ch06 Bus Mkt Strat Glbl Mkts.ppt

7/27/2019 ch06 Bus Mkt Strat Glbl Mkts.ppt

http://slidepdf.com/reader/full/ch06-bus-mkt-strat-glbl-mktsppt 1/45

PowerPoint by:

Ray A. DeCormier, Ph.D.

Central Connecticut State University

Chapter 6:

Business Marketing

Strategies forGlobal Markets



Chapter Topics

How to capture sources of global advantagesin rapidly developing economies (RDE) suchas China and India

Spectrum of Market entry options

Strategic significance of different forms of

global market participation Distinctive types of international strategies

Essential components of global strategy



Global Competition Is Here

Huge international firms, which arerelatively unknown here, are challengingUS companies in almost every globalsetting.

B2B marketing is world wide and the veryexistence of many companies will bedecided by its ability to:

1. Act decisively

2. Compete aggressively

3. Seize market opportunities



This Chapter Shines Light On:

1. Rapidly Developing Economies

(RDEs) and their source of global

advantage

2. International entry options

3. Comparison of multidomestic & global

strategies

4. Critical requirements for a successful

global strategy

4



RDEs are emerging as serious competitors in worldmarkets. Their advantages are labor costs and, insome cases, abundant raw materials.

80% of the world’s population is located in RDEs

[i.e., China, India, Mexico, South America (Brazil),Eastern Europe and Russia].

Hundreds of millions of people are now consideredmiddle class and form a significant market.

There are 25 world-class emerging multinationals.By 2025, there will be at least a 100.



Global Advantage

In order to compete in a world economy,companies need to become global.

The strategy is to meet the needs of both

low growth and high growth markets. We need new competitive models to

handle the current shifts from west to eastand the rise of the challenge of RDEs

New philosophy of “manyness” vs. the old approach of “oneness.”



Copyright © 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.Developed by Cool Pictures and MultiMedia Presentations 7

Growth advantage

Integration

advantage

“Manyness”

advantage

Resource leverageadvantage

Market

access

Resource

access

Network

coordination

Local

adaptation

Figure 6.1 The BCG Global Advantage Diamond

Source: BCG

analysis.



Integrated Strategies Include:

• Market access: driving sales growth by reaching new

markets and targeting new

market segments;

• Resource access: leveraging valuable resources (for

example, talent, assets, raw

materials, and knowledge) in RDEs to achieve competitive

advantage;

• Local adaptation: developing and adapting products and

services to satisfy the

unique needs of RDE customers;

• Network coordination: integrating operations to capitalize

on the strength of the

company’s global network.



What Products Should Go? What Should Stay?

The decision to relocate manufacturing, R&D, and

other services is a strategic decision involving:1. Economic issues abroad and at home

2. Competitive concerns

3. Environmental issues



What Products Should Go to RDEs?

Activities that could be outsourcedinclude:

Products with:1) High labor content/costs

2) High growth potential by keeping the price low

3) Large market potential in the RDEs4) Standardized manufacturing processes



What Services Should Go to RDEs?

Services that:

1. Are rule-based

2. Have high labor costs3. Have well-defined processes

Example: Call centers, accounting,programming



What Should Stay?

Products, services or jobs that:

1. Protect intellectual property (IP)

2. Demand extreme logistical requirements

3. Possess high technology content

4. Possess high performance attributes

5. Customers consider sensitive to their business

Example: Military products or processes

Table 6.1 summarizes this issue.



Maintain Home-BasedManufacturing

Relocate to RDEs

Labor Contract Low High

Growth of Demand in Home Market Low High

Size of RDE Market Low High

Degree of Standardization Low High

Intellectual Property Content High Low

Logistical Requirements High Low

Source: Adapted from Arindam Bhattacharya et al., “Capturing Global Advantage: How Leading Industrial Companies Are Transforming Their Industries by Sourcing and Selling in China, India, and Other Low-Cost Countries,” The Boston Consulting

Group, Inc., April 2004, accessed at http://www.bcg.com, pp. 26-30.

Table 6.1 – Determining Which Products toOutsource and Which to Keep In-House:Selected Criteria



Local Adaptation

Shift power to where the growth is.

Build new offerings from the ground up.

Build LGTs from the ground up, just like forming a

new company.

Customize objectives, targets, and metrics for the

RDE environment.

Provide senior executive support to the LGT,

including a direct reporting link to senior

management



Network Coordination

Share best practices

Standardize processes

Resource advantages developed in different

markets can be shared and diffused to other

operating units around the world

Take innovations developed in RDEs back

to developed markets



Spectrum of Involvement in

International Marketing

• First step for developing an effective international

marketing strategy is to understand alternative ways

that firms can participate in international markets.

• Next, entry mode selected should consider firm’s level

of experience overseas and its evolutionary stage in itsinternational involvement.



Entering the Global Marketplace

Management

Contracting

Includes management and manufacture

contracting from making to assembling

Joint VentureDomestic firm buys/joins a foreign company

to create new entity

Sell domestically-produced products tobuyers in other countries

Global Strategy

MultidomesticCompanies work together to find a balance

between local adaptation & global optimization

Strategic AllianceA business relationship between two or more

firms to cooperate through mutual need

A business relationship established to cooperate

out of mutual need and to share risk



Risk Levels

Export

Strategic

Alliances

Joint

Ventures

Contracting

Multi-

domestic

Global

Strategy

Risk

Return



Entry Modes: Exporting

a. Least commitment

b. Lowest riskc. Workable when firm lacks resources to make a

significant commitment to the market

d. Reasons for non-committal include:

a. Politicalb. Economic

c. Unfamiliar with market’s requirements or culture



Management Contracts

When equity participation is not feasible, many

partners turn to management contracts toparticipate in the venture.

A management contract is an agreement for one

company to perform a specific function under a

contract basis. Specific functions may include: Organizational skills

Specific expertise

Management services

Turnkey operations: Arrangement permits client toown, operate and control an operating system for a

% of gross sales.



Contract Manufacturing

Involves the sourcing of products from,say, China. The purchaser (marketer) maymarket the product under their own brand,post their own label and market/distributeit there and/or in other countries.

Key requirement is quality management. Contract manufacturing is most

appropriate when:

Local market is too small to justifyinvestment

Export entry is blocked Quality licensee is unavailable



Strategic Alliances

Strategic alliance – A relationship betweenpartners involving commitment of capital,management and technical resources.

The objective is to enhance both partiescompetitive positions, such as cutting orsharing costs, and/or get into newmarkets.

Example: GM & Toyota



• Partners have different organizational structures.This can create problems for marketing and productdesign decision-making. This may lead to problemsin coordination and trust.

• Partners that combine their best skill sets in onecountry may be poorly equipped to support partnersin other countries. This can lead to globalimplementation problems.

• Quick technological change often guarantees thatmost attractive partner today may not be mostattractive partner tomorrow.



Joint Ventures

Involves the joint ownership of a company to

produce/market into a host country.

Joint ownership is the development of a newcompany where both parties have a stake (equal

or majority).

Contributions do vary widely from R&D, knowhow, financial, sales, or to whatever.



Joint Venture Advantages

1. Spreads the risk

2. Opens up new markets to bothorganizations

3. Provides a better relationship to eachother’s local community

4. Less vulnerable to political risks

5. Alien companies are quickly and easilyoriented to each other’s culture

6. Any other advantages?



Joint Venture Disadvantages

Many joint ventures are disbanded because they fall

short of expectations.

Unable to mutually disclose intellectual property Unable to agree on how profits should be divided

Differing management styles

Different perception of the strategies

The relationship could even morph into

competitors



Global Strategy

A global strategy seeks to achieve a competitiveadvantage by integrating its operations acrosscountries.

It might start with a standard core product andadapt it as necessary to targeted countries on thebasis of contribution to globalized benefits.

Examples: Automobiles, commercial aircraft,consumer electronics, machinery, etc.



Upstream Activities

Upstream activities include primaryactivities that do not necessarily need

to be tied closely to the buying market

such as manufacturing.

Where is manufacturing really needed?

Where are services really needed?Where is marketing really needed?



Downstream Activities

Downstream activities involve primaryactivities where the need is as close to the

buying market as required.

Example: Many products need to be soldthrough salespeople who need to be in the

market.

Where is manufacturing really needed?Where are services really needed?

Where is marketing really needed?



MULTIDOMESTIC VS. GLOBAL

Multidomestic competition occurs when: Downstream activities are important to

competitive advantage so firms can pursue

separate strategies in each country.

Competition in each country is independent of

competition in other countries.

Global competition occurs when:

Upstream and support activities are vital to

competition where a competitive position in onecountry effects the competitive position in

another country.



According to Pankaj Ghemawat, companies need tobe careful in which strategy (global vs.multidomestic) they employ becauseinternationalism is only at 10%.

Differences in many cultures do matter.

Many countries are protectionists and will only trade

in one direction.

Many countries don’t value intellectual property

rights.

Some countries are reasserting national sovereignty.

Thus, the decision to follow a purely GLOBAL

strategy must be carefully scrutinized.



Two Dimensions of Competition:Coordination & Configuration

Configuration is concerned about whereeach activity is performed. They rangefrom centralized to decentralized.

Centralized can produce economies of scale and a reduced learning curve.

However, centralized may not be close

enough to the market and the cost of getting products there may be greaterthan the savings.



Two Dimensions of Competition:Coordination & Configuration

Coordination refers to activities thatare performed in different locations

worldwide but are coupled with eachother.

Example: A plant in one country makesbumpers, a plant in another country

makes doors, and a third plant nearthe market assembles the car.



Integration of Coordination & Configuration

Integrating coordination and configuration to thevalue of activities results in various internationalstrategies:

I. High Foreign Investment – extensivecoordination

II. Country-centered strategy – low coordination

III. Purest Global Strategy – high value-based

activities

IV. Export based – decentralize marketing; lowvalue-based activities



Types of International Strategies



Which International Strategy?

The nature of international competition is the determinantas to which strategy to employ.

Employ a global strategy when a position in one countryaffects a position in another country.

Employ a multidomestic strategy when a position in onemarket does not affect a position in other markets(markets are independent of each other).

It is important to view each market in terms of:

Culture

Administration/Political climate

Geography

Economy



Copyright © 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.Developed by Cool Pictures and MultiMedia Presentations

Framework for Global StrategyBuild on foundation of

unique competitive position

Emphasize consistent positioning strategy

across international markets

Establish clear home base

for each distinct business

Leverage product-line home bases

at different locations

Disperse activities toextend home base advantages

Coordinate and integrate

dispersed activities

Global

Strategy

Source: Adapted from

Michael E. Porter,

“Competing AcrossLocations: Enhancing

Competitive Advantage

through a Global Strategy,”

in Michael E. Porter (ed.),

On Competition (Boston:

Harvard Business School

Press, 1998), pp. 309-350.



Global Strategy: Build upon a

Unique Competitive Position

1. Globalize in those businesses and

product lines where the firm has a

unique competitive advantage.

2. Advantage must be on cost and/or

differentiation where valuesupports a premium price.



Global Strategy: Emphasize a

Consistent Positioning Strategy

1. Maintain a consistent product and

service offering from one country to

another.

2. Strategy requires patience andlong-term dedication.

3. It is not necessary to try and

expand product assortment to

capture a limited market.

4. It’s better to maintain a consistent

position.



Global Strategy: Establish a Clear

Home Base for Each Business

1. Corporate location is not as

important as having a clear home

base.

2. Home base is where:1. Strategy is set

2. Core product & process technology is

created

3. Critical mass of production resides4. Research & service is conducted



Home Base (continued)

Home base should be located

where there is favorable access to:

1. Required resources

2. Supporting industries Home base should serve as the

integrating point for activities.

Home base should have clear

worldwide responsibility for thebusiness unit.

Gl b l St t L



Global Strategy: Leverage

Product-Line Home Bases at Different

Locations

As a firm’s product line broadens

and diversifies, different countries

may act as a home base for some

of them.

These home bases should offer

best locational advantages:

To suppliers For serving customers worldwide.



Extending Competitive Advantages

Having a strong home base to housecore activities is important.

However, other activities can bedispersed to extend the firm’scompetitive advantage.

Three areas are…



Disperse Activities to Extend Home-

base Advantage

1. Capture competitive advantages inprocurement by purchasing at most cost-effective locations.

2. Securing or improving market access bylocating selected activities at their properlocation to take advantage of costs,politics, and/or local preferences.

3. Selectively tapping competitive advantagesat other locations for skills, materials ortechnologies.



Global Competitors Achieve

Unified Action By:

• Establishing a clear global strategy

• Developing consistent information and

accounting systems on a worldwide basis

• Encouraging personal relationships that

facilitate transfer learning among managers

• Carefully designing incentive systems toensure that rewards accrue for truly value-

driven actions

Documents

ch06 Bus Mkt Strat Glbl Mkts.ppt