What's Ahead
Global Marketing In the Twenty-First Century
Looking at the Global Marketing Environment
The International Trade System
Economic Environment
Political–Legal Environment
Cultural Environment
Deciding Whether to Go International
Deciding Which Markets to Enter
Deciding How to Enter the Market
Exporting
Joint Venturing
Direct Investment
Deciding on the Global Marketing Program
Product
Promotion
Price
Distribution Channels
Deciding on the Global Marketing Organization
Chapter Wrap-Up
What's Ahead
What could be more American than basketball? The sport was invented in the United States, and each year tens of millions of excited fans crowd their local gyms or huddle around their television sets to cheer on their favorite rec league, high school, college, or pro teams. But basketball is rapidly becoming a worldwide craze. For example, a recent New York Times survey of more than 45,000 teenagers on five continents asked, "What are your favorite entertainment pursuits?" The answers: (1) watching television, (2) basketball.
No organization is doing more to promote worldwide basketball than the National Basketball Association (NBA). During the past decade, the NBA has become a truly global marketing enterprise. The 1999 NBA finals reached more than 600 million television viewers in 195 countries throughout the world, and worldwide sales of NBA-licensed basketballs, backboards, T-shirts, and other merchandise top $3 billion a year. The NBA is now a powerful worldwide brand. A Fortune article summarizes:
Deployed by global sponsors Coca-Cola, Reebok, and McDonald's, well-paid [NBA superstars] hawk soda, sneakers, burgers, and basketball to legions of mostly young fans [worldwide]. That they are recognized from Santiago to Seoul says a lot about the soaring worldwide appeal of hoops—and about the marketing juggernaut known as the NBA. After watching their favorite stars swoop in and slam-dunk on their local TV stations, fans of the league now cheer the mate in Latin America, the trofsla in Iceland, and the smash in France. Care to guess the most popular basketball team in China? Why, it's the "Red Oxen" from Chicago, of course.
Basketball has even become a diplomatic tool. A few seasons back, the U.S. secretary of state, in an effort to preserve a fragile peace in Bosnia, requested that the NBA allow the broadcast of basketball games in the war-torn country. As a result, the NBA finals were aired in Bosnia for the first time ever. According to a State Department official, NBA broadcasts are "the most popular program there. The Bosnians are very big basketball buffs."
Like many other businesses, the NBA's primary motive for going global is growth. The league now sells out most of its games, and domestic licensing revenues have flattened in recent years. According to NBA Commissioner David Sterns, "There are just so many seats in an arena and so many hours of television programming, period. The domestic business is becoming mature. That's why we're moving internationally." Compared with the NBA's overall yearly revenues of $2 billion, current international revenues are modest—estimated at a little more than $60 million from TV rights fees, sponsorships, and the league's share of licensing sales. But worldwide potential is huge, and the league is investing heavily to build its popularity and business abroad. For example, its international staff of 105 is nearly double the number of people who ran the entire league back in the early 1980s.
Thanks to skillful marketing, and to the growing worldwide popularity of basketball itself, the NBA's investment appears to be paying off. According to Fortune, the NBA enjoys huge natural advantages over football, baseball, and other rivals:
It's selling a sport, basketball, that's played nearly everywhere and easily understood. (Try explaining a nickel defense to a Swede.) Pro and amateur leagues have been thriving for years in Europe and Asia, and basketball has been an Olympic sport since 1936. The U.S. "Dream Team" in 1992 was a worldwide sensation, sparking even greater interest in pro basketball in the U.S. . . . By then the groundwork had been laid for the NBA's global growth. Two men deserve much of the credit: David Stern and Michael Jordan, with a big assist from Nike. [The NBA and Nike] turned Jordan into a worldwide celebrity, known not just for his gravity-defying skills but also for his winning personality and competitive zeal. . . . In China, which has its own professional basketball leagues, boys on the streets of Beijing and Shanghai [wore] Bulls gear because they wanted to be like Mike. . . . A 1997 survey of 28,000 teenagers in 45 countries by [a global ad agency] found that Jordan was the world's favorite athlete by far.
Broader forces also helped to promote the league's efforts to go global: the collapse of communism and the growth of market economies, the globalization of American consumer companies, and a revolution in worldwide television. Most recent is the explosion of the global Internet. The NBA's site offers programming in several languages and draws 35 percent of its visitors from outside the United States.
However, beyond these natural forces, the NBA's success abroad results in large part from the league's strong marketing efforts. To exploit international opportunities:
The NBA rolled out a marketing machine that's been fine-tuned for a decade in the United States. Television programming leads the way—not just broadcasts of games but an array of NBA-produced programs, mostly targeted at kids and teenagers, that promote the league and its players. Two weekly programs, a highlights show called NBA Action and a teen show called NBA Jam that features music, fashion, and player profiles, are produced solely for the international marketplace. . . Once television has pried open a market, the NBA and its partners move in with an array of live events, attractions, and grassroots activities. [For example,] McDonald's and the NBA sponsor a program called 2Ball that teaches basic basketball skills to thousands of kids outside the U.S. Coca-Cola, meanwhile, targets basketball-crazed teenagers by putting NBA and team logos on Sprite soft drink cans sold in 30 countries. "We're using the NBA and their players to help sell Sprite, but at the same time it does a lot for the NBA," says [Coca-Cola's] director for worldwide sports.
The NBA has encountered a rash of recent problems—Michael Jordan's retirement and the end of the Chicago Bulls dynasty, negative publicity surrounding several high-profile players, and a prolonged player's strike that cut the 1998–1999 season in half. These and other events are presenting fresh challenges to the league's marketing prowess. In the post-Jordan era, the NBA faces the task of trying to extend one of pro sport's greatest growth spurts without the person most responsible for its past success. Still, the future looks bright. For example, the NBA emerged from the potentially disastrous player's strike nearly unscathed—overall attendance slipped only 2 percent and several teams actually saw large jumps in attendance. Although TV ratings for the NBA finals dipped in the year following Jordan's departure, the games still topped the Nielsen ratings.
Thus, most experts expect more slam dunks for the NBA as it continues to extend its international reach. One sustaining factor in the NBA's global appeal is the continuing presence of foreign-born players. Almost every team roster includes one: Toni Kukoc from Croatia, Luc Longley from Australia, Georghe Muresan from Romania, Arvydas Sabonis from Lithuania, or Detlef Shrempf from Germany. Such players attract large followings in their home countries. As Fortune concludes:
Imagine, then, the impact in China if a promising 18-year-old, 7-foot-1 center named Wong Zhizhi, who played for that country's . . . Olympic team, develops into an NBA star. Basketball's popularity is already exploding in China, one of the very few nations where the NBA gives away its TV programming because [it] is determined to make inroads there. Nearly all of China's 250 million TV households get the NBA Action highlights show and a game of the week on Saturday mornings; this year China Central TV broadcast the NBA All-Star game live for the first time. Winning the loyalty of two billion Chinese won't be a kou qui—a slam-dunk—but Stern is, well, bullish. "The upside is tremendous," he says. Can Ping-Pong survive an NBA invasion? Stay tuned1
In the past, U.S. companies paid little attention to international trade. If they could pick up some extra sales through exporting, that was fine. But the big market was at home, and it teemed with opportunities. The home market was also much safer. Managers did not need to learn other languages, deal with strange and changing currencies, face political and legal uncertainties, or adapt their products to different customer needs and expectations. Today, however, the situation is much different.
Global Marketing In the Twenty-First CenturyThe world is shrinking rapidly with the advent of faster communication, transportation, and financial flows. Products developed in one country—Gucci purses, Mont Blanc pens, McDonald's hamburgers, Japanese sushi, German BMWs—are finding enthusiastic acceptance in other countries. We would not be surprised to hear about a German businessperson wearing an Italian suit meeting an English friend at a Japanese restaurant who later returns home to drink Russian vodka and watch Frazier on TV.
International trade is booming. Since 1969, the number of multinational corporations in the world's 14 richest countries has more than tripled, from 7,000 to 24,000. Experts predict that by 2005, world exports of goods and services will reach 28 percent of world gross domestic product, up from only 9 percent 20 years ago. International trade now accounts for a quarter of the United States' GDP, and between 1996 and 2006, U.S. exports are expected to increase 51 percent.2
True, many companies have been carrying on international activities for decades. Coca-Cola, IBM, Kodak, Nestlé, Bayer, Sony, and other companies are familiar to most consumers around the world. But today global competition is intensifying. Foreign firms are expanding aggressively into new international markets, and home markets are no longer as rich in opportunity. Domestic companies that never thought about foreign competitors suddenly find these competitors in their own backyards. The firm that stays at home to play it safe not only might lose its chance to enter other markets but also risks losing its home market.
In the United States, names such as Sony, Toyota, Nestlé, Norelco, Mercedes, and Panasonic have become household words. Other products and services that appear to be American are in fact produced or owned by foreign companies: Bantam books, Baskin-Robbins ice cream, GE and RCA televisions, Firestone tires, Carnation milk, Pillsbury food products, Universal Studios, and Motel 6, to name just a few. Few U.S. industries are now safe from foreign competition.
Although some companies would like to stem the tide of foreign imports through protectionism, in the long run this would only raise the cost of living and protect inefficient domestic firms. The better way for companies to compete is to continuously improve their products at home and expand into foreign markets. Many U.S. companies have been successful at international marketing: IBM, Xerox, Corning, Coca-Cola, McDonald's, Gillette, Colgate, General Electric, Caterpillar, Ford, Kodak, 3M, Boeing, Motorola, and dozens of other American firms have made the world their market. But there are too few such firms. In fact, just 5 U.S. companies account for 12 percent of all exports; 1,000 manufacturers (out of 300,000) account for 60 percent.3
The longer companies delay taking steps toward internationalizing, the more they risk being shut out of growing markets in Western Europe, Eastern Europe, the Pacific Rim, and elsewhere. Domestic businesses that thought they were safe now find companies from neighboring countries invading their home markets. All companies will have to answer some basic questions: What market position should we try to establish in our country, in our economic region, and globally? Who will our global competitors be, and what are their strategies and resources? Where should we produce or source our products? What strategic alliances should we form with other firms around the world?
Ironically, although the need for companies to go abroad is greater today than in the past, so are the risks. Companies that go global confront several major problems. High debt, inflation, and unemployment in many countries have resulted in highly unstable governments and currencies, which limits trade and exposes U.S. firms to many risks. For example, in 1998 Russia created a global economic crisis when it devalued the ruble, effectively defaulting on its global debts. A more widespread Asian economic downturn had a far-reaching impact on Western firms with significant markets or investments there.
Governments are placing more regulations on foreign firms, such as requiring joint ownership with domestic partners, mandating the hiring of nationals, and limiting profits that can be taken from the country. Moreover, foreign governments often impose high tariffs or trade barriers in order to protect their own industries. Finally, corruption is an increasing problem—officials in several countries often award business not to the best bidder but to the highest briber.
Still, companies selling in global industries have no choice but to internationalize their operations. A global industry is one in which the competitive positions of firms in given local or national markets are affected by their global positions. A global firm is one that, by operating in more than one country, gains marketing, production, R&D, and financial advantages that are not available to purely domestic competitors. The global company sees the world as one market. It minimizes the importance of national boundaries and raises capital, obtains materials and components, and manufactures and markets its goods wherever it can do the best job. For example, Ford's "world truck" sports a cab made in Europe and a chassis built in North America. It is assembled in Brazil and imported to the United States for sale. Otis Elevator gets its elevators' door systems from France, small geared parts from Spain, electronics from Germany, and special motor drives from Japan. It uses the United States only for systems integration. Thus, global firms gain advantages by planning, operating, and coordinating their activities on a worldwide basis.