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Published on January 13, 2009

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Chapter 10Global and Multi-Market Strategies : Chapter 10Global and Multi-Market Strategies John S. Hill Global and Multi-Market Strategy Formulation topic layout : Global and Multi-Market Strategy Formulation topic layout Global and Multi-Market Strategy Formulation Dealing with Competitors Competitive Strategies -Global Rivalries -Initiating Competitive Strategies -Responding to Global Rivals Cooperative Strategies -Global Alliances Formulating Global & Multi-Country Marketing Strategies Defining the Core Business Strategy Internationalization -Identifying Cross-National Segments -Speed of Internationalization Globalizing the International Strategy -Building Global Brand Portfolios -Building Global Brands -Standardizing and Adapting Marketing Strategies Global and Multi-Market Financial Strategies Transfer Pricing Issues Managing Foreign Exchange Risks Global Cash Management Global & Multi-Market Financial Synergies Administering Global Finances Chapter Outline : Chapter Outline Formulating Global and Multi-Country Marketing Strategies Dealing with Competitors: Global and Multi-Market Strategies Global and Multi-Market Financial Strategies Formulating Global and Multi-Country Marketing Strategies : Formulating Global and Multi-Country Marketing Strategies Identifying and Developing Core Businesses Contribute significantly to corporate sales and profits Take full advantage of the technological and managerial resources available within corporations Have significant potential for development in world markets Internationalizing the Core Strategy : Internationalizing the Core Strategy Identifying Cross-National Customer Similarities: Global Segmentation Criteria Speed of Internationalization: Single, Multi-country or Global Expansion Strategies Internationalizing the Core Strategy : Internationalizing the Core Strategy Global Segmentation Criteria Identifying cross-national customer groupings with similar needs and who respond in similar fashions Demographic Criteria: Age segments: babies, children, teens, senior citizens Occupational similarities: business, doctors, engineers, architects, teachers Income-based segments: upper income, middle classes Gender-based segments: women (and men) Internationalizing the Core Strategy : Internationalizing the Core Strategy Global Segmentation Criteria Lifestyle-Psychographics Criteria International sophisticates: above middle-income consumers with genuine interests in international products Semi-sophisticates: middle and high-income consumers: know little about world affairs/foreign cultures but buy foreign products for status reasons Provincial consumers: poor or wealthy, with few interests in international products or world events; often nationalistic Global Segmentation Criteria: Product Features (product styling, performance, reliability) and Benefits (convenience, health, efficiency) Internationalizing the Core Strategy : Internationalizing the Core Strategy Global Segmentation Criteria Market Similarities: Cultural, Political and Economic Catalysts to Global and Multi-country Segmentation Trade Blocs, EU, NAFTA, and Mercosur: countries trade together and assimilate each other’s cultures (‘European’, ‘Latin American’) Language similarities: often remnants from colonial eras (English, French, Spanish, Arabic, German) Religious similarities, Buddhism, Confucianism and Taoism shaping Asia; Islam in the Middle East Internationalizing the Core Strategy : Internationalizing the Core Strategy Speed of Internationalization: Single, Multi-country or Global Expansion Strategies Availability of corporate resources Competitor strategies or likely reactions (first mover advantages; multi-market launches) Corporate objectives (market dominance, follower strategies) Importance of individual markets: key emerging markets (India, China, Brazil) Globalizing the International Strategy : Globalizing the International Strategy Advantages and Disadvantages Building Global Product Portfolios Creating Global Brands Globalizing the International Strategy : Globalizing the International Strategy Advantages of Global Branding Strategies Simplify marketing task and reduce promotional costs Enhances success rates of global product launches and gives products multi-country momentum Good product ideas can gain first mover advantages Take advantage of worldwide similarities among customers Country reputations for product expertise can be leveraged worldwide Globalizing the International Strategy : Globalizing the International Strategy Disadvantages of Global Branding Strategies Standardized products and images are not sensitive to cultural differences Misfortunes accruing to global brands can reverberate across entire product ranges and tarnish corporate reputations on a region-wide (Coca Cola in Europe) or worldwide scale (Nestle, Perrier) Globalizing the International Strategy : Globalizing the International Strategy Building Global Product Portfolios Four Strategies to Globalize Brand Portfolios Consolidation from regional and national lines: Proctor & Gamble in Europe and Asia Buying and Selling Brands through Mergers and Acquisitions: Unilever sold its Harmony hair care brand to EMVI Building Global Brands through New Product Development: Ford 2000 unified North American and European divisions Building Global Product Portfolios Through Geographic Extensions: McDonalds, KFC and Pizza Hut Globalizing the International Strategy : Globalizing the International Strategy Creating Global Brands Products and brands: Key difference—brands are ‘covenants with the customer’; built up over time Types of global brands Building global brand images Creating brand personalities Building trust and customer relationships How global branding contributes to strategy Brand associations and country of origin Globalizing the International Strategy : Globalizing the International Strategy Creating Global Brands Types of Global Brands Corporate (or Organizational) brands, company reputations as centerpieces of global strategies. Canon and Johnson & Johnson Range Brands, collections of product lines brought together under business. General Electric (GE) Product brands, contribute to and benefit from corporate and range branding strategies Globalizing the International Strategy : Globalizing the International Strategy Creating Global Brands Creating Brand Personalities Sincerity: honest, wholesome Excitement: sports cars, fashions Competence: reliability, intelligence Sophistication: upscale appeals Ruggedness tough, masculine appeals Globalizing the International Strategy : Globalizing the International Strategy Creating Global Brands Building Trust and Customer Relationships Clubs and usage programs: airlines, wine clubs Public relations program: video games and magazines Product shows and event stores: Cadbury World, Disney Publicity stunts: Swatch Event sponsorships: athletic events, football, rugby, tennis, golf, motor racing Globalizing the International Strategy : Globalizing the International Strategy Creating Global Brands How Global Branding Contributes to Strategy Branded components confer additional quality onto existing brands. ‘Intel Inside’ Flagship Brands “Silver Bullets”, star brands in the company’s global portfolio. Walkman for Sony Global Brand Leverage, product extensions to add additional brands: Mercedes Mega-brands, brand names are leveraged over entirely new business and product lines. Disney, Richard Branson’s Virgin Brand Associations and Country of Origin, Some countries acquire reputations for specific products, Scotch Whisky Globalizing the International Strategy : Globalizing the International Strategy Creating Global Brands Standardizing and Adapting Marketing Strategies (‘be global, act local’) Product strategies some components easier to standardize than others (brand name, warranties, positioning) Distribution worldwide has become streamlined with express mail services, the internet, and global retailers Personal selling and sales management strategies have been harder to standardize globally Pricing strategies are difficult to standardize globally because of factor price differences, transportation costs, and foreign exchange rate discrepancies Advertising strategy standardization has been facilitated by the growth of global advertising agencies and global media Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies : Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies Competitive Strategies, Global rivalries, leveraging of competitive advantages across markets, offensive competitive tactics against rivals Cooperating with Competitors: Global Alliances Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies : Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies Competitive Rivalries in Global Industries Aircraft: Boeing (US) vs. Airbus (Europe) Hamburger Franchises: McDonalds (US) vs. Burger King (UK), etc. Initiating Competition: Leveraging Competitive Advantages Across Markets Developing a product that becomes an industry standard (Xerox) Superior customer service (Caterpillar parts; Federal Express), etc. Lower cost, superior styling, technologies, innovation, reliability, corporate reputation Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies : Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies Offensive Competitive Strategies Frontal Assaults: all-out offensives. Coca-Cola and Pepsi Flanking Strategies, attacking market segments ignored by competitors, Swiss and Japanese watch producers Encirclement Strategies, use superior resources to produce greater product varieties. Japanese motorcycle producers Bypass Strategies, focus on future customer needs. “green” cars by Honda and Toyota Guerilla Strategies, disrupting rivals marketing strategies or stunting sales in major product or service lines Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies : Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies Geographically-based Offensive Competitive Strategies Emerging Market Strategies, Marketplace rivals rush into new, big markets (Latin America, Asia, Eastern Europe) to gain first mover advantages Regional Competitive Strategies, to attack (or defend against) key regional rivals. Spanish banks targeted banks in Latin America Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies : Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies Geographically-based Offensive Competitive Strategies Key Market Competitive Strategies, to undermine rivals in strategically important markets. Airbus and Boeing in Japan Attacking Rivals in the Home Market: to undermine international corporations with advantages in their domestic markets: Kodak against Fuji in Japan; Fuji attacks Kodak in US Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies : Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies Responding to Global Competitors US Counterstrategies Government-sponsored trade protection, US imposes tariffs on steel in 2002 Collaborative with global rivals, to cooperate with rivals and learn the secrets of their competitive advantages. GM in Japan Domestic Collaboration, to form industry-wide cooperation groups. Semi conductor industry Competitive Restructuring, to undertake top-to-bottom evaluations of company and competitor marketing strategies. Motorola (US) and Philips (Netherlands) Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies : Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies Responding to Global Competitors European Responses International Offensive Strategies, such as engineering conglomerate Asea-Brown- Boveri; and L’Oreal International Defensive Strategies, to consolidate market positions within Europe. Solvay (Belgium – chemicals) and Heineken (Netherlands) National Defensive Strategies , to maintain home market dominance while contemplating international expansions Restructuring or Exit Strategies, by firms unable to sustain their market positions in European theater of operations. Philips Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies : Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies Responding to Global Competitors Emerging Market Responses Defender Strategies: where industry globalization influences are low and competitive assets are home-market-customized. Bajaj countered Honda’s entry into Indian market Dodger Strategies: by firms with home-market oriented assets but under high competitive pressures; localize or JV Contender Strategies: larger, well resourced emergent firms to upgrade existing technologies and/or transfer competitive assets into foreign markets (Mexico’s Cemex) Extender Strategies: use local market expertise and products to move into similar markets abroad. Jollibee Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies : Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies Cooperating with Competitors: Global Alliances Characteristics Tend to be contractual agreements rather than equity-based relationships such as joint ventures Often involve parts of corporate supply chains rather than entire supply chains Are not necessarily permanent Often involve divisions of companies rather than entire firms Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies : Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies Collaborating with Competitors: Global Alliances Advantages—GAs used for: Technology and product development Getting into related businesses Distribution-sharing agreements Technology and market access agreements Shared production Creating size and critical mass Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies : Dealing with Competitors: Global and Multi-Market Competitive and Cooperative Strategies Collaborating with Competitors: Global Alliances Keys to managing Global Alliances Take time to get to know and trust partner Choose a partner with complementary products Be patient: do not expect instant results “Live like brothers and do business like strangers” (Arabic proverb) Maintain management team continuity where possible. Objectives should be set out in a ‘pre-nuptial agreement’ Be sure that alliances contribute to long term goals Know when a relationship has accomplished its goals Global and Multi-Market Financial Strategies : Global and Multi-Market Financial Strategies Transfer Pricing Issues Managing Foreign Currency Risks Global Cash Management: Settling Corporate Subsidiaries Global and Multi-Market Financial Synergies Administering Global Finances Global and Multi-Market Financial Strategies : Global and Multi-Market Financial Strategies Transfer Pricing Issues Corporate perspectives on transfer pricing: price to earn profits where they want; under-charge/over-charge on shipments among subsidiaries Country perspectives on transfer pricing: subsidiaries should charge “arm’s length” prices and pay appropriate taxes Managing Foreign Currency Risks Transaction risk: risks on individual transactions when exchange rate values fluctuate; forward rates an option Translation risks: ‘paper losses/gains’ when asset valuations fluctuate with exchange rate values Economic risks: Transaction and translation risks projected over the long-term; preferences for weak currency nations Global and Multi-Market Financial Strategies : Global and Multi-Market Financial Strategies Global Cash Management: Settling Corporate Subsidiary Accounts Settling individual accounts as exchange rates fluctuate poses problems as payment delays cause losses for one party Centralized cash management: Netting strategies simplify settlement by reducing number of settlement payments Global and Multi-Market Financial Synergies Disposal of Surplus Funds: in best-yield markets Raising capital: best interest rates Administering Global Finances Internal administration: ‘treasuries’ settle internal accounts External administration: by banks for less experienced firms Key points : Key points Formulating global strategies involves defining core business strategies, internationalizing those strategies, and then globalizing them for competitive strategies Core businesses contribute to corporate profits, and have significant global potential Internationalizing core strategies involves recognizing global similarities in customers and markets Globalizing international strategies entails creating global brands and global brand portfolios Total product standardization, distribution, pricing and promotional strategies rare—some adaptation usually required Key points : Key points Global brands can be classified into corporate brands, range brands, and individual brands Offensive competitive strategies can be product-based or geographically-based US companies respond to global rivals by asking for trade protection, working with competitors, forming domestic collaborations, or restructuring themselves. European companies go for offensive or defensive international strategies, national defensive strategies, or exiting the industry. Emerging market firms can go for defender, dodger, contender, or extender strategies. Companies can collaborate with rivals by global alliances. Thank You! : Thank You!

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