Developing Global Marketing Opportunities COMPETENCE GLopaL LeveL ENVIRONMENT Understanding the Global Marketing Environment Analyzing Global Marketing Opportunities Developing Global Marketing Strategies Designing Global O9Goo0e6 Managing the Global Marketing Effort Go@ ENVIRONME! COMPETENCE: ANALYTIC COMPETENCE MANAGERIAL COMPETENCEcompanies are being asked move and more often to design their marketing strategies from x global point of view. Globatized marketing sratesies rexguire an ability to Jook at business and competitive developments on a worldwide basis and to incorporate often conflicting information imo a single, workable global marketing plan. Global marketing strategies require skills and conceptual understanding, that are different from those required far developing domestie marketing stratexies In Put IIL, we concentrate on the global marketing stratesies that firms must be able to develop to be sucessful. No company can be all things to all people, and global marketing managers ave to learn to focus and build on their company’s strengths. Global marketing managers must have the strategic competence necessary to develop global marketing programs that will ensure the suecess of their firms Chapter 7 deals with the global mindset required of future slobal marketing managers. Chapter 8 concentrates on the major strategic decisions faced by firms active in global waekoting, The chapter introduces the most recent concepts on globalization of marketing strategies, Alternative market entry strategies will be the subject of Chapter 9. CHAPTER Developing a Global Mindset cnaPTER 8 Global Marketing Strategies CHAPTER 9 Global Market Entry StrategiesDeveloping a Global Mindset CHAPTER OUTLINE a ees * Global Market and Opportunity * Knowledge Components for Assessment 4, the Global Mindset 4 + Analytical Global Mark * Skills + Customer-Based Global Logics T: slogan “Think globally act locally” is frequently used to deseribe the mana- \ * Catogorzing Global Marketing + Industry-Based Global Logies + Individual Skills for a Global ing Mindset ierial challenge faced by global marketers." It captures the need to think in tlobal terms about a business or a market while at the same time tailoring a product or service to meet the particular requirements of the local customers, In this chapter, we give some background information on whit is meant by thinking globally If this thinking is truly different, and thus requires a new mindset (namely, a global one}, one should he able to differentiate it from a more traditional mindsct. There fore, we have decided to offer detailed ideas about what this new global marketer with a global perspective ought to be able to do, how he or she should be able to think, and what kind of skills could be expected from sueh a person. This chapter is different fcom others because it does not focus primarily on existin tice. Instead, we concentrate on developing new analytic tools that will muike the adoption ofa global perspective more likely? Inusiness prac CATEGORIZING GLOBAL MARKETING MINDSETS The mineket is the outlook or frame of mind that the marketer carvies round the world. The global perspective, or mindset, is characterized by a different view of the opportunities and the facts of the world market. The xlobal marketing perspec tive is more encompassing than the domestic, international, multinational, or even panregional perspective.” It is a new, truly different dimension in. managerial thinking that transcends traditional labels and shapes the outlook of global mar- keters. See Figure 7.1 for a detailed illustration of the concepts discussed in this chapterChapter 7 Developing a Global Mindset Figure 7.1: Elements of he Global Mindset Global Personal Skills Language Global Communications Telecommunications Skills stills Key Country Global Market Global Logics Frets Facts lonal Customer Logie Global Information Logic Global Purchasing Logic Global Caleueal Competizor Logie Global Industy Logic supts >2feuy (eqo19) Hiscoric Knowledge Components Global Size Logic Geographic sa Global Regulatory Logic Global Chesshoard Market | Global Market Assessment Skills DOMESTIC MINDSET The domestic perspective, or domestic mindvet, is characterized by the fact that all ba sie anchor points for a marketer are hasedl on a singte-country experience: his or her domestic market, A marketing executive growing up in the United States und profes- sionally active in the US. market has only a single-country. domestic mindset. The same is true fora Dutch manager growing up and living in Holland only. ‘Thus, the domestie mindset is ahways single-country in nature. As we all know, marketers must constantly refer to their own experience as they mike marketing decisions, Facts are not always spelled out completely, and executives typically fill in the blanks fromea ne 218 Part ll Developing Global Marketing Opportunities their own cultural experience. The domestic mind tends to fill in thove blanks from its own domestic market or cultural perspective Falling back on one's own cultural or domestic experience base eomes naturally to executives. As we shoved in Chapter 3, violating cultural norms in another country is ‘commonplace because executives, oF companies, £0 to a different country and auto- inatically transfer some of their underlying assumptions to the new locale, The re- verse, however, is also true. When data from a different country are available, executives with a domestic perspective often find that set of data meaningless, or ise ccomifiting, preferring instead the business data from their own country ‘The concept of the domestic perspective is not new to wobal market time, executives have referred to such a perspective ay ethnocentric, or culture hound.* This reaction of spurning data, cts, or readings from elsewhere is som times referred to as the not-invented-here (NIE) syndrome, a concept well known in cugineering and scientific circles. It generally results in the rejection of new ideas own and stands in the way of adopting best practice in marketing particularly when the idea originated in some distant market. Cleatly, for marketing, professionals to become effective in our new global economy, they must be able to step out of a domestic mindset ane adapta different, more open type of thinking 1g, For some that are not hom INTERNATIONAL MINDSET Marketing executives with an international mindset have broadened their reference points to other markets, typically through a longe Japanese executive who has spent four years with & U.S. subsidiary can be expected to have broadened his or her pe poration of Japanese and U.S. reference points in his or her mind. In nxany firms, executives are sent on international assignments for the single pur- pose of enhancing their perspective. Although working overseas provides @ new per spective for the manager substantial barriers limit opportunities. For one, seneling rnianager overseas is typically three to four times more costly than hiring loeals.° The extra costs include cost-of-living allowances, different taxation schemes, and the pense of sending an entire family to a different country, including tuition for private schools. An international experience for aspiring global marketers ean take several differ cent forms. Many’ students spend some time abroad in overseas university programs. International experience is gained if they have contact with the local environment. Likewise, the large numbers of international students in U.S. business schools sain international experience through their stay in the United States. At many business rement for graduation, Somsetimes, the impetus for international experience can he an unforeseen event Mark Merson, a United Kingdom-hased aecountant with major international ac- Counting firm, was transferred by his firm from the United Kingdom to Tokyo, Japan, shortly after bis promotion to partner: The firm wanted to make a major investment into training pastners for its growing presence in Asian countries. For Mark Merson this was his very Rest overseas posting, and his first experience with a very different ccltural business environment, Speaking little Japanese, he had to lean how to work with local partners and adapt to their very different style of business. Because much of the work is done in international firms and in ternational or overseas stay. A pective to an international one, allowing for ineor schools, an international experie lish, the absence of speaChapter 7 Developing a Global Mindset. — 219 Japanese is not a major handicap. However, he still needs to adapt to Japanese he havioral patterns.* All such experiences provide an international perspective as the student or exeeut tive gains in-depth knowledge ofa foreign country. Although it is international expe sience in just one country, many experts believe that such a manager would be less subject to the NIH syndrome. By broadening the doxestic,single-countey perspec tive tan international (dual-country} view, the individual would in all likelihood re= spond more openly to an initiative in « new country than would the domestie-minded executive, for whom any international contact would be a first-time experience MULTINATIONAL MINDSET Some executives, having one through severab overseas experiences or assignments, have reached a multinational perspective. These executives know more than one over- seas country well. Often their assignments span a rexfon, or even more tha ome re= sion, [n many large international ims, such as Citigeoup, Nestlé, Unilever, and Shell executives undertake a series of assignments, each of whieh may extend three to fou ‘years, in different locations. These executives not only heeome knowledgeuble about ‘one market or culture, but they have also learned how to master wesw cultures. The cadres of executives with a multinational mindset are still largely bound, how- ever, by their cultural and foreign experiences. Their skill derives from the detailed knowledge of those markets, knowledge gained from personal experience. While characterizing the multinational perspective as incorporating a greater quantity of in- ‘depth international experience is fa, it still should not be confused witha global per spective, the unique mindset we describe in more detail ina following section Some exevutives believe that a multinational mindset is developed as a result of a series of single-country assignments. Even when executives move around the world assuming ever greater responsibility, however, they frequently receive these assign ‘ments in the context of a single-country market, It would not be unusual for an exce itive to be “promoted” frm smaller fo larger countries but still have assignments that limit responsibility to the assigned country. Therefore, the development of a truly global outlook, encompassing many different countries or markets at the same time, is stifled. A global mindset is not merely the accumutation of a series of single country experiences: instead, it goes far beyond this approach and reflects a different (ype of thinking PANREGIONAL MINDSET The panresgional mindset isa variant of both the multinational and the global mindset It incorporates the ability to encompass an entire region, sueh as Europe, and incor- porate the realities of several countries at once. A marketing, manager with extensive experience across many European markets would be called a pan-European manager. Panregional managers tain their experience from exercising, marketing responsibility across mumerous markets. In the ease of Europe, this experience might snelude wore than thventy different countries. Other panregional experiences might be gained in Asia and Latin America. Because of the nature of their responsibilities, panregional managers are much closer to the thinking of marketing managers with a global mindset because the need to think across many markets simultaneously is a precursor to the global mindset, Therefoxe, we shall move next to our fifth and final mindsetIg nce eo 220 Part Developing Global Marketing Opportunities GLOBAL MINDSET With the global mindsct, we are stepping into a type of perspeetive fundamentally different from the four previously described. The global perspective encompasses all ) cultures or nationalities: it might be described as a mind hovering like a satellite over | the earth.’ The global mindset calls fora manager with a capability to niaintain equal | “mental” distance from al regions of the world. However, sch a manager should not be construed as a person without any cultural anchor. Rather, the executive with a lobul perspective maintains that point of view with respect to his or her business or profession. A personal cuttural anchor point is still required for personal balance Marketing managers with a global mindset can keep the entire global opportunity for aubusiness in mind and ean think across multiple markets rather than eompartmental ize issues on one market at a time. They are able to see the “big picture” and are sen- sitive to the links between markets and trends across the world. International, panregional, and multinational mindsets depend on experience gained from direct contact with one or several other countsies and cultures. The mar- keting executive with a global mindset achieves that view for the entire world, even for arcas where no direct prior experience exists. This ability is essential because managers who act with global responsibility for a product, segment, category, or some other project cannot possibly he personally exposed to all countries Although we have not yet said so explicitly, the global mindset is also an attitude Executives with a global mindset display an innate curiosity about world develop: ments. They recognize a need for continued, permanent, lifelong learning because uch of what they know becomes obsolete over time. Executives who aspire to a lobal mindset need to recognize the integration of industries into a global economy In this new global economy, they must see their industry as an interconnected whole and appreciate that events seenerated in this dynamie shape their industey and their customers’ needs over time. This global mindset, then, is both an attitude as well asa cognitive capability to exercise a certain set of new analytic skills, A marketing executive who wants to achieve a global mindset will have to think differently about the worldwide opportunity. The following sections of this chapter define those differences in thinking more clearly: We will concentrate on the particu lar knowledge requited for a global mindset, the new global analytic skills to be ap- plied, the strategie concepts to be understood, the personal skill to be mastered, and the managerial capabilities to he aequired KNOWLEDGE COMPONENTS FOR THE GLOBAL MINDSET In the previous section, we described the kind of oxtlook, or mindset, « marketing snanager with a global perspective brings to an assigomment. Although such an outlook is important, it alone cannot suffice. The marketing manager with a global mindset will need knowledge about the world markets. The knowledge components de- seribed in this section represent core knowledge but are not necessarily complete The components we discuss, however, will most likely aecount for a vast majority of the necessary fietual knowledge, They might serve as a guide to aspiring glebal mar keting managers who are in the process of acquainting themselves with the worldng Chapter 7 Developing a Global Mindset 221 n. with the world constantly changing, such knowledge can never be viewed as final or static it is in constant need of updating KEY MARKET KNOWLEDGE With the world consisting of more than two hundred countries and territories, it would be impossible for anyone to have firsthand and factual knowledge of all these markets, Instead, knowledge of key markets will have to suffice, Key markets are the top twenty markets in a given industry. Keep in mind, however, that the top twenty markets might vary depending on the line of business. In most industries, 80 percent or more of the economic activity can he expected to come from the top twenty coun: try markets, so we have structured the knowledge components around such alist. For the purpose of this book, we use the list of the top twenty countries determined by gross domestic product (GDP) and adjusted by purchasing power parity (sce Table 7.1). Because these markets are of strategic value, marketing managers need to un: rket dynamic. derstand the parameters that shape the n Table 7.1 Top 20 Countries Ranked by Gross Domestic Product Ranking Country USS Billions 1 United States 9728 2 ina 5,386 3 Japan 3.344 4 inci 2510 5 Germany 2075 6 08 1.455 Unites Kingdom 1437 8 tay 388 9 Brand 1318 10 Fussia 260 " Mexico 881 2 Canada 865 13 Korea 846 14 Spain 790 15 Indonesia 662 16 508 7 495 18 19 Tukey 419 2 Nenerands 413 ree attok 2002, Lasser: MD ets 200, 9.26 ance Tes CompeLl 222 Part ll_Developing Giobal Marketing Opportunities ECONOMIC KNOWLEDGE Although statistical knowledge has some value, marketing managers need to have an understanding of the economic dynamics in a key market. [tis important to know the present stage of the economic eyele, Another piece of required knowledge is the type of economic system and the structure af the economy. Understanding « country’s monctary system and foreign exchenge regime is important, as is up-to-date knowl: edge of forei economie developments in the key markets so that a clear tapestry of the economic activity emerges. Key areas of market economic knowledge are listed in Table 7.2. Real understanding comes from combining these faets into a composite understand ing of the present and future economie situation of any key market n exchange trends, The marketer with a global perspective must know POLITICAL KNOWLEDGE The global marketing manager needs to know the current and fature political trends for each key market. This knowledge will eertuinly include knowledge about the im portant political institutions and how the country is governed. Among other things, rnianagers need to know the importance of the various political parties, their political pr electoral chances for success. As it has been practiced traditionally, country analysis will not be sullicient to understand the dynamics in key markets. Companies understand the key drivers in the industrial policies of eountr ‘ements strive for added competitiveness, often in the form of generating more ex ports. The resulting economic policies affect players in that country and, given today’s global economy, often extend their influence into other countries Executives used to be concerned about politcal risk as it related to expropriations, or loss of assets; today’s global marketing manager worries more about opportunities lost or missed. The future developmen’ ofthe political system in China is of great i terest to companies with major plants there, not because they are anxious about los ing them but because poli sume can be said for Russia or any other might oceue: The executive with a global mindset is always alert to relevant develop: ments in the le rams, something about the country’s political leaders, and a sense of the leaclers eto s-tnereasingly, gow policy affects their future growth or profitability. The it of the world where major changes ding markets of the company’s industry CULTURAL KNOWLEDGE Each key market has its own cultural heritage.’ A manager with a global mindset jg expected to understand those major cultural traits and how they can shape customers Table 7.2 Key Areas of Market Economic Knowledge ar Export volume GAP gro Impor volume GNP per canta Foreign trade postion Major insta sectors Monetary plies tntaton rate Foreign reserve postion terest eve Employ ewChapter7 Developing a Global Mindset 223 or business executives in the market, Such cultural knowledge will certainly include an understanding of the Language oF languages spoken—for example, in the case of Brazil, Portuguese is the official language, whercas for Belgiwus itis Ereneb and Flemish (Dutch). In some companies, foreign language competency is critical Matsushita, a leading Japanese firm, lwgan to require that all ofits managers puss a! English competency test to be promoted. The company implemented this poli because it felt it would aid in globalizing its Japanese managers, Other Japanese firms, such as Toyota Motors, NEC, Hitachi, nd Komatsu, have implemented similar policies.” Additional knowledge of literature, the arts, or musie might be important. hy the case of Japan, for example, it would imply some understanding of teaditional arts such as kabuki and No. Each country values its own leading artists, writers, and conte posers, and familiarity with the work of these: people is integral to unterstanding the culture of any country. Included in cultural knowledge isan understanding of the se Sigious background of the country: As we explained in detail in Chapter 3, the bus ness environment is significantly affected if She country lus a Christian, Mustin, oF other religious tradition. For many countries, some understanding ofthe more popat= lar local sports way be pat of knowing the local culture HISTORIC KNOWLEDGE Executives often underestimate the value of appreciating a country’s history: Many developments that appear to be of a short-term political nature are driven by the Jony-Aerm historical experiences of a country: How groups of executives relate to euch other is also influenced by that heritage. Although global marketers typically know the historical background of their own country, few know the key historical develop- iments oF defining momewts that shaped the present in their relevant key markets. Marketers need not know history for history’s sake, but they should leavu the rele ‘vant historical facts that still shape, oF influence, the political and! economic life of country in the present. Locking ver the list ofthe top twenty economies in Table 7.1 indicates where gaps exist. As the developments in a country such as the former ‘Youoslavia demonstrate, present actions are oftea rooted in history and ean date back as many as six hundred years." Commenting on the delining historie moments of Finland, some observers believe that knowledge of Finland's history—and especially its 1939 war with the Soviet Union-—is important in understanding the determina tion that some Finnish companies apply to the conqnering of west wurkets!” GEOGRAPHIC KNOWLEDGE Part ofa thorough understancling ofa key market is knowledge ofits main xeograpie features. This knowledge may include the locations of key cities and the loxisties of getting in and out of the country. Knowing the size of « country, its key dimensions and its topography is also essential. Another critical component of the geographic knowledge of a key market is an understanding of its transportation infrastructure (which might include seaports and airports for freight shipments, avs eal, wat highway systems) and the telecommunications infrastructure UNDERSTANDING GLOBAL MARKET FACTS Up wo now, we have discussed knowledge about a company’s key markets facts are about individual countries only. A ynuch larger bady of knowledye about the224 Part Developing Global Marketing Opportunities slobal economy; polities, history, culture, and geography embraces all countries andl plays an increasingly important role in today’s bu ment. A marketing, manager with a global mindset appreciates this overarching global structure just as rmuch as each individual key market Understanding glabal economic forces, rather th forces, requires knowledge about world trade, inter the various intemational institutions that play a role in the creation of the global ‘economy. Many international institutions—ineluding the International Moni Fund (IMF), the World Trade Organization (WTO), the Group of Seven (GT, consist ing of the leaders of the seven largest economies of the world), and regional bodies such as the European Union (EU), the North American Free Trade Agreement (NAFTA), and the Association of South Fast Asian Nations (ASEAN}—have been de- scribed thoronghly in earlier chapters. In this eategory, we include understanding the current global economic trends that will shape the structure of the world econ- omy over the next decades.!2 The equivalent body of knowledge in the political realm consists of understanding how global politcal forces affect the global marketing environment. This knowledge oes heyond the political structures of any individual country but includes the role played by bodies such as the United Nations and an appreciation of the geopolitical realities of the day. The disappearance of communist regimes in eastern Europe can- not be treated as a single-country event but has to be understood in the contest of ndividual-country economic ional economie structures, and world political forces. untry-specific history has its equivalent in a new body of knowledge that we could describe as world history. The understanding required is not the knowledge of just one country but the historical trends and developments over time, including & group of countries, a region, or even the entire world. Paul Kennedy's Rise and Fall of the Great Powers is but one example of the compilation of historical knowledge that aims at a global perspective in history." In the same vein would be Denis de Rougemont’s comprehensive work on the history and development of Europe, which incorporates the philosophical and historical development of an entire continent or region.! Equivalent works exist in the following areas: world culture, where the current media trends might be included; world geography, where a clear under standing of world trade patterns and trade routes could be included: and the history of world trade THE IMPORTANCE OF ACQUIRING GLOBAL KEY MARKET KNOWLEDGE To some extent, the knowledge we are describing in this section may be viewed as strictly factual, the kind contained in a library. However, executives do not always consult their library when makiag decisions about the importance of key markets. Any decisions can be made based on erroneous, unverified knowledge and thus ean result in Jess than optimal global marketing, strategies. Significantly underestimating «country’s population without checking current figures might lead to the cli of « market that otherwise should be part of a global marketing strategy. Some studies have shown that knowledge about key markets or world affairs varies considerably between countries and that U.S. managers particularly may be approaching global Tess factual knowledge than managers from other countries, marketing battles wit CU:Chapter 7 Developing a Global Mindset — 225 ‘ A realistic stratexy of acquiring knowledge of key markets andl the global marketplace : thus ean be an important ingredient in the suecess of individual executives andl come ; panies. Sources such as the World Competitice Yearbook ave readily available and contain valuable information.” i /ALYTICAL GLOBAL MARKETING SKILLS : Acquiring a global marketing perspective is much more than mastering global mar- ; keting facts. Marketing managers who want to plot strategy with a global mindset will s be challenged to process the vast asuount of data they aequite in different ways. 1 t this section, we examine the thinking and analytic routines that exceutives have to 20 through as they chart global marketing strategies from a large set of data g Far space reasons, we do not give a complete suunmary ofthe analytic waunpetence required by global marketers. Basie marketing analysis, used for both single-conntry and multicountry situations, is not covered here. We eonecntrate on some of the unique marketing analytic skills, concepts, and tools that are relevant primarily: in slobal marketing: These topies are grouped around the concept of global losic, with special emphasis on how it applies t» obal marketing." THE GLOBAL LOGIC CONCEPT if We use global logic as an imperative in the marketplace that requires a company (0 adopt a global strategy, When the global logic is very strong, it creates a mandate to 5 pursue marketing operations on a global scale, accommodating the global imperative of Alternatively, the global logic were disregarded, the firm presumably would suffer a negative competitive consequences. The company facing a global logie in its business ut must accommodate that logic or sulfer competitively re Whereas the global logie applies to the entire lysines strategy ofa firm, the more le specific global marketing, logic desevibes the forces that demsaxd the adoption of a h global marketing strategy. ‘The global marketer must understand the source of or the global marketing logic because the strategie response might differ: The sources of : a global marketing logic might rest with the customer base, thus creating a glabal r customer logie oe a global information logic. They may also come from the purchasing. 7 approaches, resulting. in a global purchasing logic. The industry environment gener- ates its own global logic sources. ‘The steategies pursued by competitors are at the souree of the global competitor logic, The industry al the relevant key success fa tors can combine to create a global industry logic. The presence of a strong critical mass requirement can lead to the global size logic. And finally, we can identify a as lobal regulatory logic relating to the regulatory environment. We will now explore ys cach ofthese sources of global marketing logie in more detail ts. CUSTOMER-BASED GLOBAL LOGICS Customer-based global logic was atthe beginning of warketing xlobalization, I the carly 1980s, many firms beyan to review their globalizing custonuss and determine the need for globalization from their customer base. Asa result, it does make sere to begin our review of globalization drivers from the eustomier angle. Different from the approaches taken initially, we have divided the eustomer-based ilobal logie into226 Part Developing Global Marketing Opportunities s that may not all apply equally for each industry. In fact, it is important to recognize that the pressure for globalization not only stems from what customers want to buy, but also from how they buy it and where they get thei several different specific information, GLOBAL CUSTOMER LOGIC A company faces a global custom in most countries and, in particular, when the same customer purchases a given prod uct or service in many different locations, or countries. In few cases, however, is the nature of demand so homogeneous that there are virtually no differences among Countries. Move likely, levels of similarities and dissimilarities exist. How does the marketer answer the question, “Do we have a global customer?” (See Figure 7.2 Analyzing the nature of the demand across countries is a starting point. Traditionally companies have segmented their business or markets along productémarket and country/geographic territories. This traditional matrix, depicted in Figure 7.3, eap- tures the view that, as a company moves from one country to the next, significant changes occur in its marketing environment. The traditional view, emphasizing the country oF geographic differences, is characterized through the presence of thick vertical lines, each representing significant country differences. A company viewing, its business this way would constantly emphasize the difference in its global market- ing strategies. Due to the differences, once a company is in a given country, exper ence gained there can be applied to other product lines, a process we call lever logic when customers demand a similar product 6 ‘on the vertical axis, The opposite view may be taken, A comp: ences exist, still larger and more signifi yy may find that, while country differ- ant differences exist across segments, Figure 7.2: Global Customer Logie Global Customer Logi Global Curtomer NeChapter 7 Developing a Global Mindset — 227 Figure 7.3: Global Market Segmentation Matrix Countries Maximum Similarities Maximum Differences Prone! Mather Segmens Countries Maximum Maximum Simlricis product lines, or industry sectors. In that situation, the horizontal lines between the sexments are thick and solid, scith the vertical lines separating countries fine and broken. In such a situation, the emphasis on the analysis is on the horizontal axis, where leverage oceurs across a segment, product line, or sector: Similarities across countries are significant and ean be exploited. We desexibe this as the hoxtzon tal view The marketer with a global mindset will discern between geographic differences and segment-specifie similarities. For products more rooted in customs, such as food differences along, geographic lines may be grester than those seross segment lines AS ane maves toward new technological products and into industrial products and services, the geographic differences are often smaller than the segment or industrya, <<< 228 Part | Developing Giobal Marketing Opportunities, differences. The particular matrix fuced by a company, with its specific grid of lines on either the geographic or segment level, depends on the type of industry. We therefore cannot speak of generalized matrix; instead, the global marketer must be able to determine the velevant type of matris that confronts his or her company. Although such an analysis might show to what extent a market may differ across many countries, a company has other ways to test for global customer logic. More likely, « partial global customer logic may exist, Few produets, particularly consumer proxlucts, are demanded by consumers in exaetly the same form because the eompar- ies is lacking, The ultimate form of global product, which entails finetion of the diffe essential similarity in features and form, is rarely achieved, ences in requirements among countries, Ifa given underlying «fora proxluct or service exists across many countries, it is called a global need. A proxuet or service subject to global need would show its presenec worldwide, with consumers in most countries indicating such a need. Many xonerie needs, such as the need for communications, food, and so on, are global needs. Marketing products that fit & global need! could be undertaken with anulti- domestic approaches, offering each eountry its own version of that product bundle. Whether or not a product or service would be subject to a still more powerful global logic would depend on other things The second phase of customer globalization aceurs at the benefit level. Compas nies whose customers derive the same benefit from a product or service will face a much more far-reaching form of global logic. Benefits touch on the content of mar- keting communications. When a company needs to accommodate a global benefit, it will moxe sooner oF later toward some form of glubal communication. When eus- tomers desire similar features in products, a company is said to fhee a global product logic. Similarity in features allows companies to standardize products and to market Jromogencous products across world markets, cal vastomer logic, A company may face a xlobal ing homogeneous products, but encounter significant differs Not all companies face identi product logic, req ences in henelits so izht among customers. For other firms, the opposite may be tru a customer base seeks similar benefits around the world but requires different prod uct features, Companies have to be ready to accommodate different levels and inten: sity of global logic, with corresponding differences in their strategic response GLOBAL INFORMATION LOGIC Another type of logie that is different fron the first but aso relates to the customer base is defined as the information acquisition stratewy of « company’s customers.” By information acquisition, we mean the way customers sean the environment, the type of media they read or ase exposed t, und to what extent they goto obtain information about produets and services t long distance frora howe. Traditional coverage of inlor- mation acquisition is well documented in standard marketing texts. Typically, cove sumers or business customers scan the local media before making a particular purchasing decision. There was very litle, ifany, global information logic in the cus tomer base that influenced international firms More recent developments, however, have made such inf. and thus affect the presence ofa zlobal information logic. Many business-to-business ven sectors tend to read specific magazines or publict customers in technologyChapter 7 Developing a Global Mindset — 229 tions, mostly from the United States, thus making that information available to buy crs in other countries. A Belgium buyer reviewing a US-based industry publication thus acts to nequite information on a global scale, not just locally: This is particularly true for sectors such as information technology, communications, computers, elec tronic commerce, an medical instruments, where the U.S. market is viewed as the lead market and developments in the United States ure quickly spotted elsewhere As a nest step, buyers mi t go to specific t ide shows with u global attendance Such shows exist in both the United States and Europe, and for some industries they are the most important events, Telecom is a major trade show taking place every four years in Geneva, Switzerkund. Visitors come from all over the world, thus creating @ «global information acquisition opportunity: Other important trade shows can be iden, tified for many specific industries. Frequent travel by business executives exposes many buyers to information outside their home country. Tb the extent they follow up and actively pursue such information, a global information logic exists. In consumer industries, this development ssbeen even more pronounced. Infor- mation sources have spread through cable TV channels and satellite TV, making it possible for eonsumers to sit in their living room in the Netherlands and wate a pro= ‘gram transmitted from the U ted! Kingdom. To reach such consumers, companies in the Netherlands may have to advertise via # foreign channel, although the customer is in many ways viewed as a domestic customer. Sports events, such as the Olympies or world championships, create other strong slobal information logies. The commit- ment of advertisers to the Olympies in Sidney, Australia, was not primarily driven by the potential exposure to event visitors or even the ustealian market. Instead, these companies were pursuing customers “joining in” via television from mnany countries The actual event site is immaterial, Global companies are primarily interested in the audience generated by the event. Possibly the most important change in our information aequisition is the develop ment of the Internet and the World Wide Web (WWW). This new electronie network has rapidly hecome a new mode for researching product or service inforn tion. Co sumers anywhere can enter the WWW and locate product information in « different country, thus ercating strong global information logic wy company seeking to understand thoroughly the forces that shape the global imarketphice must recognize the changing way by which customers acquire informa tion. Neglecting global information logic in a business would put the company’s ene tire communications strategy at risk, and any global strategy needs to be based om thorough understanding of this logic GLOBAL PURCHASING LOGIC Across the world, customers show different types of purchasing behavior and processes. A company is subject to a global purchasing logic to the extent that its cus= tomers search the world for best products as opposed to purchasing within a given lo cal market only: In many industries, a customer no longer buys within the confines of one country only. Although this is less the case in consumer goods markets, industrial buyers are hecoming accustomed to look for the best bargain on a regional or even a worldwide basis Automobile companies’ purchasing behavior for parts used in assembling eary provides an example. Total parts costs traditionally account for 45 percent of totalEO OO 230 Part Developing Global Marketing Opportunities product costs for car makers." Typically, parts purchases were sent out for bid each year, splitting supply contracts among several companies to bid down prices. In re ‘cent years, these companies have begun to pay mo to increase efficiency. In some of the high-technology sectors of parts (for example automotive electronies, which includes automatic breaking systems or engine ‘management systems), research costs have amounted to about 10 percent of parts costs for parts suppliers. With each part supplier paying for its own research to fit components into specific car models, car companies have in fact paid for the same set of research costs several times. This situation has led some companies—GM_ was first among them—to concentrate parts purchases on fewer suppliers. at times tire c attention to parts costs as a way even a single supplier, per car model and to give them a contract over the model life cycle Parallel to this development, car companies have begun to insist on best prices and now engage in worldwide sourcing. Rather than purchasing from nearby plants, ‘4 car company will source a greater distance away for lower costs. In some cases, parts are flown in by cargo aircraft from long distances on a regularly determined schedule, “justin time.” This setup has changed the way companies purchase parts and locate plants, making the entire world the shopping plaza for firms that no longer source in the same country or nearby. Thus, the automotive parts and components i dustry has become subject to a strong global purchasing logic wherein buyers, ear ‘companies in this case, search the world for the best bargain. Many car components suppliers have hac! to adjust to this demand, often turning local firms into global sup- pliers, iFthey wanted to survive.®” The presence of global sourcing or global purchas- 1 practices in an industry is therefore one of the strongest indications of the presence ofa significant global purchasing logic ‘The presence of a gray market is another indicator. Gray markets exist where prices for a given product or service between two countries are widely’ different. Customers aware of that price difference begin to purchase in the low-price area and move the products into the high-price area. These gray-market activities are not illegal, and in Chapter 10 we explore this phenomenon in greater detail. We need to understand, however, that industries in which such activities persist are subject to a slobal purchasing logic. Many intemational firms experience this phenomenon constantly: When Sony launched its PlayStation 2, the game machine was first intro- duced in Japan and US. market. Asian licensed dealers del not get the machine until much later. Still, PliyStation 2 ied been available in Hony, Kong, and ‘Taiwan for some time, sith pirated versions of the software widely available” Professional traders are likely to fill the void left by global companies for products that are subject to global demand, indicating the presence of a strong global purchas- ing logic This test of global purchasing logic is often present therefore in industry or business-to-business markets. It happ Jess in consumer marketing because dividual consumers usually buy a given product or service in one location only. Citicorp, the leading US.-based international bank, has encountered similar req ments among its wealthy customers looking for private banking services. The con pany began to offer a Citigold service to upwardly mobile Asian private customers with access to banking services wherever Citicorp has a branch—worldwide. For some leisure or travel-related products, such as films, hotels, or even telephone INDIChapter 7 Developing a Global Mindset 231 services, a global purchasing logic exists hecause travelers can purchase these serv- {ces from different locations if the price is right INDUSTRY-BASED GLOBAL LOGICS When the debate on the merits of globa ‘zation hegan in the carly 1960s, the pre dominant assumption among proponents of globalization was the belief that con: sumers, oF customers, were becoming more similar, thus driving the teend toward lobalization. In previous editions, this section was largely devoted to these trends and explained in detail sources of the various pressures that might compel finns to adopt some form ofa global marketing stratexy. However, there are still many Firms for which pressure from the customer hase iself is not sufliciently strong to warrant all-out global marketing strategies. Instead, as the experience of countless other firms has shown, different forces, often related to an industry's competitive behavior, or in: herent industry economics may outshine customer-based forces as a source for glob alization. These industry-based global logics in the form of global competitor logic, ‘obal industry logic, global size logic, and global regulatory logic will he our focus for this section GLOBAL COMPETITOR LOGIC When the need to develop a global marketing strategy stems from the behavior of a company’s major competitors, we are speaking of a global competitor logic. Global pressures rooted in competitive actions ean be observed from specific eompetitive patterns, First and foremost, a firm might face global competitor logic when the firm encounters the same competitors consistently wherever it markets. [n some indus tries, particularly those of industrial equipment, a sinall set of internationally aetive companies pursue major orders, such as for aircraft, power plants, turbines, and si ilar large installations. Whenever a large public tender is opened, the same sales teams pursue the contract, no matter the country in question. This situation is a clear sign of global competitor logic. The presence of other globally aetive players who can reach into most markets requires all players to adopt a global marketing strategy to remain competitive themselves In extreme situations, leading companies engage in what we call a global chess ‘game. Picturing the world market as a chessboard, the global chess game implies & consistent, direct, and competitor-oriented move that is highly cognizant of the var ‘xs market positions of each player: The competitive situation of Kodak versus Faji Film has continued over many years and has taken place both in the United States and in Japan. Kodak wants to protect its business in the United States and Raji aims to maintain its lead in Japan. In China, where the market dominance is up for grabs, Kodak signed an agreement with the Chinese government in 1997 to invest more than $1 billion into production assets in the country, with the government in return banning other foreign firms from producing locally for several years.* The battle of Caterpillar versus Komatsu is another typical example of such competitive games, in which two players face off worldwide and pursue competitive advantages in. many territories Over the years, Caterpillar had been able to navigate the turbulences in the international environmert to its advantage while keeping its rival in check. One Of the most intense global competitive battles being, waged presently pits Coca-Colaaaa eee 232 Part Developing Giobal Marketing Opportunities Co, aginst PepsiCo, armed with their leading brands of Coke and Pepsi, respec tively: Pepsi found itself outmancuvered when its botiler in Venezuela was acquired | overnight by Coke, resulting in « complete loss of local distribution for Peps. In a dition, the global fight has extended to sineral water Pepsi s leading inthe United | ‘States with its Aquafina brand versus Coca Cola’s Dasani brand, extending the same type of intensive competitive battle to other beverage categories As in a chess game. the competitors moves ate very open and visible, and each company continu ally takes into account the next move of the opponent. The presence of significant global competitor logic is derived from the number of relevant competitive theaters. Companies must understand when they are compet- le, slobal competitive theater, or arena, in which the eventual outcome or zanking denotes their competitive position on a worldwide basis. In one global com. petitive arena, it will make sense to consider market share on a global, not on a na tional, basis. Indicating the presence of a single competitive arena is the fact thatthe outcome in the world market race is more important than the ranking in any single national market. For a company such as Boeing, the global market share for wicle- bodied passenger jets is more important than the market share in any’ given country The U.S. company’ will therefore view any threat by its European rival Airbus as sexi= ‘ous, particularly also in the important sector for low-cost airlines in the United States and Europe, where Airbus managed to crack a previous airtight Boeing monopoly:?” ‘A-company might find many individual-country theaters rather than one global theater, thus calling for country-hy-comntsy ceuupetition. In such a case, looking, at market share and competitive position on a country-by-countey basis woud be more relevant. Intermediate stratexies are required by regional competitive theaters, where the relevant unit of analysis then becomes the region, such as Europe, North America, or Asia. Global competitor logic is strongest where the company faves one single relevant global theater and weakest when the relevant competitive theater is ‘one country only (see Figure 7.4) Recent developinents in sone industries have shown, however, that care must be exercised in the analysis of global competitive theaters, An analysis in the white goods industry in 1980 might not have found much presence of any global competitor logic because matin players were confined to regions (e.g, US. firms to the United States and European firms to parts of Europe). The aggressive competitive behavior of one single player, in this ease Electrolux of Sweden, led to the acquisition of “Zanussi, a major Heian producer, and White Westinghouse, a major U.S, company, in the 1980s, purchases that transformed an entire industry: Major US, firms reacted. Maytag purchased Hoover of the United Kingdom, Whirlpacl acquired the appli tance business of Philips of the Netherlands, and GE entered into a close agreement with GEC of the United Kingdom. These moves were triggered by a ps threat to their position by Electrolux. As a result, an entire industry with little global competitor logic was transformed into an industry with an overwhelming global com. petitive logic. For Maytag and GE Appliances, the globalization strategies did not ‘cceate permanent positive results and Maytag later disinvested itself ofits European acquisitions. On the other hand, Bosch Siemens, ariginaly active only in Europe, has now announced several aequisitions in the US. market and made it elear that any major player needed to be among the top firms both in Europe and the United States. Clearly, firms without any accommodation of that global competitive loge riskChanter 7 Developing a Global Mindset 233 Figure 7.4: Global Competitive Theaters Competitive Theaters Country-Specific Theaters Regional Theaters Global Theaters competitive disadvantage over the long term. In many other industries as well, sud: den move by one major player has brought about a complete eompetitive reorguniza tion and a suddea emergence ofa global competitive loxic GLOBAL INDUSTRY LOGIC Conceptually, every industry requires some hasie dos and don'ts for its participants A company that violates these competitive rules invariably sulfers competitive disal= vantage and, in the long run, govs out of business. These asie rules af eampetition, required of any player that wants to he a member of a particular industry, have tru tionally heen called key success factors (KSFs) When an industry is characterized by similar KSFs across the world, a global industry logic exists that would make transferring this esperience from one county to another important Each company, successful in its howe market, his learned how to deliver on the KSFs in its industry: An important indicator of global industry logge is the trans ferability of these KSFs across the world. If the lessons of competition and the ba sie competitive requirements for a company’ to sustain itself in an industry axca 234 Prt Developing Global Marketing Opportunities essentially the same, the first and most important condition for a global industry logic exists. When a company competes in a global industry, applying any experience ‘across many countries becomes of great importance. Firms that do so effectively gain a competitive ndvantage The presence ofa significant global industry logic will often draw competitors into leveraging their experience into other countries, therefore also ereating a secondary effect in the global competitor logic. The experience in the white-goods industry serves as an example, As mentioned above, Electrolux was the first player to pursue a tlobal strategy, prompting many competitors to follow suit for fear of competitive disadvantage. Electrolux’s original intent to change its strate country-by-country or even regional one (centering on Scandinavia) to a broader slobal strategy rested on some new assumptions. The Electrolux managers were not tempted by a sudden emergence of customers who all wanted the same appliances. Instead, they realized that, while appliances were different on the outside from coun- try to country, the important components hidden from view were essentially the same, When costs for appliances became an important element, the costs for key components could be driven down only ifthe company gained economies of scale on compressors, pumps, and other elements pres nllions of appliances. Electrolux believed that a competitive cost position for large component woh depended on gaining market share by acquiring other appliance makers in fore countries. Electrolux was able to combine its component manufacturing with that of the acquired firms, reducing costs and investing in new models otherwise not afford- able. This fundamental economie logic in the appliance business was not restricted to Electrolnx’s local market but applied to the world market as a whole. The company acted on this global industry logic, causing a competitive effect that changed the en- tire industry worldwide. Leveraging this type of component system may play a role in one industry, but in other parts of the value chain. Whether w strong global industry logie exists in a given industry will depend on the presence of such leverage points from essentially a industries, companies may be able to leverage other GLOBAL SIZE LoGiC A very particular logic is the one driven by critical mass. For many firms, a minimal size of a key activity needs to be sustained before they can safely compete in a given industry. The presence of some form of critical mass in the economies of an industry therefore easily relates to a global logic if that necessary eritical mass can no longer be achieved in a single market. When companies need to pursue global markets to get over the critical mass hurdle, a global size logie exists Such critical mass issues exist in many industries. In the commercial airplane building business, the development of a new passenger jet requires huge sums of money. Boeing, together with Airbus (the leading builder of commercial airliners), cetimates that a new model such as its planned high-speed Sunie Gruiser would cost about $10 billion.*' No single domestic market is large enough to provide sufficient volume to justify such an investment, thus creating a global size logie that drives for Ket coverage to recoup investment costs, In the pharmaceuticals in- dustry, the development of a new drug, ranging from compound development through toxicology and clinical testing, tends to cost about $400 million in cash out- lays, Ifthe imputed interest for opportunity costs on the accumulated research outlayChapter 7 Developing a Global Mindset — 235, is included, total development doubles to $800 million.” In both Instances, the amount of money a company may pay for research and development is limited. fn few industries does this limit exceed 10 percent of sales revenue, and in the pharma ceuticals industry, it was estimated to hist: reached 20 percent of sales. Whatever the acceptable percentage in & given industry, the relationship determines the vol- tume the company needs to sell to pay off the entire development ofa system or niew product. In many industries, the minimal sales level to he achieved over the produet life eycle exceeds the volume a company can expect to obtain i even as large a mar et as the United States, The desire to achieve relevant size on a global basis has fucled several recent imergers in the pharmaceutical industry. Recent mergers sand aequisitions include Bristol-Myers Squibb’s acquisition of DuPont's pharmaceutical business, Johnson & Johnson's acquisition of Alza, and Abbott Laboratories’ purchase of BASF’s Knoll pharmaceutical unit. In each of these cases, the acquiring eompany’attempted to i. crease ts size to improve its competitive posture in a glabal competitive battle." The pursuit of new markets to pay off initial large investments for development is at the heart ofthe global size logic. What many of these companies have found is that the development or adjustment of an initial product to new markets iy minor once the first step has heen taken, Aithouh we have eited mostly high-technology compe nies oF industries so far; the same development can be seen in the motion pieture in dustry, where true profitability often can be achieved only from foreign sales. Critical mass may be encountered in many ways. It may consist of a comput system in one industry or a logisties system for another lyzed separately and may show different patt reservations tach industry must be an GLOBAL REGULATORY LoGic It has become apparent recently that governments, through their regulatory influ ence, can significantly affect the rationale for pursuing global strategies. Although in the past, government regulations have always had an impact on business, they te id, in general, did not push a company to ded to be country-speeifie in scope pursue global marketing strategies. Jn several industries, recent trends. toward deregulation, which implies a lowering of the regulatory threshold, have opened markets to foreign competitors and thus provided an impetus to globalization, Far= thermore, some countries are treading the path of trade liberalization, allowing for more international entries into. previously prohibited markets: this trend has also stimulated the growth of global logie. The recent entry of China into the WTO is a 200d example of sueh developments Such deregulation has had major repereussiows in the international airlines indus- try. New types of accords, so-eilled openesky agreements, have been signed between the United States and Italy, Korea, and the Czech Republie, giving snare access toi ternational airlines in hoth the U.S. and the foreign markets.® Such trends ave caus ing some airlines to seek links with fo alliance among. L xr competitors. The Star Alliance is am hans of Germany, United Airlines of the United States, Air Canada, Thai International, Scandinavian Airlines, and nine other airlines covering, 729 airports in 124 countries. The Star Alliance resulted in a substantial increase of interline revenues for United, and about 8 percent of United passensers traveled Star Alliance partners.® Star Alliance members account for 24 percent of the worlda ara 236 Part ll_ Developing Global Marketing Opportunities passenger market, and the alliance covers codle share systems with other airlines, frequent flyer program, ground services, and common lounge facilities at many’ air- ports. One airline member, Thai International, claims to have received benefits worth $90 million from the alliance in 2001.7 One of the industries most affected by recent regulatory activity is the telecom- ‘munications industry. With deregulation sweeping the world and resulting in most overnments selling off their stakes in state monopolies, telecommunieations comp nies suddenly have access to many more markets than before. The deregulitory fever, often taking the form of privatization of government-owned phone companies, is rapidly expanding the telecommunications market in many countries. It is being, followed by a muathet opening that allows for multiple carriers in a given country wese trends are supported by new regulations or deregulation by the European Union (EU) and the World Trade Organization (WTO) ‘The market openings ereated many new opportunities for formerly government sche Telekom) and France (Franee ‘owned phone monopolies. Both in Germany (Det Telecom), the phone companies were privatized, entered in the stock market, and ev couraged to pursue opportunities abroad. Both Deutsche Telekom and France Tele= com had acquired a combined stake of 22 percent in Sprint, only to sell their shares when the firms had to reduce debt loads in the wake of the telecommunications in- dustry stock collapse in 2001. Deregulations proceeded much more slowly in other countries. In Japan, where the government still owns a 45.9 percent stake in Nippon Telephone & Telegraph (NTT), foreign ownership was restricted to 20 percent.”” NTT still controls 64 percent of DoCoMo, Japan's leading mobile phone eompany. Forced to allow competitors to enter the Japanese market, DoCoMo has made nn ies itself and tried to co ‘merous investments in overseas mobile phone compa mer Cialize its new third-generation wireless service.” Foreign competitors would like see the Japanese government reduce further its ownership of NTT and NTT reduce its ownership in DoCoMo to give them more aceess to those firms’ purchasing of equipment and services. In Mexico, foreign telephone companies were also finding it difficult to enter. Althouxh ostensibly privatized, Telmex, the formerly government- owned firm, still has a substantial hold on the Mexican market, allowing it to charge high access fees. Those favoring further deregulation point out that Mexico's phone density, with thirteen lines per 100 people, was below that of poorer countries such as Brazil, Columbia, and Costa Rica. A study by an international organization, OECD, found that of its thirty member nations, Mexico had the highest charge for a single phone line. However, elmes is already preparing investinents in the United States as a way to blunt further expected inroads into its domestic market, which ‘were made possible by further deregulations.*! As these examples demonstrate, yovernments or other regulatory bodies can be- ‘come major drivers forcing companies to take a global view of their markets. A com pany may thus have to review its situation carefully and monitor regulatory pressure for indications of impending changes in the world market. INTEGRATING GLOBAL LOGICS INTO A COMPOSITE VIEW So far in this seetion, we have focused on major global logies und how they might in in designing global marketing strategies. We have described 1" generic, global logie forces, forces that we have found extremely fluence compani seven prototype,Chapter 7 Developing a Global Mindset 237 uusefll for explaining the globalization pressures in a large number of industries. Con- ceivably, there could he others that might be more or less appropriate for a given ine dustry Although we have discussed these global logics one at a time, a company’ will of course be exposed simultineonsly ta several, and some will be more important than others. By plotting them on « single graph (see Figure 7.5), an analyst ean get an Impression wf the nature of the pressures. Some firms might find the customer or purchasing logies stronger; other firms might find industry-based hrsies exerting greater pressure, Most likely, the graphs (spider swebs) created would be different from industry to industry. Judging from the graphs, a firm fecing a large footprint, exe hibited by a larger area covered by the conneeted points is said to face greater global Jogie than one fang a smaller footprint Any firm must have a clear understanding of the particular set of forees it faces, Global Iogie patterns are rarely sytametrical, and i is important to isolate the dom nating globul logic in any kiven industry, In Chapter 8, we make a direct vonnection, between the particular set of global logie forces faced by a firm and the suxeested xencric global marketing strategy best suited to that situation Global logie forces are not static. A company might well be able to describe the present constellation of global logie forees it faces, Equally important, however, are the trends and the expected forces that will enter the picture in the future, A com- pany would thus be advised sot only to analyze the present situation but also to un: derstand the nature of the constellation as it will evolve in a particular industry Effective global marketing stratogies need to take into account the predicted constel: lation as the dominant factor The faaulamental importance of the concept of global loge is its general vatity Once a global marketing logic exists in a given industry, all fis in the world market Figure 7.8: Global Logie Patterns , Coscomet yg Industry Information Sine Purchasing “RegularoryDeveloping Global Marketing Opportunities GLOBAL MARKET AND OPPORT' become subject to that imperative. A company faeing considerable global loge pres- sures simply cannot avoid taking relevant action because global logic must be accom modated. Eventually, and inevitably, firms that disregard global logie forces face substantial competitive penalties over time. VITY ASSESSMENT ‘Ty bring a global perspective to the analysis of marketing opportunities requires a new approach to the analysis of data. Traditionally, international marketers per formed a considerable amount of analysis on a country-hy-country basis. By eoutrast, marketing with a global mindset requires that additional analytic market assessme skills be acquired. This section introduces the global chessboard and lead markets as two new skills and concepts. They are to be viewed as additional skills beyond those already described in Chapter 6. THE WORLD MARKET AS A GLOBAL CHESSBOARD In the section on global competitor logic, we spoke of competition as a form of global chess. Rather than describing the rules ofthis game, we will concentrate on drawing, analogies between the world macket and the chessboard (see Figure 7.6). The global chessboard is not x square board consisting of sixty-four equal squares. Rather, it con: sists of many squares, one for each of the approximately two hundred countries that presently exist. Also, contrary to regular chess, in which each space is of equal size the spaces on the global chessboard vary in size. In this game, square size represents, market size, or typically, gross national product (GNP): countries with large GNPs are represented by large squares: countries with small GNPs are represented by cor- respondingly smaller squares. The United States, as the country with the largest GNP (representing about 20 percent of world GNP), would make up 20 percent of this global chessboard. Other countries would follow, each in proportion to its GNE® Figure 7.6: The Traditional Versus the Global Chessboard ‘The Global Chessboard Differs } Has One Square for Each Covanry (200 plas) The Squares Are Nor All Equal in Size (Driven by GNP oF Related Metric) “The Board Changes During, Play Political and Economie Developments)