International Marketing

Answer the questions of the cases in the attachment. 2.5 or 3 pages between both cases plus references. 

APA 7

Trim Size: 8.5in x

1

1in Kotabe c01-case.tex V2 – 11/07/2016 6:47pm Page 1

�

� �

�

� � � � � � � � � � � � � � � �

1GLOBALIZATION IMPERATIVE

� � � � � � � �SHORT CASES

� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �

CASE 1-1
UNDERSTANDING THE LOCAL CUSTOMS AND PREFERENCES: A LESSON LEARNED FROM
BEST BUY PULLOUT OF THE CHINESE MARKET

On February 22, 2011, Best Buy, the largest U.S.-based con-
sumer electronic retailer, announced its withdrawal from the
Chinese market, closing its nine stores in China. The com-
pany had been operating in China for 5 years, with an addi-
tional 3 years of preparing the market entry. During its 5 years’
expansion in China, Best Buy succeeded in opening nine
stores in big cities such as Shanghai, Beijing, Suzhou, and
Hangzhou. Despite its major store expansion in China, Best
Buy just captured only 1 percent of the Chinese market. Best
Buy was struggling to compete with two major local competi-
tors, Gome and Suning—each owned 1,000 branded stores in
China.

In running its business in China, Best Buy stuck to its
American business model: big box stores with fixed prices.
In China, consumer electronics retailers lease parts of their
store to manufacturers of distinct brands and make money
from the “entrance fee” paid by the manufacturers and some
percentage of their sales profit. On the contrary, Best Buy
makes money only from the business profit by purchasing all
of its products directly from manufacturers and then pricing
them independently. A majority of salespeople in traditional
Chinese retailers usually comes from the supplier side (i.e.,
manufacturers’ own employees); thus, enabling them to offer
specialist knowledge and negotiate discounts. Best Buy’s sales
team, on the other hand, is established by hiring staffs indepen-
dently, and the company does not utilize commission policy for
its sales staff to avoid biased promotions.

Best Buy emphasizes superior service to the customers in
positioning itself to Chinese consumers. The blue-shirted store
employees are trained to provide the best service for cus-
tomers. Consequently, Best Buy’s prices are perceived to be
too expensive by Chinese consumers. Despite all of its efforts
to attract consumers, Best Buy did not succeed in boosting
sales and winning market share.

China is considered an immature market with most con-
sumers coming from the low-end segments. This characteristic
has often been blamed by industry critics as the reason why
Western companies fail in China. Consumers in China prefer
to bargain over set prices. Consumers are exposed to a great
variety of options that are priced much lower than the fair
market prices, and they can get access to these products eas-
ily. With so much piracy going on in the market, consumers’
demand for electronic products at the fair market prices would
be reduced. Best Buy’s store format presented as a huge flag-
ship store posed a problem in China. Most Chinese consumers
prefer smaller, conveniently located retail outlets due to the
high adoption of cars in China that has created traffic con-
gestion. This store format issue is claimed to have been the
reason for Best Buy’s closing in the United Kingdom as well
as in Turkey.

As a matter of fact, Best Buy’s business in China is not
limited to the operation of its flagship stores. In 2006, the com-
pany acquired a Chinese electronic retailer, Five Star—the
nation’s fourth-largest retailer. Five Star, based in Nanjing,
eastern Jiangsu province, had about 170 stores in 7 provinces,
employs more than 8,000 people and had sales of 24.7 bil-
lion yuan (US$3.8 billion) in 2009. As of June 30, 2010, its
competitor, Gome, had about 704 stores in more than 200 Chi-
nese cities with additional 370 stores run by Huang Guangyu’s
Gome Group. Another local competitor, Suning, had 1,206
outlets in 223 cities in the country as of September 30, 2010.

In an interview with the Financial Times in late 2011, Brian
Dunn, Best Buy’s chief executive told that, learning from the
past mistakes, the company was exploring ways to reintroduce
its brand in China. The brand that the company was testing
within its Five Star stores would be named Best Buy Mobile
or Star Mobile. Best Buy Mobile has been used in the United
States for standalone mobile shops as well as specialized stores

1

Trim Size: 8.5in x 11in Kotabe c01-case.tex V2 – 11/07/2016 6:47pm Page 2�

� �
�

2 • Case 1 • Globalization Imperative

within a store. Thus, overcoming the problem of geographi-
cally concentrated, big box store format in China, Best Buy
was thinking of “breaking the bulk” by opening up smaller
store format that concentrates on a certain product category.

DISCUSSION QUESTIONS

1. What do you think is the main problem behind Best Buy’s
failure in China?
2. What global strategy did Best Buy implement in reaching
consumers in China? Do you think the strategy is appropriate?
Why or why not?

3. If you were hired as Best Buy’s global consultant, what
would you recommend to Best Buy in its plan to return to
China market? What strategy should Best Buy take?

Sources: “Best Buy Brand Closes Shop in China and Turkey,” Finan-
cial Times, February 22, 2011; “Best Buy’s Withdrawal: American
Morals Fail to Transcend Chinese Consumer Market,” ChinaBrief-
ing.com, March 2, 2011; “Why Best Buy Failed in China,” cnbc.com,
March 7, 2011; “Why Best Buy’s Overseas Strategy Is Falling,” Busi-
nessInsider.com, November 4, 2011; “Best Buy Shuts China Stores
to Focus on More Profitable Brand,” Bloomberg News, February 22,
2011; and “Best Buy Seeks Ways to Return Brand to China,” Financial
Times, September 29, 2011.

� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �

CASE 1-2
KEEPING WITH THE TIMES—MCDONALD’S, I’M LOVIN’ IT!

McDonald’s, the world’s largest restaurant chain with over
30,000 outlets in more than 115 countries, brings to mind many
terms: golden arches, Big Macs, McNuggets, affordable meals,
brand value, and American capitalism to name just a few.
How did McDonald’s become one of the world’s best known
brands? Needless to say, being in the food industry entails dif-
ferent menus for different parts of the world, based on varying
tastes and preferences. At the time when McDonald’s made
its foray into foreign markets, it was almost impossible to have
a mass marketing or global strategy in terms of McDonald’s
menu items. Therefore, the company adopted a strategy to
appeal to those different preferences. According to the com-
pany, the secret to its successful brand is a type of multido-
mestic strategy, which the company used successfully and was
able to offer different menus in different countries.

Previously, McDonald’s even extended this strategy to
marketing for its restaurants in foreign markets. Remem-
ber the yellow and red garbed clown that attracted kids to
McDonald’s? McDonald’s had maintained the same image for
years, and by the start of the 21st century, it was not work-
ing anymore. Add to that the growing health consciousness
among consumers the world over that caused the restaurant
chain to suffer from decreasing profitability. But by 2005, the
year that marked its 50th anniversary McDonald’s was on its
way to regaining its stardom.

With time, it is necessary for companies to keep abreast of
the changes that are taking place in the environment. Today,
many firms are shifting from a multidomestic or multinational
strategy to a more global one. It is believed that one rea-
son for this is the growing convergence in consumer behav-
ior, especially for food and apparel. For example, consumers
all over the world are moving toward a healthy lifestyle that
includes a healthy diet and exercise. For firms, a global strat-
egy allows them to minimize overall costs and also market-
ing costs by repeating commercials with few alterations, and it
also justifies high advertising expenditure to release a perfect
ad. McDonald’s is one of these companies that have adopted
a global marketing strategy. McDonald’s has had to revive

its global business over the past 5 years, one of the ways
to do it being to replace its previous shoddy image with a
hip new one.

In the year 2003, the company launched its first truly global
marketing campaign called “I’m lovin’ it.” The new promotion
effort aimed at changing the company’s image in markets all
over the world sends the same message to its global consumers
with small changes for local tastes and preferences. Thus, even
though there is still a significant divergence in McDonald’s
menus, the new global marketing campaign enabled it to
instill distinct global brand value in the minds of consumers.
McDonald’s invested heavily in the campaign, employing
celebrities such as singer Justin Timberlake and popular music
group Destiny’s Child who draw a global audience, to appear
in its advertisements. In addition, McDonald’s introduced
more healthy foods in its menus such as salads. The “I’m lovin
it” marketing campaign was targeted at consumers in all age
groups from kids and young adults to seniors. The conceptu-
alization of the ad was also global. It was the brainchild of
a Germany-based firm Heye and Partner, and the company
settled on this agency after consulting with several marketing
agencies in many different countries. The strategy worked, and
in just 1 year, the company’s revenues were up by more than 10
percent. As for the novel marketing drive, the company won
Advertising Age magazine’s Marketer of the Year Award for
2004. As for its recent comeback, McDonald’s is truly lovin’ it.
Recently, McDonald’s has started serving breakfast menus all
day in the United States and has seen profits rise.

DISCUSSION QUESTIONS

1. Why do firms such as McDonald’s need to have a
global marketing strategy even though its national menus are
localized?
2. What alternative strategy could McDonald’s have used to
regain its market?
3. For the future, how should McDonald’s tap into the con-
vergence among global consumers?

Trim Size: 8.5in x

1

1in Kotabe c05-case.tex V2 – 11/07/2016 6:49pm Page 1

�

� �

�

� � � � � � � � � � � � � � � �

5POLITICAL AND LEGAL
ENVIRONMENT

� � � � � � � �SHORT CASES

� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �

CASE 5-1
WAL-MART BRIBERY CASE IN MEXICO

In 2005, an email was sent to a Wal-Mart lawyer, Maritza I.
Munich, by a former executive at the company’s largest for-
eign subsidiary—Wal-Mart de Mexico. The email described
how Wal-Mart de Mexico had become involved in a series of
bribery cases in order to gain market dominance. The bribery
was intended to ease the process of getting construction per-
mits for Wal-Mart stores across Mexico; sometimes to speed
up permit process and other times to obtain confidential infor-
mation or eliminate fines. The information was so detailed
that it mentioned the specific dates, names, and amounts of
the bribes.

The former executive who sent this email was Sergio
Cicero Zapata, who resigned from the Wal-Mart de Mexico
in 2004 after almost 10 years of working in the company’s
real estate department. In an interview with the New York
Times conducted in early 2012, Mr. Cicero described how
he personally dispatched two outside lawyers to deliver cash
to government officials. Their main target was anyone with
power to oppose Wal-Mart’s expansion, such as mayors and
city council members, obscure urban planners, and low-level
bureaucrats who issued permits. These bribes were to buy
zoning approvals, reductions in environmental impact fees,
and the allegiance of neighborhood leaders. The New York
Times conducted a thorough examination of this case and
found many instances where permits were approved and given
within weeks or days after the two outside lawyers made pay-
ments. More and more legal obstacles melted after payments
were made.

Ms. Munich was very aware of challenges of avoiding cor-
ruption in Latin America, as she had served for 12 years
in Mexico and elsewhere in Latin America as a lawyer for
Procter & Gamble. In 2004, she insisted that the board
adopt a strict anticorruption policy prohibiting all employ-
ees from “offering anything of value to a government official
on behalf of Wal-Mart.” Ms. Munich took quick action follow-
ing Mr. Cicero’s report and hired a Harvard-trained lawyer in
Mexico City to meet and interview Mr. Cicero. At the same
time, big bosses at the group headquarters in Bentonville,
Arkansas, were informed about the payments. Wal-Mart sent

investigators to Mexico City, and within days they found evi-
dence of widespread bribery. A paper trail of hundreds of
suspect payments totaling more than $24 million was found,
as well as documents showing that Wal-Mart de Mexico’s top
executives had taken steps to conceal the case from Wal-Mart’s
headquarters in Bentonville. The company’s lead investigator,
in a confidential report to his superiors, concluded: “There is
reasonable suspicion to believe that Mexican and USA laws
have been violated.”

Mr. Cicero named the Wal-Mart de Mexico’s chief execu-
tive, Eduardo Castro-Wright, as the most responsible. Before
his tenure with the company, bribes were occasionally paid,
but the use of bribes increased after Mr. Wright assumed the
position. Leaders of Wal-Mart de Mexico had very aggres-
sive growth goals, and the executives were under pressure
to do whatever necessary to obtain permits. Fueled by the
desire to build hundreds of new stores before Wal-Mart’s
competitors, Mr. Castro-Wright would encourage specific pay-
ments for specific purposes. He allegedly used the service of
gestores—who are a fixture in Mexico’s bureaucracies (some
are legitimate)—to get things done as smoothly as possible.
These gestores would submit invoices worded with brief, vague
descriptions of their services that contain codes known only to
the executives.

The Mexican operation indeed is growing much faster
than the U.S. one—with Mexico’s 10-year average sales
growth being 18 percent, more than twice the rate of the
U.S. supercenters. The stunning growth in Mexico made
Mr. Castro-Wright a rising star in Bentonville and led to his
promotion to a senior position in the United States in 2005.
Despite this bribery allegation, surprisingly, he was promoted
to vice chairman of Wal-Mart in 2008.

Several years later, in April 2012, the New York Times
reported this case to the public. The Times disclosed that
Wal-Mart headquarters had launched an investigation and
found that their Mexican subsidiary had bribed government
officials, but the company ended up not disciplining anyone.
The giant retailer did not disclose any of this to the authorities
until December 2011. After the article by the New York Times

1

Trim Size: 8.5in x 11in Kotabe c05-case.tex V2 – 11/07/2016 6:49pm Page 2�

� �
�

2 • Case 5 • Political and Legal Environment

appeared, Wal-Mart said it started an “extensive” investiga-
tion in the fall of 2011 into its compliance with the Foreign Cor-
rupt Practices Act (FCPA), America’s antibribery law. Within
days of the New York Times’ coverage, Wal-Mart’s investors
lost $10 billion value from the value of its shares. Felipe
Calderón, the Mexican president, as well as some elected offi-
cials across the United States were outraged. It seemed that
top Wal-Mart executives focused more on damage control
than on rooting out wrongdoing. As a giant company that faces

Sources: “Vast Mexico Bribery Case Hushed Up by Wal-Mart after
Top-Level Struggle,” New York Times, April 21, 2012; “Walmart’s
Mexican Morass: The World’s Biggest Retailer Is Sent Reeling by
Allegations of Bribery,” Economist, April 28, 2012; “Walmart in
Mexico: Unfinished Story,” Financial Times, April 23, 2012; and
“Wal-Mart’s U.S. Expansion Plans Complicated by Bribery Scandal,”
New York Times, April 29, 2012.

a saturated market in the United States, Wal-Mart has turned
to international expansion as a priority tool for growth. Unfor-
tunately, this time, one of its successful international markets
had dug a big hole to cover up.

DISCUSSION QUESTIONS

1. How would you evaluate the actions of the executives at
Wal-Mart headquarters? What do you think they should have
done?
2. What laws do you think have been violated? Who should
be blamed for the incidence?
3. What do you think Wal-Mart should do to clean up its
tarnished reputation, especially in the international market?
How would your recommendations improve Wal-Mart’s rep-
utation in the future?

� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �

CASE 5-2
TRADEMARK LAWSUIT IN CHINA: PROVIEW’S IPAD VERSUS APPLE’S IPAD

In late 2010, a struggling Taiwanese-owned company, Proview,
threatened to sue Apple for trademark infringement of its
iPad trademark. Proview is a contract manufacturer of flat
screens that attempted to market its tablet computer called
IPAD almost a decade ago. The company registered its IPAD
trademarks between 2000 and 2004 in several different coun-
tries: the European Union (EU), China, Mexico, South Korea,
Singapore, Indonesia, Thailand, and Vietnam.

In 2006, Proview agreed to sell the global trademark for the
IPAD name to a U.S.-registered company called IP Applica-
tion Development (IPAD) for $55,104. As the company was in
great financial trouble, selling the valuable trademarks would
help them with their problems. At that time, according to Yang
Rongshan, a spokesperson for Proview, Proview did not sus-
pect that the company, IPAD, had any association with Apple.
Still, according to Mr. Yang, the trademarks for the Chinese
market were not included in that agreement.

China’s official trademark database shows that Proview
Shenzhen registered the iPad trademark in China as early as
2000, and this is where all the dispute began. Apple claimed
that it had made a request to have the China trademark trans-
ferred to its name in early 2010, before it began selling the
iPad. The Shenzhen court, however, rejected the request in
December—a ruling that Apple appealed.

According to legal experts in China, after a patent or trade-
mark is recorded with customs, which can normally take up
to a month, customs would seize shipments from any sender
other than the rights holders. When goods are seized, cus-
toms can fine the defendant while the court is deciding on the
infringement claims. Shipments would remain blocked dur-
ing the court case. Many foreign companies failed to register
trademarks in China because they are unaware that this would

Source: “Apple Pays Proview $60m to Resolve IPad Trademark Dis-
pute,” BloombergBusiness, www.bloomberg.com, July 2, 2012.

affect exports as well. Despite the rejection, Apple keeps sell-
ing iPads in China, and that is what makes this dispute tense.
Apple sued Proview Shenzhen, asking the court to transfer the
trademark to Apple, a request that was rejected by the court.
At the same time, Proview Shenzhen sued Apple resellers in
the southern Chinese cities of Shenzhen and Huizhou for an
immediate block on sales of iPads.
In early 2012, local authorities in a northern Chinese city,
Xinhua in the district of Shijiazhuang, a mid-size city in the
province next to Beijing, had ordered Apple to stop selling
iPads at local resellers. In addition to asking for halt of iPad
sales, Proview Shenzhen requested a temporary restraining
order on iPad sales in a Shanghai court and filed multiple com-
plaints to local commercial authorities demanding that sales of
the iPad be frozen. Eventually on June 25, 2012, Apple gave
in and agreed to pay $60 million to settle a 2-year-old legal
dispute with Proview regarding the iPad trademark in China.
Apple sells the iPad in Beijing and many other cities, but the
Shijiazhuang move has demonstrated a first small success in
the long battle against the U.S. company.

DISCUSSION QUESTIONS

1. .a. If you are Proview, how do you view this case? Support
your arguments with data.

b. If you are Apple, how do you view this case? Support
your arguments with data.

2. Assume you are an outside observer, which party would
you back? Why? On what basis do you make your arguments?
3. What consequences would each of the disputing parties
have to bear as a result of this battle?
4. In general, how should foreign companies prevent such
incidents? What actions must they take before marketing their
products globally?