GLOBAL STRATEGY

1
GLOBAL STRATEGY
Prof. Horst O. Bender, Ph.D. Rotterdam School of
Management Erasmus University (NL) THESEUS
Institute (F) hobender_at_B2B-MSI.com
2
CHARACTERISTICS OF TODAYS COMPETITIVE MARKETS

• 1. Maturing markets, slow growth in the West
  outsourcing of manufacturing and intellectual
  activities China continuing strong India
  becoming a major player continued uncertainty in
  South America, Russia somewhat improving the EU
  expanding the old and the new Europe the
  differences within NATO
• 2. Mature infrastructure in the western world
  the need for new infrastructure in Asia
• 3. Globalization of markets and investments
• 4. Supplier proliferation
• 5. Market fragmentation
• 6. Mobile production
• 7. Rapid adoption of advanced technologies
• 8. Continued outsourcing of manufacturing
• 9. Outsourcing of white-color jobs
• 10. Short life of technological monopolies
• 11. Vendors with significant resources
• 12. Differentiation reduction commoditization of
  products

3
THE GLOBALIZATION OF MARKETS

• 1. The marketplace for products, ideas and
  technologies is worldwide- All countries - not
  just the developed ones - want advanced goods-
  They want them in their most competitive levels
  of quality, reliability, service, and price -
  Technology is sought and used the world over to
  improve the quality of life
• 2. Critical success factors in global
  competition- Ideas- Technology/innovation-
  Market presence and standing- Building and
  exploiting core competencies- Fierce
  competitiveness- Quality and speed
• 3. Companies - not governments - are the major
  means of achieving global market standing
• 4. The successful firm will know how to recognize
  the best new ideas and exploit the most promising
  technologies
• 5. Knowledge has become the crucial element of
  competition
• - The company is engaged in a worldwide
  competition for talent- Companies will flourish
  or fail on how well they become multicultural
  organizations- On being able to attract - and
  keep - the knowledge worker

4
THE MULTINATIONAL VERSUS THE GLOBAL CORPORATION

• The multinational corporation
• A parent company with foreign "subsidiaries"
  (sales, marketing and production)
• The parent company does RD centrally in the home
  country and manufactures for its domestic market
  or the region
• The daughters don't do research. They locally
  adjust, produce and sell what the parent company
  designs (high relative costs)
• The global corporation
• Views the entire world as a single, largely
  identical entity (low relative costs)
• Its operations span the world- Purchasing- Manu
  facturing- Marketing
• Research is done anyplace within the system
• Money is centrally managed for all members of the
  group
• The top management is transnational
• The company has a strong, if not a leadership
  position, in all areas of the triad

5
THE PROGRESSION TOWARDS GLOBAL PRODUCTS

• EARLY Commodities (e.g. food, grain, ores,
  coal)Processed products (e.g. spices, tea,
  steel, chemicals)
• LATER Manufactured products, including all
  technology-based and high-tech products, e.g.-
  Automobiles - Banking - Biotechnology-
  Consumer electronics - Computers - Electronic
  instruments- Pharmaceuticals -
  Semiconductors - Telecommunication- Transport
• INDUSTRIES HAVING RECENTLY BECOME GLOBAL-
  Retail banking - Fast food - Newspaper
  publishing - Retailing ...

6
FORCES SHAPING THE TRANSNATIONAL ECONOMY
The National State
The Internet
The Region
The World Financial System
The Transnational Enterprise
7
FACTORS CONTRIBUTING TO GLOBALIZATION

• Internet
• Telecommunications/travel
• Convergence of customer needs and preferences
  (B2C)
• Increasing importance of scale economies and cost
• Global sourcing/outsourcing (B2B)
• Deregulation and diminishing trade barriers
• Growing number of customer firms operating
  multinational

8
THE GLOBAL STRATEGIC HIERARCHY
STRA- TEGIC INTENT
BUILDING LAYERS OF COMPETITIVE ADVANTAGE
GLOBAL MISSION
LONG-TERM OBJECTIVES
GLOBAL MARKETING
VALUE PROPOSITION
IMPLEMENTATION PLAN
Building layers of competitive advantage E.g.
in - Research - Development - Engineering -
Manufacturing - Marketing - Distribution -
Logistics - etc.
9
ELEMENTS OF A MULTINATIONAL COMPETITIVE STRATEGY
(I)

• 1. Scope of the business
• What products or services does the company
• Produce
• Sell and/or
• Distribute
• In which countries will the company locate its
  value-creating activities, including
• Procurement
• Operations
• Technology development
• Physical distribution
• Marketing

10
ELEMENTS OF A MULTINATIONAL COMPETITIVE STRATEGY
(II)

• 2. Long-term objectives for each component of the
  enterprise
• Includes goals for
• Growth
• Profitability
• Market share
• In a multinational enterprise, to be established
  for
• Each line of products
• In each country
• Serve as guides to the allocation of resources
  within the organization
• 3. Major functional policies for the enterprise.
  Covers
• The extent of each business unit's vertical
  integration
• Whether to supply branded products, private
  brands, or both (in consumer markets)
• The technological policy for each business unit
  (leadership/followership)
• The level of quality and service

11
INTEGRATION/RESPONSIVENESS GRID
10
Pressure for Global Integration
5
0
0
5
10
Pressure for Local Responsiveness
12
DIMENSIONS OF THE INTEGRATION/RESPONSIVENESS GRID

• Pressure for Global Integration
• Importance of multinational customers
• Presence of multinational competitors
• Investment intensity
• Technology intensity
• Pressure for cost reduction
• Universal needs

• Pressure for Local Responsiveness
• Differences in customer needs
• Differences in distribution channels
• Availability of substitutes and the need to adapt
• Market structure
• Host government demands

13
INTEGRATION/RESPONSIVENESS GRID
10
Global Business
Multinational Business
Pressure for Global Integration
5
Locally Responsive Business
0
0
5
10
Pressure for Local Responsiveness
14
INTEGRATION/RESPONSIVENESS GRID
10
Global Strategy
Multinational Strategy
Pressure for Global Integration
5
Multi- Domestic Strategy
0
0
5
10
Pressure for Local Responsiveness
15
INTEGRATION/RESPONSIVENESS GRID
10
Product
Promotion
Pressure for Global Integration
5
Price
Distribution
0
0
5
10
Pressure for Local Responsiveness
16
INTEGRATION/RESPONSIVENESS GRID
10
Drugs
2000
1970 2000
2000
Cars
Pressure for Global Integration
5
Books
1970
1990
0
0
5
10
Pressure for Local Responsiveness
17
INTERNATIONAL MARKETING STRATEGY
MARKET PORTFOLIO STRATEGY
MARKETING MIX STRATEGIES
MARKET ENTRY STRATEGIES
18
INTERNATIONAL MARKETING STRATEGY
Market Suitability
MARKET PORTFOLIO STRATEGY
Market Scope
Portfolio Balance
Product
Market Entry Mode
Place/ Promotion
Price
Entry Timing
Entry Ally
MARKET ENTRY STRATEGIES
MARKETING MIX STRATEGIES
19
MARKET PORTFOLIO STRATEGY

• Market suitability
• Which individual markets will be chosen?
• Market scope
• How many markets will be chosen?
• Portfolio balance
• How will the risks and resources be spread?

COMPETITIVE STRENGTH
Strong
Average
Weak
D
High
F
MARKET ATTRACTIVE- NESS
UK
B
S
Market
Suitability
Medium
DK
Market
Portfolio
NL
Scope
Balance
Low
20
MARKET ENTRY STRATEGY

• Entry mode
• Which organizational vehicle should be chosen?
• Entry ally
• Which partner should be chosen?
• Entry timing
• Which moment is most opportune?

ENTRY MODE Indirect export Direct export -
Trading companies - Direct to customer -
Agent - Distributor - Travelling
salesman - Foreign sales branch/subsidiary
Market
Suitability
Market
Portfolio
Scope
Balance
21
CRITERIA TO SELECT ENTRY ALLIES

• Draw up partner profile
• Overall experience in the market
• Market area(s) covered
• Products handled
• Size of company
• Experience with exporters products
• Sales organization
• Ability to carry inventory
• After-sales service capability
• Experience with promotion techniques
• Reputation with customers
• Financial strength
• Relations with local government
• Languages known
• Willingness to cooperate

Market
Entry
Mode
Entry
Entry
Timing
Ally
22
TIMING OF ENTRY

• Company situation
• Market opportunities
• Business cycle
• Political situation
• Economic situation
• Exchange rate situation
• Product life cycle

Market
Entry
Mode
Entry
Entry
Timing
Ally
23
THE INTERNATIONAL MARKETING MIX ISSUES

• Standardization/customization
• Product offering
• Service support
• Pricing
• Communications
• Distribution

Country D
Country E
Country C
Country B
Country A
Market
Entry
Mode
Introduction
Maturity
Decline
Growth
Entry
Entry
Timing
Ally
Time
24
MATCHING TECHNOLOGY AND MARKETINGFOR GLOBAL
QUALITY AND VALUE
Country B Product
Corporate RD
Key Account Team
Country B Product
Module 1
TECHNOLOGY CORE COMPETENCIES
Module 2
NAKEDSOLUTION
Module 3
Global Account A Product
Module 4
National Marketing
Global Account B Product
Corporate Marketing
MARKETING CORE COMPETENCIES
25
GLOBAL PRICING POLICY ISSUES

• Product differentiation
• Perceived value
• Cost structure
• Legal/government considerations
• Taxes
• Fences
• Globalization
• Internet
• Transshipments

Product
Place/
Price
Promotion
26
VALUE-BASED PRICING THE BASIC ARGUMENT
VALUE PROPOSITION Perceived Value, Value-in-Use
Magnitude of Inducement
Price
Profit
Contribution
Fixed Costs
Variable Costs
Total Costs
Product
Place/
Price
Promotion
27
DIFFERENTIATED PRICING
Perceived Value Country
Perceived Value Country
A
A
Price Country
A
PV Country
B
Price Country
B
PV Country
C
Price Country
C
Total Costs
Total Costs
Variable Costs
Variable Costs
Product
Place/
Price
Promotion
28
DUMPING
Perceived Value Home Country
Price Home Country
PV Country
B
Total Costs
Price Country
B
Variable Costs
Product
Place/
Price
Promotion
29
INTERNATIONAL PRICING (I)
Highest

Lowest
Product
Time
Today (with fence)
Tomorrow (without fence)
Place/
Price
Promotion
30
INTERNATIONAL PRICING (II)
Highest

Future International Price Corridor
Lowest
Product
Time
Today (with fence)
Tomorrow (without fence)
Place/
Price
Promotion
31
GLOBAL DISTRIBUTION STRATEGY ISSUES

• The functions to be performed by distributors
• Maintaining local stocks
• Financing
• Providing promotional support
• Supplying services including- Customer
  education- Repairs- Financing
• Uniformity/diversity in performing the
  distribution function
• The impact of globalization and the Internet

Product
Place/
Price
Promotion
32
GLOBAL COMMUNICATION STRATEGY ISSUES

• Widespread debate during the 1980s
• Proponents of global approach stressed
  similarities- Needs, life styles, ...
• Opponents emphasized differences- Language,
  customs, other national characteristics, ...
• Providing promotional support
• Supplying services including- Customer
  education- Repairs- Financing
• The Internet has resolved this discussion

Product
Place/
Price
Promotion