European companies will grow bigger and more competitive. Witness the competition
in the aircraft industry between Europe’s Airbus consortium and the United States’ Boe-
ing. Perhaps an even bigger concern, however, is that lower barriers inside Europe will
only create thicker outside walls. Some observers envision a “fortress Europe” that heaps
favors on firms from EU countries but hinders outsiders by imposing obstacles such as
stiffer import quotas, local content requirements, and other nontariff (nontax) barriers.
Also, companies that plan to create “pan-European” marketing campaigns directed
to a unified Europe should proceed with caution. Even if the European Union truly
does manage to standardize its general trade regulations and implement the euro, cre-
ating an economic community will not create a homogenous market. Companies mar-
keting in Europe face 14 different languages, 2,000 years of historical and cultural
differences, and a daunting mass of local rules. Consider the experience of the ac-
claimed Leo Burnett ad agency when it took on the goal of creating a single Euro-
pean campaign for United Distillers’ Johnnie Walker account:■ Johnnie Walker It was only after many painful tests and revisions that the
final ad rolled out and achieved success. In an ad with the headline “The Wa-
ter of Life,” a man attends the running of the bulls in Pamplona and, after
narrowly escaping being trampled, celebrates with a glass of Johnnie Walker
Red Label. In many countries, the Pamplona setting raised hackles because
people said, “The Spanish don’t know anything about whiskey.” The ad was
a total failure in Germany because to Germans it seemed simply reckless.
“Also,” said Jenny Vaughn, worldwide brand director for Johnnie Walker, “be-
cause of the German animal rights campaigners, you can’t show a goldfish
in a goldfish bowl on German television, so a bull run was just not on.”^9The most successful pan-European ads are those that are highly visual and sym-
bolic. These ads focus on the product and consumer and are aimed at one of the two
audiences that market researchers really agree are turning into Euroconsumers—the
young and the rich. One such ad is for TAG Heuer watches in which a swimmer races
a shark, a hurdler leaps over an oversized razor blade, and a relay runner grabs a dyna-
mite baton, all mind games that athletes everywhere use to rev up their performance.
Closer to home, in North America, the United States and Canada phased out trade
barriers in 1989. In January 1994, the North American Free Trade Agreement (NAFTA)
established a free trade zone among the United States, Mexico, and Canada. The agree-
ment created a single market of 360 million people who produce and consume $6.7
trillion worth of goods and services. As it is implemented over a 15-year period, NAFTA
will eliminate all trade barriers and investment restrictions among the three coun-
tries. Prior to NAFTA, tariffs on American products entering Mexico averaged 13 per-
cent, whereas U.S. tariffs on Mexican goods averaged 6 percent.
Other free trade areas are forming in Latin America and South America. For ex-
ample, MERCOSUR now links Brazil, Argentina, Paraguay, and Uruguay. Chile and
Mexico have formed a successful free trade zone. Venezuela, Colombia, and Mexico—
the “Group of Three”—are negotiating a free trade area as well. It is likely that NAFTA
will eventually merge with this and other arrangements to form an all-Americas free
trade zone.
Although the United States has long regarded Latin America as its backyard, it is
the European nations that have tapped this market’s enormous potential. As Wash-
ington’s efforts to extend NAFTA to Latin America have stalled, European countries
have moved in with a vengeance. MERCOSUR’s two-way trade with the EU in 1995
amounted to $43 billion, a total that exceeded trade with the United States by $14
billion. When Latin American countries instituted market reforms and privatized pub-
lic utilities, European companies rushed in to grab up lucrative contracts for rebuild-
ing Latin America’s infrastructure. Spain’s Telefonica de Espana has spent $5 billion
buying phone companies in Brazil, Chile, Peru, and Argentina. European companies
have moved rapidly into the private sector. In Brazil, seven of the ten largest private
companies are European owned, compared to two controlled by Americans. Among
the notable European companies operating in Latin America are automotive giants
Volkswagen and Fiat, the French supermarket chain Carrefours, and the Anglo-Dutch
personal care products group Gessy-Lever.part three
Developing
Marketing(^372) Strategies