rrrrrrrrrrrrrrr GLOBAL MARKETING MANAGEMENT rrrrrrrrrrrrrrrrrrrr 5TH EDITION This page intentionally left blank rrrrrrrrrrrrrrr GLOBAL MARKETING MANAGEMENT rrrrrrrrrrrrrrrrrrrr 5TH EDITION Masaaki Kotabe Temple University Kristiaan Helsen Hong Kong University of Science and Technology JOHN WILEY &SONS, INC. DEDICATION To my sons and SDK —M.K. To my mother and A.V. —K.H. Vice President & Executive Publisher George Hoffman Executive Editor Lise Johnson Senior Editor Franny Kelly Production Manager Dorothy Sinclair Senior Production Editor Valerie A. Vargas Marketing Manager Diane Mars Creative Director Harry Nolan Senior Designer James O’Shea Production Management Services Elm Street Publishing Services Senior Illustration Editor Anna Melhorn Photo Associate Sheena Goldstein Assistant Editor Maria Guarascio Editorial Assistant Emily McGee Associate Media Editor Elena Santa Maria Cover Photo Credit ª Daniel lvascu/iStockphoto This book was set in 10/12pt Times Ten Roman by Thomson Digital and printed and bound by Courier- Kendallville. The cover was printed by Courier-Kendallville. Copyright ª 2010, 2008, 2004 John Wiley & Sons, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc. 222 Rosewood Drive, Danvers, MA 01923, website www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, (201)748-6011, fax (201)748-6008, website http://www.wiley.com/go/permissions. Evaluation copies are provided to qualified academics and professionals for review purposes only, for use in their courses during the next academic year. These copies are licensed and may not be sold or transferred to a third party. Upon completion of the review period, please return the evaluation copy to Wiley. Return instructions and a free of charge return shipping label are available at www.wiley.com/go/returnlabel. Outside of the United States, please contact your local representative. ISBN-13 978-0-470-38111-3 Printed in the United States of America 10987654321 rrrrrrrrrrrrrrrrrrrr ABOUT THE AUTHORS Masaaki ‘‘Mike’’ Kotabe holds the Washburn Chair Professorship in International Business and Marketing, and is Director of Research at the Institute of Global Management Studies at the Fox School of Business at Temple University. Prior to joining Temple University in 1998, he was Ambassador Edward Clark Centennial Endowed Fellow and Professor of Marketing and International Business at the University of Texas at Austin. Dr. Kotabe also served as Vice President of the Academy of International Business in the 1997–1998 term. He received his Ph.D. in Marketing and International Business at Michigan State University. Dr. Kotabe teaches international marketing, global sourcing strategy (R&D, manufacturing, and marketing interfaces) and Asian business practices at the undergraduate and MBA levels, and teaches theories of international business at the Ph.D. level. He has lectured widely at various business schools around the world, including Austria, Brazil, China, Colombia, Finland, Germany, Indonesia, Japan, Korea, Mexico, Norway, Sweden, and Turkey. For his research, he has worked closely with leading companies such as AT&T, Kohler, NEC, Nissan, Philips, Sony, and Seven & I Holdings (parent of 7-Eleven stores), and served as advisor to the United Nations’ and World Trade Organization’s Executive Forum on National Export Strategies. Dr. Kotabe has written many scholarly publications. His numerous research papers have appeared in such journals as Journal of Marketing, Journal of International Business Studies, Strategic Management Journal,andAcademy of Management Journal. His books include Global Sourcing Strategy: R&D, Manufacturing, Marketing Inter- faces (1992), Japanese Distribution System (1993), Anticompetitive Practices in Japan (1996), MERCOSUR and Beyond (1997), Marketing Management (2001), Market Revolution in Latin America: Beyond Mexico (2001), Emerging Issues in International Business Research (2002), and Global Supply Chain Management (2006). He currently serves as Editor of the Journal of International Management, and also serves and/or has served on the editorial boards of Journal of Marketing, Journal of International Business Studies, Journal of International Marketing, Journal of World Business, Journal of the Academy of Marketing Science, Advances in International Management, Journal of Business Research, and Thunderbird International Business Review, among others. He also serves as Advisor to the Institute of Industrial Policy Studies (IPS) National Competitiveness Report. Dr. Kotabe has been elected a Fellow of the Academy of International Business for his significant contribution to interna- tional business research and education. Kristiaan Helsen has been an associate professor of marketing at the Hong Kong University of Science and Technology (HKUST) since 1995. Prior to joining HKUST, he was on the faculty of the University of Chicago for five years. He has lectured at Nijenrode University (Netherlands), the International University of Japan, Purdue University, the Catholic University of Lisbon, and China Europe International Busi- ness School (CEIBS) in Shanghai, China. Dr. Helsen received his Ph.D. in Marketing at the Wharton School of the University of Pennsylvania. His research areas include promotional strategy, competitive strategy, and hazard- rate modeling. His articles have appeared in journals such as Marketing Science, Journal of Marketing, Journal of Marketing Research, and European Journal of Operations Research, among others. Dr. Helsen is on the editorial board of the International Journal of Research in Marketing. v vi About the authors Professors Kotabe and Helsen recently published the SAGE Handbook of Inter- national Marketing (2009), an authoritative collection of chapters written by expert researchers from around the world that provides an in-depth analysis of international marketing issues that must be understood and addressed in today’s global and interdependent markets. The Handbook brings together the fundamental questions and themes that have surfaced, and promises to be an essential addition to the study of international marketing. rrrrrrrrrrrrrrrrrrrr PREFACE THREE FUNDAMENTAL ISSUES ADDRESSED rrrrrrr IN THE FIFTH EDITION We have continued to receive many letters and e-mail messages as well as comments on Amazon.com from instructors and business executives around the world who used the previous editions of Global Marketing Management. Their comments have been unanimously favorable. Thanks to the increased desire in many parts of the world for access to our book in their own languages, our book has been translated into Chinese, Japanese, Portuguese, and Spanish. However, we just cannot be sitting on our laurels. As the world around us has been constantly changing, the contents and context of our book also must change to reflect the climate of the time. Today, the worst global financial crisis since the Great Depression of 1929 has changed the global marketing environment completely. A continued global economic growth has proved to be a false assumption. Now there are even political tides against freer trading environments. Although we currently live in a very unfortunate global economic environment, we are fortunate enough to capture various changes in the marketplace and describe them in this fifth edition of our book. In our mind, the role of a textbook is not only to describe today’s realities but also to extrapolate logically from them how the future will unfold. After all, that is how marketing executives have to act and make correct decisions based on the facts they have gathered. Today’s realities are a product of past realities, and the future will be an uncharted course of events lying ahead of us. We constantly strive to help you better understand state-of-the-art marketing practices on a global basis with relevant histori- cal background, current marketing environments, and logical explanations based on a massive amount of knowledge generated by marketing executives as well as by academic researchers from around the world. Therefore, the fifth edition of our book builds on three major changes that have taken place in the last decade or so. First, the landscape of the global economy has changed drastically, particularly as a result of the global financial crisis and ensuing global recession. The emergence of Brazil, Russia, India, and China, among others, as economic superpowers has occurred during the same period. For example, China’s role as the world’s factory is well established; India’s increased role in information technology development is obvious; and Brazil and Russia are still rich in mineral resources that are becoming scarce around the world. Second, the explosive growth of information technology tools, including the internet and electronic commerce (e-commerce), has had a significant effect on the way we do business internationally. This still continues to be an evolving phenomenon that we need to take a careful look at. On one hand, everyone seems to agree that business