North America.

A company's entry strategy typically follows one of two possible approaches: a waterfall approach, in which countries are gradually entered sequentially; or asprinkler approach, in which many countries are entered simultaneously within a limited period of time. Increasingly, especially with technology-intensive firms, they are born global and market to the entire world right from the outset.[13] Generally speaking, companies such as Matsushita, BMW, and General Electric, or even newer companies such as Dell, Benetton, and The Body Shop, follow the waterfall approach. Expansion can be carefully planned and is less likely to strain human and financial resources. When first-mover advantage is crucial and a high degree of competitive intensity prevails, the sprinkler approach is preferred, as when Microsoft introduces a new form of Windows software. The main risk is the substantial resources involved and the difficulty of planning entry strategies in so many potentially diverse markets. The company must also decide on the types of countries to consider. Attractiveness is influenced by the product, geography, income and population, political climate, and other factors. Kenichi Ohmae recommends that companies concentrate on selling in the "triad markets"the United States, Western Europe, and the Far Eastbecause these markets account for a large percentage of all international trade.[14]

Developed versus Developing Markets

Although Ohmae's position makes short-run sense, it can spell disaster for the world economy in the long run. The unmet needs of the emerging or developing world represent huge potential markets for food, clothing, shelter, consumer electronics, appliances, and other goods. Many market leaders are rushing into Eastern Europe, China, and India. Colgate now draws more personal and household products business from Latin America than North America.[15] The developed nations and the prosperous parts of developing nations account for less than 15 percent of the world's population. Is there a way for marketers to serve the other 85 percent, which has much less purchasing power? Successfully entering developing markets requires a special set of skills and plans. Consider how the following companies are pioneering ways to serve these invisible consumers:[16]

Grameen-Phone markets cell phones to 35,000 villages in Bangladesh by hiring village women as agents who lease phone time to other villagers, one call at a time.

Colgate-Palmolive rolls into Indian villages with video vans that show the benefits of toothbrushing; it expects to earn over half of its Indian revenue from rural areas by 2003. An Indian-Australian car manufacturer created an affordable rural transport vehicle to compete with bullock carts rather than cars. The vehicle functions well at low speeds and carries up to two tons. Fiat developed a "third-world car," the Palio, that far outsells the Ford Fiesta in Brazil and that will be launched in other developing nations. Corporacion GEO builds low-income housing in Mexico. The two-bedroom homes are modular and can be expanded. The company is now moving into Chile and southern U.S. communities. A Latin American building-supply retailer offers bags of cement in smaller sizes to customers building their own homes.

These marketers are able to capitalize on the potential of developing markets by changing their conventional marketing practices to sell their products and services more effectively.[17] It cannot be business as usual when selling in developing markets. Economic and cultural differences abound; a marketing infrastructure may barely exist; and local competition can be surprisingly stiff. In China, PC maker Legend and mobile-phone provider TCL have thrived despite strong foreign competition. Besides their close grasp on Chinese tastes, they also have their vast distribution networks, especially in rural areas.[18] Smaller packaging and lower sales prices are often critical in markets where incomes are limited. Unilever's 4-cent sachets of detergent and shampoo have been a big hit in rural India, where 70 percent of the country's population still lives. When Coke moved to a smaller, 200 ml bottle in India, selling for 10 to 12 cents in small shops, bus-stop stalls, and roadside eateries, sales jumped.[19] A Western image can also be helpful, as Coke discovered in China. Part of its success against local cola brand Jianlibao was due to its symbolic values of modernity and affluence.[20] A Russian ad for Nestl's Nescaf. As consumer spending has risen in Russia, the market for products of major multinationals like Nestl has boomed.

Recognizing that its cost structure made it difficult to compete effectively in developing markets, Procter & Gamble devised cheaper, clever ways to make the right kinds of products to suit consumer demand. It now uses contract manufacturers in certain markets and gained eight share points in Russia for Always feminine protection pads by responding to consumer wishes for a thicker pad.[21] Due to a boom in consumer spending, Russia has been the fastest-growing market for many major multinationals, including Nestl, L'Oral, and IKEA.[22] The challenge is to think creatively about how marketing can fulfill the dreams of most of the world's population for a better standard of living. Many companies are betting that they can do that. General Motors
After launching Buick in China in 1999, GM poured more than $2 billion into the region over the next five years, expanding the lineup to 14 models, ranging from the $8,000 Chevrolet Spark mini-car to high-end Cadillacs. Although competition in the third-largest car market is fierce, GM was able to secure 11 percent market share in 2004 and reap sizable profits. But initial gains in the Chinese market do not necessarily spell long-term success. After investing to establish the markets, foreign pioneers in television sets and motorcycles saw domestic Chinese firms emerge as rivals. In 1995, virtually all mobile phones in China were made by global giants Nokia, Motorola, and Ericsson. Within 10 years, their market share had dropped to 60 percent. To secure and build on its gains, General Motors pledged to [23] invest another $3 billion in the region to boost capacity and build its reputation.

Regional Free Trade Zones

Regional economic integrationtrading agreements between blocs of countrieshas intensified in recent years. This development means that companies are more likely to enter entire regions at the same time. Certain countries have formed free trade zones or economic communitiesgroups of nations organized to work toward common goals in the regulation of international trade. One such community is the European Union (EU).
The European Union

Formed in 1957, the European Union set out to create a single European market by reducing barriers to the free flow of products, services, finances, and labor among member countries, and by developing trade policies with nonmember nations. Today, the European Union is one of the world's largest single markets. The 15 member countries making up the EU increased by 10 in May 2004 with the addition of Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. The EU now contains more than 454 million consumers and accounts for 23 percent of the world's exports. It has a common currency, the euro monetary system. European unification offers tremendous trade opportunities for non-European firms. However, it also poses threats. European companies will grow bigger and more competitive. Witness the competition in the aircraft industry between Europe's Airbus consortium and Boeing in the United States. Perhaps an even bigger concern, however, is that lower barriers inside Europe will only create thicker outside walls. Some observers envision a "fortress Europe" that heaps favors on firms from EU countries but hinders outsiders by imposing obstacles such as stiffer import quotas, local content requirements, and other nontariff (nontax) barriers. Also, companies that plan to create "pan-European" marketing campaigns directed to a unified Europe should proceed with caution. Even as the EU standardizes its general trade regulations and currency, creating an economic community will not create a homogeneous market. Companies marketing in Europe face 14 different languages, 2,000 years of historical and cultural differences, and a daunting mass of local rules.
Nafta

Closer to home, in North America, the United States and Canada phased out trade barriers in 1989. In January 1994, the North American Free Trade Agreement

(NAFTA) established a free trade zone among the United States, Mexico, and Canada. The agreement created a single market of 360 million people who produce and consume $6.7 trillion worth of goods and services annually. As it is implemented over a 15-year period, NAFTA will eliminate all trade barriers and investment restrictions among the three countries. Prior to NAFTA, tariffs on American products entering Mexico averaged 13 percent, whereas U.S. tariffs on Mexican goods averaged 6 percent.
Mercosul

Other free trade areas are forming in Latin America. For example, MERCOSUL now links Brazil, Argentina, Paraguay, and Uruguay. Chile and Mexico have formed a successful free trade zone. It is likely that NAFTA will eventually merge with this and other arrangements to form an all-Americas free trade zone. It is the European nations that have tapped Latin America's enormous potential. As Washington's efforts to extend NAFTA to Latin America have stalled, European countries have moved in with a vengeance. When Latin American countries instituted market reforms and privatized public utilities, European companies rushed in to grab up lucrative contracts for rebuilding Latin America's infrastructure. Spain's Telefonica de Espana spent $5 billion buying phone companies in Brazil, Chile, Peru, and Argentina. In Brazil, seven of the ten largest private companies are European owned, compared to two controlled by Americans. Among the notable European companies operating in Latin America are automotive giants Volkswagen and Fiat, the French supermarket chain Carrefours, and the Anglo-Dutch personal-care products group Gessy-Lever.
APEC

Twenty-one Pacific Rim countries, including the NAFTA member states, Japan, and China, are working to create a pan-Pacific free trade area under the auspices of the Asian Pacific Economic Cooperation forum (APEC). There are also active attempts at regional economic integration in the Caribbean, Southeast Asia, and parts of Africa.

Evaluating Potential Markets

Yet, however much nations and regions integrate their trading policies and standards, each nation still has unique features that must be understood. A nation's readiness for different products and services and its attractiveness as a market to foreign firms depend on its economic, political-legal, and cultural environments.

Suppose a company has assembled a list of potential markets to enter. How does it choose among them? Many companies prefer to sell to neighboring countries because they understand these countries better and can control their costs more effectively. It is not surprising that the two largest U.S. export markets are Canada and Mexico, or that Swedish companies first sold to their Scandinavian neighbors. As growing numbers of U.S. companies expand abroad, many are deciding the best place to start is next door. At other times, psychic proximity determines choices. Many U.S. firms prefer to sell in Canada, England, and Australiarather than in larger markets such as Germany and Francebecause they feel more comfortable with the language, laws, and culture. Companies should be careful, however, in choosing markets according to cultural distance. Besides the fact that potentially better markets may be overlooked, it also may result in a superficial analysis of some very real differences among the countries. It may also lead to predictable marketing actions that would be a disadvantage from a competitive standpoint.[24] Regardless of how chosen, it often makes sense to operate in fewer countries with a deeper commitment and penetration in each. In general, a company prefers to enter countries (1) that rank high on market attractiveness, (2) that are low in market risk, and (3) in which it possesses a competitive advantage. Here is how Bechtel Corporation, the construction giant, goes about evaluating overseas markets. Bechtel Corporation
Bechtel provides premier technical, management, and directly related services to develop, manage, engineer, build, and operate installations for customers in nearly 60 countries worldwide. Before Bechtel ventures into new markets, the company starts with a detailed strategic market analysis. It looks at its markets and tries to determine where it should be in four or five years' time. A management team does a cost-benefit analysis that factors in the position of competitors, infrastructure, regulatory and trade barriers, and the tax situation (both corporate and individual). Ideally, the new market should be a country with an untapped need for its products or services; a quality, skilled labor pool capable of manufacturing the product; and a welcoming environment (governmental and physical).

Are there countries that meet Bechtel's requirements? Although Singapore has an educated, English-speaking labor force, basks in political stability, and encourages foreign investment, it has a small population. Although many countries in central Europe possess an eager, hungry-to-learn labor pool, their infrastructures create difficulties. The team evaluating a new market must determine whether the company could earn enough on its investment to cover the risk factors or other negatives.[25]

Deciding How to Enter the Market

Once a company decides to target a particular country, it has to determine the best mode of entry. Its broad choices are indirect exporting, direct exporting, licensing,joint ventures, and direct investment. These five market-entry strategies are shown in Figure 21.2. Each succeeding strategy involves more commitment, risk, control, and profit potential.
Figure 21.2. Five Modes of Entry into Foreign Markets

Indirect and Direct Export

The normal way to get involved in an international market is through export. Occasional exporting is a passive level of involvement in which the company exports from time to time, either on its own initiative or in response to unsolicited orders from abroad. Active exporting takes place when the company makes a commitment to expand into a particular market. In either case, the company produces its goods in the home country and might or might not adapt them to the international market. Companies typically start with indirect exportingthat is, they work through independent intermediaries. Domestic-based export merchants buy the manufacturer's products and then sell them abroad. Domestic-based export agents seek and negotiate foreign purchases and are paid a commission. Included in this group are trading companies. Cooperative organizations carry on exporting activities on behalf of several producers and are partly under their administrative control. They are often used by producers of primary products such as fruits or nuts. Export-management companies agree to manage a company's export activities for a fee. Indirect export has two advantages. First, it involves less investment: The firm does not have to develop an export department, an overseas sales force, or a set of international contacts. Second, it involves less risk: Because international-marketing intermediaries bring know-how and services to the relationship, the seller will normally make fewer mistakes. Companies eventually may decide to handle their own exports.[26] The investment and risk are somewhat greater, but so is the potential return. A company can carry on direct exporting in several ways:

Domestic-based export department or division. Might evolve into a selfcontained export department operating as a profit center. Overseas sales branch or subsidiary. The sales branch handles sales and distribution and might handle warehousing and promotion as well. It often serves as a display and customer service center. Traveling export sales representatives. Home-based sales representatives are sent abroad to find business. Foreign-based distributors or agents. These distributors and agents might be given exclusive rights to represent the company in that country, or only limited rights.

Whether companies decide to export indirectly or directly, many companies use exporting as a way to "test the waters" before building a plant and manufacturing a product overseas. University Games of Burlingame, California, maker of education games that encourage social interaction and imagination, has blossomed into a $50 million-per-year international company through careful entry into overseas ventures. University Games
Bob Moog, president and founder of University Games, says his company's international sales strategy relies heavily on third-party distributors and has a fair degree of flexibility. "We identify the international markets we want to penetrate," says Moog, "and then form a business venture with a local distributor that will give us a large degree of control. In Australia, we expect to run a print of 5,000 board games. These we will manufacture in the United States. If we reach a run of 25,000 games, however, we would then establish a subcontracting venture with a local manufacturer in Australia or New Zealand to print the [27] games." The company now sells in 28 countries.

Using a Global Web Strategy

One of the best ways to initiate or extend export activities used to be to exhibit at an overseas trade show. With the Web, it is not even necessary to attend trade shows to show one's wares: Electronic communication via the Internet is extending the reach of companies large and small to worldwide markets. Major marketers doing global e-commerce range from automakers (GM) to directmail companies (L.L. Bean and Lands' End) to running-shoe giants (Nike and Reebok) to Amazon.com. Marketers like these are using the Web to reach new customers outside their home countries, to support existing customers who live abroad, to source from international suppliers, and to build global brand awareness. These companies adapt their Web sites to provide country-specific content and services to their best potential international markets, ideally in the local language. The number of Internet users is rising quickly as access costs decline, local-language content increases, and infrastructure improves. Upscale retailer and cataloger The Sharper Image now gets more than 25 percent of its online business from overseas customers.[28] The Internet has become an effective means of everything from gaining free exporting information and guidelines to conducting market research and offering customers several time zones away a secure process for ordering and paying for products. "Going abroad" on the Internet does pose special challenges. The global marketer may

run up against governmental or cultural restrictions. In Germany, a vendor cannot accept payment via credit card until two weeks after an order has been sent. German law also prevents companies from using certain marketing techniques like unconditional lifetime guarantees. On a wider scale, the issue of who pays sales taxes and duties on global e-commerce is murkier still. Finding free information about trade and exporting has never been easier. Here are some places to start a search:
www.ita.doc.gov U.S. Department of Commerce's International Trade Administration www.exim.gov www.sba.gov Export-Import Bank of the United States U.S. Small Business Administration

www.bxa.doc.gov Bureau of Industry and Security, a branch of the Commerce Department

Also, many states' export-promotion offices have online resources and allow businesses to link to their sites.

Licensing
Licensing is a simple way to become involved in international marketing. The licensor issues a license to a foreign company to use a manufacturing process, trademark, patent, trade secret, or other item of value for a fee or royalty. The licensor gains entry at little risk; the licensee gains production expertise or a well-known product or brand name. Licensing has potential disadvantages. The licensor has less control over the licensee than it does over its own production and sales facilities. Furthermore, if the licensee is very successful, the firm has given up profits; and if and when the contract ends, the company might find that it has created a competitor. To avoid this, the licensor usually supplies some proprietary ingredients or components needed in the product (as Coca-Cola does). But the best strategy is for the licensor to lead in innovation so that the licensee will continue to depend on the licensor. There are several variations on a licensing arrangement. Companies such as Hyatt and Marriott sell management contracts to owners of foreign hotels to manage these businesses for a fee. The management firm may even be given the option to purchase some share in the managed company within a stated period. In contract manufacturing, the firm hires local manufacturers to produce the product. When Sears opened department stores in Mexico and Spain, it found qualified local

manufacturers to produce many of its products. Contract manufacturing gives the company less control over the manufacturing process and the loss of potential profits on manufacturing. However, it offers a chance to start faster, with less risk and with the opportunity to form a partnership or buy out the local manufacturer later. Finally, a company can enter a foreign market through franchising, which is a more complete form of licensing. The franchiser offers a complete brand concept and operating system. In return, the franchisee invests in and pays certain fees to the franchiser. McDonald's, KFC, and Avis have entered scores of countries by franchising their retail concepts and making sure their marketing is culturally relevant. KFC Corporation
KFC is the world's largest fast-food chicken chain, owning or franchising 12,800 outlets in about 90 countries60 percent of them outside the United States. KFC had a number of obstacles to overcome when it entered the Japanese market. The Japanese saw fast food as artificial, made by mechanical means, and unhealthy. To build trust in the KFC brand, advertising showed scenes depicting Colonel Sanders' beginnings in Kentucky that conveyed southern hospitality, old American tradition, and authentic home cooking. The campaign was hugely successful, and in less than eight years KFC expanded its presence from 400 locations to more than 1,000. KFC is China's largest, oldest, and most popular quick-service restaurant chain, also with over 1,000 locations. KFC is the most popular international brand throughout China, ranking higher than all others, according to a consumer survey conducted by A.C. Nielsen. China operations offer such fare as an "Old Beijing Twister"a wrap modeled after the way Peking duck is served, but with fried [29] chicken inside.

Joint Ventures
Foreign investors may join with local investors to create a joint venture company in which they share ownership and control. For instance:[30]

Coca-Cola and Nestl joined forces to develop the international market for "ready-to-drink" tea and coffee, which currently they sell in significant amounts in Japan. Procter & Gamble formed a joint venture with its Italian archrival Fater to cover babies' bottoms in the United Kingdom and Italy. Whirlpool took a 53 percent stake in the Dutch electronics group Philips's white-goods business to leapfrog into the European market.

A joint venture may be necessary or desirable for economic or political reasons. The foreign firm might lack the financial, physical, or managerial resources to undertake the venture alone; or the foreign government might require joint ownership as a condition for entry. Even corporate giants need joint ventures to crack the toughest markets. When it wanted to enter China's ice cream market, Unilever joined forces with Sumstar, a state-owned Chinese investment company. The venture's general manager says Sumstar's help with the formidable Chinese bureaucracy was crucial in getting a high-tech ice cream plant up and running in just 12 months.[31] Joint ownership has certain drawbacks. The partners might disagree over investment, marketing, or other policies. One partner might want to reinvest earnings for growth, and the other partner might want to declare more dividends. Joint ownership can also prevent a multinational company from carrying out specific manufacturing and marketing policies on a worldwide basis.

Direct Investment
The ultimate form of foreign involvement is direct ownership of foreign-based assembly or manufacturing facilities. The foreign company can buy part or full interest in a local company or build its own facilities. General Motors has invested billions of dollars in auto manufacturers around the world, such as Shangai GM, Fiat Auto Holdings, Isuzu, Daewoo, Suzuki, Saab, Fuji Heavy Industries, Jinbei GM Automotive Co., and AvtoVAZ.[32] If the market appears large enough, foreign production facilities offer distinct advantages. First, the firm secures cost economies in the form of cheaper labor or raw materials, foreign-government investment incentives, and freight savings. Second, the firm strengthens its image in the host country because it creates jobs. Third, the firm develops a deeper relationship with government, customers, local suppliers, and distributors, enabling it to adapt its products better to the local environment. Fourth, the firm retains full control over its investment and therefore can develop manufacturing and marketing policies that serve its long-term international objectives. Fifth, the firm assures itself access to the market in case the host country starts insisting that locally purchased goods have domestic content. The main disadvantage of direct investment is that the firm exposes a large investment to risks such as blocked or devalued currencies, worsening markets, or expropriation. The firm will find it expensive to reduce or close down its operations, because the host country might require substantial severance pay to the employees.

Deciding on the Marketing Program

International companies must decide how much to adapt their marketing strategy to local conditions.[33] At one extreme are companies that use a globally standardized marketing mix worldwide. Standardization of the product, communication, and distribution channels promises the lowest costs. Table 21.1 summarizes some of the pros and cons of standardizing the marketing program. At the other extreme is an adapted marketing mix, where the producer adjusts the marketing program to each target market. For a discussion of the main issues, see "Marketing Insight: Global Standardization or Adaptation?"
Table 21.1. Global Marketing Pros and Cons

Advantages Economies of scale in production and distribution Lower marketing costs Power and scope Consistency in brand image Ability to leverage good ideas quickly and efficiently Uniformity of marketing practices Disadvantages Differences in consumer needs, wants, and usage patterns for products Differences in consumer response to marketing-mix elements Differences in brand and product development and the competitive environment Differences in the legal environment Differences in marketing institutions Differences in administrative procedures

Between the two extremes, many possibilities exist. Most brands are adapted to some extent to reflect significant differences in consumer behavior, brand development, competitive forces, and the legal or political environment. Satisfying different consumer needs and wants can require different marketing programs. Cultural differences can often be pronounced across countries. Hofstede identifies four cultural dimensions that can differentiate countries:[34] 1. Individualism vs. collectivism. In collectivist societies, such as Japan, the selfworth of an individual is rooted more in the social system than in individual achievement. 2. High vs. low power distance. High power distance cultures tend to be less egalitarian. 3. Masculine vs. feminine. How much the culture is dominated by assertive males versus nurturing females. 4. Weak vs. strong uncertainty avoidance. How risk tolerant or aversive people are. Even global brands, such as Pringles, Always, and Toyota, will undergo some changes in product features, packaging, channels, pricing, or communications in different global markets. (See "Marketing Memo: The Ten Commandments of Global Branding.") Marketers must make sure that their marketing is relevant to consumers in every market. Walt Disney Co.
When Walt Disney launched the Euro Disney theme park outside Paris in 1992, it was harshly criticized as being an example of American cultural imperialism. A number of local French customs and values, such as serving wine with meals, were ignored. As one Euro Disney executive noted, "When we first launched, there was the belief that it was enough to be Disney. Now we realize our guests need to be welcomed on the basis of their own culture and travel habits." Renamed Disneyland Paris, the theme park eventually became Europe's biggest tourist attractioneven more popular than the Eiffel Towerby making a [35] number of changes and adding more local touches.

Disneyland Paris, Europe's biggest tourist attraction.

Product
Some types of products travel better across borders than othersfood and beverage marketers have to contend with widely varying tastes.[36] "Marketing Insight: Establishing Global Service Brands" describes some of the special concerns for marketing services globally. Warren Keegan has distinguished five adaptation strategies of product and communications to a foreign market (see Figure 21.3).[37]
Figure 21.3. Five International Product and Communication Strategies

Straight extension means introducing the product in the foreign market without any change. Straight extension has been successful with cameras, consumer electronics, and many machine tools. In other cases, it has been a disaster. General Foods introduced its standard powdered Jell-O in the British market only to find that British

consumers prefer the solid wafer or cake form. Campbell Soup Company lost an estimated $30 million in introducing its condensed soups in England; consumers saw expensive small-sized cans and did not realize that water needed to be added. Straight extension is tempting because it involves no additional R&D expense, manufacturing retooling, or promotional modification; but it can be costly in the long run.

Marketing Insight: Global Standardization or Adaptation? The marketing concept holds that consumer needs vary and that marketing programs will be more effective when they are tailored to each target group. This also applies to foreign markets. Yet in 1983, in a groundbreaking article in the Harvard Business Review, Harvard Professor Theodore Levitt challenged this view and supplied the intellectual rationale for global standardization: "The world is becoming a common marketplace in which peopleno matter where they livedesire the same products and lifestyles." The development of the Web, the rapid spread of cable and satellite TV around the world, and the global linking of telecommunications networks have led to a convergence of lifestyles. The convergence of needs and wants has created global markets for standardized products, particularly among the young middle class. Levitt favors global corporations that try to sell the same product the same way to all consumers. They focus on similarities across world markets and "sensibly force suitably standardized products and services on the entire globe." These global marketers achieve economies through standardization of production, distribution, marketing, and management. They translate their efficiency into greater value for consumers by offering high-quality and more reliable products at lower prices. Coca-Cola, McDonald's, Marlboro, Nike, the NBA, and Gillette are among the companies that have successfully marketed global products. Consider Gillette: Some 1.2 billion people use at least one Gillette product daily, according to the company's estimates. Gillette enjoys huge economies of scale by selling a few types of razor blades in every single market. Many companies have tried to launch their version of a world product. Yet, most products require some adaptation. Toyota's Corolla will exhibit some differences in styling. McDonald's offers a

ham and cheese "Croque McDo" in France, a variation of the French favorite croque monsieur. Coca-Cola is sweeter or less carbonated in certain countries. Rather than assuming that its domestic product can be introduced "as is" in another country, the company should review the following elements and determine which would add more revenue than cost:

Product features Brand name Labeling Packaging Colors Advertising execution Materials Prices Sales promotion Advertising themes Advertising media

Consumer behavior can dramatically differ across markets. Take annual beverage consumption. One of the highest per capita consumers of carbonated soft drinks is the United States, with 203.9 liters per capita consumption; Italy is among the lowest. But Italy is one of the highest per capita drinkers of bottled water with 164.4 liters, whereas the United Kingdom is only 20 liters. When it comes to beer, Ireland and the Czech Republic lead the pack, with over 150 liters per capita, with France among the lowest at 35.9 liters. Besides demand-side differences, other types of supply-side differences can also prevail. Levitt's critics pointed out that flexible manufacturing techniques made it easier to produce many different product versions, tailored to particular countries. One study showed that companies made one or more marketing-mix adaptations in 80 percent of their foreign products and that the average number of adapted elements was four. So perhaps Levitt's globalization dictum

should be rephrased. Global marketing, yes; global standardization, not necessarily. Sources: Theodore Levitt, "The Globalization of Markets," Harvard Business Review (MayJune 1983): 92102; Bernard Wysocki Jr., "The Global Mall: In Developing Nations, Many Youths Splurge, Mainly on U.S. Goods," Wall Street Journal, June 26, 1997, p. A1; "What Makes a Company Great?" Fortune, October 26, 1998, pp. 218226; David M. Szymanski, Sundar G. Bharadwaj, and P. Rajan Varadarajan, "Standardization versus Adaptation of International Marketing Strategy: An Empirical Investigation," Journal of Marketing (October 1993): 117; "Burgers and Fries a la Francaise,"The Economist, April 17, 2004, pp. 6061; Johny K. Johansson, "Global Marketing: Research on Foreign Entry, Local Marketing, Global Management," in Handbook of Marketing, edited by Bart Weitz and Robin Wensley (London: Sage Publications, 2002), pp. 457483.

Product adaptation involves altering the product to meet local conditions or preferences. There are several levels of adaptation.

A company can produce a regional version of its product, such as a Western European version. Finnish cellular phone superstar Nokia customized its 6100 series phone for every major market. Developers built in rudimentary voice recognition for Asia, where keyboards are a problem, and raised the ring volume so the phone could be heard on crowded Asian streets. A company can produce a country version of its product. In Japan, Mister Donut's coffee cup is smaller and lighter to fit the hand of the average Japanese consumer; even the doughnuts are a little smaller. Kraft blends different coffees for the British (who drink their coffee with milk), the French (who drink their coffee black), and Latin Americans (who want a chicory taste). A company can produce a city version of its productfor instance, a beer to meet Munich tastes or Tokyo tastes. A company can produce different retailer versions of its product, such as one coffee brew for the Migros chain store and another for the Cooperative chain store, both in Switzerland.

Marketing Memo: The Ten Commandments of Global Branding For many companies, global branding has been both a blessing and a curse. A global branding program can lower marketing costs, realize greater economies of scale in production, and provide a long-term source of growth. If not designed and implemented properly, it may ignore important differences in consumer behavior and/or the competitive environment in the individual countries. These suggestions can help a company retain many of the advantages of global branding while minimizing the potential disadvantages: 1. Understand similarities and differences in the global branding landscape. International markets can vary in terms of brand development, consumer behavior, competitive activity, legal restrictions, and so on. 2. Do not take shortcuts in brand-building. Building a brand in new markets should be done from the "bottom-up," both strategically (building awareness before brand image) and tactically (creating sources of brand equity in new markets). 3. Establish a marketing infrastructure. A company must either build marketing infrastructure "from scratch" or adapt to existing infrastructure in other countries. 4. Embrace integrated marketing communications. A company must often use many forms of communication in overseas markets, not just advertising. 5. Establish brand partnerships. Most global brands have marketing partners in their international markets that help companies achieve advantages in distribution, profitability, and added value. 6. Balance standardization and customization. Some elements of a marketing program can be standardized (packaging, brand name); others typically require greater customization (distribution channels). 7. Balance global and local control. Companies must balance global and local control within the organization and distribute decision making between global and local

managers. 8. Establish operable guidelines. Brand definition and guidelines must be established, communicated, and properly enforced so that marketers everywhere know what they are expected to do and not do. The goal is to set rules for how the brand should be positioned and marketed. 9. Implement a global brand equity measurement system. A global brand equity system is a set of research procedures designed to provide timely, accurate, and actionable information for marketers so they can make the best possible short-run tactical decisions and long-run strategic decisions. 10. Leverage brand elements. Proper design and implementation of brand elements (brand name and trademarked brand identifiers) can be an invaluable source of brand equity worldwide. Source: Adapted from Kevin Lane Keller and Sanjay Sood, "The Ten Commandments of Global Branding," Asian Journal of Marketing 8, no. 2 (2001): 97108.

Marketing Insight: Establishing Global Service Brands The world market for services is growing at double the rate of world merchandise trade. Large firms in accounting, advertising, banking, communications, construction, insurance, law, management consulting, and retailing are pursuing global expansion. Pricewaterhouse, American Express, Citigroup, Club Med, Hilton, and Thomas Cook are known worldwide. U.S. credit card companies have streamed across the Atlantic to convince Europeans of the joys of charge cards. In Britain, industry heavyweights Citibank and American Express have wrested a lot of business from big British banks like Barclay's. Many countries, however, have erected entry barriers or regulations. Brazil requires all accountants to possess a professional degree from a Brazilian university. Many Western European countries want to limit the number of U.S. television programs and films shown in their countries. Many U.S. states bar foreign bank branches. At the

same time, the United States is pressuring South Korea to open its markets to U.S. banks. The World Trade Organization, consisting of 147 countries, and the General Agreement on Tariffs and Trade (GATT), consisting of 110 countries, continue to press for more free trade in international services and other areas. Retailers who sell books, videos, and CD-ROMs, and entertainment companies have also had to contend with a culture of censorship in countries such as China and Singapore. In Singapore, for example, book retailers must submit potentially "hot" materials to the Committee on Undesirable Publications. Sources: Charles P. Wallace, "Charge!" Fortune, September 28, 1998, pp. 189196; <www.wto.org>; Ben Dolven, "Find the Niche," Far Eastern Economic Review, March 26, 1998, pp. 5859.

Product invention consists of creating something new. It can take two forms. Backward invention is reintroducing earlier product forms that are well adapted to a foreign country's needs. The National Cash Register Company reintroduced its crank-operated cash register at half the price of a modern cash register and sold substantial numbers in Latin America and Africa. Forward invention is creating a new product to meet a need in another country. There is an enormous need in less developed countries for low-cost, high-protein foods. Companies such as Quaker Oats, Swift, and Monsanto are researching these countries' nutrition needs, formulating new foods, and developing advertising campaigns to gain product trial and acceptance. Toyota produces vehicles specifically designed, with the help of local employees, to suit the tastes of these markets.[38] Product invention is a costly strategy, but the payoffs can be great, particularly if a company can parlay a product innovation into other countries. In globalization's latest twist, American companies are not only inventing new products for overseas markets, but also lifting products and ideas from their international operations and bringing them home. Hagen-Dazs
Hagen-Dazs had developed a flavor for sale solely in Argentina, called "dulce de leche." Translated as "sweet of milk," it was named for the caramelized milk that is one of the most popular flavors in Argentina. Just one year later, the company rolled out dulce de leche in supermarkets from Boston to Los Angeles to Paris. The co-opted flavor soon did $1 million

a month in the United States, becoming one of the top 10 flavors. It was particularly popular [39] in Miami, where it sold twice as fast as any other flavor.

In launching products and services globally, certain brand elements may have to be changed. When Clairol introduced the "Mist Stick," a curling iron, into Germany, it found that mist is slang for manure. Few Germans wanted to purchase a "manure stick." Brand slogans or ad taglines sometimes have to be changed too:[40]

When Coors put its brand slogan "Turn it loose" into Spanish, it was read by some as "suffer from diarrhea." A laundry soap ad claiming to wash "really dirty parts" was translated in French-speaking Quebec to read "a soap for washing private parts." Perdue's slogan"It takes a tough man to make a tender chicken"was rendered into Spanish as "It takes a sexually excited man to make a chick affectionate." Electrolux's British ad line for its vacuum cleaners"Nothing sucks like an Electrolux"would certainly not lure customers in the United States!

Table 21.2 lists some other famous blunders in this arena.

Table 21.2. Blunders in International Marketing

Hallmark cards failed when they were introduced in France. The French dislike syrupy sentiment and prefer writing their own cards. Philips began to earn a profit in Japan only after it had reduced the size of its coffeemakers to fit into smaller Japanese kitchens and its shavers to fit smaller Japanese hands. Coca-Cola had to withdraw its two-liter bottle in Spain after discovering that few Spaniards owned refrigerators with large enough compartments to accommodate it. General Foods' Tang initially failed in France because it was positioned as a substitute for orange juice at breakfast. The French drink little orange juice and almost none at breakfast. Kellogg's Pop-Tarts failed in Britain because the percentage of British homes with

Table 21.2. Blunders in International Marketing

toasters was significantly lower than in the United States, and the product was too sweet for British tastes.

Procter & Gamble's Crest toothpaste initially failed in Mexico when it used the U.S. campaign. Mexicans did not care as much for the decay-prevention benefit, nor did scientifically oriented advertising appeal to them. General Foods squandered millions trying to introduce packaged cake mixes to Japanese consumers. The company failed to note that only 3 percent of Japanese homes were equipped with ovens. S. C. Johnson's wax floor polish initially failed in Japan. The wax made the floors too slippery, and Johnson had overlooked the fact that Japanese do not wear shoes in their homes.

Communications
Companies can run the same marketing communications programs as used in the home market or change them for each local market, a process called communication adaptation. If it adapts both the product and the communications, the company engages in dual adaptation. Consider the message. The company can use one message everywhere, varying only the language, name, and colors.[41] Exxon used "Put a tiger in your tank" with minor variations and gained international recognition. Colors can be changed to avoid taboos in some countries. Purple is associated with death in Burma and some Latin American nations; white is a mourning color in India; and green is associated with disease in Malaysia.[42] The second possibility is to use the same theme globally but adapt the copy to each local market. For example, a Camay soap commercial showed a beautiful woman bathing. In Venezuela, a man was seen in the bathroom; in Italy and France, only a man's hand was seen; and in Japan, the man waited outside. The positioning stays the same, but the creative execution reflects local sensibilities, as with Unilever. Unilever

Global marketing powerhouse Unilever decided to base the positioning of its detergent brands around the world on the consumer insight that parents universally saw dirty clothes and stains as a favorable sign of their children's experiences. The pitch in Europe for Omo detergent was a sentimental 60-second spot themed "Dirt is Good" that exhorted viewers to love their dirt. In North America, a different pitch was used. The ad slogan for Wisk detergent was "Go Ahead. Get Dirty," and communications featured a sponsorship with [43] baseball legend Cal Ripken.

The third approach consists of developing a global pool of ads, from which each country selects the most appropriate one. Coca-Cola and Goodyear have used this approach. Finally, some companies allow their country managers to create countryspecific adswithin guidelines, of course. Kraft uses different ads for Cheez Whiz in different countries, given that household penetration is 95 percent in Puerto Rico, where the cheese is put on everything, and 65 percent in Canada, where it is spread on morning breakfast toast. In the United States, it is considered a junk food. A Lands' End ad for Germany. Because Germany has a number of laws preventing or limiting the use of sales promotion tools, Land's End cannot advertise its money-back guarantee, though it can accept merchandise returns.
[View full size image]

The use of media also requires international adaptation because media availability varies from country to country. Norway, Belgium, and France (and now the United States) do not allow cigarettes and alcohol (except for beer in the United States) to be advertised on TV. Austria and Italy regulate TV advertising to children. Saudi Arabia does not want advertisers to use women in ads. India taxes advertising. Magazines vary in availability and effectiveness; they play a major role in Italy and a minor one in Austria. Marketers must also adapt sales promotion techniques to different markets. Several European countries have laws preventing or limiting sales promotion tools such as discounts, rebates, coupons, games of chance, and premiums. In Germany, Lands' End could not advertise its money-back guarantee, although it does accept returned merchandise. American Express could not award points based on charges to its card for redeeming merchandise. A German store could not advertise that it would contribute a small sum to the fight against AIDS for each transaction; a German law limits discounts to 3 percent of list price. However, these restrictions are under attack and are beginning to crumble.

Personal selling tactics may have to change too. The direct, no-nonsense approach favored by Americans (characterized by more of a "let's get down to business" and "what's in it for me" stance) may not work as well in Europe, Asia, and other places where a more indirect, subtle approach can be more effective.[44] With younger, more worldly employees, however, such cultural differences may be less pronounced.

Price
Multinationals face several pricing problems when selling abroad. They must deal with price escalation, transfer prices, dumping charges, and gray markets. When companies sell their goods abroad, they face a price escalation problem. A Gucci handbag may sell for $120 in Italy and $240 in the United States. Why? Gucci has to add the cost of transportation, tariffs, importer margin, wholesaler margin, and retailer margin to its factory price. Depending on these added costs, as well as the currency-fluctuation risk, the product might have to sell for two to five times as much in another country to make the same profit for the manufacturer. Because the cost escalation varies from country to country, the question is how to set the prices in different countries. Companies have three choices: 1. Set a uniform price everywhere Coca-Cola might want to charge 75 cents for Coke everywhere in the world, but then Coca-Cola would earn quite different profit rates in different countries. Also, this strategy would result in the price being too high in poor countries and not high enough in rich countries. 2. Set a market-based price in each country Here Coca-Cola would charge what each country could afford, but this strategy ignores differences in the actual cost from country to country. Also, it could lead to a situation in which intermediaries in low-price countries reship their Coca-Cola to high-price countries. 3. Set a cost-based price in each country Here Coca-Cola would use a standard markup of its costs everywhere, but this strategy might price CocaCola out of the market in countries where its costs are high. Another problem arises when a company sets a transfer price (the price it charges another unit in the company) for goods that it ships to its foreign subsidiaries. If the company charges too high a price to a subsidiary, it may end up paying higher tariff duties, although it may pay lower income taxes in the foreign country. If the company charges too low a price to its subsidiary, it can be charged with dumping. Dumping occurs when a company charges either less than its costs or less than it charges in its home market, in order to enter or win a market. In 2000, Stelco, a

Canadian steelmaker, successfully fought dumping of steel products by steelmakers in Brazil, Finland, India, Indonesia, Thailand, and Ukraine. A Canadian tribunal found that cut-price steel imports from these countries caused "material injury to Canadian producers, including Stelco."[45] When the U.S. Customs Bureau finds evidence of dumping, it can levy a dumping tariff on the guilty company. Various governments are watching for abuses and often force companies to charge the arm's-length pricethat is, the price charged by other competitors for the same or a similar product. Many multinationals are plagued by the gray market problem. The gray market consists of branded products diverted from normal or authorized distributions channels in the country of product origin or across international borders. Dealers in the low-price country find ways to sell some of their products in higher-price countries, thus earning more. Industry research suggests that gray market activity accounts for over $40 billion in revenue each year. In 2004, 3Com successfully sued several companies in Canada (for a total of $10 million) who provided written and oral misrepresentations to get deep discounts on 3Com networking equipment. The equipment, worth millions of dollars, was to be sold to a U.S. education software company and sent to China and Australia, but instead ended up back in the United States.[46] Very often a company finds some enterprising distributors buying more than they can sell in their own country and reshipping the goods to another country to take advantage of price differences. Multinationals try to prevent gray markets by policing the distributors, by raising their prices to lower-cost distributors, or by altering the product characteristics or service warranties for different countries. In the European Union, the gray market may disappear altogether with the transition to a single currency unit. Once consumers recognize price differentiation by country, companies will be forced to harmonize prices throughout the countries that have adopted the single currency. Companies and marketers that offer the most innovative, specialized, or necessary products or services will be least affected by price transparency.[47] The Internet will also reduce price differentiation between countries. When companies sell their wares over the Internet, price will become transparent: Customers can easily find out how much products sell for in different countries. Take an online training course, for instance. Whereas the price of a classroom-delivered day of training can vary significantly from the United States to France to Thailand, the price of an onlinedelivered day of training would have to be similar.[48]

Another global pricing challenge that has arisen in recent years is that countries with overcapacity, cheap currencies, and the need to export aggressively have pushed prices down and devalued their currencies. For multinational firms this poses challenges: Sluggish demand and reluctance to pay higher prices make selling in these emerging markets difficult. Instead of lowering prices, and taking a loss, some multinationals have found more lucrative and creative means of coping.[49] General Electric Company
Rather than striving for larger market share, GE's power systems unit focused on winning a larger percentage of each customer's expenditures. The unit asked its top 100 customers what services were most critical to them and how GE could provide or improve them. The answers prompted the company to cut its response time for replacing old or damaged parts from 12 weeks to 6. It began advising customers on the nuances of doing business in the diverse environments of Europe and Asia and providing the maintenance staff for occasional equipment upgrades. By adding value and helping customers reduce their costs and become more efficient, GE was able to avoid a move to commodity pricing and was actually able to generate bigger margins. These margins led to record revenues of $15 [50] billion in 2000, a 50 percent rise from the previous year.

Distribution Channels
Too many U.S. manufacturers think their job is done once the product leaves the factory. They should pay attention to how the product moves within the foreign country. They should take a whole-channel view of the problem of distributing products to final users. Figure 21.4 shows the three major links between seller and ultimate buyer. In the first link, seller's international marketing headquarters, the export department or international division makes decisions on channels and other marketing-mix elements. The second link, channels between nations, gets the products to the borders of the foreign nation. The decisions made in this link include the types of intermediaries (agents, trading companies) that will be used, the type of transportation (air, sea), and the financing and risk arrangements. The third link, channels within foreign nations, gets the products from their entry point to final buyers and users.
Figure 21.4. Whole-Channel Concept for International Marketing

Distribution channels within countries vary considerably. To sell soap in Japan, Procter & Gamble has to work through one of the most complicated distribution systems in the world. It must sell to a general wholesaler, who sells to a product wholesaler, who sells to a product-specialty wholesaler, who sells to a regional wholesaler, who sells to a local wholesaler, who finally sells to retailers. All these distribution levels can mean that the consumer's price ends up double or triple the importer's price. If P&G takes the soap to tropical Africa, the company might sell to

an import wholesaler, who sells to several jobbers, who sell to petty traders (mostly women) working in local markets. Another difference lies in the size and character of retail units abroad. Large-scale retail chains dominate the U.S. scene, but much foreign retailing is in the hands of small, independent retailers. In India, millions of retailers operate tiny shops or sell in open markets. Their markups are high, but the real price is brought down through haggling. Incomes are low, and people must shop daily for small amounts; they are limited to whatever quantity can be carried home on foot or on a bicycle. Most homes lack storage space and refrigeration. Packaging costs are kept low in order to keep prices low. In India, cigarettes are often bought singly. Breaking bulk remains an important function of intermediaries and helps perpetuate the long channels of distribution, which are a major obstacle to the expansion of large-scale retailing in developing countries. When multinationals first enter a country, they prefer to work with local distributors who have good local knowledge, but friction often arises later.[51] The multinational complains that the local distributor does not invest in business growth, does not follow company policy, does not share enough information. The local distributor complains of insufficient corporate support, impossible goals, and confusing policies. The multinational must choose the right distributors, invest in them, and set up performance goals to which they can agree.[52] Some companies choose to invest in infrastructure to ensure that they benefit from the right channels. Peruvian cola company Kola Real has been able to survive despite competing with Coca-Cola and Pepsi-Cola in Mexico by setting up its own distribution network of 600 leased lorries, 24 distribution centers, and 800 salespeople.[53] Many retailers are trying to make inroads into global markets. France's Carrefour, Germany's Metro, and United Kingdom's Tesco have all established global positions. Germany's Aldi follows a simple formula globally. It stocks only about 700 products, compared with more than 20,000 at a traditional grocer such as Royal Ahold's Albert Heijin, almost all on their own exclusive label. Because it sells so few products, Aldi can exert strong control over quality and price and can simplify shipping and handling, leading to large margins. Retail experts expect Aldi to have 1,000 stores in the United States by 2010, with as much as 2 percent of the U.S. grocery market. American retail giant Wal-Mart is also expanding overseas, although sometimes with mixed results.[54] Wal-Mart

Wal-Mart has more than 1,000 stores in Mexico, Canada, Germany, Argentina, China, Britain, South Korea, Brazil, and Puerto Rico. By 2003, Wal-Mart was receiving 20 percent of its revenue from overseas, up from 12 percent in 2000. The company has learned along the way. German operations have encountered a number of obstacles. When Wal-Mart opened its stores in Latin America, sales were disappointing. Wal-Mart designed its Latin American stores like those in the United States: narrow aisles crowded with merchandise, huge parking lots, many products with red, white, and blue banners, and so on. However, Latin American shoppers expect wider aisles since they come with larger families; many do not have a car and need door-to-door bus transportation, and the red, white, and blue [55] banners seem like Yankee imperialism.

Country-of-Origin Effects
In an increasingly connected, highly competitive global marketplace, government officials and marketers are concerned with how attitudes and beliefs about their country affect consumer and business decision making. Country-of-origin perceptions are the mental associations and beliefs triggered by a country. Government officials want to strengthen their country's image to help domestic marketers who export and to attract foreign firms and investors. Marketers want to use country-of-origin perceptions in the most advantageous way possible to sell their products and services.

Building Country Images

Governments now recognize that the images of their cities and countries affect more than tourism and have important value in commerce. Attracting foreign business can improve the local economy, provide jobs, and improve infrastructure. City officials in Kobe, Japan, were able to entice multinationals Procter & Gamble, Nestl, and Eli Lilly to locate their Japanese headquarters in the city through traditional marketing techniques, with careful targeting and positioning.[56] Across the globe, after seeing its name being used to help sell everything from pizza to perfume to blinds, the city of Venice made it a priority to capitalize on its image. City officials developed a trademark that could be licensed to product marketers.[57] Hong Kong officials also developed a symbola stylized dragonto represent their city's core brand values.[58] Countries all over the world are being marketed like any other brand. In some cases, negative perceptions must be overcome. Research by the British Council in 2000 revealed that young opinion leaders in 28 countries saw Britons as weak on creativity and innovation, class-ridden, racist, and cold. Emphasizing the country's traditional values and heritage, as has typically been done, might only exacerbate the situation. One commentator's recommendation was to concentrate on the 1,700 foreign media correspondents in London who play a critical role in conveying the British image to their respective countries.[59]

Attitudes toward country of origin can change over time. Before World War II, Japan had a poor quality image. The success of Sony and its Trinitron TV sets and Japanese automakers Honda and Toyota helped to change people's opinions. Relying partly on the global success of Nokia, Finland launched a campaign to enhance its image as a center of high-tech innovation.[60] "Marketing Insight: The Ups and Downs of Brand America" describes some of the issues that arose due to the anti-American sentiment after the commencement of the Iraq war in 2003.

Consumer Perceptions of Country of Origin

Global marketers know that buyers hold distinct attitudes and beliefs about brands or products from different countries.[61] These country-of-origin perceptions can affect consumer decision making directly and indirectly. The perceptions may be included as an attribute in decision making or influence other attributes in the process ("if it is French, it must be stylish"). The mere fact that a brand is perceived as being successful on a global stage may lend credibility and respect.[62] Several studies have found the following:[63] Hong Kong's trademark, a stylized dragon with the tagline "Asia's world city."

People are often ethnocentric and favorably predisposed to their own country's products, unless they come from a less developed country. The more favorable a country's image, the more prominently the "Made in ..." label should be displayed. The impact of country of origin varies with the type of product. Consumers want to know where a car was made but not the lubricating oil.

Certain countries enjoy a reputation for certain goods: Japan for automobiles and consumer electronics; the United States for high-tech innovations, soft drinks, toys, cigarettes, and jeans; France for wine, perfume, and luxury goods. Sometimes country-of-origin perception can encompass an entire country's products. In one study, Chinese consumers in Hong Kong perceived American products as prestigious, Japanese products as innovative, and Chinese products as cheap.

The favorability of country-of-origin perceptions must be considered both from a domestic and foreign perspective. In the domestic market, country-of-origin perceptions may stir consumers' patriotic notions or remind them of their past. As international trade grows, consumers may view certain brands as symbolically important in their own cultural heritage and identity. Patriotic appeals have been the basis of marketing strategies all over the world. Patriotic appeals, however, can lack uniqueness and even be overused. For example, during the Reagan administration in the 1980s, a number of different U.S. brands in a diverse range of product categories (e.g., cars, beer, clothing, etc.) used pro-American themes in their advertising, perhaps diluting the efforts of all as a result. A company has several options when its products are competitively priced but their place of origin turns consumers off. The company can consider co-production with a foreign company that has a better name: South Korea could make a fine leather jacket that it sends to Italy for finishing; or the company can adopt a strategy to achieve world-class quality in the local industry, as is the case with Belgian chocolates, Polish ham, and Colombian coffee. Companies can target niches to establish a footing in new markets. China's leading maker of refrigerators, washing machines, and air conditioners, Haier, is building a beachhead in the United States with American college students who loyally buy its mini-fridges, which are sold at Wal-Mart and elsewhere.[64] Haier's long-term plans are to introduce innovative products in other areas, such as flat-screen TV sets and wine-cooling cabinets.
Marketing Insight: The Ups and Downs of Brand America One concern for global marketers is how political issues about their domestic country can spill over to influence consumers' perceptions of their products and services in overseas markets. As the United States found itself at odds with other countries in recent years over various issues, including the war in Iraq, marketers wondered how it

might influence the effectiveness of their marketing programs. Initially, the answer appeared to be little. As one protester against the U.S. policy on North Korea observed, "Calling for political independence is one thing, and liking American brands is another. I like IBM, Dell, Microsoft, Starbucks, and Coke." Many consumers seemed willing to separate politics and products. American technology was widely admired and young people all over the world continued to embrace American youth culture. Perhaps the most compelling example of the power of American brands overseas is the fact that McDonald's most successful market in Europe has been France, a country often dismissive of American politics and culture. Part of the explanation for this mental compartmentalization may be the way these global American brands had been built and marketed over the years. Many of them successfully tapped into universal consumer values and needssuch as Nike with athletic performance, Levi's with rugged individualism, and Coca-Cola with youthful optimism. Further, these firms hire thousands of employees and make sure their products and marketing activities are consistent with local sensibilities. Many of these same brands also had gone to great lengths through the years to weave themselves into the cultural fabric of their foreign markets. One story told by a Coca-Cola executive is about a young child visiting America from Japan who commented to her parents on seeing a Coca-Cola vending machine"Look, they have Coca-Cola too!" As far as she was concerned, Coca-Cola was a Japanese brand. In some cases, consumers actually don't know where brands come from, either because the brand has become so intertwined with multiple countries or the country of origin is just not that well known. In surveys, consumers routinely guess that Heineken is German and that Nokia is Japanese (Dutch and Finnish, respectively). Few consumers know that Hagen-Dazs and Este Lauder originated in the United States. Concerned about a potentially tarnished American image, Charlotte Beers, former chief executive of the Ogilvy & Mather ad agency, was sworn in as President Bush's Under Secretary for Public Diplomacy and Public Affairs on October 2, 2001, and charged with helping to improve the national reputation in the Middle East, where public perceptions were especially negative. Despite these efforts, as time wore on after the commencement of the Iraq war, some U.S. brands such as McDonald's, Coca-Cola, Microsoft, and Yahoo! did

appear to sustain some tarnishing of their images. Sources: Janet Guyon, "Brand America," Fortune, October 27, 2003, pp. 179182; Richard Tompkins, "As Hostility Towards America Grows, Will the World Lose Its Appetite for Coca-Cola, McDonald's and Nike," Financial Times, March 27, 2003, p. 13; Gerry Kermouch and Diane Brady, "Brands in an Age of AntiAmericanism, BusinessWeek, August 4, 2003, pp. 6978; Parija Bhatnagar, "U.S. Brands Losing Luster," CNN/Money, May 21, 2004; "Burgers and Fries a la Francaise," The Economist, April 17, 2004, pp. 6061.

As progress is made, companies can start to build local roots to increase relevance, as exemplified by Toyota. Toyota
Toyota has made sales in North America a top priority. As one executive bluntly stated, "We must Americanize." As proof of their conviction, consider the following. Toyota has become the number-three player in the U.S. car market. In 2001, it sold more vehicles in the United States than in Japan, and over two-thirds of these sales were manufactured locally. An estimated two-thirds of its corporate operating profit comes from the United States. Toyota's U.S. factories and dealerships employ 123,000 Americansmore than Coca-Cola, [65] Microsoft, and Oracle combined.

Toyota is not alone in emphasizing the American market. BMW sold more cars in the United States in 2003 than it did in Germany.[66]

Deciding on the Marketing Organization

Companies manage their international marketing activities in three ways: through export departments, international divisions, or a global organization.

Export Department
A firm normally gets into international marketing by simply shipping out its goods. If its international sales expand, the company organizes an export department consisting

of a sales manager and a few assistants. As sales increase, the export department is expanded to include various marketing services so that the company can go after business more aggressively. If the firm moves into joint ventures or direct investment, the export department will no longer be adequate to manage international operations.

International Division
Many companies become involved in several international markets and ventures. Sooner or later they will create international divisions to handle all their international activity. The international division is headed by a division president, who sets goals and budgets and is responsible for the company's international growth. The international division's corporate staff consists of functional specialists who provide services to various operating units. Operating units can be organized in several ways. First, they can be geographical organizations. Reporting to the international-division president might be regional vice presidents for North America, Latin America, Europe, Africa, the Middle East, and the Far East. Reporting to the regional vice presidents are country managers who are responsible for a sales force, sales branches, distributors, and licensees in the respective countries. The operating units may be world product groups, each with an international vice president responsible for worldwide sales of each product group. The vice presidents may draw on corporate-staff area specialists for expertise on different geographical areas. Finally, operating units may be international subsidiaries, each headed by a president. The various subsidiary presidents report to the president of the international division. Many multinationals shift between types of organization. IBM
Part of IBM's massive reorganization strategy has been to put 235,000 employees into 14 customer-focused groups such as oil and gas, entertainment, and financial services. This way a big customer will be able to cut one deal with a central sales office to have IBM computers installed worldwide. Under the old system, a corporate customer with operations in 20 countries had to contract with 20 little Big Blues, each with its own pricing structure [67] and service standards.

Global Organization
Several firms have become truly global organizations. Their top corporate management and staff plan worldwide manufacturing facilities, marketing policies, financial flows, and logistical systems. The global operating units report directly to

the chief executive or executive committee, not to the head of an international division. Executives are trained in worldwide operations. Management is recruited from many countries; components and supplies are purchased where they can be obtained at the least cost; and investments are made where the anticipated returns are greatest. These companies face several organizational complexities. For example, when pricing a company's mainframe computers to a large banking system in Germany, how much influence should the headquarters product manager have? And the company's market manager for the banking sector? And the company's German country manager? Bartlett and Ghoshal have proposed circumstances under which different approaches work best. In Managing Across Borders, they describe forces that favor "global integration" (capital-intensive production, homogeneous demand) versus "national responsiveness" (local standards and barriers, strong local preferences). They distinguish three organizational strategies:[68]
1.

A global strategy treats the world as a single market This strategy is warranted when the forces for global integration are strong and the forces for national responsiveness are weak. This is true of the consumer electronics market, for example, where most buyers will accept a fairly standardized pocket radio, CD player, or TV. Matsushita has performed better than GE and Philips in the consumer-electronics market because Matsushita operates in a more globally coordinated and standardized way.

2. A multinational strategy treats the world as a portfolio of national opportunities This strategy is warranted when the forces favoring national responsiveness are strong and the forces favoring global integration are weak. This is the situation in the branded packaged-goods business (food products, cleaning products). Bartlett and Ghoshal cite Unilever as a better performer than Kao and P&G because Unilever grants more decision-making autonomy to its local branches. 3. A "glocal" strategy standardizes certain core elements and localizes other elements This strategy makes sense for an industry (such as telecommunications) where each nation requires some adaptation of its equipment, but the providing company can also standardize some of the core components. Bartlett and Ghoshal cite Ericsson as balancing these considerations better than NEC (too globally oriented) and ITT (too locally oriented).

Many firms seek a blend of centralized global control from corporate headquarters with input from local and regional marketers. Finding that balance can be tricky. Coca-Cola's "think local, act local" philosophy, which decentralized much of the power and responsibility to design marketing programs and activities, fell apart when many local managers lacked the necessary skills or discipline. Decidedly un-Cokelike ads appearedsuch as skinny-dippers streaking down a beach in Italyand sales stalled. The pendulum swung back, and Coke executives in Atlanta began to play a stronger strategic role again.[69]

Summary
1. Despite the many challenges in the international arena (shifting borders, unstable governments, foreign-exchange problems, corruption, and technological pirating), companies selling in global industries need to internationalize their operations. Companies cannot simply stay domestic and expect to maintain their markets. 2. In deciding to go abroad, a company needs to define its international marketing objectives and policies. The company must determine whether to market in a few countries or many countries. It must decide which countries to consider. In general, the candidate countries should be rated on three criteria: market attractiveness, risk, and competitive advantage. Developing countries offer a unique set of opportunities and risks. 3. Once a company decides on a particular country, it must determine the best mode of entry. Its broad choices are indirect exporting, direct exporting, licensing, joint ventures, and direct investment. Each succeeding strategy involves more commitment, risk, control, and profit potential. 4. In deciding on the marketing program, a company must decide how much to adapt its marketing programproduct, communications, distribution, and priceto local conditions. At the product level, firms can pursue a strategy of straight extension, product adaptation, or product invention. At the communication level, firms may choose communication adaptation or dual adaptation. At the price level, firms may encounter price escalation and gray markets. At the distribution level, firms need to take a whole-channel view of the challenge of distributing products to the final users. In creating all elements of the marketing program, firms must be aware of the cultural, social, political, technological, environmental, and legal limitations they face in other countries.

5. Country-of-origin perceptions can affect consumers and businesses alike. Managing those perceptions in the most advantageous way possible is an important marketing priority. 6. Depending on the level of international involvement, companies manage their international marketing activity in three ways: through export departments, international divisions, or a global organization.

Applications
Marketing Debate: Is The World Coming Closer Together?
Many social commentators maintain that youth and teens are becoming more and more alike across countries as time goes on. Others, while not disputing that fact, point out that the differences between cultures at even younger ages by far exceed the similarities. Take a position: People are becoming more and more similar versus The differences between people of different cultures far outweigh their similarities.

Marketing Discussion
Think of some of your favorite brands. Do you know where they come from? Where and how they are made or provided? Do you think it would affect your perceptions of quality or satisfaction?
Marketing Spotlight: Starbucks Starbucks opened in 1971, at a time when coffee consumption in America had been declining for a decade. The decline stemmed from rivalry among the major coffee brands, which were competing on price. As a result, they were using cheaper coffee beans to reduce costs, which compromised the quality of the coffee. Starbucks' founders decided to experiment with a new concept: a store that would sell only the finest imported coffee beans and coffee brewing equipment. The original store did not sell coffee by the cup, only beans. You could get a good cup of coffee, but you had to make it yourself at home. Howard Schultz came to Starbucks in 1982 and saw a new possibility for the company. While in Milan on business, Schultz

walked into an Italian coffee bar and had an epiphany with his espresso. "There was nothing like this in America. It was an extension of people's front porch. It was an emotional experience," he said. He knew right away that he wanted to bring this concept to the United States. Schultz set about creating an environment for Starbucks coffeehouses that would reflect Italian elegance melded with American informality. Schultz envisioned that Starbucks would become a "personal treat" for its customers, a "Third Place"a comfortable, sociable gathering spot bridging the workplace and the home. Starbucks' geographical expansion throughout the United States was carefully planned. The management team agreed that all stores would be owned and operated by the company rather than as a franchise. In building a strong brand, Schultz knew that he and his executive team needed complete control to cultivate an unparalleled image of quality. In too many other companies, franchisees did business their own way. Franchisees could potentially sacrifice Starbucks' commitment to excellence in order to turn higher profits. Starbucks did not want to allow the corner-cutting that had caused the original decline in Americans' consumption of coffee. Starbucks employed a "hub" expansion strategy, in which coffeehouses entered a new market in a clustered group. For each region, a large city served as the hub. Teams of trained professionals supported the new cluster of stores. In the large hub market, the company rapidly opened 20 or more stores within the first two years. From the established hub, Starbucks stores then spread to new "spoke" markets: smaller satellite cities and nearby suburban locations. The joke about two Starbucks across the street from each other reflects Starbucks' strategy. The deliberate saturation often cannibalizes 30 percent of one store's sales by introducing a store nearby. But this drop in revenue is offset by efficiencies in marketing and distribution costs, and the enhanced image of convenience. A typical customer stops by Starbucks 18 times a month. No American retailer has a higher frequency of customer visits. Starbucks expanded to Tokyo in 1996. Although detractors said that fastidious tea-drinking Japanese would never buy coffee in paper cups, Starbucks proved them wrong. Locations in Japan have two and a half times the annual sales of those in the United States. There are now over 500 Starbucks locations in Japan, and the country is

the company's most profitable region anywhere. When expanding globally, Starbucks also used acquisitions. In 1998, it gained a foothold in the British coffee market by buying the London-based Seattle Coffee Company. In 2001, it made its first foray onto the Continent, opening locations in Switzerland and Austria and then Spain, Germany, and Greece. Interestingly, Starbucks is bucking the typical European coffeehouse trend by making its coffeehouses nonsmoking. About 40 percent of Europeans smoke. Critics said Starbucks would lose half of its market by prohibiting smoking at its coffeehouses, but Starbucks was unfazed. The first store in Vienna had 100,000 guests in the first two months. The controversial nonsmoking policy received a positive response because Starbucks couched it in terms of the coffee, not health. Signs in stores say "Aroma protection through smoke-free space" and then thank customers for not smoking. Howard Schultz stepped down as CEO in 2000, but he remains chairman and "Chief Global Strategist." Starbucks currently has over 7,400 stores, 1,460 of which are outside the United States in over 30 countries. Schultz eventually sees having 25,000 stores worldwide; he wants to see a Starbucks in every country in the world. But there's one country that especially has his eye: Italy, where the whole Starbucks concept began. Discussion Questions 1. What have been the key success factors for Starbucks? 2. Where is Starbucks vulnerable? What should it watch out for? 3. What recommendations would you make to senior marketing executives going forward? What should the company be sure to do with its marketing? Sources: Andy Serwer, "Hot Starbucks to Go," Fortune, January 26, 2004, pp. 6174; Cora Daniels, "Mr. Coffee: The Man Behind the $4.75 Frappuccino Makes the 500," Fortune, April 14, 2003, p. 139; Steven Erlanger, "An American Coffeehouse (or 4) in Vienna," New York Times, June 1, 2002, p. A1.

Notes
1. Kevin Lane Keller, "Red Bull: Managing a High Growth Brand," in Best Practice Cases in Branding, (Upper Saddle River, NJ: Prentice Hall, 2003); "Selling Energy," The Economist, May 9, 2002. 2. <http://www.ita.doc.gov/>. 3. "The List," BusinessWeek, April 21, 2003, p. 14 4. Michael E. Porter, Competitive Strategy (New York: The Free Press, 1980), p. 275.
5.

Charles Fleming and Leslie Lopez, "The Corporate ChallengeNo Boundaries: ABB's Dramatic Plan to Recast Its Business Structure along Global Lines: It May Not Be Easyor Wise," Wall Street Journal, September 28, 1998, p. R16; Richard Tomlinson, "Dethroning Percy Barnevik," Fortune, April 1, 2002.

6. <www.abb.com>. 7. Ron Lieber, "Give Us This Day Our Global Bread," Fast Company, March 2001, p. 158. 8. Jan Johanson and Finn Wiedersheim-Paul, "The Internationalization of the Firm," Journal of Management Studies (October 1975): 305322. 9. Stan Reid, "The Decision Maker and Export Entry and Expansion," Journal of International Business Studies (Fall 1981): 101112; Igal Ayal, "Industry Export Performance: Assessment and Prediction," Journal of Marketing (Summer 1982): 5461; Somkid Jatusripitak, The Exporting Behavior of Manufacturing Firms (Ann Arbor: University of Michigan Press, 1986). 10. Michael R. Czinkota and Ilkka A. Ronkainen, International Marketing, 5th ed. (New York: Harcourt Brace Jovanovich, 1999). 11. Igal Ayal and Jehiel Zif, "Market Expansion Strategies in Multinational Marketing," Journal of Marketing (Spring 1979): 8494.

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60. Jim Rendon, "When Nations Need a Little Marketing," New York Times, November 23, 2003. 61. Zeynep Gurhan-Canli and Durairaj Maheswaran, "Cultural Variations in Country of Origin Effects," Journal of Marketing Research 37 (August 2000): 309317. 62. Jan-Benedict E. M. Steenkamp, Rajeev Batra, and Dana L. Alden, "How Perceived Brand Globalness Creates Brand Value," Journal of International Business Studies 34 (2003): 5365. 63. Johny K. Johansson, "Global Marketing: Research on Foreign Entry, Local Marketing, Global Management," pp. 457483; Johnny K. Johansson, "Determinants and Effects of the Use of 'Made In' Labels," International Marketing Review (UK) 6, no. 1 (1989): 4758; Warren J. Bilkey and Erik Nes, "Country-of-Origin Effects on Product Evaluations," Journal of International Business Studies (SpringSummer 1982): 8999; "Old Wine in New Bottles," The Economist, February 21, 1998, p. 45; Zeynep Grhan-Canli and Durairaj Maheswaran "Cultural Variations in Country of Origin Effects," pp. 309317. 64. Gerry Kermouch, "Breaking into the Name Game," BusinessWeek, April 7, 2003, p. 54; "Haier's Purpose," The Economist, March 20, 2004, p. 72. 65. Chester Dawson, "The Americanization of Toyota," BusinessWeek, April 15, 2002, pp. 5254; "Twenty Years Down the Road," The Economist, September 14, 2002, pp. 6263. 66. Alex Taylor III, "BMW Turns More American Than Ever," Fortune, February 23, 2004, p. 42. 67. Dwyer, "Tearing Up Today's Organization Chart," pp. 8090. 68. Christopher A. Bartlett and Sumantra Ghoshal, Managing Across Borders (Cambridge, MA: Harvard Business School Press, 1989). 69. Betsy McKay, "Coke Hunts for Talent to Re-Establish Its Marketing Might," Wall Street Journal, March 6, 2002, p. B4.