Professional Documents
Culture Documents
International Marketing 6e
and
Summary 249
Key Terms 250
Discussion Questions 250
Chapter Quiz 251
Notes 252
Case 7-1 Prosperity Painting Equipment 253
Case 7-2 Volkswagen Phideon in China 256
8. Expansion Strategies and Entry Mode Selection 259
Chapter Objectives 259
8-1 Going International: Evaluating Opportunities 260
8-2 Control versus Risk in International Expansion 261
8-3 Deciding on the International Entry Mode 262
8-3a Indirect Exporting 262
8-3b Direct Exporting 264
8-3c Licensing 265
8-3d Franchising 266
8-3e Joint Ventures 269
8-3f Consortia 272
8-3g Wholly Owned Subsidiaries 272
8-3h Branch Offices 273
8-3i Strategic Alliances 274
Summary 276
Key Terms 277
Discussion Questions 277
Chapter Quiz 277
Notes 279
Case 8-1: Danone in a Bind 280
Case 8-2 sweetFrog’s Expansion to Egypt and the Dominican Republic 282
Part 4 Managing and Implementing the International Marketing Mix 284
9. Products and Services: Branding Decisions in International Markets 285
Chapter Objectives 285
9-1 Standardization versus Adaptation 286
9-1a Global Standardization 287
9-1b Regional Standardization 289
9-1c Global Localization 291
9-1d Mandatory Adaptation 292
9-1e Local, Nonmandatory Adaptation 293
9-2 Private-Label (Retailer) Brands 294
9-3 Global Branding and Country-of-Origin Information 294
9-3a Product-Country and Service-Country Stereotypes 296
9-3b Country Branding 296
9-3c Country of Origin and Ethnocentrism 297
9-3d The Brand Name 298
9-4 The Service Side: Tariff and Nontariff Barriers to Entry 299
9-5 Products, Services, and Culture 300
9-6 Protecting Brand Names 301
9-6a Identifying Types of Counterfeiting 301
9-6b Combating Counterfeiting 304
Preface
The sixth edition of International Marketing arrives at a time of considerable upheav-
al and uncertainty about international trade and globalization. The era of global trade agree-
ments and lower tariff barriers appears to be over – or, at minimum, this trend has stalled.
Notwithstanding that globalization and international trade were largely responsible for lift-
ing millions of people out of poverty, by 2016, trade and trade agreements had become
thorny political topics in Europe and in the United States. With the loss of so many manufac-
turing jobs in the U.S., trade had come to be considered as the main reason for the disap-
pearance of U.S. manufacturing jobs and the stagnation of middle class wages. In addition,
the global influence of multinational companies on local economies and government poli-
cies has become a major concern.
By late 2018, as the new edition of International Marketing was being finalized, the
U.S. and China were in the midst of a major rift over U.S. complaints about China’s trade
policies: unfair government subsidies, currency manipulation, and the theft of intellectual
property. Starting with U.S. tariff hikes on Chinese steel and aluminum exports, new tariffs
have been imposed by the U.S. on billions of dollars’ worth of Chinese goods. Not surpris-
ingly, this led to retaliatory tariffs by China on key U.S. exports. In addition, the U.S. finds
itself at odds with Canada and the European Union over trade and tariffs. The U.S. govern-
ment is also insisting on major changes to the NAFTA agreement with Canada and Mexico,
to reduce the current U.S. trade imbalances with the two countries. The U.S. has threatened
to pull out of NAFTA altogether if a satisfactory agreement could not be reached. Many
business leaders, academics, and public sector officials are worried about this escalation of
trade disputes. Some have suggested the possibility of an all-out global trade war, not seen
since the 1930s.
Notwithstanding these current controversies, international trade continues to grow.
People around the world seek expanded economic opportunities, improved standards of
living, and communities free from armed conflicts. Against this backdrop, the authors would
like to share a quote from one of the founders of the Thunderbird School of Global Manage-
ment.
“Borders frequented by trade seldom need soldiers.”
Dr. William Schurz, President
Thunderbird School of Global Management 1949-52
The sixth edition of International Marketing has been fully updated to provide anal-
yses about current economic and political challenges, trade disputes, and other develop-
ments in international marketing. In addition to updating the comprehensive materials
about multinational firms, the new edition features important discussions about interna-
tional marketing and small and medium-size exporting firms. The sixth edition also includes
new coverage on services exports and the booming international e-commerce and e-
payments sectors. The authors continue to expand the materials on international marketing
and developing countries, with a number of new illustrations focused on Latin America and
Africa.
All cases have been revised and updated to offer current company examples and
overviews of industry developments. Several new cases were added. Each chapter has at
least one case study that helps students apply the knowledge acquired in the chapter.
International Marketing reflects the authors’ teaching philosophy: presenting vivid,
real-world examples that help students to better understand international marketing theo-
ry. Professor Lascu shares her own perspectives as a product of different cultures who has
experienced and observed marketing on five continents, both as an expatriate and as a lo-
cal, in a free-market system and under a repressive, anti- consumerist command economy.
Professor Hiller has substantial experience with international trade promotion, as well as
business and management in Latin America that complements Dr. Lascu’s research back-
ground and extensive work in Europe and Asia.
ANCILLARY MATERIALS
Textbook Media is pleased to offer a competitive suite of supplemental materials for
instructors using its textbooks. These ancillaries include a Test Bank, PowerPoint Slides, and
an Instructor’s Manual. This text comes with a test bank created by the author, and it in-
cludes questions in a wide range of difficulty levels for each chapter. All Textbook Media
test banks offer not only the correct answer for each question but also a rationale or expla-
nation for the correct answer and a reference to the location in the chapter where materials
addressing the question content can be found. The Test Item Files are available in files that
are readily adaptable to the major Learning Management Systems. The software files allows
the instructor to easily create customized or multiple versions of a test and include the op-
tion of editing or adding to the existing question bank.
A full set of PowerPoint® Slides, written by the author, is available for this text. This
is designed to provide instructors with comprehensive visual aids for each chapter in the
book. These slides include outlines of each chapter, highlighting important terms, concepts,
and discussion points.
The Instructor’s Manual for this book has also been written by the author and offers
suggested syllabi for 10- and 14-week terms; lecture outlines and notes; in-class and take-
home assignments; recommendations for multimedia resources such as films and Web sites;
and long and short essay questions and their answers, appropriate for use on tests.
The authors express their deep gratitude for the immense support received in the
process of developing the sixth edition of International Marketing. They would especially
like to thank Tom Doran and Ed Laube for their unrelenting support and creativity and for
their exacting oversight of this project for almost a decade. They would also like to thank
the instructors who have used previous editions. Dana Lascu expresses thanks to her family,
to Bram, Michael, and Daniel Opstelten, and to her parents, Lucia and Damian Lascu, for the
formidable international experiences that this book is based on and for creating and facili-
tating the foundations for this text. George Hiller would like to thank his wife, Laura, for her
support, and also to acknowledge his inspiring students and colleagues at the University of
Richmond.
The Introduction to
International Marketing
Chapter 1
of International Marketing
Learning Objectives
Chapter Outline
Learning Objectives
1-1 The Importance of International Marketing
1-2 Levels of International Marketing Involvement
1-3 The Ethnocentric, Polycentric, Regiocentric, and Geocentric Framework
and International Marketing Concepts
After studying
1-3a Ethnocentric Orientation
this chapter, 1-3b Polycentric Orientation
you should be able to: 1-3c Regiocentric Orientation
1-3d Geocentric Orientation
1-4 Drivers of International Expansion
• Define international marketing
1-4a Drivers in the Business Environment
and identify the different levels
1-4b Firm-Specific Drivers
of international involvement.
1-5 Obstacles to Internationalization
1-5a Self-Reference Criterion
• Describe the different company
orientations and philosophies
1-5b Government Barriers
toward international marketing. 1-5c Ethnocentrism
1-5d International Competition
• Identify environmental and firm-
specific drivers that direct firms Summary
toward international markets. Key Terms
Discussion Questions
• Identify obstacles preventing Chapter Quiz
firms from engaging in successful Notes
international ventures. Case 1-1 Alpaca Luxe: Marketing Opportunities in the Emerging Market of
Mongolia
Case 1-2 Zhang National Steel Company
Chapter 1 -3- Scope, Concepts and Drivers of
International Marketing
ket opportunities, to keep pace with competition, and to maximize the potential of their product
mix.
Throughout history, companies have become leaders of industry despite the smaller size
and limited markets of their home countries. It should be noted, however, that an international
presence was essential for their success. Take, for example, successful global companies from the
Netherlands, a small country in Western Europe, that are giants of industry worldwide. Among
them are Philips, a leading electronics manufacturer; Royal Ahold, a large retailer; Royal Dutch Shell,
a major Dutch-British oil company; and Unilever, a Dutch-British leading consumer products compa-
ny. Japan, also a comparatively small country, boasts a number of firms that are industry leaders.
Among them are Mitsui and Mitsubishi (electronics, banking, import-export, among others), Dentsu
(advertising), Sony and Panasonic (electronics), and Ito Yokado (retail).
International companies such as Apple, General Motors, Mitsubishi, Microsoft, and Procter
& Gamble earn profits greater than the gross domestic product of many low-income countries.
U.S.-based Fortune 500 companies employ almost thirty million workers around the world. More
than 300,000 US companies export. Nearly 98 percent of these firms are smaller and medium-size
companies (SMEs) with fewer than 500 employees.1 Companies find that products in the late stage
of their life cycle can experience a new life in emerging markets in middle-and low-income coun-
tries.
Avon in China
China may be the most difficult place to be an Avon Lady: The sign-up process takes many
weeks, and candidates must take a written test on China’s sales regulations and attend a related
class. Then they have to abide by many regulations, including a cap on sales commission. But be-
ing an Avon Lady is at least an option now: China lifted its ban on direct sales in 2005, after being
required to liberalize its retail industry.
In spite of these restrictions, however, Avon
has been doing reasonably well in China, reporting
double-digit increases in sales for the company, as it
changed gears to focus primarily on store sales – un-
til recently. In 2012, Avon was accused of breaching
the U.S. Foreign Corrupt Practices Act, promoting
their business interests by bribing Chinese govern-
ment officials. And its reputation suffered subse-
quently, when Coty, the fragrance company, re-
neged on a buyout offer. By 2015, Avon paid nearly
$350 million on legal challenges and compliance fees,
more than double the penalties it incurred. And yet,
despite these challenges, Avon has been able to pen-
etrate markets in large and small cities in even the
most remote areas in China. In Figure 1-1, an Avon
store in Lhasa, Tibet, has a prominent central loca-
tion and a local clientele vying for Western beauty
products.2 1.1 Avon display at 13,000 feet
in Lhasa, Tibet.
To excel in international business, companies must constantly monitor the international en-
vironment for opportunities. For over two decades, privatization in countries previously dominated
by government monopolies has made it possible for multinationals to compete for local energy,
airline, railway, and telecommunications industries. In the future, postal services might constitute
the new competitive territory of international companies. Already, in many markets, post offices are
enterprising competitors to established private sector firms, increasingly and effectively competing
not only for mailing services, but also for banking services.
1-3 Consumers North America and Europe have a strong preferences for pastries – croissants, danishes,
brioches, you name it. Thus they are similar in preferences. Where they differ is in their tolerance for
high prices: in Berlin upscale stores (1-3a), such pastries are about $2.00, whereas in similar stores
in Helsinki (1-3b), they cost about almost $6.00.
Global marketing involves marketing activities across different countries without focusing
primarily on national or regional segmentation. Global marketing is possible due to the emergence
of global consumer segments with similar preferences (see Figures 1-3a and 1-3b) and due to effi-
cient global allocation of company talent and resources. A company engaging in global marketing
has a geocentric philosophy to internationalization.
It should be noted, however, that the terms defined in the preceding paragraphs are often
used interchangeably by nonbusiness and business alike—even by international managers. Interna-
tional, global, and multinational are used to refer to any company crossing borders, without particu-
lar reference to the global strategy used. The descriptions of the levels of international marketing
involvement should primarily guide one to understand when distinctions are made. Another widely-
used approach to distinguishing between companies’ international orientation and philosophy is
the ethnocentric, polycentric, regiocentric, and geocentric (EPRG) framework.
rior to foreign ones and therefore provide the most effective framework for the company’s over-
seas involvement; consequently, international operations and customers are considered secondary
to domestic operations and customers.4
Ethnocentric firms are likely to be highly centralized and consider that the purpose of their
international operations is to identify markets that could absorb surplus domestic production; alter-
natively, international operations could represent a cash cow that generates revenue and necessi-
tates only minimal attention and investment. As a result, plans for international markets are devel-
oped primarily in-house by an international division and are similar to those for the domestic mar-
ket.5
Firms in the tobacco industry,6 as well as firms at the forefront of technology, tend to have
an ethnocentric marketing orientation. It should be mentioned that, often, ethnocentric firms ap-
proach globalization by internationalizing at the level of the function, rather than the firm; for ex-
ample, the marketing department may have a geocentric strategy even if top management has an
ethnocentric orientation.7 Alternatively, in the case of Wal-Mart, while merchandise is fully adapted
to local preferences, staffing clearly indicates an ethnocentric philosophy; top management come
from the company’s headquarters, in Arkansas.
In many cases, U.S. firms sell American brands along with their related U.S. lifestyles and
traditions—for example, blue jeans and entertainment are often marketed internationally using
marketing themes and strategies used in the U.S.
Each subsidiary has its own marketing plans and objectives and operates autonomously as
an independent profit center on an individual country basis to achieve its goals; all marketing activi-
ties are performed in each country independently of the company headquarters.8 To address local
consumer needs, marketing research is conducted independently in each overseas market, and
products are fully adapted to meet these needs. Alternatively, separate product lines are developed
to meet the needs of the individual markets.
In the process of developing individual strategies for each market, the company does not
coordinate activities across the different countries and cannot benefit from economies of scale that
such coordination would allow. Furthermore, numerous functions are duplicated, and, ultimately,
final product costs are higher to the end consumer. For decades, Ford used a polycentric strategy in
meeting the needs of budget-conscious consumers by developing a Ford Escort automobile for the
United Kingdom that looked different from the one sold in the United States or Southeast Asia. 9
Currently, the Ford automobile addressing the needs of the budget-conscious consumer, the Ford
Focus, looks identical in each market: Ford has adopted a geocentric approach to product develop-
ment.
rope, McDonald’s uses Polish potatoes, which do not lend themselves to a thin, McDonald’s-style
cut French fry but are touted to be the best in the region. It also uses local beef from the European
regions not affected or threatened by livestock disease. The company is also sensitive to the ban on
genetically-modified foods in the European Union. In India or Pakistan, for example, McDonald’s
serves lamb or vegetarian burgers. Throughout the world, it provides a uniform service that offers,
in addition to the fast food it is known for, clean restrooms, air conditioning, and service with a
smile—even in markets where a smile is a rare occurrence in a service encounter.
IBM
IBM has been going through massive reorganizations to keep abreast of the ever-
changing international market; IBM is a dynamic geocentric company. Under IBM’s old system,
a corporate customer with operations in several countries had to contract with small IBM offic-
es in each country, and each IBM office had its own regulations. The IBM organization was, at
the time, polycentric. The reorganization placed IBM’s
employees into 14 customer-focused groups, such as
financial services, entertainment, and oil and gas, to be
able to work with a central sales office to have IBM
computers installed in the entire client organization.
Organizing on the basis of function, rather than on
country of operations, demonstrates a geocentric mar-
ket orientation. Currently, the company’s main focus is
on what it considers its strategic imperatives, which
include analytics, cloud, mobile, social, and security
products. 11
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B E F O R E Y O U S TA RT
DO
THIS....
1 Select baking sheets (cooky sheets
2 If pan with sides is used for cooky
or pans) as indicated in each recipe.
sheet, turn it upside-down and bake
Heavy or double sheets (two sheets of
cookies on the bottom ... (insures
the same size placed one on top of
even browning). Grease cool pans as
the other) prevent cookies from
indicated in recipes ... with unsalted
browning on the bottom too much and
shortening.
too quickly.
Miscellaneous
25
Cookies
Rolled
30-39
Cookies
Molded 25,
Cookies 40-42
Stir in ...
Stir in ...
MINCEMEAT COOKIES
Extra quick, no extra fruits needed ... they are
in the mincemeat.
Follow recipe above—and mix into
the dough 2 cups well drained
mincemeat.
APPLESAUCE COOKIES
Yummy applesauce cake in cooky form.
Follow recipe above—except add 1 tsp. cloves with other spices.
Mix into the dough 2 cups well drained thick applesauce, 1 cup cut-
up raisins, and ½ cup coarsely chopped nuts. Bake 9 to 12 min.
Stir in ...
Fold in ...
3 cups WHEATIES
Stir in ...
CHOCOLATE ICING
Melt together over hot water 1
tbsp. butter and 1 sq.
unsweetened chocolate (1 oz.).
Stir in 3 tbsp. top milk and 1½
cups sifted confectioners’ sugar. to give iced cookies a professional
Thin with cream to make glossy air: Place the same amount of
and easy to spread. icing (1 tsp.) on center of each.
Then, with a spatula, spread the
amount: Icing for about 30 icing with circular motion in pretty
cookies. swirls.
FRUIT-AND-NUT DROPS
Follow recipe above—except sift with dry ingredients 1 tsp.
cinnamon, ½ tsp. cloves, ¼ tsp. nutmeg. Mix into the dough 1 cup
cut-up dates (or raisins) and 1 cup cut-up nuts.
note: The spices may be omitted.
Molasses ‘n’ spice, my how nice!
Stir in ...
Stir in ...
★ MONKEY-FACED COOKIES
You’ll be amused by the droll faces.
In an antique shop, pasted on the
under side of a drawer in an old table,
a radio friend of Fultonville, New York,
discovered this recipe written in faded
ink in old-fashioned script: “for Elsa.”
Mix together thoroughly ...
Stir in ...
COCONUT JUMBLES
Follow recipe above—and mix into the dough 1 cup moist
shredded coconut.