Chapter 1 Activity

When doing business in Indonesia, when you hear your business counterpart say "belum," it means

"not yet." In Indonesia, the term "belum" means "not yet."

No Direct Foreign Marketing

A company in this stage does not actively cultivate customers outside national boundaries; however, this company's products may reach foreign markets.

Global Marketing

Companies at this stage treat the world as one market. Market segmentation decisions are no longer focused on national borders. Instead, market segments are defined by income levels, usage patterns, or other factors that frequently span countries and regions.

International Marketing

Companies in this stage are fully committed to international marketing activities. Such companies seek markets all over the world and sell products for markets in various countries.

Regular Foreign Marketing

Firm has permanent productive capacity devoted to the production of goods and services to be marketed in foreign markets.

This mini case introduces one of the fundamental reasons for global trade, namely peace. It describes different companies and sectors and the way they influence peace.Internationalization of American business is accelerating. The globalization of markets and competition requires that global managers be attentive to the global environment. In this environment, global managers must recognize the link between commerce and peace. The means by which international commerce engenders peace and how companies go about internationalizing their marketing activities are dynamic, difficult processes that have tremendous rewards.Read the case below and answer the questions that follow.Global PerspectiveGLOBAL COMMERCE CAUSES PEACEGlobal commerce thrives during peacetime. The economic boom in North America during the late 1990s was in large part due to the end of the Cold War and the opening of the formerly communist countries to the world trading system. However, we should also understand the important role that trade and international marketing play in producing peace.Boeing Company, one of America's largest exporters, is perhaps the most prominent example. Although many would argue that Boeing's military sales (aircraft and missiles) do not exactly promote peace, over most of the company's history, that business has constituted only about 20-25 percent of the company's commercial activity. The company still counts customers in more than 150 countries, and its 169,000 employees work in 65 countries.1 The new 787 Dreamliner includes parts from around the world, including Australia, France, India, Italy, Japan, Russia, and Sweden. Its more than 12,000 commercial jets in service worldwide carry about 1 billion travelers per year. Its NASA Services division is the lead contractor in the construction and operation of the 16-country International Space Station, first manned by an American and two Russians in the fall of 2000. The Space and Intelligence Systems Division also produces and launches communications satellites affecting people in every country.All the activity associated with the development, production, and marketing of commercial aircraft and space vehicles requires millions of people from around the world to work together. Moreover, no company does more 2 to enable people from all countries to meet face-to-face for both recreation and commerce. All this interaction yields not just the mutual gain associated with business relationships but also personal relationships and mutual understanding. The latter are the foundation of global peace and prosperity.Another group of companies that promotes global dialogue and therefore peace is the mobile phone industry. By 2015, the number of mobile phone subscribers exceeded 7.0 billion. Samsung (South Korea), Nokia (Finland), and Apple (United States) are the market leaders.Individuals and small companies also make a difference—perhaps a subtler one than large multinational companies, but one just as important in the aggregate. Our favorite example is Daniel Lubetzky's company, PeaceWorks. Mr. Lubetzky used a fellowship at Stanford Law School to study how to foster joint ventures between Arabs and Israelis. Then, following his own advice, he created a company that combined basil pesto from Israel with other raw materials and glass jars supplied by an Arab partner to produce the first product in a line he called Moshe & Ali's Gourmet Foods. The company now sells four different product lines in 15,000 stores in the United States and has its headquarters on Park Avenue in New York, as well as business operations in Israel, Egypt, Indonesia, Turkey, and Sri Lanka. Again, beyond the measurable commercial benefits of cooperation between the involved Arabs, Israelis, and others is the longer-lasting and more fundamental appreciation for one another's circumstances and character.International marketing is hard work. Making sales calls is no vacation, even in Paris, especially when you've been there 10 times before. But international marketing is important work. It can enrich you, your family, your company, and your country. And ultimately, when international marketing is done well, by large companies or small, the needs and wants of customers in other lands are well understood, and prosperity and peace are promoted along the way. 3Sources: For more details, see http://boeing.com; http://airbus.com;http://peaceworks.com. Heidi Vogt, "Making Change: Mobile Pay in Africa," The Wall Street Journal, January 2, 2015, p. B6.Cell phone sales data are available at http://www.mobithinking.com.1 Boeing's 2014 Annual Report (http://boeing.com).2 The European commercial aircraft manufacturer Airbus is beginning to catch up, employing 63,000 people around the world (see Airbus's 2014 Annual Report, http://www.airbus.com).3 In response to criticisms of globalization catalyzed by the riots in Seattle in 1999, a growing literature argues for trade as a fundamental cause of peace. For a variety of such arguments, see Jagdish Bhabwati, In Defense of Globalization (Oxford: Oxford University Press, 2004); Thomas L. Friedman, The World Is Flat (New York: Farrar, Straus, and Giroux, 2005); Clifford J. Schultz III, Timothy J. Burkink, Bruno Grbac, and Natasa Renko, "When Policies and Marketing Systems Explode: An Assessment of Food Marketing in the War-Ravaged Balkans and Implications for Recovery, Sustainable Peace, and Prosperity," Journal of Public Policy & Marketing 24, no. 1 (2005), pp. 24-37; William Hernandez Requejo and John L. Graham, Global Negotiation: The New Rules (New York: Palgrave Macmillan, 2008), Chapter 13; Steven Pinker, The Better Angels of Our Nature: Why Violence Has Declined (New York: Viking, 2011; Hernando de Soto, "The Capitalist Cure for Terrorism," Wall Street Journal October 10, 2014, online.) As stated in the case, "All the activity associated with the development, production, and marketing of Boeing's commercial aircraft and space vehicles requires millions of people from around the world to work together. Moreover, no company does more to enable people from all countries to meet face-to-face for both recreation and commerce." Which of the following can most reasonably be concluded from this information and the fact that this process has helped Boeing to become a highly successful company with happy employees?

Interactions between people yield mutual understanding which is the foundation of global prosperity.

Starbucks—Going Global FastThis activity is important because as a marketing manager working in a global environment, you must be able to make decisions on global market entry. These decisions include deciding which countries to enter, which should be entered first, which are longer-term decisions, and what adaptations for cultural or business environment reasons will need to be made.The goal of this activity is to demonstrate your understanding of the case and to apply international marketing concepts to recommend a course of action.Read the case below and answer the questions that follow.In 1999, Starbucks Corp. had 281 stores abroad. Today, over one-third of its 19,000 stores are located in foreign countries.Starbucks is hard-pressed to be profitable in a home market that is quickly becoming saturated. The firm's 12,000 locations in the United States are mostly in big cities, suburbs, and shopping malls. Starbucks is concerned about cannibalization of its own store sales by further expansion. Indeed, some analysts gave Starbucks only a few years before it saturates the U.S. market.To build further returns, Starbucks has chosen to export its concept aggressively. The chain now operates more than 7,000 international outlets in about 60 countries. That leaves plenty of room to grow. Recently, the chain has opened stores in Vienna, Zurich, Madrid, Berlin, and Jakarta, in addition to Mexico and Puerto Rico. But global expansion poses huge risks for Starbucks. For example, it makes less money on each overseas store because most are operated with local partners. While that makes it easier to start up on foreign turf, it reduces Starbucks' share of profits to about 20 to 50 percent.While Starbucks is well-known and well-liked in its home market, its overseas image for the most part seems new, and to many young people, very cool. In Vienna, where Starbucks had a gala opening for its first Austrian store, Helmut Spudich, a business editor for the paper Der Standard, predicted that Starbucks would attract a younger crowd than the established cafés. "The coffeehouses in Vienna are nice, but they are old. Starbucks is considered hip," he says.But if Starbucks can count on its youth appeal to win a welcome in new markets, such enthusiasm cannot be counted on indefinitely. In Japan, the company beat even its own bullish expectations, growing to over 900 stores after starting in Tokyo in 1996. Affluent young Japanese women like Anna Kato, a 22-year-old Toyota employee, loved the place. "I don't care if it costs more, as long as it tastes sweet," she says, sitting in the world's busiest Starbucks, in Tokyo's Shibuya district. Yet same-store sales growth has fallen in Japan, Starbucks' top foreign market, as rivals offer similar fare. In England, Starbucks' second-biggest overseas market, with over 400 stores, imitators are popping up left and right to steal market share.Entering other big markets may be tougher yet. The French seem to be ready for Starbucks' sweeter taste, says Philippe Bloch, cofounder of Columbus Cafe, a Starbucks-like chain. But he wonders if the company can profitably cope with France's arcane labor regulations and benefits. And in Italy, the epicenter of European coffee culture, the notion that the locals will abandon their own 200,000 coffee bars for Starbucks strikes many as ludicrous. For one, Italian coffee bars prosper by serving food as well as coffee, an area where Starbucks struggles. Also, Italian coffee is cheaper than U.S. coffee and, say Italian purists, much better. Despite such concerns, Starbucks finally opened its first shop in Milan in 2018. It had a lot to prove when entering Italy. A skeptical Carlo Petrini, founder of the anti-globalization movement Slow Food, sniffed that Starbucks' "substances served in styrofoam" won't cut it (Starbucks, of course, uses paper cups).In a 2005 bid to boost sales in Japan, its largest international market, Starbucks expanded its business beyond cafés and into convenience stores, with a line of chilled coffee in plastic cups. The move offers Starbucks a chance to grab a chunk of Japan's $10 billion market for coffee sold in cans, bottles, or vending machines. It also has worked with Japanese beverage maker Suntory to develop and sell bottled and canned coffee. These products are adapted to local taste and are less sweet than U.S. drinks.Starbucks opened its first store in Africa in 2016, hoping to tap into an expanding consumer class, opening just 12 to 15 stores initially. By contrast, in China, by 2018 they were opening a new store every 15 hours, with 3,000 planned over the next few years. Shanghai now boasts the largest Starbucks store in the world. Starbucks is pushing "a coffee culture in China where the reward will be healthy, long-term, profitable growth for decades to come," CEO Kevin Johnson said. Which of these is not true about Starbucks' entry strategy in Vienna and Milan?

Since Italy is the birthplace of espresso and so many other coffee drinks, Starbucks knew that it would be easy to break into that country.

Samsung is a _____ company.

South Korean

Which of these is a true statement about Starbucks' success in the Far East?

Starbucks grew rapidly in Japan, since its first store in 1996, and is planning thousands of stores in China.

Which is a true statement about Starbucks' entry into the Far East?

Starbucks has entered convenience stores in Japan and also partnered with a local beverage company to develop canned coffee.

Infrequent Foreign Marketing

Temporary surpluses caused by variations in production levels or demand may result in infrequent marketing overseas.

The packaging of Oreos changes from country to country because of

buying habits and pantry size.

Branding is a controllable element as well. Branding of the Oreos and company affiliation may change from country to country. This is done because the association with a trusted brand can

help sales.

The video you are about to watch describes the many aspects of marketing "Oreo" cookies globally. Oreos are manufactured by Kraft Foods. As you watch the video, pay attention to how this brand acts as an example of global marketing.At the global marketing level, the most profound change is the orientation of the company toward markets and associated planning activities. At this stage, companies treat the world, including their home market, as one market. Market segmentation decisions are no longer focused on national borders. Instead, market segments are defined by income levels, usage patterns, or other factors that frequently span countries and regions. As an example of controllable elements, Kraft has changed Oreos to suit particular countries. How are consumer tastes and expectations regarding Oreos addressed in China and Venezuela? In China, Oreos are ___________; in Venezuela ______________ is used.

less sweet; milk chocolate