Amar KJR Nayak/IB/XIMB

Amar KJR Nayak/IB/XIMB

The Globalization of MarketsTheodore Levitt

Key Concerns:

How to customize products for the demands of new markets?

 Differences in culture and values among nations

(Month of Ramadan, Bank Lending rates, etc.)

Amar KJR Nayak/IB/XIMB

Differences in tastes of people in different regions / nations

 Customization of goods / services for different

market segments 

Different character of people and companies under the influence of new technology

Amar KJR Nayak/IB/XIMB

Vindication of Model T 

General Rule!

Lower the cost and price

Improve the quality & reliability 

Henry Ford – Production of Model T 

Need for Global imagination

Amar KJR Nayak/IB/XIMB

Strategic issues  

Knowing a lot about many things v/s knowing everything about one great thing 

 Give customers what he says he wants or what he

can take  

Lower cost international product – patronage expands exponentially

Amar KJR Nayak/IB/XIMB

Global Corporation accepts and adjusts to the differences only reluctantly, after relentlessly testing their immutability, and after trying in various ways to circumvent and reshape them

Amar KJR Nayak/IB/XIMB

Summary 

Converging commonalityDevelopments in technology

From customizing items to offering globally standardized products

 Only Global companies will achieve long-term success by Concentrating on what everyone

wants rather than Cater to details of what everyone thinks they might like

Amar KJR Nayak/IB/XIMB

A strategy!! 

Offer everyone simultaneously high-quality, more or less standardized products at optimally low prices

Samsung’s (Washing Machines, Refrigerators, TVs, etc)

Amar KJR Nayak/IB/XIMB

A strategy!!

Examples?  Global Corporations will seek sensibly to force suitably standardized products

and practices on the entire globe!!

Prof. Amar KJR Nayak

Global Production Strategies

Factors that influence international production

Trade Restrictions  

Import duties 

Exchange Rates

Opportunity for international businesses to specialize and integrate manufacturing

plants  

US Companies in W. Europe in 1970s 

A process of rationalization &International value addition

Nissan, Seimens, Ford Motors

Prof. Amar KJR Nayak

Prof. Amar KJR Nayak

International Division of Labor 

Production of standardized products moving to low cost regions

Ex.: Chemicals, Drugs, Automobiles, Textiles, etc

Critical functions like R&D

concentrating in a few advanced countries

Production Cost Reduction Methods

India, US, Japan

Prof. Amar KJR Nayak

Production Cost Reduction MethodsGlobal Bench Marks

United States JapanMarket Research

Product Characteristics 

Design 

Engineering 

Supplier Pricing 

 Cost

If cost is too high, return to design phase

Manufacturing 

Periodic Cost Reduction

 Market Research 

Product Characteristics 

Planned Selling PriceLess Desired Profit

Target Cost 

Design Engineering Supplier Pricing 

Target costs for each component force marketers, designers, and engineers from all departments and suppliers to struggle

and negotiate trade-offs 

Manufacturing 

Continuous Cost Reduction

Prof. Amar KJR Nayak

Four production strategies

Global concentrated production 

Host market production 

Product specialization for a global or regional market

 Transnational vertical integration of

production

Business Strategy

European – Merchandize: Colonization

American – Technology: IPLC

Japanese – Mass Production (M&S, T&H)

Case Analysis

Case of

Matsushita

The Transformation

Amar KJR Nayak/IB/XIMB

A case of home videocassette recorders (VCRs)

SONY JVC/MG

Product Betamax VHS

Introduction 1975 1976

Quality (Technically)

Superior Not Superior

Amar KJR Nayak/IB/XIMB

SONY JVC/MGSize Compact Bigger

in SizeMarket Position(End of 1980s)

34 66

Market Position(2000)

0 100

How did this happen?

Summary:Strategic Moves

Amar KJR Nayak/IB/XIMB

Strategic Moves of Matsushita Group 

Complement Strengths in Product Development /Mass Production

Managerial Attitude to work with Partners

Make the video cassette players (VCP) compatible with Video Cassette recorders

Respond to Market Demand(play duration of VCP)

Amar KJR Nayak/IB/XIMB

Standardize and promote the production of VHS formatted cassettes

Collaborate with video rental shops to promote VHS cassette players

Tie-up with other players in the value chain of the product both in the in home market and foreign

markets 

Standardize product through increased production and increased sales in home and overseas markets:

Critical Volume to Market Standardization

Is the Strategy applicable to you?

Business Strategy – Summary

European – Merchandize: Colonization

American – Technology: IPLC

Japanese – Mass Production (M&S, T&H)

Asian & Indian - ?