4
Global competitive strategies
Home, supplier, partner, and customer countries of competitors
differences as sources of competitive advantage
Differences in global value connection
Differences in products, brand, technology
Differences in impacts of political, legal and regulatory climate
trade agreements, home country policies
Design global competitive strategies for competitive
advantage
8. 5
Global competitive strategies
Competitive advantage must be relative to both global and local
competitors:
Unilever in US: Breyers,
Ben and Jerrys, Good Humor, Klondike, Popsicle
Nestl in US: Dreyers
The great ice cream battle
9. 6
UNILEVER in India Kwality Wall
Hindustan Lever faces successful local competitor
Gujarat Cooperative Milk Marketing Federation (GCMMF): India's
largest food products marketing organization.
Two million farmers in the cooperative
Slogan: A taste of India
PRICE: 10 rupees (20 cents): 100 milliliter Amul ice cream
versus
80 milliliter Hindustan Lever Kwality Wall vanilla ice cream
ADVERTISING COSTS: Amul: 1% of sales versus
Hindustan Lever: 10-15% of sales on advertising
10. 7
Umbrella brands:Nestl products in the super-market.Some products
carry both global brand and local brand.
11. 8
Global platform strategy
The global challenge
Global market size: standardization
12. Local differentiation: customization
Strategy: Determine best combination of global and local activities
for competitive advantage
13. 9
Forces calling for global products (standardization):
Convergence in customer preferences and income across target
countries with economic development and trade
Competition from successful global products
International brand awareness
Cost benefits from standardization
Falling costs of trade with greater globalization
Global platform strategy
14. 10
Forces calling for local products (customization):
Differences in customer preferences and income across target
countries
Build local brand recognition
Competition from successful domestic products
Regulatory requirements (quality, safety, technical specifications,
domestic content) -- EU product standards
High costs of trade create separate markets
Global platform strategy
15. 11
Global platform strategy
Reduces development and production costs
Used in automobiles, mobile phones, computers, aircraft
Example: Cost per product (development and mfg):$80
Cost of basic platform development: $100
Cost of each variation (development and production):$50
Use platform when serving four or more customer country
markets:Compare costs of serving four markets:
Distinct products:4 x $80 = $320
Platform and 4 variations $100 + 4 x $50 = $300 ***
16. 12
Global platform strategyProduct variety versus economies of
scale
Business sells 10 units each in Country A and in Country F
Unit costs economies of scale Two local products at 10 units each $
30/unit
Global product at 20 units$ 20/unit
Price company can charge per unit:Global product:$80/unit in each
country
Two local products: $95/unit in each country
Global versus regional product:
Tailoring brings $ 5 more earnings per unit
Profit greater by $ 100
Improve tradeoff with platforms and flexible factories to realize
economies of scope (mass customization)
17. 13
Global platform strategy
International business managers make decisions about what should be
global versus local:
Products
Technology and inputs
Manufacturing
Brands
Marketing
Distribution
Example: Wal-Mart must compete with both international players such
as Carrefour and local retailers
18. 14
Global platform strategyLocal brand positioning of a global brand
and global product
Corona sells the same beer, produced in 8 plants in Mexico, all
over the world
Advertising adapts to target countries: begins as a working class
beer in Mexico, becomes a high quality import in most other
countries.
Marketing adapts to local markets
Corona coordinates internationally through its
subsidiaries
19. 15
Global platform strategy
Most products are local and not branded.For example: in food sector
Nestle estimates that only 1 % of all goods in food markets are
branded
Increasing number of international brands, Corona, Nestl,
Sony
Increasing brand variations: BMW 3-series (1990s):
More than 1 million varieties can be ordered
Local distribution and marketing
Example: McDonalds, Coca-Cola: Global brand, some local product
tailoring, reliance on local distribution
Local technology, production, customer service
Acer computer company
20. 16
Global network strategy
Create network of customers, suppliers, partners
Use network to achieve global size and reach
Use network to provide local customization
Network relationships generate competitive advantage
21. 17
Global network strategy
Buyers
Sellers
The international business contributes value by creatingan
international network: Recall Li & Fung
Networks can consist of informal business relationships or more
formal contractual relationships
Networks facilitate coordination of sourcing and serving
Network replaces n m links with
m + n links (hub and spoke network)
12 links
7 links
22. 18
Global network strategy
Physical networks:
Communications: Wired and mobile telephone systems
Internet
Transportation: Railroads, Airlines, Shipping, Intermodal
systems
Energy: Oil and natural gas pipelines, Electric power transmission
and distribution
Logistics: Postal systems, Wholesale and retail distribution
Business networks:
Manufacturing, services, distribution, technology, social networks
(trust and information sharing)
23. 19
Global network strategy: The global factory
Hong Kong manufacturers own or contract with more than 40,000
factories in South China employing four million workers
To take advantage of specialized sources in different countries -
best quality
To take advantage of cost variations across countries - least cost
sources
To take advantage of location - minimize transport-costs,
transaction costs, and tariffs
24. 20
Global network strategy: The global store
Examples: Dairy Farm, Shell, Zara
Growth: access to additional customers
Develop global brands
Coordination economies from centralized regional warehouses and
production facilities
Provide access to sourcing network Enhances value of supplier
contacts by expansion of distribution
Lower transaction costs for suppliers who deal with fewer
distributors
Lower risk from pooling demand fluctuations
25. 21
Global network strategy
Network effects: Number of members can affect the value ofmost of
existing links
Architecture: Structure of the network affects costs and
performance (hub-and-spoke versus point-to-point)
Companies should capture the value created by their network
organizing activities
Networks are mechanisms for delivering all kinds of services, such
as entertainment and information, rather than physical
products.
Access is becoming a potent conceptual tool for rethinking our
world view as well as our economic view, making it the single most
powerful metaphor of the coming age. Jeremy RivkinThe Age of
Access
26. 22
Global network strategyPartner networks
Achieve global scale
Members focus on their region
Reduce competition by avoiding duplication of facilities and
operations
Avoid government restrictions on ownership and market
dominance
Technology standard setting
Complements in production
Complements in demand (game players and games)
27. 23
Global network strategyPartner networks: Global reachBritish
Airways / American Airlines
Provide 60% of all transatlantic services
"Alliance that Revolves Around You"
ONEWORLD members: Iberia, Cathay Pacific, Quantas, Finnair, Aer
Lingus, Lan Airlines (Chile)
The airlines cooperate on scheduling and ticketing, frequent flyer
programs, airport clubs, baggage handling, customer service
Competitive response to the STAR ALLIANCE from United, Lufthansa,
SAS, Air Canada and Thai Airways (210,000 Employees, flights to 578
cities in 106 countries)
600 destinations in 135 countries around the world, operating over
8000 flights daily, 230 million passengers/year
28. 24
Global network strategyPartner networks: Technology standards
Mobile phone operating system:Owners
29. 25
Global network strategyPartner networks: Technology standards
Mobile phone operating system:Licensees
30. 26
Global network strategyPartner networks: Technology standards
Software licensing company
Open- standard operating system
First open Symbian OS phone (in 2001):
Nokia 9210 Communicator
About 85% market share
Standard-setting network
31. 27
Global network strategyFranchise networks
Advantages
Rapid international growth
Local ownership
Local management
Lower capital outlays
Disadvantages
Search cost of finding franchise owners overseas
Costs of monitoring performance across borders
Transaction costs of forming franchise contracts in other country
remains
32. 28
Global intermediary strategy
Matchmaker
Brings buyers and sellers together across international
borders
Market maker
Creates and operates markets that cross international borders
Agent
Provide representation in other countries
33. 29
Global intermediary strategyMatchmaker
Bridge international differences in goods and services, business
practices, law and regulations, currencies, languages, time
zones
Provide value-added activities
Representative agents in sales, distribution, purchasing,
financing, contracting, and supply chain managers
Match offers to buyer and seller needs: product features, location,
time.
Avoids costs of search for buyers and sellers
Reduces buyer and seller risks from dealing with few trading
partners,
34. 30
Global intermediary strategyMatchmaker
Language: Seller speaks Chinese, buyer speaks Spanish, intermediary
speaks both
Currency: Seller wants pesos, buyer has dollars, intermediary
changes dollars to pesos
Distance: Seller is in Thailand, buyer is in Brazil, intermediary
arranges transportation
Trust: Buyer and seller both trust the intermediary without having
dealt directly with each other
Time: Seller is in Japan, buyer is in Mexico, intermediary operates
in both time zones
Knowledge: Seller in Germany knows production technology, buyer in
US knows preferences of US customers, intermediary combines
knowledge of supply and demand across borders
Culture: Seller and buyer are in different countries, intermediary
adapts products, services, contract terms and negotiation to
diverse social customs
35. 31
Mitsui
Our first core competence is facilitating international trade with
innovative services tailored to client needs
36. 32
Mitsui
Our second core competence is working with our global clientele to
create new trade flows and new business
37. 33
Mitsui
Distributor of goods and services;
Transfer agent for technology;
Financier, Investor;
Project organizer;
Market developer;
Resource developer;
Well-informed consultant and business partner.
Mitsui
38. 34
Mitsui is in top 15 of Fortune Global 500
http://www.mitsui.co.jp/tkabz/english/corp/index.htm
39. 35
Global intermediary strategyBeating bypass competition
TradeCountry H
Transaction cost T
Transaction strategy offers innovative transactions
Your costs of trade T must be less than competitor costs of trade
T*
Example:
Li & Fung
ServeCountry A
SourceCountry B
Bypass competition
Transaction cost T*
40. 36
Global intermediary strategy
Market maker
Cemex
41. Mittal
42. Cargill
43. BP Amoco
44. eBay
The global market maker aggregates demand across countries and
aggregates supply across countries
45. 37
Global intermediary strategy
Market maker
Ingram Micro: the leading international wholesaler of technology
products and services
Wholesales 280,000 computer hardware and software products think of
number of prices!
Sources in US and many other countries from 1,700
manufacturers
Serves 175,000 resellers in more than 100 countries
Serves through operations and affiliates in 35 countries
Establishes prices, coordinates sales and purchases, clears the
market, allocates products
46. 38
Global intermediary strategyMarket maker
Creates and operates international markets
Chooses prices, conveys information
Adjusts sourcing and serving to clear markets avoids efficiency
losses from market imbalances
Provides immediacy: ready to buy and sell
Allocates goods and services across countries
Gathers and aggregates information about customers and suppliers on
an international level, inventories, orders, and production
Applies IT to international coordination
Earns returns from international risk pooling
47. 39
Global intermediary strategyAgents
Export Marketing Company (EMC) represents sellers, can be broker or
dealer, bears risks, arranges resale, transportation, credit
Export Trading Company (ETC) represents buyers, handles imports,
usually takes title to goods
Act as international agent: provide expertise in negotiation,
market knowledge
Provide trust to buyers and sellers
Allows principal to delegate authority for distant
transactions
Provides market expertise, often to smaller firms
48. 40
Global intermediary strategyMore agents
Piggyback arrangements: e.g. Sony distributes in Japan for
Whirlpool; GE Trading Co. distributes for other US manufacturers in
Africa and Latin America
General Trading Companies: In Japan, there are Sogo Shosha (large
scale) and Senmon Shosha (smaller scale) trading companies. Similar
companies exist in Europe, South Korea, Taiwan, Singapore and Hong
Kong
Government Procurement Agencies, e.g. China Central Trade
Offices
Distributor/Importer (jobbers, dealers, wholesalers)
Direct sales (representatives that work on commission)
Overseas retailers, wholesalers
49. 41
Global entrepreneur strategy
Bring buyers and sellers together in new combinations
Provide new products to new customer countries
Arrange new production and procurement in supplier countries
Introduce innovative transaction methods across borders
Citigroup financial services, Google, eBay
Apply innovative technologies and business methods
Create new business firms in other countries
New inter-country connections!
50. 42
Global entrepreneur strategy
Micro credit
In 1974, Yunus, a Bangladeshi economist from Chittagong University,
led his students on a field trip to a poor village. They
interviewed a woman who made bamboo stools, and learnt that she had
to borrow the equivalent of 15p to buy raw bamboo for each stool
made. After repaying the middleman, sometimes at rates as high as
10% a week, she was left with a penny profit margin.
1983: Yunus founds Grameen Bank
In Bangladesh today, Grameen Bank has 1,084 branches, with 12,500
staff serving 2.1 million borrowers in 37,000 villages.
www.grameen.com
Muhammad Yunus of Bangladesh and the Grameen Bank jointly awarded
the 2006 Nobel Peace Prize.
51. 43
Investment strategy next time
Summary and take-away points
Coordination of competitive actions across borders key to gaining
global competitive advantage
Achieve standardization and customization
Advantage over global and local competitors
Many more strategies possible