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Dynamics of International Advertising

Theoretical and Practical Perspectives

by Barbara Mueller (Author)
Textbook XII, 354 Pages

Summary

Now in its third edition, Dynamics of International Advertising highlights the unique challenges marketers face in developing and implementing successful international advertising campaigns.
With a balance of theoretical and practical perspectives, this edition takes the reader inside the dynamics of advertising as it functions within the international marketing mix. Updated with the most recent statistical information as well as current examples and case studies, the text addresses the key issues that advertisers must keep in mind when creating effective communication programs for foreign markets: cultural norms and values, political and legal environments, economic policies, social contexts and more. Both the process and product of international advertising are addressed, from research and strategy development to creative execution and media planning. Ethical concerns are highlighted as well.
Dynamics of International Advertising is a comprehensive text for upper-division undergraduate or graduate level courses dealing with international advertising. It can also serve as a supplemental text for courses in international marketing as well as for introductory advertising, marketing or mass communication courses seeking to expand coverage of the international dimension.

Table Of Contents

  • Cover
  • Title
  • Copyright
  • About the author(s)/editor(s)
  • About the book
  • This eBook can be cited
  • Contents
  • Preface
  • 1 Growth of International Business and Advertising
  • Historical Overview
  • Saturated Domestic Markets
  • Higher Profit Margins in Foreign Markets
  • Increased Foreign Competition in Domestic Markets
  • The Trade Deficit
  • The Emergence of New Markets
  • European Union
  • China
  • Commonwealth of Independent States
  • World Trade
  • Growth in Advertising Expenditures Worldwide
  • Trend Toward International Agencies
  • Summary
  • References
  • 2 The International Marketing Mix
  • Globalization Versus Localization of The Marketing Mix
  • Product
  • Product Standardization
  • Product Adaptation
  • New Product Development
  • Country-of-origin Effect
  • Branding and Trademark Decisions
  • Brand Piracy
  • Packaging and Labeling Decisions
  • Place
  • Channels between Nations: Indirect Export
  • Channels between Nations: Direct Export
  • Channels between Nations: Manufacture Abroad
  • Channels within Nations: Distribution to Consumers
  • Channels within Nations: Wholesaling Abroad
  • Channels within Nations: Retailing Abroad
  • Distribution Standardization versus Specialization
  • Price
  • Pricing Objectives and Strategies
  • Governmental Influences on Pricing
  • Export Pricing
  • Pricing and Manufacture Abroad
  • Promotion
  • Advertising
  • Sales Promotion
  • Public Relations
  • Personal Selling
  • Direct Marketing
  • Sponsorships
  • Trade Fairs and Exhibitions
  • Product Integration or Product Placement
  • Integrated Marketing Communications
  • Summary
  • References
  • 3 The International Marketing and Advertising Environment
  • Demographic Characteristics
  • Market Size
  • Population Growth
  • Population Distribution
  • Economic Factors
  • Classification Systems
  • Income
  • Urbanization
  • Geographic Characteristics
  • The Political-Legal Environment
  • Political-Legal Environment of the Home Country
  • Political-Legal Environment of the Host Country
  • Political Risk
  • International Law
  • Summary
  • References
  • 4 The Cultural Environment
  • Concept of Culture
  • Self-Reference Criterion and Ethnocentrism
  • Subcultures
  • Growth by Ethnicity
  • Culture and Communication
  • Verbal Communication
  • Nonverbal Communication
  • The Influence of Culture on Marketing and Advertising
  • Religion, Morals, and Ethical Standards
  • Expressions of Culture
  • Values
  • Internationally Based Frameworks for Examining Cultural Variation
  • Hofstede’s Dimensions of Culture
  • Power Distance
  • Individualism versus Collectivism
  • Masculinity versus Femininity
  • Uncertainty Avoidance
  • Long-Term/Short-Term Orientation
  • Indulgence versus Restraint
  • The GLOBE Study
  • Influence of Culture on Consumer Behavior
  • Why Consumers Buy
  • What Consumers Buy
  • Who Makes Purchase Decisions?
  • How Much Consumers Buy
  • Cultural Universals
  • Tools for Understanding Cross-Cultural Communication
  • Market Distance
  • Summary
  • References
  • 5 Coordinating and Controlling International Advertising
  • Centralized Versus Decentralized Control of International Advertising
  • Global Approach (Centralized Decision Process, Standardized Advertising Approach)
  • Local Approach (Decentralized Decision Process, Differentiated Advertising Approach)
  • Regcal Approach (Centralized Decision Process, Regional Approach)
  • Glocal Approach (Decentralized Decision Process, Standardized Approach)
  • Agency Selection
  • Domestic and In-House Agencies
  • International Agencies and Global Networks
  • Foreign (Local) Agencies
  • Agency Selection Criteria
  • Marketing and Advertising Strategy Options
  • Summary
  • References
  • 6 Creative Strategy and Execution
  • Strategic Decisions
  • Globalization of Advertising
  • Products Suitable for Globalized Advertising
  • Localization of Advertising
  • The Globalization-Localization Continuum
  • Execution Decisions
  • Advertising Appeals
  • Verbal Communication: Copy and Dialogue
  • Music
  • Nonverbal Communication: Visuals and Illustrations
  • Creativity in the International Arena
  • Summary
  • References
  • 7 Advertising Media in the International Arena
  • National/Local Versus International Media
  • National/Local Media
  • Media Availability
  • Media Viability
  • Media Coverage
  • Media Cost
  • Media Quality
  • Role of Advertising in the Mass Media
  • Media Spillover
  • Local Broadcast Media
  • Radio
  • Local Print Media
  • Other Local Media
  • International Media
  • International Print Media
  • International Broadcast Media
  • Digital and Social Media
  • International Media Data
  • International Media-Buying Services
  • Summary
  • References
  • 8 Research in the International Arena
  • Steps in Research Design
  • Problem Definition
  • Determination of Information Sources
  • Research Design
  • Data Collection
  • Data Analysis and Reporting
  • Secondary Data
  • Problems with Secondary Data
  • Domestic Sources of Secondary Data
  • International Sources of Secondary Data
  • Primary Data
  • Primary Research Methods
  • Observation
  • Focus-Group Interviews and In-Depth Interviews
  • Experimental Techniques
  • Surveys
  • Research Relating to Message Design, Placement, and Tracking Studies
  • Technological Advances and Research
  • Control of International Research
  • Summary
  • References
  • 9 Advertising Regulatory Considerations in the International Arena
  • Influences on National Regulations
  • Types of Products That May Be Advertised
  • The Audiences That Advertisers May Address
  • The Content or Creative Approach That May Be Employed
  • The Media That Advertisers Are Permitted to Employ
  • The Use of Advertising Materials Prepared Outside the Country
  • The Use of Foreign Languages in Advertising and Marketing Materials
  • The Use of Local versus International Advertising Agencies
  • International and Regional Regulation
  • The United Nations
  • World Trade Organization
  • The Organization for Economic Cooperation and Development
  • The European Union
  • The Gulf Cooperation Council
  • Self-Regulation
  • The Trend Toward Self-Regulation
  • The International Chamber of Commerce
  • Implications for International Advertisers
  • Summary
  • References
  • 10 Ethics and Beyond: Corporate Social Responsibility and Doing Business in the Global Marketplace
  • Business Ethics in the Global Marketplace
  • Applying Ethics to the Marketing Mix
  • Beyond Ethics: Corporate Social Responsibility
  • Communicating Corporate Social Responsibility to the Public
  • Summary
  • References
  • Index

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PREFACE

This third edition of Dynamics of International Advertising: Theoretical and Practical Perspectives was undertaken with the objective of reflecting the dramatic changes that have impacted the field of advertising since the previous edition, when the economic downturn caused advertising budgets to shrink, agencies to lay off advertising professionals, and many consumers in developed and developing markets alike to tighten their belts. Since then, the economy has rebounded in the United States as well as around the globe. Advertising Age reports that worldwide spending on media and marketing will top $1 trillion for the first time in 2017. While the United States remains the top market in terms of ad spending, since the last edition, China has taken Japan’s place as the second-largest ad market in the world, and India has joined the list of top-ten ad markets. While North America is home to 47 of the world’s top 100 advertisers, Advertising Age reports that the rest are spread across the globe, with 33 based in Europe and 20 in Asia. U.S.-based Procter & Gamble is the largest advertiser in the world, and Netherlands/U.K.-based Unilever is number two. The largest Asian-based advertiser is Japan’s Toyota Motor Corp. World business today is truly driven by global competition among global companies for global consumers. The consumer of 2017 wears Adidas sneakers and Levi’s jeans, drives to work in a Fiat, watches a Sony TV, connects with friends on a Samsung cell phone, enjoys an ice-cold Corona, stops off for a sandwich at Pret a Manger—the British chain with the French-sounding name—and decorates his or her home with furniture from Ikea.

Methods for reaching these global consumers have evolved as well. While television remains the dominant medium in terms of ad spend, newspapers have now ceded second place to digital media. And, social media have exploded. Worldwide, users of social media are expected to reach 2.5 billion by 2018—approximately one-third of the earth’s population. A recent global report found that the average consumer has five social media accounts and spends nearly two and one-half hours a day browsing these networks. Facebook and Twitter have become increasingly attractive to advertisers, but new forms of social media are just around the corner. Consumers are placing ever-higher expectations on businesses to integrate good causes into their day-to-day operations. Those in growth ← ix | x → economies (such as China, Brazil, India, and Malaysia) are particularly bullish on corporations “doing good.” Corporate social responsibility—or CSR—has become the new buzzword. Marketers around the globe have increasingly come to the realization that they are responsible for more than maximizing shareholder profits—indeed, they are beholden to their customers, employees, the environment, and society in general. This new edition incorporates the best examples of contemporary advertising from around the globe that demonstrate how both clients and agencies are responding to these changes. The latest statistics are incorporated into each and every table, and new insights from academic research are highlighted.

This text introduces the reader to the challenges and difficulties in developing and implementing communications programs for foreign markets. While advertising is the major focus, the author recognizes that an integrated marketing communications approach is critical to competing successfully in the international setting. In order to communicate effectively with audiences around the globe, marketers must coordinate not only advertising, direct marketing, sales promotions, personal selling, and public relations efforts, but the other aspects of the marketing mix as well. Therefore, the basics of international marketing are briefly reviewed in the first several chapters of this text. The remainder of the book then focuses on international advertising.

While significant changes are incorporated throughout the text, I have kept the basic structure of the book similar to that of the second edition. The text comprises a total of ten chapters. In Chapter 1, factors influencing the growth of international advertising are examined. Chapter 2 highlights the role that product, price, distribution, and promotion play in selling abroad. Domestic advertising and international advertising differ not so much in concept as in environment; the international marketing and advertising environment is outlined in Chapter 3. Chapter 4 is devoted to developing a sensitivity to the various cultural factors that impact international marketing efforts. Chapter 5 addresses the coordination and control of international advertising. Chapter 6 deals with creative strategies and executions for foreign audiences. Chapters 7–9 explore media decisions in the global marketplace, international advertising research and methods for obtaining the information necessary for making international advertising decisions, and, finally, regulatory considerations. Lastly, Chapter 10 focuses on the social responsibility of international advertising agencies and multinational corporations in foreign markets.

Every attempt has been made to provide a balance of theoretical and practical perspectives. For example, the issues of centralization versus decentralization and standardization versus localization are addressed as they apply to the organization of international advertising programs, development and execution of creative strategy, media planning and buying, and advertising research. Readers will find that these are not black-and-white issues. Rather, they can be viewed as a continuum. Some marketing and advertising decisions can be centralized while others may be decentralized. Similarly, depending on the product to be advertised and the audience to be targeted, some elements of the marketing and advertising mix may be standardized while others should be customized.

First and foremost, Dynamics of International Advertising: Theoretical and Practical Perspectives is the ideal textbook for upper-division undergraduate and graduate students in specialized courses dealing with international advertising or marketing. It is also an effective supplemental text for introductory advertising, marketing, or mass communications courses seeking to expand coverage of the international dimension. The text should also prove useful to practitioners of international advertising, whether on the client side or within the advertising agency. Finally, researchers of international advertising and marketing will find it a valuable resource.

I am indebted to a number of individuals for the successful completion of this text. I am most grateful to the folks at Peter Lang Publishing. In particular, I’d like to acknowledge Mary Savigar, former acquisitions editor, for encouraging the development of this third edition, as well as Kathryn Harrison, who took over the reins from Mary and saw the project through to its completion. Thanks ← x | xi → also go to Tom Bechtle, who diligently edited the manuscript, and to Bernadette Shade, who once again held my hand through the production process, as well as oversaw the development of the attractive new cover for this latest edition. On a personal note, this book—like my others—would not have been possible without the unconditional love and support of my husband, Juergen, and my daughter, Sophie. Both stood by me, as always, without complaint.

Barbara Mueller

| 1 →

CHAPTER 1

Growth of International Business and Advertising

The keystone of our global economy is the multinational corporation. A growing number of corporations around the world have traversed geographical boundaries and become truly multinational in nature. As a result, consumers around the world write with Bic pens and wear Adidas running shoes, talk on Samsung cell phones and drive Toyota autos. Shoppers can stop in for a McDonald’s burger in Paris or Beijing, and German and Japanese citizens alike increasingly make their purchases with the American Express card. And, for most other domestic firms, the question is no longer, Should we go international? Rather, the questions relate to when, how, and where the companies should enter the international marketplace. The growth and expansion of firms operating internationally have led to growth in international advertising. U.S. agencies are increasingly looking abroad for clients. At the same time, foreign agencies are rapidly expanding around the globe, even taking control of some of the most prestigious U.S. agencies. The United States continues to both produce and consume the highest share of the world’s advertising. However, advertising’s global presence is evidenced by the location of major advertising markets. In rank order, the top global advertising markets are the United States, China, Japan, Germany, the United Kingdom, Brazil, France, Australia, South Korea, and Canada (Advertising Age 2014). And today, half of the world’s largest advertising agencies are headquartered outside the United States (Advertising Age 2015). This chapter outlines the growth of international business and advertising.

Historical Overview

There have been three waves of globalization since 1870. The first wave, between 1870 and 1914, was led by improvements in transport technology (from sailing ships to steamships) and by lower tariff barriers. Further driving this first wave of modern globalization were rising production scale economies due to advancements in technology that outpaced the growth of the world economy. Product needs also became more homogenized in different countries as knowledge and industrialization diffused. Communication became easier with the telegraph and, later, the telephone. By the early 1900s, firms ← 1 | 2 → such as Ford Motor, Singer, Gillette, National Cash Register, Otis, and Western Electric already had commanding world market shares. Exports during this first wave nearly doubled to about 8 percent of world income (World Bank 2002, 326).

The trend to globalization slowed between 1914 and the late 1940s. These decades were marked by a world economic crisis as well as two world wars, which resulted in a period of strong nationalism. Countries attempted to salvage and strengthen their own economies by imposing high tariffs and quotas so as to keep out foreign goods and protect domestic employment. It was not until after the Second World War that the number of U.S. firms operating internationally again began to grow significantly.

The second wave of globalization was from 1945 to 1980. International tensions—whether in the form of cold war or open conflict—tend to discourage international marketing. However, during this period, the world was, for the most part, relatively peaceful. This, paired with the creation of the International Monetary Fund (IMF) and the General Agreement on Tariffs and Trade (GATT) at the close of World War II, facilitated the growth of international trade and investment. Indeed, during this period, tariffs among the industrialized nations fell from about 40 percent in 1947 to roughly 5 percent by 1980. In 1950, U.S. foreign direct investment stood at $12 billion. By 1965 it had risen to $50 billion, and by the late 1970s to approximately $150 billion (U.S. Bureau of the Census 1995, 870).

The third wave of globalization has been from approximately 1980 to the present. Spurring this third wave has been further progress in transport (containerization and air freight) and communication technology (falling telecommunication costs associated with satellites, fiber-optic cable, cell telephones, and the Internet). Along with declining tariffs on manufactured goods (currently under 4 percent), many countries lowered barriers to foreign investment and improved their investment climates. After the September 11th attacks in the United States, some economists worried that the year 2001 would mark a reversal of the current era of globalization. Recession, U.S. security concerns, and resentment abroad seemed aligned against the forces that drove companies abroad in the 1990s in search of new markets. However, according to a PricewaterhouseCoopers survey of 171 business executives at large U.S. multinationals, commitment to international expansion actually rose in the year after the September 11th attacks. Of those surveyed, 27 percent planned some sort of geographic expansion during the following year, up from 19 percent prior to the attacks (Hilsenrath 2002). And it appears that the same forces that drove globalization in the past might, in fact, be intensifying. A 2016 Fortune magazine survey reports that the top 500 multinational companies alone generated a record $27.6 trillion in sales in 2015. The United States led all countries, with 134 companies on the list. China ranked second (103 companies), and Japan third (52 companies) (Fortune 2016). See Table 1.1 for ranking of the top 25 global firms.

In addition to these large corporations, thousands of smaller firms are engaging in international marketing. A record 305,000 U.S. companies exported goods in 2012, nearly 98 percent of which were small- or medium-sized companies (SMEs) with fewer than 500 employees. Indeed, smaller firms are grabbing an ever-growing share of U.S. exports. SMEs were responsible for 33 percent of goods exported in 2012 (Small Business & Entrepreneurship Council 2015). Smaller firms thus represent the largest pool for potential growth in export sales. Microbreweries provide an excellent example. With production normally limited to fewer than 15,000 barrels a year, microbreweries would seem more local than global players. But the microbrewery industry is going through a transition in which exports make sense. With more than 135 regional specialty breweries and 1,871 microbreweries in the United States in 2014, the field has become highly competitive (Brewers Association 2015). As a result, several of the most successful “craft” brewers are among a growing number of smaller U.S. companies looking to foreign markets to expand sales. Brewers have had the greatest successes in Sweden, Italy, and, to a lesser extent, Great Britain. ← 2 | 3 →

Corporations look abroad for the very same reasons they seek to expand their markets at home. Where economies of scale are feasible, a large market is essential. However, if a single market is not large enough to absorb the entire output, a firm may look to other markets. If production equipment is not fully utilized in meeting the demands of one market, additional markets may be tapped. Seasonal fluctuations in demand in a particular market may also be evened out by sales in another. During economic downturns in one market, corporations may turn to new markets to absorb excess output.

Table 1.1: World’s 25 Largest Corporations, 2016 (in $U.S. millions)

Source: Fortune (2016, F1–F8).

Firms may also find that a product’s life cycle can be extended if the product is introduced in different markets—that is, products already considered obsolete by one group may well be sold successfully ← 3 | 4 → to another. In addition to the reasons noted, significant changes in the United States and around the globe have helped fuel this phenomenal growth in international business.

Saturated Domestic Markets

As many markets reach saturation, firms look to foreign countries for new customers. Take the case of Starbucks. Starbucks was founded in Seattle in 1971. The company currently has over 11,500 stores in the United States alone. Seattle has about one coffee shop for every 4,000 residents. Las Vegas is second on the list, with just over 21 Starbucks per 100,000 residents. Indeed, the crowding of so many stores so close together has become a national joke, eliciting quips such as the headline in The Onion, a satirical publication: “A New Starbucks Opens in Restroom of Existing Starbucks” (Holmes 2002, 101). It might seem there couldn’t possibly be any room left in America for another Starbucks, but CEO Howard Schultz announced that the company is “significantly understored” in North America, which is why he wants to add many more locations. Many new Starbucks opening in the future will be drive-throughs. And Starbucks’s expansion plans include grabbing more customers at all hours of the day. The company intends to offer lunch and dinner to customers, and it’s even expanding to beer, wine, and snacks for the late-evening crowd.

Back in 1999, Starbucks had just 281 stores abroad. Today it has about 10,000 non-U.S. outlets in more than 65 countries—and it is still in the early stages of a globalization plan. Starbucks expects to eventually increase the number of its stores worldwide to 40,000. Starbucks’s China and Asia-Pacific region is the company’s fastest-growing retail store market with more than 4,000 stores, including 1,000 in Mainland China, 1,000 in Japan, 500 in Korea, and its first store in Vietnam. China became Starbucks’s largest market outside the United States in 2014. India, the Middle East, and Africa are also seen as key areas of focused future expansion. While it seems there is a Starbucks almost everywhere, there is one locale that has long been missing from its massive footprint: Italy, the home of the espresso bar. But that will change in 2017 when Starbucks opens its first location in Milan, followed by others across Italy. Schultz says he plans to develop a coffee blend specifically for the Italian market and add a bar for customers to stand at, as is the custom in Italian coffeehouses (McGregor 2016).

Higher Profit Margins in Foreign Markets

For the typical Fortune 500 company today, domestic revenues account for just about 60 percent of total sales—a figure that is bound to shrink even further as globalization continues to advance. For an ever-growing number of firms, foreign revenues as a percentage of total revenues are well over 50 percent. Consider McDonald’s, which gets two-thirds of its revenue from overseas. While the fast-food chain might seem as American as apple pie, McDonald’s earns the majority of its revenue from Europe and Asia. Dow Chemical, another beneficiary of globalization, reports similar figures. Most of the company’s growth comes from exploding sales in overseas markets where demand for plastics, building materials, paint, and other Dow products is skyrocketing. Examples of other firms that derive half or more of their revenues from abroad include Intel (85 percent), General Electric (54 percent), Ford (51 percent), and Nike (50 percent) (Newman 2011). This trend toward higher profit margins in foreign markets is clearly not limited to U.S. firms. Nokia sells over 97 percent of its products outside the home market, and Toyota sells more vehicles in the United States than it does in Japan. Analysts figure that almost two-thirds of the company’s operating profits come from the United States.

Increased Foreign Competition in Domestic Markets

Over the past decades, foreign products have played an increasingly significant role in the United States. Classic examples include the phonograph, color television, video- and audiotape recorders, the telephone, and the integrated circuit. Although all were invented in the United States, domestic producers accounted for only a small percentage of the U.S. market for most of these products—and an even ← 4 | 5 → smaller share of the world market. For example, in 1970, U.S. producers’ share of the domestic market for color televisions stood at nearly 90 percent. By 1990 it had dropped to little more than 10 percent. The decline in sales of U.S.-produced stereo components was even more dramatic—from 90 percent of domestic sales to little more than 1 percent during the same time span. Brand names such as Sony and Panasonic became household words for most American consumers.

Foreign companies continue to play a prominent part in the daily lives of Americans today, and domestic firms face competition in nearly every sector. While McDonald’s, Burger King, KFC, and Subway dominate the fast food scene, they face competition from every corner of the globe. What foreign chain operators see in the U.S. market are consumers who spend nearly half of their food budget at restaurants and who are eager to try new ethnic flavors. Pollo Campero reigns from Guatemala. The chain has over 50 U.S. locations to date. The menu includes grilled chicken flavored with Latin spices and citrus, empanadas, a salsa bar, and fresh-made sides. Jollibee, from the Philippines, started out in California in 1998 and in 2009 added locations in New York and Las Vegas. The fast food restaurant serves everything from burgers with pineapple to spaghetti. Nando’s, a South African firm, serves up Afro-Portuguese chicken with a spicy “peri-peri” sauce. Nando’s began with one restaurant in Washington, D.C., in 2008 and now has multiple locations in the nation’s capital. And British import Wagamama offers diners cheap ramen at several locations in Boston, with more planned.

When a U.S. consumer buys new tires, shops for the latest best-seller, or purchases a jar of mayonnaise, chances are increasingly good that the supplier will be a local subsidiary of a company based in Japan, Europe, or elsewhere outside the United States. For example, both Firestone rubber and CBS records were acquired by Japanese firms, and Macmillan Publishing and Pillsbury are owned by British firms (Shaughnessy and Lindquist 1993). Switzerland’s Nestlé and the Anglo-Dutch giant Unilever moved into the U.S. market to grow their businesses. Unilever set the pace, paying $20.3 billion for Bestfoods, whose brands include Hellmann’s Mayonnaise and Skippy Peanut Butter, as well as acquiring Slim-Fast, a diet-supplement firm, and Ben & Jerry’s Ice Cream. Meanwhile, Nestlé acquired pet food manufacturer Ralston Purina, best known for its Purina Dog Chow brand. It was a logical move, as the pet food market is growing faster than Nestlé’s traditional, mature businesses—particularly in the United States, where animal owners are buying higher-margin products that promise both dietary and health benefits for their pets (Bernard 2001). This “selling of America” has caused a good deal of concern among the business community as well as the general public. The United Kingdom is the biggest investor in the United States by far, followed by Japan, the Netherlands, and Canada (Jackson 2013). Increased foreign competition on domestic soil is not unique to the United States, but rather is occurring both in developed countries and in emerging economies.

Following recent lackluster growth in the global economy, the 2015 World Investment Report shows that Foreign Direct Investment (FDI) inflows in 2014 declined 16 percent to $1.2 trillion, down from an all-time high of $1.8 trillion in 2007. However, recovery is in sight: expectations are for a rise to $1.5 trillion in 2016 and to $1.7 trillion in 2017. FDI inflows today account for more than 40 percent of external development finance to developing and transition economies. China became the world’s largest recipient of FDI. Of the top ten FDI recipients in the world, five are developing economies (UNCTAD 2015).

The Trade Deficit

Exports are considered a central contributor to economic growth and well-being of a country. In 2013, the U.S. trade deficit was $476 billion, as imports of $2.76 trillion exceeded exports of $2.28 trillion (Amadeo 2014). The trade deficit is the shortfall between what a country sells abroad and what it imports. In 2006, the U.S. trade deficit was a whopping $753 billion and was referred to as the “Grand Canyon” of trade deficits. The shrinking deficit suggests the U.S. economy is strengthening. Amadeo (2010) provides an excellent analogy: ← 5 | 6 →

Table 1.2 presents U.S. trade with selected countries. Note that the United States exports much to its neighbors to the north and south.

The Emergence of New Markets

European Union

The emergence of new markets has stimulated interest in international business. On December 31, 1992, many physical, fiscal, and technical barriers to trade among the 12-nation European Union (EU) began to disappear, giving birth to something akin to the United States of Europe. The original “European 12” (Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, and the United Kingdom) were joined by Sweden, Finland, and Austria in 1999, bringing the total population to 375 million with an average per capita gross domestic product of $23,500. And in 2004, 10 additional countries joined the union, creating a new “Mega-Europe” of 25 states and more than 450 million consumers. The newcomers were Poland, Hungary, the Czech Republic, Slovakia, Slovenia, Lithuania, Latvia, Estonia, Cyprus, and Malta. In 2007, Bulgaria and Romania also joined the EU. In 2013, Croatia became the EU’s newest member. Clearly, EU membership is not static. Indeed, mid-decade, British Prime Minister David Cameron laid out his government’s demands for European Union reform, noting that a looser “British model of membership” would allow him to support his country’s continued membership in the 28-nation bloc. At issue were a number of areas, including protection for countries such as Britain that do not use the Euro single currency, less red tape, and greater power for national parliaments to opt out of rules made by the Brussels-based EU (U.T. News Services 2015). Significant debate followed, and in June of 2016 Britain held a referendum on whether to leave the EU. The referendum passed, helped by a turnout of 71.8 percent, with more than 30 million people voting. Since the referendum, Britain has a new Prime Minister, Theresa May. (The former home secretary took over from David Cameron, who resigned the day after the referendum.) It appears that the British economy has weathered the initial shock of the Brexit vote; however, the value of the British pound remains near a 30-year low. Opinion is sharply divided over the long-term effects of leaving the EU (Wheeler and Hunt 2016).

In terms of GDP growth forecasts and average per capita income among the majority of member states, mega-Europe’s economy is on a par with that of the United States. Many companies have already approached Europe as a single market—rather than as a group of distinct countries—by realigning their product lines and developing strategies that can be employed throughout the EU. For example, Nike, which has been marketing its “Just do it” slogan since 1988, in 2008 tried out a softer catchphrase on young European women: “Here I am.” Crafted by the Amsterdam office of the independent Wieden + Kennedy agency, the pan-European campaign included five short animated Web films about the life stories of five top European female athletes. One showed tennis player Maria Sharapova’s rise from a childhood in Siberia to the top-ranked player in the world. The spots highlighted the criticism and negativity that Maria had to overcome. “You’re just another pretty face,” critics in the spot said. “You won’t be agile enough. You won’t stay on top for long.” At the end, the animated Sharapova morphed into the real Sharapova, who formed the “I” in “Here I am.” The aim of the campaign was to deliver the message that there is more to sports than getting fit or competing. It’s about building self-esteem. The idea for the slogan came out of research commissioned by Nike that found that university-age women in ← 6 | 7 → Europe aren’t as competitive about sports as men. “To appeal to them, agency copywriters decided they needed a different slogan from the ‘Just do it’ message,” noted Mark Bernath, creative director for Nike at Wieden + Kennedy. “Here I am” promoted the personal benefit of exercise without being aggressive, he said (Patrick 2008). Nike executives liked the slogan because they thought it would be understood in English across Europe. Underscoring how marketers can use the Internet, particularly with younger consumers, Nike also paid for the spots to appear on Facebook, Bebo, and other social-networking sites popular with young women. In addition, Nike booked time for the ads on video screens in gyms and university student unions across Europe, including the U.K., France, Italy, Germany, and Russia. The campaign also included traditional television and print ads, on-line banners, and even a collection of athletes’ stories on the Nikewomen.com Web site (see Figure 1.1), as well as a gallery-worthy coffee table book featuring 22 young international female athletes.

Table 1.2: U.S. Trade with Selected Countries 2010 (in $U.S. millions)

Source: Congressional Research Service Report (2011). U.S. International trade: Trends and forecasts.

China

As recently as 1977, the total volume of two-way trade between the People’s Republic of China and the United States was under $400 million. Less than two years later, China began to experiment with open markets and continued to liberalize trade laws. In 1979 Coca-Cola became the first American product available in China when the company was awarded the exclusive right to sell soft drinks to the Chinese market. That same year, for the first time, Chinese authorities permitted domestic product advertising in newspapers. By 1988 two-way trade between the United States and China had jumped to almost $17 billion. Despite the events in Tiananmen Square in June 1989, U.S. businesses continued to knock on China’s door. In 1992, in a joint venture with a Chinese state-owned company, McDonald’s opened a restaurant in Beijing, with 700 seats and 29 cash registers—the biggest McDonald’s in the world, slightly larger than the one that had opened in Moscow in early 1990. At the close of the first day of business, the restaurant had registered 13,214 transactions—representing approximately 40,000 customers—setting a one-day sales record for any McDonald’s in the world.

Biographical notes

Barbara Mueller (Author)

Barbara Mueller (Ph.D., University of Washington) is Professor of Advertising at San Diego State University. Her work has appeared in numerous journals, including the Journal of Advertising, International Journal of Advertising, and International Marketing Review. She is the author of Communicating with the Multicultural Consumer: Theoretical and Practical Perspectives (Peter Lang, 2008) and co-author (with Katherine Toland Frith) of Advertising and Societies: Global Issues (Peter Lang, second edition, 2010).

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Title: Dynamics of International Advertising