7<\/strong><\/td>\n| Understanding and Reaching Global Consumers and Markets<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n | LEARNING<\/small>\u00a0OBJECTIVES<\/small><\/strong><\/p>\n After reading this chapter you should be able to:<\/p>\n LO 7-1<\/span><\/span>Describe the nature and scope of world trade from a global perspective and identify the major trends that have influenced world trade and global marketing.\u00a0<\/span><\/p>\n LO 7-2<\/span><\/span>Identify the environmental forces that shape global marketing efforts.<\/span><\/p>\n LO 7-3<\/span><\/span>Name and describe the alternative approaches companies use to enter global markets.<\/span><\/p>\n LO 7-4<\/span><\/span>Explain the distinction between standardization and customization when companies craft worldwide marketing programs.<\/span><\/p>\n BUILDING<\/small>\u00a0A BILLION<\/small>\u00a0DOLLAR<\/small>\u00a0BUSINESS IN<\/small>\u00a0INDIA THE<\/small>\u00a0DELL<\/small>\u00a0INC<\/small>. WAY<\/small><\/strong><\/p>\n Why did Dell Inc. embark on a bold global growth initiative in 2007? In the words of Steve Felice, former president of Dell Asia-Pacific and Japan, \u201cOur success was going to be largely dependent on our ability to expand globally.\u201d<\/p>\n Dell\u2019s global initiative focused on emerging economies in Asia, Africa, and Latin America. Compared with mature economies in North America and Western Europe, emerging economies offered significant growth potential, according to Michael Dell, Dell\u2019s founder and chief executive officer. And Dell\u2019s global strategy has proven successful. India is a major growth market for Dell Inc. and posts annual sales over $1.5 billion. In 2013, Dell employed some 25,000 people in India, which represented about one-fourth of its global workforce.<\/p>\n Dell\u2019s global initiative was bold in its departure from prior product development practices. Prior to its global initiative, Dell designed products for global requirements and distributed the same product globally. The company now routinely designs low-cost notebook, laptop, and desktop personal computers for customers in China, India, and other emerging economies.<\/p>\n Dell\u2019s global initiative also required many changes in its signature direct sales, service, and distribution strategy. The company built its U.S. business with telephone- and Internet-based sales\u2014without retailers. However, in emerging economies and India, customers prefer to see, touch, and use a personal computer before they buy. In response, Dell uses individual sales affiliates who reach out to customers in person and give them a firsthand product experience at their doorstep.<\/p>\n At the same time, Dell has joined hands with Indian chain retailers such as Croma and eZone for a shop-in-a-shop counter for its products. Dell backs this hybrid retail model by offering extended onsite service (technicians who visit individuals\u2019 homes) in over 650 cities to both retail and small business customers.<\/p>\n Dell also opened Dell exclusive stores in 2008. According to a company spokesperson, \u201cThe exclusive Dell store is a step towards enhancing the overall purchase experience for consumers in India. We have rapidly increased our presence in the consumer market here with new products and by expanding our reach. With the launch of Dell exclusive stores, we offer our customers the touch and feel for Dell branded products within a unique shopping experience.\u201d<\/p>\n Each Dell exclusive store offers the advantages of Dell\u2019s direct purchasing model with the additional benefit of retail availability\u2014allowing customers to browse, touch, and feel the product. Dell\u2019s approach makes it possible for customers to see the products on the retail shelves and then place an order for the preferred model with the choice to customize the looks and configuration of the unit. By early 2013, Dell had 60 exclusive stores in India.<\/p>\n Page 161<\/p>\n Dell\u2019s global initiative also involved a new advertising campaign, with Dell opting for real-life successful entrepreneurs in India to endorse its products. The \u201cTake Your Own Path\u201d advertising campaign has proven to be highly effective. Dell\u2019s success in India illustrates the importance of understanding global customers and reaching them by adapting to their specific needs and preferences.1<\/sup><\/p>\n This chapter describes today\u2019s complex and dynamic global marketing environment. It begins with an overview of world trade and the emergence of a borderless economic world. Attention is then focused on prominent cultural, economic, and political-regulatory factors that present both an opportunity and a challenge for global marketers. Four major global market entry strategies are then detailed, including the advantages and disadvantages of each. Finally, the task of designing, implementing, and evaluating worldwide marketing programs for companies such as Dell Inc. is described.<\/p>\n<\/div>\n Page 162<\/p>\n \u00a0<\/p>\n DYNAMICS OF WORLD TRADE<\/p>\n The dollar value of world trade has more than doubled in the past decade. Manufactured products and commodities account for 75 percent of world trade. Service industries, including telecommunications, transportation, insurance, education, banking, and tourism, represent the other 25 percent.<\/p>\n LO 7-1<\/span>Describe the nature and scope of world trade from a global perspective and identify the major trends that have influenced world trade and global marketing.<\/p>\n<\/div>\n World Trade Flows<\/p>\n All nations and regions of the world do not participate equally in world trade. World trade flows reflect interdependencies among industries, countries, and regions. These flows manifest themselves in country, company, industry, and regional exports and imports. The dynamics of world trade are evolving. China will replace the United States as the biggest country measured by trade in 2015. Asia will overtake Western Europe as the largest region measured by trade in 2015.<\/p>\n Global Perspective on World Trade<\/span>\u00a0\u00a0\u00a0\u00a0The United States, China, Japan, Western Europe, and Canada together account for more than two-thirds of world trade in manufactured products and commodities.2<\/sup>\u00a0China is the world\u2019s leading exporter, followed by the United States and Germany. The United States is the world\u2019s leading importer, followed by China and Germany. China, Germany, and the United States remain well ahead of other countries in terms of imports and exports, as shown in\u00a0Figure 7\u20131<\/span>.<\/p>\n A global perspective on world trade views exports and imports as complementary economic flows: A country\u2019s imports affect its exports and exports affect its imports. Every nation\u2019s imports arise from the exports of other nations. As the exports of one country increase, its national output and income rise, which in turn leads to an increase in the demand for imports. This nation\u2019s greater demand for imports stimulates the exports of other countries. Increased demand for exports of other nations energizes their economic activity, resulting in higher national income, which stimulates their demand for imports. In short, imports affect exports and vice versa. This phenomenon is called the\u00a0trade feedback effect<\/em>\u00a0and is one argument for free trade among nations.<\/p>\n Not all trade involves the exchange of money for products or services. In a world where 70 percent of all countries do not have convertible currencies or where government-owned enterprises lack sufficient cash or credit for imports, other means of payment are used. An estimated 10 to 15 percent of world trade involves\u00a0countertrade<\/strong>, the practice of using barter rather than money for making global sales.3<\/sup><\/p>\n Countertrade is popular with many Eastern European nations, Russia, and Asian countries. For example, Daimler AG agreed to sell 30 trucks to Romania in exchange for 150 Romanian-made jeeps. Daimler then sold the jeeps in Ecuador in exchange for bananas, which it brought back to Germany and sold to a German supermarket chain in exchange for cash. Volvo of North America delivered automobiles to the Siberian police force when Siberia had no cash to pay for them. It accepted payment in oil, which it then sold for cash to pay for media advertising in the United States.<\/p>\n United States Perspective on World Trade<\/span>\u00a0\u00a0\u00a0\u00a0The United States has been the world\u2019s perennial leader in terms of\u00a0gross domestic product (GDP)<\/strong>, which is the monetary value of all products and services produced in a country during one year. The United States is also among the world\u2019s leaders in exports due in large part to its global prominence in the aerospace, chemical, office equipment, information technology, pharmaceutical, telecommunications, and professional service industries. However, the U.S. percentage share of world exports has shifted downward over the past 30 years, whereas its percentage share of world imports has increased. Therefore, the relative position of the United States as a supplier to the world has diminished despite an absolute growth in exports. At the same time, its relative role as a marketplace for the world has increased, particularly for automobile, oil, textile, apparel, and consumer electronics products.<\/p>\n FIGURE 7\u20131<\/p>\n The United States, China, and Germany are the leaders in global merchandise trade by a wide margin. China exports more manufactured products and commodities than it imports. The United States imports more manufactured products and commodities than it exports. Read the text to learn about trends in U.S. exports and imports and the competitive advantage of nations.<\/p>\n<\/div>\n Page 163<\/p>\n \u00a0<\/p>\n The difference between the monetary value of a nation\u2019s exports and imports is called the\u00a0balance of trade<\/strong>. When a country\u2019s exports exceed its imports, it incurs a surplus in its balance of trade. When imports exceed exports, a deficit results. World trade trends in U.S. exports and imports are reflected in the U.S. balance of trade.<\/p>\n Two important things have happened in U.S. exports and imports over the past 30 years. First, imports have exceeded exports each year, indicating that the United States has a continuing balance of trade deficit. Second, the volume of both exports and imports has increased dramatically, showing why almost every American is significantly affected. The effect varies from the products they buy (Samsung DVD players from South Korea, Waterford crystal from Ireland, Louis Vuitton luggage from France) to those they sell (Cisco Systems\u2019s Internet technology to Europe, DuPont\u2019s chemicals to the Far East, Merck pharmaceuticals to Africa) and the jobs and improved standard of living that result.<\/p>\n World trade flows to and from the United States reflect demand and supply interdependencies for goods and services among nations and industries.4<\/sup>\u00a0The four largest importers of U.S. products and services are, in order: Canada, Mexico, China, and Japan. These countries purchase approximately 67 percent of U.S. exports. The four largest exporters to the United States are, in order: China, Canada, Mexico, and Japan.<\/p>\n Competitive Advantage of Nations<\/p>\n As companies in many industries find themselves competing against foreign competitors at home and abroad, government policymakers around the world are increasingly asking why some companies and industries in a country succeed globally while others lose ground or fail. Harvard Business School professor Michael Porter suggests a \u201cdiamond\u201d to explain a nation\u2019s competitive advantage and why some industries and firms become world leaders.5<\/sup>\u00a0He has identified four key elements, which appear in\u00a0Figure 7\u20132<\/span>:<\/p>\n Page 164<\/p>\n \u00a0<\/p>\n 1.<\/strong>Factor conditions.<\/em>\u00a0These reflect a nation\u2019s ability to turn its natural resources, education, and infrastructure into a competitive advantage. Consider Holland, which exports 60 percent of the world\u2019s cut flowers. The Dutch lead the world in the cut-flower industry because of their research in flower cultivation, packaging, and shipping\u2014not because of their weather.<\/p>\n 2.<\/strong>Demand conditions.<\/em>\u00a0These include both the number and sophistication of domestic customers for an industry\u2019s product. Japan\u2019s sophisticated consumers demand quality in their consumer electronics, thereby making Japan\u2019s producers\u2014Sony, Sanyo, Sharp, Pioneer, JVC, Matsushita, and Hitachi\u2014among the world leaders in the electronics industry.<\/p>\n 3.<\/strong>Related and supporting industries.<\/em>\u00a0Firms and industries seeking leadership in global markets need clusters of world-class suppliers that accelerate innovation. Swiss companies are leaders in the global watch market, in part, because of high-quality supporting watch-movement makers.<\/p>\n 4.<\/strong>Company strategy, structure, and rivalry.<\/em>\u00a0These factors include the conditions governing the way a nation\u2019s businesses are organized and managed, along with the intensity of domestic competition. The Italian shoe industry has become a world leader because of intense domestic competition among firms such as MAB, Bruno Magli, and Rossimoda, which has made shoes for Christian Dior and Anne Klein Couture.<\/p>\n Case histories of firms in more than 100 industries were analyzed in Porter\u2019s study. While the strategies used by successful global competitors differed in many respects, a common theme emerged: A firm that succeeds in global markets has first succeeded in intense domestic competition. Hence, competitive advantage for global firms grows out of continuous improvement, innovation, and change.<\/p>\n FIGURE 7\u20132<\/p>\n Porter\u2019s diamond of national competitive advantage contains four key elements that explain why some industries and firms in different countries become world leaders.<\/p>\n<\/div>\n Page 165<\/p>\n \u00a0<\/p>\n Sony and Bruno Magli have succeeded in the global marketplace as well as in their domestic markets.<\/p>\n<\/div>\n Sony Corporation<\/p>\n www.sony.com<\/p>\n Bruno Magli<\/p>\n www.brunomagli.it<\/p>\n The Dark Side of Global Competitive Advantage<\/p>\n Pursuit of a country\u2019s competitive advantage in global markets also has a dark side\u2014 economic espionage.6<\/sup>\u00a0Economic espionage<\/em>\u00a0is the clandestine collection of trade secrets or proprietary information about competitors. This practice is common in high-technology industries such as electronics, specialty chemicals, industrial equipment, aerospace, and pharmaceuticals, where technical know-how and trade secrets separate global industry leaders from followers.<\/p>\n It is estimated that economic espionage costs U.S. firms upwards of $250 billion a year in lost sales. The intelligence services of some 23 nations routinely target U.S. firms for information about research and development efforts, manufacturing and marketing plans, and customer lists. To counteract this threat, the\u00a0Economic Espionage Act (1996)<\/strong>\u00a0makes the theft of trade secrets by foreign entities a federal crime in the United States. This act prescribes prison sentences of up to 15 years and fines up to $500,000 for individuals. Agents of foreign governments found guilty of economic espionage face a 25-year prison sentence and a $10 million fine.<\/p>\n learning review<\/span><\/p>\n 7-1.<\/strong><\/span>What is the trade feedback effect?<\/p>\n 7-2.<\/strong><\/span>What variables influence why some companies and industries in a country succeed globally while others lose ground or fail?<\/p>\n<\/div>\n Page 166<\/p>\n \u00a0<\/p>\n MARKETING IN A BORDERLESS ECONOMIC WORLD<\/p>\n Global marketing has been and continues to be affected by a growing borderless economic world. Four trends in the past decade have significantly influenced the landscape of global marketing:<\/p>\n Trend 1: Gradual decline of economic protectionism by individual countries.<\/p>\n Trend 2: Formal economic integration and free trade among nations.<\/p>\n Trend 3: Global competition among global companies for global customers.<\/p>\n Trend 4: Emergence of a networked global marketspace.<\/p>\n Decline of Economic Protectionism<\/p>\n Protectionism<\/strong>\u00a0is the practice of shielding one or more industries within a country\u2019s economy from foreign competition through the use of tariffs or quotas. The argument for protectionism is that it limits the outsourcing of jobs, protects a nation\u2019s political security, discourages economic dependency on other countries, and promotes development of domestic industries. Read the Making Responsible Decisions box and decide for yourself if protectionism has an ethical dimension.7<\/sup><\/p>\n Tariffs and quotas discourage world trade as depicted in\u00a0Figure 7\u20133<\/span>.\u00a0Tariffs<\/strong>, which are a government tax on products or services entering a country, primarily serve to raise prices on imports. The average tariff on manufactured products in industrialized countries is 4 percent. However, wide differences exist across nations. For example, European Union countries have a 10 percent tariff on cars imported from Japan, which is about four times higher than the tariff imposed by the United States on Japanese cars.<\/p>\n The effect of tariffs on consumer prices is substantial. Consider U.S. rice exports to Japan. The U.S. Rice Millers\u2019 Association claims that if the Japanese rice market were opened to imports by lowering tariffs, lower prices would save Japanese consumers $6 billion annually, and the United States would gain a large share of the Japanese rice market. Tariffs imposed on bananas by European Union countries cost consumers $2 billion a year. U.S. consumers pay $5 billion annually for tariffs on imported shoes. Incidentally, 99 percent of shoes worn in the United States are imported.<\/p>\n \u00a0<\/p>\n FIGURE 7\u20133<\/p>\n How does protectionism affect world trade? Protectionism hinders world trade through tariff and quota policies of individual countries. Tariffs increase prices and quotas limit supply.<\/p>\n<\/div>\n Page 167<\/p>\n \u00a0<\/p>\n Global Ethics and Global Economics\u2014The Case of Protectionism<\/p>\n World trade benefits from free and fair trade among nations. Nevertheless, governments of many countries continue to use tariffs and quotas to protect their various domestic industries. Why? Protectionism earns profits for domestic producers and tariff revenue for the government. There is a cost, however. Protectionist policies cost Japanese consumers between $75 billion and $110 billion annually. U.S. consumers pay about $70 billion each year in higher prices because of tariffs and other protective restrictions.<\/p>\n Sugar and textile import quotas in the United States, automobile and banana import tariffs in European countries, shoe and automobile tire Import tariffs in the United States, beer Import tariffs In Canada, and rice import tariffs In Japan protect domestic Industries but also interfere with world trade for these products. Regional trade agreements, such as those found in the provisions of the European Union and the North American Free Trade Agreement, may also pose a situation whereby member nations can obtain preferential treatment in guotas and tariffs but nonmember nations cannot.<\/p>\n Protectionism, in its many forms, raises an Interesting global ethical guestion. Is protectionism, no matter how applied, an ethical practice?<\/p>\n<\/div>\n \u00a0<\/p>\n A\u00a0quota<\/strong>\u00a0is a restriction placed on the amount of a product allowed to enter or leave a country. Quotas can be mandated or voluntary and may be legislated or negotiated by governments. Import quotas seek to guarantee domestic industries access to a certain percentage of their domestic market. For example, there is a limit on Chinese dairy products sold in India, and in Italy there is a quota on Japanese motorcycles. China has import quotas on corn, cotton, rice, and wheat.<\/p>\n The United States also imposes quotas. For instance, U.S. sugar import quotas have existed for more than 70 years and preserve about half of the U.S. sugar market for domestic producers. American consumers pay $3 billion annually in extra food costs because of this quota. U.S. quotas on textiles are estimated to add 50 percent to the wholesale price of clothing for American consumers\u2014which, in turn, raises retail prices.<\/p>\n The major industrialized nations of the world formed the\u00a0World Trade Organization (WTO)<\/strong>\u00a0in 1995 to address an array of world trade issues.8<\/sup>\u00a0There are 159 WTO member countries, including the United States, which account for more than 90 percent of world trade. The WTO is a permanent institution that sets rules governing trade between its members through panels of trade experts who decide on trade disputes between members and issue binding decisions. The WTO reviews more than 200 trade disputes annually.<\/p>\n Rise of Economic Integration<\/p>\n A number of countries with similar economic goals have formed transnational trade groups or signed trade agreements for the purpose of promoting free trade among member nations and enhancing their individual economies. Three of the best-known examples are the European Union (or simply EU), the North American Free Trade Agreement (NAFTA), and the Asian Free Trade Areas.<\/p>\n Page 168<\/p>\n \u00a0<\/p>\n European Union<\/span>\u00a0\u00a0\u00a0\u00a0The European Union consists of 28 member countries that have eliminated most barriers to the free flow of products, services, capital, and labor across their borders (see\u00a0Figure 7\u20134<\/span>).9<\/sup>\u00a0This single market houses more than 500 million consumers with a combined gross domestic product larger than that of the United States. In addition, 16 countries have adopted a common currency called the\u00a0euro.<\/em>\u00a0Adoption of the euro has been a boon to electronic commerce in the EU by eliminating the need to continually monitor currency exchange rates.<\/p>\n The EU creates abundant marketing opportunities because firms do not need to market their products and services on a nation-by-nation basis. Rather, pan-European marketing strategies are possible due to greater uniformity in product and packaging standards; fewer regulatory restrictions on transportation, advertising, and promotion imposed by countries; and the removal of most tariffs that affect pricing practices. For example, Colgate-Palmolive Company now markets its Colgate toothpaste with one formula and package across EU countries at one price. Black & Decker\u2014 the maker of electrical hand tools, appliances, and other consumer products\u2014now produces 8, not 20, motor sizes for the European market, resulting in production and marketing cost savings. These practices were previously impossible because of different government and trade regulations. Europeanwide distribution from fewer locations is also feasible given open borders. French tire maker Michelin closed 180 of its European distribution centers and now uses just 20 to serve all EU countries.<\/p>\n \u00a0<\/p>\n FIGURE 7\u20134<\/p>\n The European Union in early 2014 consists of 28 countries with more than 500 million consumers.<\/p>\n<\/div>\n European Union<\/p>\n www.europa.eu.int<\/p>\n Page 169<\/p>\n \u00a0<\/p>\n North American Free Trade Agreement<\/span>\u00a0\u00a0\u00a0\u00a0The North American Free Trade Agreement (NAFTA) lifted many trade barriers between Canada, Mexico, and the United States and created a marketplace with more than 450 million consumers. NAFTA has stimulated trade flows among member nations as well as cross-border retailing, manufacturing, and investment.10<\/sup>\u00a0For example, NAFTA paved the way for Walmart to move to Mexico, Target to enter Canada, and Mexican supermarket giant Gigante to move into the United States. Whirlpool Corporation\u2019s Canadian subsidiary stopped making washing machines in Canada and moved that operation to Ohio. Whirlpool then shifted the production of kitchen ranges and compact dryers to Canada. Ford invested $60 million in its Mexico City manufacturing plant to produce smaller cars and light trucks for global sales.<\/p>\n In 2006, a comprehensive free trade agreement among Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the United States extended many NAFTA benefits to Central American countries and the Dominican Republic. Called CAFTA-DR, this agreement is viewed as a step toward a 34-country Free Trade Area of the Americas for the Western Hemisphere.<\/p>\n Asian Free Trade Agreements<\/span>\u00a0\u00a0\u00a0\u00a0Efforts to liberalize trade in East Asia\u2014from Japan and the four \u201cLittle Dragons\u201d (Hong Kong, Singapore, South Korea, and Taiwan) through Thailand, Vietnam, Malaysia, and Indonesia\u2014are also growing. Although the trade agreements are less formal than those underlying the EU and NAFTA, they have reduced tariffs among countries and promoted trade.<\/p>\n A New Reality: Global Competition among Global Companies for Global Consumers<\/p>\n The emergence of a largely borderless economic world has created a new reality for marketers of all shapes and sizes. Today, world trade is driven by global competition among global companies for global consumers.<\/p>\n Global Competition<\/span>\u00a0\u00a0\u00a0\u00a0Global competition<\/strong>\u00a0exists when firms originate, produce, and market their products and services worldwide. The automobile, pharmaceutical, apparel, electronics, aerospace, and telecommunication fields represent well-known industries with sellers and buyers on every continent. Other industries that are increasingly global in scope include soft drinks, cosmetics, ready-to-eat cereals, snack chips, and retailing.<\/p>\n Global competition broadens the competitive landscape for marketers. The familiar \u201ccola war\u201d waged by Pepsi-Cola and Coca-Cola in the United States has been repeated around the world, including in India, China, and Argentina. Procter & Gamble\u2019s Pampers and Kimberly-Clark\u2019s Huggies have taken their disposable diaper rivalry from the United States to Western Europe. Boeing and Europe\u2019s Airbus vie for lucrative commercial aircraft contracts on virtually every continent.<\/p>\n Collaborative relationships also are a common way to meet the demands of global competition. Global\u00a0strategic alliances<\/strong>\u00a0are agreements among two or more independent firms to cooperate for the purpose of achieving common goals such as a competitive advantage or customer value creation. For example, General Mills and Nestl\u00e9 of Switzerland created Cereal Partners Worldwide to fine-tune Nestl\u00e9\u2019s European cereal marketing and distribute General Mills cereals worldwide. Today this global alliance produces almost $3 billion in annual sales in more than 140 countries.<\/p>\n Page 170<\/p>\n \u00a0<\/p>\n Pepsi-Cola, now available in about 160 countries and territories, accounts for a quarter of all soft drinks sold internationally. This Brazilian ad\u2014\u201dHow to make jeans last 10 years\u201d\u2014features the popular Diet Pepsi brand targeted at weight-conscious consumers.<\/p>\n<\/div>\n PepsiCo, Inc.<\/p>\n www.pepsico.com<\/p>\n Global Companies<\/span>\u00a0\u00a0\u00a0\u00a0Three types of companies populate and compete in the global marketplace: (1) international firms, (2) multinational firms, and (3) transnational firms.11<\/sup>\u00a0All three employ people in different countries, and many have administrative, marketing, and manufacturing operations (often called\u00a0divisions<\/em>\u00a0or\u00a0subsidiaries)<\/em>\u00a0around the world. However, a firm\u2019s orientation toward and strategy for global markets and marketing defines the type of company it is or attempts to be.<\/p>\n An\u00a0international firm<\/em>\u00a0engages in trade and marketing in different countries as an extension of the marketing strategy in its home country. Generally, these firms market their existing products and services in other countries the same way they do in their home country. Avon, for example, successfully distributes its product line through direct selling in Asia, Europe, and South America, employing virtually the same marketing strategy used in the United States.<\/p>\n A\u00a0multinational firm<\/em>\u00a0views the world as consisting of unique parts and markets to each part differently. Multinationals use a\u00a0multidomestic marketing strategy<\/strong>, which means that they have as many different product variations, brand names, and advertising programs as countries in which they do business. For example, Lever Europe, a division of Unilever, markets its fabric softener known as Snuggle in the United States in 10 European countries under seven brand names, including Kuschelweich in Germany, Coccolino in Italy, and Mimosin in France. These products have different packages, different advertising programs, and occasionally different formulas. Procter & Gamble markets Mr. Clean, its popular multipurpose cleaner, in North America and Asia. But you won\u2019t necessarily find the Mr. Clean brand in other parts of the world. In many Latin American countries, Mr. Clean is Maestro Limpio. Mr. Clean is Mr. Proper in most parts of Europe, Africa, and the Middle East.<\/p>\n A\u00a0transnational firm<\/em>\u00a0views the world as one market and emphasizes cultural similarities across countries or universal consumer needs and wants rather than differences. Transnational marketers employ a\u00a0global marketing strategy<\/strong>\u2014the practice of standardizing marketing activities when there are cultural similarities and adapting them when cultures differ. This approach benefits marketers by allowing them to realize economies of scale from their production and marketing activities.<\/p>\n Global marketing strategies are popular among many business-to-business marketers such as Caterpillar and Komatsu (heavy construction equipment) and Texas Instruments, Intel, and Hitachi (semiconductors). Consumer product marketers such as Timex, Seiko, and Swatch (watches), Coca-Cola and Pepsi-Cola (cola soft drinks), Mattel and LEGO (children\u2019s toys), Nike and Adidas (athletic shoes), Gillette (personal care products), L\u2019Or\u00e9al and Shiseido (cosmetics), and McDonald\u2019s (quick-service restaurants) successfully execute this strategy.<\/p>\n Page 171<\/p>\n \u00a0<\/p>\n Each of these companies markets a\u00a0global brand<\/strong>\u2014a brand marketed under the same name in multiple countries with similar and centrally coordinated marketing programs.12<\/sup>\u00a0Global brands have the same product formulation or service concept, deliver the same benefits to consumers, and use consistent advertising across multiple countries and cultures. This isn\u2019t to say that global brands are not sometimes tailored to specific cultures or countries. However, adaptation is used only when necessary to better connect the brand to consumers in different markets.<\/p>\n Consider McDonald\u2019s.13<\/sup>\u00a0This global marketer has adapted its proven formula of \u201cfood, fun, and families\u201d across 123 countries on six continents. Although the Golden Arches and Ronald McDonald appear worldwide, McDonald\u2019s tailors other aspects of its marketing program. It serves beer in Germany, wine in France, and coconut, mango, and tropical mint shakes in Hong Kong. Hamburgers are made with different meat and spices in Japan, Thailand, India, and the Philippines. But McDonald\u2019s world-famous french fry is standardized. Its french fry in Beijing, China, tastes like the one in Paris, France, which tastes like the one in your hometown.<\/p>\n Global Consumers<\/span>\u00a0\u00a0\u00a0\u00a0Global competition among global companies often focuses on the identification and pursuit of global consumers, as described in the Marketing Matters box on the next page.14<\/sup>\u00a0Global consumers<\/strong>\u00a0consist of consumer groups living in many countries or regions of the world who have similar needs or seek similar features and benefits from products or services. Evidence suggests the presence of a global middle-income class, a youth market, and an elite segment, each consuming or using a common assortment of products and services, regardless of geographic location.<\/p>\n A variety of companies have capitalized on the global consumer. Whirlpool, Sony, and IKEA have benefited from the growing global middle-income class desire for kitchen appliances, consumer electronics, and home furnishings, respectively. Levi Strauss, Nike, Adidas, Coca-Cola, and Apple have tapped the global youth market. DeBeers, Chanel, Gucci, Rolls-Royce, and Sotheby\u2019s and Christie\u2019s, the world\u2019s largest fine art and antique auction houses, cater to the elite segment for luxury products worldwide.<\/p>\n Sweden\u2019s IKEA is capitalizing on the home-improvement trend sweeping through China. The home-furnishings retailer is courting young Chinese consumers who are eagerly updating their housing with modern, colorful but inexpensive furniture. IKEA entered China in 1998. The company expects to have at least 18 stores open in China by 2015.<\/p>\n<\/div>\n IKEA<\/p>\n www.ikea.com<\/p>\n Page 172<\/p>\n \u00a0<\/p>\n The Global Teenager\u2014A Market of 2 Billion Voracious Consumers<\/p>\n The \u201cglobal teenager\u201d market consists of 2 billion 13- to 19-year-olds in Europe, North and South America, and industrialized nations of Asia and the Pacific Rim who have experienced intense exposure to television (MTV broadcasts in 169 countries in 28 languages), movies, travel, social media, and global advertising by companies such as Apple, Sony, Nike, and Coca-Cola. The similarities among teens across these countries are greater than their differences. For example, a global study of middle-class teenagers\u2019 rooms in 25 industrialized countries indicated it was difficult, if not impossible, to tell whether the rooms were in Los Angeles, Mexico City, Tokyo, Rio de Janeiro, Sydney, or Paris. Why? Teens spend $250 billion annually for a common gallery of products: Nintendo video games, Tommy Hilfiger apparel, Levi\u2019s blue jeans, Nike and Adidas athletic shoes, Swatch watches, Apple \u00a1Phones (shown in the photo), Benetton apparel, and Cover Girl cosmetics.<\/p>\n Teenagers around the world appreciate fashion and music, and they desire novelty and trendler designs and Images. They also acknowledge an Americanization of fashion and culture based on another study of 6,500 teens In 26 countries. When asked what country had the most Influence on their attitudes and purchase behavior 54 percent of teens from the United States, 87 percent of those from Latin America, 80 percent of the Europeans, and 80 percent of those from Asia named the United States. This phenomenon has not gone unnoticed by parents. As one parent in India said, \u201cNow the youngsters dress, talk, and eat like Americans.\u201d<\/p>\n<\/div>\n Emergence of a Networked Global Marketspace<\/p>\n The use of Internet technology as a tool for exchanging products, services, and information on a global scale is the fourth trend affecting world trade. Almost 3 billion businesses, educational institutions, government agencies, and households worldwide are expected to have Internet access by 2015. The broad reach of this technology attests to its potential for promoting world trade.<\/p>\n A networked global marketspace enables the exchange of products, services, and information from sellers\u00a0anywhere<\/em>\u00a0to buyers\u00a0anywhere<\/em>\u00a0at\u00a0any time<\/em>\u00a0and at a lower cost. In particular, companies engaged in business-to-business marketing have spurred the growth of global electronic commerce.15<\/sup>\u00a0Ninety percent of global electronic commerce revenue arises from business-to-business transactions among a dozen countries in North America, Western Europe, and the Asia\/Pacific Rim region.<\/p>\n Nestl\u00e9 is an innovator in customizing website content and communicating with consumers in their native languages. Read the text to learn how many country websites Nestl\u00e9 operates. The website shown here is for Hungary.<\/p>\n<\/div>\n Nestl\u00e9 Company<\/p>\n www.nestle.com<\/p>\n Page 173<\/p>\n \u00a0<\/p>\n Industries that have benefited from Internet technology include industrial chemicals and controls; maintenance, repair, and operating supplies; computer and electronic equipment and components; aerospace parts; and agricultural and energy products. The United States, China, Canada, the United Kingdom, Germany, Sweden, Japan, India, and Taiwan are among the most active participants in worldwide business-to-business electronic commerce.<\/p>\n QR 7-1<\/p>\n Nestl\u00e9 Hungary Ad<\/p>\n Marketers recognize that the networked global marketspace offers unprecedented access to prospective buyers on every continent. Companies that have successfully capitalized on this access manage multiple country and language websites that customize content and communicate with consumers in their native tongue. Nestl\u00e9, the world\u2019s largest packaged food manufacturer, coffee roaster, and chocolate maker, is a case in point. The company operates 65 individual country websites in more than 20 languages that span five continents.<\/p>\n learning review<\/span><\/p>\n 7-3.<\/strong><\/span>What is protectionism?<\/p>\n 7-4.<\/strong><\/span>The North American Free Trade Agreement was designed to promote free trade among which countries?<\/p>\n 7-5.<\/strong><\/span>What is the difference between a multidomestic marketing strategy and a global marketing strategy?<\/p>\n<\/div>\n A GLOBAL ENVIRONMENTAL SCAN<\/p>\n Global companies conduct continuing environmental scans of the five sets of environmental factors described earlier in\u00a0Figure 3\u20131\u00a0(social, economic, technological, competitive, and regulatory forces). This section focuses on three kinds of uncontrollable environmental variables\u2014cultural, economic, and political-regulatory\u2014that affect global marketing practices in strikingly different ways than those in domestic markets.<\/p>\n LO 7-2<\/span>Identify the environmental forces that shape global marketing efforts.<\/p>\n<\/div>\n Cultural Diversity<\/p>\n Marketers must be sensitive to the cultural underpinnings of different societies if they are to initiate and consummate mutually beneficial exchange relationships with global consumers. A necessary step in this process is\u00a0cross-cultural analysis<\/strong>, which involves the study of similarities and differences among consumers in two or more nations or societies.16<\/sup>\u00a0A thorough cross-cultural analysis involves an understanding of and an appreciation for the values, customs, symbols, and language of other societies.<\/p>\n You will have to visit India to sample McDonald\u2019s Maharaja Mac or the McAloo Tikki burger described in the text.<\/p>\n<\/div>\n Values<\/span>\u00a0\u00a0\u00a0\u00a0A society\u2019s\u00a0values<\/strong>\u00a0represent personally or socially preferable modes of conduct or states of existence that tend to persist over time. Understanding and working with these aspects of a society are important factors in global marketing. For example,<\/p>\n \u2022<\/span>McDonald\u2019s does not sell beef hamburgers in its restaurants in India because the cow is considered sacred by almost 85 percent of the population. Instead, McDonald\u2019s sells the Maharaja Mac: two all-chicken patties, special sauce, lettuce, cheese, pickles, onions on a sesame-seed bun. For the 40 percent of Indian consumers who eat no meat of any kind, McDonald\u2019s offers the McAloo Tikki burger, which features a spicy breaded potato patty, and the McPuff, a vegetable and cheese pastry.<\/p>\n \u2022<\/span>Germans have not been overly receptive to the use of credit cards such as Visa or MasterCard and installment debt to purchase products and services. Indeed, the German word for debt,\u00a0Schuld,<\/em>\u00a0is the same as the German word for guilt.<\/p>\n Page 174<\/p>\n \u00a0<\/p>\n Cultural symbols evoke deep feelings. What cultural lesson did Coca-Cola executives learn when they used the Eiffel Tower and the Parthenon in a global advertising campaign? Read the text to find the answer<\/p>\n<\/div>\n These examples illustrate how cultural values can influence behavior in different societies. Cultural values become apparent in the personal values of individuals that affect their attitudes and beliefs and the importance assigned to specific behaviors and attributes of products and services. These personal values affect consumption-specific values, such as the use of installment debt by Germans, and product-specific values, such as the importance assigned to credit card interest rates.<\/p>\n Customs<\/span>\u00a0\u00a0\u00a0\u00a0Customs<\/strong>\u00a0are what is considered normal and expected about the way people do things in a specific country. Clearly customs can vary significantly from country to country. For example, 3M Company executives were perplexed when the company\u2019s Scotch-Brite floor-cleaning product initially produced lukewarm sales in the Philippines. When a Filipino employee explained that consumers there customarily clean floors by pushing coconut shells around with their feet, 3M changed the shape of the pad to a foot and sales soared. Some other customs may seem unusual to Americans. Consider, for example, that in France, men wear more than twice the number of cosmetics than women do and that Japanese women give Japanese men chocolates on Valentine\u2019s Day.<\/p>\n The custom of giving token business gifts is popular in many countries where they are expected and accepted. However, bribes, kickbacks, and payoffs offered to entice someone to commit an illegal or improper act on behalf of the giver for economic gain is considered corrupt in any culture.<\/p>\n The prevalence of bribery in global marketing has led to an agreement among the world\u2019s major exporting nations to make bribery of foreign government officials a criminal offense. This agreement is patterned after the\u00a0Foreign Corrupt Practices Act (1977)<\/strong>, as amended by the\u00a0International Anti-Dumping and Fair Competition Act<\/em>\u00a0(1998). These acts make it a crime for U.S. corporations to bribe an official of a foreign government or political party to obtain or retain business in a foreign country. For example, the German engineering company Siemens AG paid an $800 million fine for $1 billion in alleged bribes of government officials around the globe.17<\/sup><\/p>\n Cultural Symbols<\/span>\u00a0\u00a0\u00a0\u00a0Cultural symbols<\/strong>\u00a0are things that represent ideas and concepts. Symbols and symbolism play an important role in cross-cultural analysis because different cultures attach different meanings to things. So important is the role of symbols that a field of study, called\u00a0semiotics<\/strong>, has emerged that examines the correspondence between symbols and their role in the assignment of meaning for people. By adroitly using cultural symbols, global marketers can tie positive symbolism to their products, services, and brands to enhance their attractiveness to consumers. However, improper use of symbols can spell disaster. A culturally sensitive global marketer will know that:18<\/sup><\/p>\n Page 175<\/p>\n \u00a0<\/p>\n \u2022<\/span>North Americans are superstitious about the number 13, and Japanese feel the same way about the number 4.\u00a0Shi,<\/em>\u00a0the Japanese word for four, is also the word for death. Knowing this, Tiffany & Company sells its fine glassware and china in sets of five, not four, in Japan.<\/p>\n \u2022<\/span>\u201cThumbs-up\u201d is a positive sign in the United States. However, in Russia and Poland, this gesture has an offensive meaning when the palm of the hand is shown, as AT&T learned. The company reversed the gesture depicted in ads, showing the back of the hand, not the palm.<\/p>\n Cultural symbols evoke deep feelings. Consider how executives at Coca-Cola Company\u2019s Italian office learned this lesson. In a series of advertisements directed at Italian vacationers, the Eiffel Tower, the Empire State Building, and the Tower of Pisa were turned into the familiar Coca-Cola bottle. However, when the white marble columns in the Parthenon that crowns the Acropolis in Athens were turned into Coca-Cola bottles, the Greeks were outraged. Greeks refer to the Acropolis as the \u201choly rock,\u201d and a government official said the Parthenon is an \u201cinternational symbol of excellence\u201d and that \u201cwhoever insults the Parthenon insults international culture.\u201d Coca-Cola apologized for the ad.19<\/sup><\/p>\n What does the Nestl\u00e9 Kit Kat bar have to do with academic achievement in Japan? Read the text on the next page to find out.<\/p>\n<\/div>\n Nestl\u00e9 Company<\/p>\n www.nestle.com<\/p>\n Global marketers are also sensitive to the fact that the country of origin or manufacture of products and services can symbolize superior or poor quality in some countries. For example, Russian consumers believe products made in Japan and Germany are superior in quality to products from the United States and the United Kingdom. Japanese consumers believe Japanese products are superior to those made in Europe and the United States. About a third of Americans say the quality of products from other countries is not as good as products made in the United States.20<\/sup><\/p>\n Language<\/span>\u00a0\u00a0\u00a0\u00a0Global marketers should know not only the native tongues of countries in which they market their products and services but also the nuances and idioms of a language. Even though about 100 official languages exist in the world, anthropologists estimate that at least 3,000 different languages are spoken. There are 23 official languages spoken in the European Union, and Canada has two official languages (English and French). Seventeen major languages are spoken in India alone.<\/p>\n QR 7-2<\/p>\n Nestl\u00e9 Japan Ad<\/p>\n English, French, and Spanish are the principal languages used in global diplomacy and commerce. However, the best language to use to communicate with consumers is their own, as any seasoned global marketer will attest to. Unintended meanings of brand names and messages have ranged from the absurd to the obscene:<\/p>\n \u2022<\/span>When the advertising agency responsible for launching Procter & Gamble\u2019s successful Pert shampoo in Canada realized that the name means \u201clost\u201d in French, it substituted the brand name Pret, which means \u201cready.\u201d<\/p>\n \u2022<\/span>In Italy, Cadbury Schweppes, the world\u2019s third-largest soft-drink manufacturer, realized that its Schweppes Tonic Water brand had to be renamed Schweppes Tonica because \u201cil water\u201d turned out to be the idiom for a bathroom.<\/p>\n \u2022<\/span>The Vicks brand name common in the United States is German slang for sexual intimacy; therefore, Vicks is called Wicks in Germany.<\/p>\n Experienced global marketers use\u00a0back translation<\/strong>, where a translated word or phrase is retranslated into the original language by a different interpreter to catch errors. For example, IBM\u2019s first Japanese translation of its \u201cSolution for a small planet\u201d advertising message yielded \u201cAnswers that make people smaller.\u201d The error was corrected. Nevertheless, unintended translations can produce favorable results. Consider Kit Kat bars marketed by Nestl\u00e9 worldwide. Kit Kat is pronounced \u201ckitto katsu\u201d in Japanese, which roughly translates to \u201cSurely win.\u201d Japanese teens eat Kit Kat bars for good luck, particularly when taking crucial school exams.21<\/sup><\/p>\n Page 176<\/p>\n \u00a0<\/p>\n The Mini is marketed in many countries using many languages, such as English and Italian. The Italian translation is \u201cStop Looking at My Rear\u201d<\/p>\n<\/div>\n Cultural Ethnocentricity<\/span>\u00a0\u00a0\u00a0\u00a0The tendency for people to view their own values, customs, symbols, and language favorably is well known. However, the belief that aspects of one\u2019s culture are superior to another\u2019s is called\u00a0cultural ethnocentricity<\/em>\u00a0and is a sure impediment to successful global marketing.<\/p>\n An outgrowth of cultural ethnocentricity exists in the purchase and use of products and services produced outside of a country. Global marketers are acutely aware that certain groups within countries disfavor imported products, not on the basis of price, features, or performance, but purely because of their foreign origin.<\/p>\n Consumer ethnocentrism is common in many countries. This bumper sticker is just one illustration of how ethnocentric consumers express themselves in the United States.<\/p>\n<\/div>\n Consumer ethnocentrism<\/strong>\u00a0is the tendency to believe that it is inappropriate, indeed immoral, to purchase foreign-made products.22<\/sup>\u00a0Ethnocentric consumers believe that buying imported products is wrong because such purchases are unpatriotic, harm domestic industries, and cause domestic unemployment. Consumer ethnocentrism has been observed among a segment of the population in the United States, France, Japan, Korea, and Germany as well as other parts of Europe and Asia. Consumer ethnocentrism makes the job of global marketers more difficult.23<\/sup><\/p>\n Page 177<\/p>\n \u00a0<\/p>\n Economic Considerations<\/p>\n Global marketing is also affected by economic considerations. Therefore, a scan of the global marketplace should include (1) a comparative analysis of the economic development in different countries, (2) an assessment of the economic infrastructure in these countries, (3) measurement of consumer income in different countries, and (4) recognition of a country\u2019s currency exchange rates.<\/p>\n Stage of Economic Development<\/span>\u00a0\u00a0\u00a0\u00a0There are 195 independent countries in the world today, each of which is at a slightly different point in terms of its stage of economic development. However, they can be classified into two major groupings that will help the global marketer better understand their needs:<\/p>\n \u2022<\/span>Developed<\/em>\u00a0countries have somewhat mixed economies. Private enterprise dominates, although they have substantial public sectors as well. The United States, Canada, Japan, and most of Western Europe can be considered developed.<\/p>\n \u2022<\/span>Developing<\/em>\u00a0countries are in the process of moving from an agricultural to an industrial economy. There are two subgroups within the developing category: (1) those that have already made the move and (2) those that remain locked in a preindustrial economy. Countries such as Brazil, Poland, Hungary, India, China, Slovenia, Australia, Israel, Venezuela, and South Africa fall into the first group. In the second group are Afghanistan, Sri Lanka, Ethiopia, Tanzania, and Chad, where living standards are low and improvement will be slow.<\/p>\n About 86 percent of the world\u2019s population of roughly 7.1 billion people reside in developing countries and live on one-fifth of total world income. Four billion of these people live on less than $2 per day.24<\/sup>\u00a0In global marketing terms, they are viewed as being at the\u00a0bottom of the pyramid<\/strong>, which is the largest, but poorest, socioeconomic group of people in the world.25<\/sup><\/p>\n Today, global companies are choosing to serve people at the bottom of the pyramid by being responsive to their conditions and needs. Motorola is an example. The company developed a low-cost cell phone with battery life as long as 500 hours for rural villagers without regular electricity and an extra-loud volume for use in noisy markets. Motorola\u2019s cell phone, a no-frills design priced at $40, has a standby time of two weeks and conforms to local languages and customs. Motorola has been successful selling this cell phone design in rural areas across China, India, and Turkey. Still, the task facing global marketers is not easy. A country\u2019s stage of economic development affects and is affected by other economic factors, as described next.<\/p>\n Economic Infrastructure<\/span>\u00a0\u00a0\u00a0\u00a0The\u00a0economic infrastructure<\/em>\u2014a country\u2019s communications, transportation, financial, and distribution systems\u2014is a critical consideration in determining whether to try to market to a country\u2019s consumers and organizations. Parts of the infrastructure that North Americans or Western Europeans take for granted can be huge problems elsewhere\u2014not only in developing nations but even in Eastern Europe, the Indian subcontinent, and China, where such an infrastructure is assumed to be in place. Two-lane roads outside major urban centers that limit average speeds to 35 to 40 miles per hour are common and a nightmare for firms requiring prompt truck delivery in these countries. In China, the bicycle is the preferred mode of transportation. This is understandable because China has few navigable roads outside its major cities\u2014 where 80 percent of the population lives. In India, Coca-Cola uses large tricycles to distribute cases of Coke along narrow streets in many cities. Wholesale and retail institutions tend to be small. In many of these countries, the majority are operated by new owner\u2013managers, who are still learning the ways of a free market system.<\/p>\n The communication infrastructures in these countries also differ. This infrastructure includes telecommunication systems and networks in use, such as telephones, cable television, broadcast radio and television, computer, satellite, and wireless telephone. In general, the communication infrastructure in many developing countries is limited or antiquated compared with that of developed countries.<\/p>\n Page 178<\/p>\n \u00a0<\/p>\n The Coca-Cola Company has made a huge financial investment in bottling and distribution facilities in Russia.<\/p>\n<\/div>\n The Coca-Cola Company<\/p>\n www.thecoca-colacompany.com<\/p>\n Even the financial and legal system can cause problems. Formal operating procedures among financial institutions and the notion of private property are still limited. As a consequence, it is estimated that two-thirds of the commercial transactions in Russia involve nonmonetary forms of payment. The legal red tape involved in obtaining titles to buildings and land for manufacturing, wholesaling, and retailing operations also has been a huge problem. Still, the Coca-Cola Company plans to invest $1 billion by 2015 for bottling facilities in Russia, and Frito-Lay spent $60 million to build a plant outside Moscow to make Lay\u2019s potato chips.<\/p>\n Consumer Income and Purchasing Power<\/span>\u00a0\u00a0\u00a0\u00a0A global marketer selling consumer products must also consider what the average per capita or household income is among a country\u2019s consumers and how the income is distributed to determine a nation\u2019s purchasing power. Per capita income varies greatly between nations. Average yearly per capita income in EU countries is about $33,000 and is less than $500 in some developing countries such as Liberia. A country\u2019s income distribution is important because it gives a more reliable picture of a country\u2019s purchasing power. Generally, as the proportion of middle-income households in a country increases, the greater that nation\u2019s purchasing capability tends to be.<\/p>\n In established market economies such as those in North America and Western Europe, 65 percent of households have an annual purchasing capability of $20,000 or more. In comparison, 75 percent of households in the developing countries of Sub-Saharan Africa have an annual purchasing power of less than $5,000.26<\/sup><\/p>\n Seasoned global marketers recognize that people in developing countries often have government subsidies for food, housing, and health care that supplement their income. So people with seemingly low incomes are actually promising customers for a variety of products. For instance, a consumer in South Asia earning the equivalent of $250 per year can afford Gillette razors. When that consumer\u2019s income rises to $1,000, a Sony television becomes affordable, and a new Volkswagen or Nissan automobile can be bought with an annual income of $10,000. In developing countries of Eastern Europe, a $1,000 annual income makes a refrigerator affordable, and $2,000 brings an automatic washer within reach\u2014good news for Whirlpool, the world\u2019s leading manufacturer and marketer of major home appliances.<\/p>\n Page 179<\/p>\n \u00a0<\/p>\n Levi Strauss & Co. launched its Denizen brand jeans in China in late 2010. Created for teens and young adults in emerging markets who cannot afford Levi-branded jeans, Denizen is now sold in the United States.<\/p>\n<\/div>\n Levi Strauss & Co.<\/p>\n www.levistrauss.com<\/p>\n QR 7-3<\/p>\n Denizen Video<\/p>\n Efforts to raise household incomes in developing countries is evident in the popularity of microfinance.\u00a0Microfinance<\/strong>\u00a0is the practice of offering small, collateral-free loans to individuals who otherwise would not have access to the capital necessary to begin small businesses or other income-generating activities. An example of microfinance is found in Hindustan Lever\u2019s Project Shakti initiative in India. The company realized it could not sell to the rural poor in India unless it found ways to distribute its products such as soap, shampoos, and laundry detergents. Lever provided start-up loans to women to buy stocks of products to sell to local villagers. Today, over 45,000 women entrepreneurs sell Lever products to 600,000 Indian consumers in 135,000 villages in India. Equally important, these women now have a source of income, whereas before they had nothing.27<\/sup><\/p>\n Income growth in developing countries of Asia, Latin America, and Eastern Europe is expected to stimulate world trade. The number of consumers in these countries earning the equivalent of $10,000 per year is expected to surpass the number of consumers in the United States, Japan, and Western Europe combined by 2015. By one estimate, half of the world\u2019s population has now achieved \u201cmiddle-class\u201d status.28<\/sup>\u00a0For this reason, developing countries represent a prominent marketing opportunity for global companies.<\/p>\n |
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