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Marketing Across Borders:
It’s a Big, Big World
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Marketer’s Toolkit:
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The 10 Strategies You Need to Succeed
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ISBN-10: 1-4221-0265-3
ISBN-13: 978-1-4221-0265-7
2653BC
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Copyright 2006 Harvard Business School Publishing Corporation
All rights reserved
Printed in the United States of America
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This chapter was originally published as chapter 12 of Marketer’s Toolkit,
copyright 2006 Harvard Business School Publishing Corporation.
No part of this publication may be reproduced, stored in or introduced into a retrieval system,
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permission should be directed to permissions@hbsp.harvard.edu, or mailed to Permissions,
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12
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Marketing Across Borders
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Key Topics Covered in This Chapter
• Approaches to distribution
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l o b a l t ra d e i s large and growing. In 2004 the
United States alone exported more than $1.1 trillion in
goods and services and imported almost $1.8 trillion.
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Global trade can also be profitable. U.S. companies, for example, raked
in $315 billion in overseas profits during 2004, according to the U.S.
Bureau of Economic Analysis. That amount was up 26 percent from
2003 and far outpaced profit growth from domestic operations.
Growth in global trade has been facilitated by better and cheaper
communications, improved shipping, rising incomes in formerly
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poor regions, the removal of many trade restrictions, and the rise of
manufacturing in places such as South Korea and China. Indeed,
China’s booming steel industry has created such demand for raw ma-
terials that iron ore mines in northern Minnesota—half a world
away from the blast furnaces—have sprung back to life after decades
of decline.
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If they are not doing so already, companies look over their ram-
parts and wonder, Should we be marketing abroad? Could we? As
with all marketing questions, the answers should be based on solid re-
search and analysis—the same type of opportunity-seeking analysis
described earlier in this book. You should ask yourself these questions:
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Marketing Across Borders 3
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• Must we alter our products to satisfy local preferences?
• How can we communicate effectively with people of different
cultures?
Global marketing is a big subject—too big to be covered in this
overview book. Consequently, our goal here is to examine a limited
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number of the issues that face any company considering marketing
abroad, using the marketing mix as a reliable guide.
Earlier, we described the four P’s of the marketing mix—prod-
uct, place, price, and promotion—as the tools companies use to pur-
sue their objectives in target markets. Fortunately, these tools are as
useful in global commerce as they are in domestic commerce. This
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chapter revisits elements of the marketing mix and discusses their
relevance to marketing across borders.
Product Decisions
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are narrow and petrol prices are sky-high. Nor could Britain’s left-
hand automobiles come to America without alterations.
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4 Marketer’s Toolkit
Still, there were many signs that product universality was on the
way. One needed only observe the large and once fragmented U.S.
market to appreciate that geographic diversity was giving way to ho-
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mogeneity with each passing year. Krispy Kreme donut shops, once
icons of Southern living, appeared in Boston, Las Vegas, and Hon-
olulu. Seattle’s Starbucks quickly spread to three thousand locations
across the country. The Home Depot and Wal-Mart stores were
cropping up everywhere. Many regional and local brands had al-
ready succumbed to national brands. It seemed logical that this trend
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would extend to the global stage.
Thus far (and to the relief of many consumers), this homoge-
nization has made much less progress than Levitt anticipated. Re-
flecting on Levitt’s thesis twenty years later, Harvard marketing
professor John Quelch postulated that a global economic slump and
anti-American sentiment had put a damper (temporarily) on the
move toward global brands.2 This lack of progress, if that’s the right
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phrase, should caution marketing managers as they make product
decisions. Will buyers in foreign markets respond favorably to the
same products, packaging, and promotion as do domestic cus-
tomers? If not, to what extent must offerings be customized for for-
eign tastes and requirements?
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Marketing Across Borders 5
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Asian homes and rooms are generally smaller than those in America,
and energy prices are much higher. This means that kitchen and
laundry appliances must be more compact and energy efficient.
Products in many categories, however, can be distributed world-
wide without problems. These include many industrial products and
consumer products that target young buyers. The youth market,
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more than other consumer segments, is very accepting of global
products if they are “the latest thing” and “cool.” Swatch watches,
cell phones, and Sony’s PlayStation fit this description. Products
used outside the home tend to be less culture-bound.4
FIGURE 12-1
Production Market
efficiency suitability
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Costs Revenues
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6 Marketer’s Toolkit
It’s the old trade-off of mass production and customization, this time
played in a different arena.
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The Global Product Platform
One way around the trade-off between efficiency and market suit-
ability is to design a global product platform that can be altered in-
expensively to accommodate the requirements of different national
markets.
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The global steam iron designed by Sunbeam and its then inter-
national affiliate, Rowenta, provides an early example. In this case,
engineers, marketers, and executives of the two companies were
brought together to review market research and to study the prod-
ucts of key competitors. Two committees were created: a marketing
committee and a technical committee. The former was charged
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with determining the feature set required by customers in different
markets; the latter’s job was to create a design capable of providing
those features and satisfying regulatory standards in all national mar-
kets. That design would have to establish the product as the low-cost
leader. The technical committee had to develop a set of specifica-
tions capable of satisfying electrical safety codes in all major markets.
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Marketing Across Borders 7
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Promotion
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do the other elements of the marketing mix. It touches the percep-
tions and psyches of customers, which are closely linked with cul-
ture, traditions, and social expectations.
Thus, a Western cosmetics maker cannot produce a TV com-
mercial showing a scantily clad woman applying makeup and run it
in parts of the Islamic world, where it would be viewed as scan-
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dalous. So, here again, you are faced with a trade-off between the
cost efficiencies of standardized promotional materials and more
costly, but more effective, customized versions.
Some companies have gotten around this trade-off by producing
ads having universal appeal. A prime example is Coca-Cola’s “I’d
like to teach the world to sing” commercial, first launched in 1971.
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ing themes with Coca-Cola. The ad was a huge success. The song
itself was so popular that a non-Coca-Cola version was produced,
featuring a popular singing group of the time, and released in many
languages. Both the recording and its sheet music were huge hits.6
Qantas, an Australian airline company, did something similar in
the years that followed. It developed a lavishly filmed television com-
mercial showing a chorus of children set against a background of
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8 Marketer’s Toolkit
cultural values. After it was in the can, the original English voice-over
could be altered to suit other markets.
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Which approach to promotion is most suited to your products,
goals, and overseas markets? The cheapest approach is to spin off
your existing media ads, simply substituting the local language. Al-
ternatively, you can adapt the same ads to suit specific markets. Or
you could go for universality from the very start. Each approach is
bound to produce a different impact.
foreign sales and gain confidence in your ability to manage and mar-
ket abroad.
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Marketing Across Borders 9
FIGURE 12-2
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Simple Complex
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might begin by hiring a South Korean national to represent its prod-
ucts to original equipment makers (OEMs) in that country. As the
volume of sales increases, the German company might see the wis-
dom of creating a South Korean subsidiary to sell its German-made
goods and to design, manufacture, and sell components that meet
the exact specifications of Korean OEMs.
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Price
What should you charge for your product in newly targeted foreign
markets? Pricing in global markets is complex because of many fac-
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Finnish firm for 70 euros. Customers, of course, are equally free not
to buy them at those prices.
On the one hand, exporters are justified in charging more to re-
coup the costs of tariffs and transportation. But in the end, what the
market will bear is the ultimate determinant of what the price
should be. There is no inherent right to any particular profit margin.
As long as antidump rules are observed, you are free to follow
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10 Marketer’s Toolkit
the hope of capturing market share. Or you can price high if cus-
tomers perceive the product to be unique, exotic, or superior.
One of the pitfalls of differential pricing is that it can create arbi-
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trage situations that can undermine your distribution arrangements.
These are generally called gray markets. Consider this hypothetical
example:
Gizmo Ceramics, a British firm, has distributors in the United States
and Mexico and sells its product in each country for $100 per case.To
meet its high labor and operating costs, the U.S. distributor must resell
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the product to local retailers at $175 per case, whereas the Mexican dis-
tributor has been prospering by selling the same items to Mexican re-
tailers for $125 per case—a difference of $50. (Note: U.S. dollars are
used in this example to avoid confusion.) A number of U.S. retailers of
Gizmo products figure this out and begin placing all their orders with
the Mexican distributor, saving $50 on each case, minus the incremen-
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tal shipping cost. Soon, the U.S. distributor goes out of business, upset-
ting Gizmo’s distribution scheme.
Theoretically, there is nothing wrong with a gray market when
the losers add no value to justify their higher prices. Economists
would even say that the gray market creates more efficiency. How-
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makes it possible for buyers to see and take advantage of low prices
wherever they may be found.
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Marketing Across Borders 11
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ground in the foreign market—a sales office, a joint venture com-
pany, or a subsidiary. Who, for example, should determine design,
packaging, and naming of the product—the people back in Cleve-
land, or the subsidiary operating out of Madrid? Who should com-
mission and approve media advertising? The price of your product?
There are, of course, no absolutely right or wrong answers to
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these questions. In the end, they depend on the situation, your ap-
proach to centralization versus decentralization, and your experi-
ence in overseas markets. Some companies have headquarters-based
product-line managers who make all decisions, foreign and domes-
tic, for their lines. This approach enhances the ability to leverage
corporatewide assets, but perhaps at the cost of losing the tacit
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knowledge that only people closer to their markets can have.
Philip Kotler describes three strategies for organizing the cross-
border effort and its many decisions:7
• Global. This approach treats the entire world as a single mar-
ket. Of necessity it emphasizes a standard approach to product
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12 Marketer’s Toolkit
FIGURE 12-3
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Home Control Local Control
Product
R&D
Manufacturing
Material sourcing
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Packaging decisions
Product-line management
Pricing
Promotion
Brand development
Advertising
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Sales
Distribution
Source: John A. Quelch and Edward J. Hoff, “Customizing Global Marketing,” Harvard Business Review,
May–June 1986. Adapted with permission.
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Summing Up
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Marketing Across Borders 13
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subsidiary in a country or region.
• Transportation costs and tariffs often result in products being
priced differently in different national markets. This can create
gray markets.
• Companies that market across borders must determine where
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decisions on pricing, product design, distribution, and promo-
tion will be made.
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14 Notes
Chapter 12
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1. Theodore Levitt, “The Globalization of Markets,” Harvard
Business Review, May–June 1983, 92–102.
2. John A. Quelch, “The Return of the Global Brand,” Harvard
Business Review, August 2003, 22–23.
3. Philip Kotler, Marketing Management, millennium edition
(Upper Saddle River, NJ: Prentice Hall, 2000), 367.
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4. John A. Quelch and Edward J. Hoff, “Customizing Global
Marketing,” Harvard Business Review, May–June 1986, 59–68.
5. The Sunbeam story was told to Richard Luecke by Alvin
Lehnerd, a former Sunbeam executive, and later recounted in Marc
H. Meyer and Alvin P. Lehnerd, The Power of Product Platforms (New
York: Free Press, 1997), 105–117.
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6. The full story of this ad—one of the most successful in his-
tory—is nicely told at www2.coca-cola.com/heritage/cokelore_
hilltop_include.html.
7. Kotler, Marketing Management, 387–388.
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