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CHAPTER 11 · MARKETING STRATEGY

8 What kinds of factors influence the pricing of goods and services in the international marketplace?
Identify and describe three.
9 Why do many MNEs find they cannot use the same distribution strategy overseas that they have used
at home?
10 In choosing the best distribution system, what types of criteria do MNEs use? Identify and discuss three.
11 In what ways are multinationals using the following concepts to help them gain greater international
market share: ongoing market assessment, new product development, and effective pricing? In each case,
offer an example.

REAL CASE

Citigroup in China
The banking industry faces many barriers to globaliza-
tion. Overcoming cultural differences and dealing with
varying regulations and financial systems make it very
difficult to establish a truly global bank. Citigroup is a
leader in international banking, with 36 per cent of its in-
come originating outside North America. Formed in 1998
by the merger of Citicorp and Travelers Group, in 2004
Citigroup had a presence in more than 100 countries
around the world. Only HSBC can claim to do better.
Citibank enters a developing country with its own mar-
keting strategy. In the first stage of development, it caters
to the global customer (usually a large corporation) by
providing short-term loans, cash management, and for-
eign exchange services. During a country’s second stage
of development, as demand grows in the face of a bur-
geoning middle class, Citibank begins to offer personal
financial products.
In China, the political climate has limited Citibank’s
expansion plans in the Asia region. Citibank opened its
first office in China in 1902 but was thrown out by the
new communist government of Chairman Mao in 1949.
Even after it was allowed back into the country, its busi-
ness was restricted mainly to foreign currency. China’s
market potential, however, always attracted the bank, and
when the country began to show interest in opening its
borders and joining the World Trade Organization,
Citibank stepped in as a key broker in negotiations with
the US government. The bank’s efforts are paying off. In
the 1990s, the Chinese began to open their economy and
make commitments for further reforms. By 2001, import
tariffs had been lowered to an average of 15 per cent from
44 per cent in 1992, and they are expected to continue to
decrease, averaging 9 per cent by 2006. China has also
committed to the complete liberalization of its banking
industry by 2006.
Deregulation is allowing Citibank to implement its
emerging market strategy in China. In the initial phase, the
bank marketed only to large foreign corporate clients. By
2004, it had expanded its customer base to include travel-
ers, business people, wealthy Chinese with foreign ex-
change needs, and local businesses. Citibank’s international
network has also made it attractive to Chinese MNEs oper-
ating in other markets. Among these is Legend, a Chinese
PC manufacturer that today controls over 25 per cent of
the domestic market and is as yet unknown outside the
mainland. Other examples include Konka (electronics),
Haier (consumer appliances), and China Telecom. Local
banks do not have the same level of international service.
Deregulation not only allows Citibank to open fully func-
tional branches to cater to the wealthy and, increasingly, to
the middle class, it also attracts more foreign clients. UPS
and FedEx, for instance, both seek to open 100 per cent-
owned delivery systems in China. Home to the largest num-
ber of mobile phone subscribers in the world and nowhere
near saturation, China also expects to attract telecom ser-
vice providers and product manufacturers. With 10 million
PCs sold in 2001, the computer industry is also waiting to
enter the market. In short, opportunities for foreign invest-
ment in China are creating a large number of MNE sub-
sidiaries from which Citibank can draw its client pool.
Citibank’s second marketing stage for emerging markets
is expanding into personal banking. To some degree,
Citigroup now offers consumer banking, corporate and
investment banking, and insurance in the Chinese market.
The bank does not yet provide a full range of consumer
services to the entire population. Indeed, its banking fees
are kept high for all but very large deposits to attract only
the wealthier segments of the population.
In 2002, the firm was first allowed to offer foreign ex-
change services to Chinese nationals but is not yet allowed

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to offer consumer banking in yuan. In 2004, it partnered
with the Shanghai Pudong Development Bank to offer
credit cards that can be used in yuan and US dollar trans-
actions. The credit card business is tricky in China because
there is no credit rating agency, but by moving forward
with this service, Citibank’s goal is to create brand aware-
ness that will allow it to dominate the market once it
matures. The bank is likely to move consumers into mort-
gages, personal loans, pension funds, and other financial
products in the final stage of marketing.
Although Citibank has a definite first-mover advantage
in the Chinese market, it still faces competition from
domestic banks. These include the Industrial and
Commercial Bank of China and other large foreign com-
petitors such as the HSBC, which also has extensive ex-
perience in the region.
Websites: www.citigroup.com; www.fedex.com; www.ups.com;
www.legend.com.cn; www.konka.com; www.haier.com;
www.chinatelecom.com.cn; www.icbc.com.cn; and www.hsbc.com.
REAL CASE
Brazilian soap operas: a world market
. . . I let myself get hooked on Brazilian soap operas.
But those are so wild and over-the-top, the whole
country stops to watch them. They’re nothing like
American soaps.
Paula Sharp, US Writer
When Roque Santeiro aired in Brazil after 10 years of
censorship, São Paulo, a city comparable to New York,
suddenly came to a halt. The 8:00 P.M. soap opera has be-
come a ritual in many households; people leave anything
they are doing to glue themselves to the TV. Not surpris-
ingly, leading television stations compete heavily for this
market. Indeed, soap operas are the main source of in-
come for Brazilian TV stations, including TV Globo,
Sistema Brasileiro de Televisão (SBT), and Manchete.
Fierce competition has helped Brazilian soap operas be-
come among the very best in the world. Roque Santeiro
revolutionized editing and launched its scriptwriter as an
icon in Brazil. Period-set costumes were used for Escrava
Isaura. And in “Torre de Babel,” the shopping mall in which
most of the action takes place was built for $1.1 million
dollars, only to be blown to pieces as the plot developed.
Brazilian soap operas differ from their US counterparts
by their running time and the structure of their plot.
REAL CASE
Sources: Anthony Spaeth, “China’s Legend in the Making,” Time.com, May 8,
2000; “Citigroup Allowed to Build Mansion in Shanghai,” People’s Daily,
December 4, 2000; Michael Shari, Brian Bremner, Heather Timmons and Becky
Gaylord, “Citibank Conquers Asia,” Business Week (international edition),
February 26, 2001; “Foreign Bank Integration Accelerates in China,” The
Banker, May 3, 2004; “Citibank Business in Beijin,” China Daily, March 26,
2004; “Another First: Citibank Wins Foreign Exchange Approval,” China Daily,
March 20, 2002.
1 How can a foreign organization such as Citibank
make an initial assessment of a host-country market
(such as China) in deciding how to do business
there? What is involved in this process?
2 What steps can Citibank take in conducting add-
itional screening of the Chinese market before
entry? Briefly describe each step and discuss how
relevant it is or is not to Citibank.
3 Based on the case facts, which of the four Ps of
marketing would be relevant for Citibank’s entry
into China?
While American soap operas can run for 10 years or
more, Brazilian soap operas run an average of eight
months and tend to have a very specific storyline and
plot structure.
With a population of 172 million, Portuguese-speaking
Brazil is one of the biggest markets for soap operas in the
world. It is also one of the biggest producing countries,
at nearly 20 soaps per year, as well as a leading exporter.
Soap operas from Brazil are dubbed into foreign lan-
guages and exported to 128 countries around the world,
including the United States, China, Italy, and Spanish-
speaking Latin America. In Cuba, the communist gov-
ernment even rescheduled its electric energy rationing
to allow citizens to tune into Escrava Isaura. Since its
Brazilian premiere in 1977, Escrava Isaura, the story of a
white slave on a Brazilian plantation, has been aired in
nearly 80 countries.
Why are Brazilian soaps so successful? One reason is
that audiences in other non-triad nations can identify
with what is portrayed as Brazilian reality. Since their be-
ginning in the 1960s, Brazilian soap operas have often
dealt with such controversial issues as religion, the role of
the state, class differences, abortion, sexuality, and racism.
▼
These issues were portrayed with due consideration to
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CHAPTER 11 · MARKETING STRATEGY
Brazil’s predominantly conservative and religious audi-
ence. Soap operas have become not only entertainment
but also a means for social dialogue in Brazil. The audi-
ence shares the plot lines with friends and co-workers
and discusses the moral dilemmas that are brought up in
the story. TV stations have also tended to borrow from
the proven success of stories in other media. The literary
works of Mario Benedetti, Mario Vargas Llosa, Jorge
Amado, João Guimaraes Rosa, the classics of Greek and
Roman literature, and folk stories have all inspired soap
operas. These universal themes help Brazil export its
soap operas around the world. Wherever the story is an
original, as it often is, it has more in common with a
novel (not surprisingly the name for soap operas in
Brazil is telenovelas) than with the scattered plot line of
an American soap.
TV Globo
In terms of audience, the fourth largest private TV
network in the world is Brazil’s TV Globo, which held
54 per cent of the Brazilian viewership in 2003 and over
77 per cent of the television advertising market. TV Globo
is part of the Globo Group, which also controls the coun-
try’s number one radio station, the second largest maga-
zine group, and the cable television company Globo Cabo.
TV Globo had its beginning in 1965 with the inaugur-
ation of Channel 4 in Rio de Janeiro. Soon after, the com-
pany purchased TV Paulista to broadcast in São Paolo,
Brazil’s biggest city. To enter the Belo Horizonte market,
the company acquired J. B. Amaral Group in 1968, then
expanded in 1971 to Recife by purchasing the Vitor Costa
Group. By 2003, a combination of acquisitions and broad-
casting licenses had made TV Globo the largest network
in Brazil, with 115 TV stations reaching 99.98 per cent of
Brazil’s population.
It was in 1966 that TV Globo produced its first two
soap operas. At first they were relatively low-budget, but
by 2000 production costs reached over $100,000 per one-
hour episode, a sizable expense for a Brazilian produc-
tion. Because a 30-second ad during the 8 P.M. soap opera
costs approximately $102,000, soaps constitute the largest
source of income for TV Globo. The firm has its own
recording studios with a staff of 1,500 scriptwriters, and
its soaps are the most successful in the market, capturing
upwards of 60 per cent of the audience.
At less than 10 per cent of total sales, foreign sales are a
tiny but growing portion of revenues for producers. A
one-hour soap opera episode can be priced anywhere be-
tween $300 in Cuba and $40,000 in Italy. The number of
TV sets per capita, the purchasing power of the country,
and the amount the stations can earn on advertising de-
termine prices to foreign TV stations. In collaboration
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with Telelatino, the US-based broadcaster, TV Globo is
planning to enter the US market with a $10 billion, 150-
episode soap opera called “At All Costs.” The target group
is the large Latin American market. TV Globo will use its
proven story lines and reshoot them with an all-Spanish-
speaking cast from different Latin American countries.
TV Globo faces competition on various fronts. In the
domestic market, SBT and Manchete produce their own
soaps to compete with those of TV Globo. Although TV
Globo remains by far the most successful, other domestic
networks have been able to erode the 80 per cent audi-
ence the network enjoyed in the late 1970s. TV Globo’s
response was to support its own star system, invest in a
scriptwriting school in São Paolo, and create stories that
are more responsive to TV audiences. The station is very
protective of its directors, scriptwriters, and actors, often
keeping them sitting idle under salary rather than allow-
ing them to go to the competition. Audience panels and
rating information are used to change plots of soaps that
do not reach desired ratings.
TV Globo also faces competition from established soap
opera industries in other Latin American countries, in-
cluding Mexico, Argentina, Venezuela, and Colombia.
Although these productions have a limited share of the
Brazilian market, TV Globo competes with them in their
own markets and in non-Latin American markets. These
competitors have traditionally made lower-quality soaps.
Over the last few years, however, improvements in cast-
ing, scriptwriting, and directing have begun to increase
their notoriety in international markets.
During Ramadan, mosques in Côte d’Ivoire changed
the prayer time schedule to allow the faithful to see the
last episode of the Mexican soap Marimar. This soap was
also an international hit in Indonesia and the Philippines,
where the female lead actress was received with all the
honors of royalty.
Another source of competition comes from importing
nations, such as Spain, Italy, Portugal, Greece, and China.
Local storylines are being created that are likely to erode
TV Globo’s market share. Growing competition from for-
eign companies is forcing TV Globo to find innovative
ways of capitalizing a market. For example, it recently
partnered with a Chinese company to develop a soap
about a Chinese man who falls in love with a Brazilian
woman and goes to Brazil to court her. This guarantees
access to the Chinese market.
Thirty-five years of experience in the soap opera market
have given Brazil and TV Globo a competitive advantage
against new entrants. As production develops in these
countries, however, Brazil must adapt to increasing com-
petition to continue its lead. There are a number of ways
in which to do this, including specializing in some types of
soaps, partnering with foreign producers, and moving into
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other areas of entertainment. In fact, the soap opera busi-
ness has left Brazil with excellent producers, scriptwriters,
directors, camera operators, editors, and actors who can
be used to create anything from commercials, drama ser-
ies, and sitcoms to theater and films. This last has already
begun to occur. In 1999, a long-acclaimed Brazilian soap
opera actress, Fernanda Montegro, was nominated for a
best actress Oscar for her part in Central Station, a movie
that was also nominated for best foreign film.
Websites: http://redeglobo1.globo.com/home and www.sbt.com.br.
Sources: Daniel Mato, “Telenovelas: Transnacionalización de la industria y trans-
formación del género,” in N. Garcia Canclini (ed.), Industrias culturales e inte-
gración latinoamericana (Mexico: Grijalbo, 1999); Nora Mazziotti, La industria
de la telenovela (Buenos Aires: Paidós, 1996); “Home-grown Films First for
Endnotes
1 See, for example, Carla Rapoport, “The New US Push Into
Europe,” Fortune, January 10, 1994, pp. 73–74.
2 Susan P. Douglas and C. Samuel Craig, “Evolution of Global
Marketing Strategy: Scale, Scope, and Synergy,” Columbia
Journal of World Business, Fall 1989, pp. 47–59.
3 Fred Luthans and Richard M. Hodgetts, Business, 2nd ed.
(Hinsdale, IL: Dryden Press, 1993), pp. 378–382.
4 “China Goes Mobile Crazy,” BBC.co.uk, August 15, 2001.
5 See, for example, Joseph A. McKinney, “Degree of Access to
the Japanese Market: 1979 to 1986,” Columbia Journal of
World Business, Summer 1989, pp. 53–59.
6 “Turin Meets Detroit—in the Volga,” Economist, May 5,
1998.
7 See, for example, James B. Treece et al., “New Worlds to
Conquer,” Business Week, February 28, 1994, pp. 50–52.
8 John Templeman and James B. Treece, “BMW’s Comeback,”
Business Week, February 14, 1994, pp. 42–44.
9 Also see Daniel McGinn and Adam Rogers, “Operation
Supercar,” Newsweek, November 23, 1998, pp. 48–53.
10 Richard A. Melcher and John Templeman, “Ford of Europe is
Going in for Emergency Repairs,” Business Week, June 17,
1991, p. 48; and Daniel Howes, “Ford’s Blue Oval Takes on
Added Luster in Europe with Thursfield,” Detnews.com,
December 4, 2001.
11 “Intel’s Right-hand Turn,” Economist.com, May 12, 2005.
12 Mark Borden, “Let the Games Begin,” Fortune, November 26,
2001.
13 “Hand-to-Hand Combat,” Economist.com, December 16,
2004.
14 For another look at growth and market share considerations,
see Manab Thakur and T. K. Das, “Managing the Growth-
Share Matrix: A Four-National Study in Two Industries,”
Management International Review, vol. 31, no. 2 (Second
Quarter 1991), pp. 139–159.
15 Luthans and Hodgetts (1993) n. 3 above, p. 381.
16 Also see “The Fate of the Dollar,” BBC.co.uk, January 19,
2001.
ENDNOTES
Brazil,” BBC.co.uk, May 8, 2001; “Brazil Media Giant Winks at Wall Street,”
Sunday Times, November 12, 2000; David Templeton, “Soap Box,” Sonoma
Country Independent, October 4, 2000; Alex Bellos, “Obituary: Roberto
Marinho,” The Guardian, August 8, 2003; Andrei Khalip, “Brazil Cues Pan-Latin
Lovers For US-Bound Soaps,” Entertainment Design, June 28, 2002.
1 How is language an issue when marketing Brazilian
entertainment to other countries?
2 What competitive advantages does Brazil have in
the development of a film industry? What types of
barriers does this industry face in international
markets?
3 In what way can foreign capital prove to be a key
strategy for TV Globo and the Globo Group?
17 Joan Magretta, “Fast, Global, and Entrepreneurial Supply
Chain Management, Hong Kong Style,” Harvard Business
Review, September/October 1998, pp. 103–114.
18 See, for example, Robert T. Green and Ajay K. Kohli, “Export
Market Identification: The Role of Economic Size and
Socioeconomic Development,” Management International
Review, vol. 31, no. 1 (First Quarter 1991), pp. 37–50.
19 Christopher Knowlton, “Shell Gets Rich by Beating Risk,”
Fortune, August 26, 1991, pp. 79–82.
20 Ibid., p. 82.
21 Also see Keith Naughton et al., “The Global Six,” Business
Week, January 25, 1999, pp. 68–70, 72.
22 “The Art of Overtaking,” Economist, September 6, 2001.
23 Peter Fuhrman, “A Tale of Two Strategies,” Forbes, August 6,
1990, p. 42; and “New Opel Transmission Plant to be Built
in Hungary,” General Motors, Press Release, April 17,
1998.
24 “U.S. President Bill Clinton Visits Open Eisenach Plant,”
General Motors, Press Release, May 14, 1998.
25 For more on some of General Motors’ international expan-
sion, see Jonathan Friedland and Joseph B. White, “GM Is
Leading an Investment Boom in Mexico,” Wall Street Journal,
December 24, 1998, pp. A 5–6; Lisa Schuchman and Joseph B.
White, “Global Consolidations in Autos Heat Up,” Wall Street
Journal, December 21, 1998, p. A 2; and Seth Faison, “GM
Opens Buick Plant in Shanghai,” New York Times, December
18, 1998, pp. C 1, 19.
26 “IBM is First to Ship Products with ‘Magical’ New Material,”
IBM News Release, May 21, 2001.
27 Bart Ziegler, “A Giant Stirs: IBM Is Ready to Do Battle.
Should Anyone Worry?” Wall Street Journal, March 20, 1995,
p. R20.
28 Andrew Tellijohn, “Bang & Olufsen will bring high-end audio
to Galleria,” The Business Journal, November 15, 2002.
29 Joel Millman, “The Merchant of Mexico,” Forbes, August 5,
1991, pp. 80–81 and Matthew Schifrin, “Partner or Perish,”
Forbes.com, May 21, 2001.
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